Bargaining Power of Suppliers


Increasing prices and reducing the quality of products sold are potential means through which suppliers can exert power over firms competing within an industry. If a firm is unable to recover cost increases through its pricing structure, its profitability is reduced by its suppliers’ actions. A supplier group is powerful when:

  • It is dominated by a few large companies and is more concentrated than the industry to which it sells;
  • Satisfactory substitute products are not available to industry firms;
  • Industry firms are not a significant customer for the supplier group;
  • Suppliers’ goods are critical to buyers’ marketplace success;
  • The effectiveness of suppliers’ products has created high switching costs for industry firms, and
  • Suppliers are a credible threat to integrate forward into the buyers’ industry. Credibility is enhanced when suppliers have substantial resources and provide the industry’s firms with a highly differentiated product.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Forces in the Environments


Environment is the sum of all the forces surrounding and influencing the life and development of the firm. The forces themselves can be classified as external or internal. Management has no direct control over them, though it can exert influences. The external forces are commonly called uncontrollable forces and consist of the following:

  1. Competitive: kinds and numbers of competitors, their locations, and their activities.
  2. Distributive: national and international agencies available for distributing goods and services.
  3. Economic: variables (such as GNP, unit labor cost, and personal consumption expenditure) that influence a firm’s ability to do business.
  4. Socio-economic: characteristics and distribution of the human population.
  5. Financial: variables such as interest rates, inflation rates, and taxation.
  6. Legal: the many kinds of foreign and domestic laws by which international firms must operate.
  7. Physical: elements of nature such as topography, climate, and natural resources.
  8. Political: elements of nations’ political climates such as nationalism, forms of government, and international organizations.
  9. Socio-cultural: elements of culture (such as attitudes, beliefs, and opinions) important to international businesspeople.
  10. Labor: consumption, skills, and attitudes of labor.
  11. Technological: the technical skills and equipment that affects how resources are converted to products.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Resource Dependence Theory


This is the theory that argues that the goal of an organization is to minimize its dependence on other organizations for the supply of scarce resources in its environment and to find ways of influencing them to make resources available. Thus an organization must simultaneously manage two aspects of its resource dependence: 1) it has to exert influence over organizations so that it can obtain resources, and 2) it must respond to the needs and demands of other organizations in its environment.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Inflation


Inflation is a rise in the general level of prices. The most commonly reported measure of inflation is the annual percentage change in the consumer price index (CPI). The consumer price index tracks changes in the prices of a group of goods and services that most consumers buy. Prices are increasing when the CPI is positive and decreasing when it is negative. One major cause of inflation is the relationship between wages and productivity. Productivity is the output per worker hour. When wages increase faster than productivity, the result is inflation. The amount we can consume of any product depends upon the amount we produce. When wages go up but output does not, we have more money income but not more purchasing power. This occurs because the total supply of goods available for purchase has not increased as rapidly as the amount of money in circulation. The combination of rising wages and constant or sagging output exerts an upward push on prices.

Wage increases in one industry often put pressure on other industries to increase wages. Another cause of inflation is the expectation that inflation will continue in the future. Labor unions demand wage increases in anticipation of expected increases in the cost of living. Manufacturers raise the prices of their products in anticipation of future labor and raw material; cost increases. Consumers borrow money to finance today’s purchases in the belief that prices will be higher tomorrow. Some economists argue that inflation subsides only when people believe that it will subside.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Market Survey


Stated most simply, the objective of a market survey is to determine a reasonably attainable sales volume in a specific market area for a specific type of business. This means finding out how many potential consumers of the planned merchandise or service there are in this market and how many of them can reasonably be expected to become customers of the firm under consideration.

The thoroughness of a market survey will vary under different conditions. The survey is essential for stores that plan to develop much of their own customer traffic. If sales are to depend on the firm’s merchandising policies, sales promotion efforts, special services, or uniqueness, a particularly thorough market survey should be made in advance. Firms that plan to rely on the established customer flow already generated by other businesses in the area may follow less thorough procedures. The latter types of firms have often been described as “parasite stores,” meaning that their location has been dictated by the existing firms in the area that have attracted a substantial traffic flow and which the new firm will tap for its own sales. Examples of small firms in this category are a restaurant in a skyscraper lobby, a medium-priced dress shop next to a large department store, an office-building tobacco shop, or a drugstore in an airline terminal. In these cases, the amount and nature of the traffic and its sales potential are pretty well established. Such firms may still, however, exert various types of sales promotion activities to increase total income within the traffic.

The chief concern here is with the types of firms that may rely heavily on a market survey to help them build much of their customer traffic.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Ethical Expectations and Public Values


Ethical expectations are a vital part of the business environment. The public expects business to be ethical and wants corporate managers to apply ethical principles—in other words, guidelines about what is right and wrong, fair and unfair, and morally correct—when they make business decisions.

In the global arena, ethical standards—and even what is meant by ethics—can vary from one society to another. In spite of differences in ethical meanings, cultural variation does not automatically rule out common ethical agreement being reached among people of different societies.

Human rights issues have become more prominent and important for business. For many years that pressure was exerted on South Africa’s political leaders to halt racially discriminatory practices of apartheid and its business leaders to challenge the South African government’s enforcement of the policy.

The question is not, ‘Should business be ethical?’ nor is it, ‘Should business be economically different?’ Society wants business to be both at the same time. Ethical behavior is a key aspect of corporate social performance. To maintain public support and credibility—that is, business legitimacy—businesses must find ways to balance and integrate these two social demands: high economic performance and high ethical standards. When a company and its employees act ethically in dealings with other stakeholders, they are improving the organization’s contribution as a social actor. When they fail to act ethically, there is the risk of losing the public support an organization needs to be credible and successful.

Business leaders are faced with the continuing challenge of meeting public expectations that are, themselves, always changing. Yesterday’s acceptable behavior may not be tolerated today. Many forms of harassment and discrimination were once common. Today, however, social standards make such actions unacceptable. Public expectations of service and ethical behavior are as relevant to a business as customer expectations regarding products such as automobiles and computers.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Leadership: The Uses of Power


Power can be used in many ways. Three outcomes potentially result when a leader tries to exert power—Commitment, Compliance, and Resistance. These outcomes depend on the leader’s base of power, how that base is operationalized, and the subordinate’s individual characteristics.

Commitment probably will result from the attempt to exercise power if the subordinate accepts and identifies with the leader. Such an employee will be highly motivated by requests that seem important to the leader. A committed subordinate will work just as hard as the leader to complete the project, even if that means working overtime.

Compliance means the subordinate is willing to carry out the leader’s wishes as long as doing so will not require extra effort and energy. Thus, the subordinate may work at a reasonable pace but refuse to work overtime, insisting that the job will still be there tomorrow. Many ordinary requests from a boss and the subsequent responses of subordinates fit this description.

Resistance occurs when the subordinate fights the leader’s wishes. A resistant subordinate may even deliberately neglect the project to ensure that it is not done as the leader wants.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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