Management Must strive for Efficiency - Essay Example

Management must strive for efficiency and effectiveness throughout organisation Efficiency and effectiveness are necessary for the survival of an organisation though there are times when one may have to be compromised for the larger benefit. Efficiency involves the perfecting of processes while effectiveness involves making the right decision and taking right action. The latter may be based on business intelligence or intuition, may be planned or by happenstance. The external environment as envisaged in the PESTEL and five forces models demands effectiveness. The efficiency of internal operations is necessary support in unknown terrain though it does not determine customer reaction. Take the case of Honda, the strategy for entering the US market was not clear at the start. The organisation steered its course to suit the path that emerged in the search for new markets. The emergent strategy is a less efficient method but it was highly effective since it led to an in-depth understanding of the market. The exploratory attitude led to the opening up of unexpected markets and novel distribution systems. Unknown territories and high yielding risks provides serendipitous outcomes that the efficient emergent approach would fail to. Nintendo, on the other hand, entered the home market after studying the competition. It aimed to attract a wide audience by providing diverse products for all age groups and by creating new audiences. Wii and DS created a market for ‘casual games’, games that required little skill and experience. The market for casual games jumped from 1% to 20% within a year (McLoughlin & Aker, 2010, p. 50). The efficiency of the intended strategy was borne out. Tobin (2004, p. 10 - 18) follows the rise and fall of Pokemon. What originally started out as a Game Boy cartridge went on to become a famous television show, comic book and trading cards that had children hooked within a few years of introduction. The strategy seems to have intended a certain outcome but emerged differently on the strength of audience reaction. The launch was a mix of efficient planning and effective utilisation of market awareness. Davenport, Leibold and Voelpel (2006, p. 379) highlight the company’s focus on core competence of marketing, production and distribution while outsourcing gaming talent to companies and individuals with the required competence for it. This allowed for an efficient and effective use of internal skills and externally available talent. The organisational context provides the base for choosing a right mix of efficiency and effectiveness. An organisation that is perceived as providing a high benefit has flexibility in pricing which an organisation without the benefit would lack. Cost efficiency may be considered at a low benefit – low cost end of the strategy clock and would attract cost conscious customers. Efficiency may be found in effective utilisation of resources, innovative approaches to marketing and a cost-reducing approach to reaching the customer as in the case of EasyJet. Companies with diverse product offerings at different target markets will enjoy varying levels of success. The concept of the Product Life Cycle allows for specific actions to be taken depending on the quadrant in which products lie. An aggressive market stance that allows for short term investments for long term gain may be effective in a promising ‘question mark’ product while the existing efficiency must be retained for the ‘cash cow’. Stagnant markets may consider widening the customer base through appropriate product and pricing strategy in order to allow the returns on the product to continue. This strategy makes use of the existing efficiencies in the system while trying to lengthen the life of a product in the market. The decision to strengthen a potential profit earner may be aided by a review of the promotion practices in use and the adoption of higher budgets or effective alternative communication methods. Benchmarking allows the organisation to review its progress with respect to itself or external players. Companies may benchmark their product features or their financial performance to get a view of their progress. The comparisons allow them to review their strategy relating to pricing, promotion, product, inventory and channels. Another important aspect of the value chain, the people may be considered to be a cost and all expenses related to their processes added to work out the efficiency of a function. Financial analysis determines the effectiveness of fund and asset utilisation with the efficient use of ratios that pinpoint the areas that call for concentration. The loss of efficiency has the capacity to ruin a well-nourished brand as shown in the Porsche Cayenne case. The company’s existing efficiency in operations allowed for a speedy recovery, made possible by an existing brand image. Effectiveness lay in finding the means to allow a quick return to the efficiency the product was reputed for. Continuous innovation is an effective approach to remain current in the market while efficiency is necessary to curtail operating costs while maintaining the desired quality with low- or no-defects. The effectiveness of the marketing plan lay in the widespread viewership that it catered to. Television, gaming consoles, computers, comics and cards – children had access and demanded more of relevant merchandise that could be used in all types of settings. Nintendo had the infrastructure available to allow the international launch and success of new gaming ideas that were launched. The entire marketing structure and plan was dependent on the ability of the internal organisation to quickly ramp up stock to meet market demand when there was a sudden upsurge. This efficiency of the supply chain allowed Nintendo to remain in the reckoning in the volatile child-oriented market where toys and games quickly lose their significance. Marketing processes increase the effectiveness of the product at the point of sale. The efficiency of the value chain covers the primary and support activities that allow the organisation to reach and maintain the market. Organisations that focus on developing the strength of the value chain work with the aim of maintaining customer satisfaction. The value chain may extend beyond the moment of sale to customer maintenance. Product service or return due to internal flaw should be possible at the speed of purchase to retain brand credibility in the eyes of the customer. To enable this, the company will choose a system to cater to customer needs with a focus on customer convenience. Repair should be possible on the spot with easily available spares and limited skills. For products that require technological skills, the customer should be able to receive a diagnosis and a time frame for solution to be willing to return to the brand. ABC utilises technology to ascertain the diagnosis at diverse points of customer contact. While this may appear to present a holistic flow for the customer, it is the addition of effectiveness to the efficiency of supply chain management that allows for effective customer satisfaction and possibly delight. TQM (Total Quality Management) involves the introduction of a quality orientation at every stage of management and operations. Structure, style of management and attitude towards employees work in close conjunction with operational dictates about suppliers and inventory control to assure cost efficiency and high brand esteem within the organisation. This mix of efficiency and effectiveness is further supported by a continuous feedback system to measure the efficiency of operations. This approach is effective in a technology oriented business with a strong market base. While the TQM approach provides a framework of internal organisation and management, it does not delve into the maintenance and growth or globalisation of markets. The balanced scorecard borrows the TQM approach of providing measurement feedback on a limited number of variables that are capable of guiding the business owner to survival and growth. The scorecard attempts to create a dashboard based on four fundamental processes that provide a continuing feedback and highlight processes that require immediate attention and rectification. The impact of the efficiency of the processes is derived from the financial targets of the organisation that accrue from effective customer care. Efficient processes and effective objective setting combine to create customer loyalty and financial gain. Campbell, Stonehouse and Houston (2002, p. 1-2) explain that strategy building is a long-term continuous process. Nintendo continue to strategise on ways to increase internal efficiency and market effectiveness by reviewing the target audience and continuously innovating to meet the changing demands of the audience. Efficiency and effectiveness do not necessarily happen in conjunction, the context determines which takes precedence. Strategic management aims to increase the effectiveness at the higher levels of management in understanding the environment and being abreast with changing trends and increasing the efficiency at the lower levels (Hitt, Ireland and Hoskisson, xx, p. 286). Bibliography Campbell, David, Stonehouse, George & Houston, Bill (2002). Business Strategy: An Introduction. Butterworth-Heinemann. Davenport, Thomas H., Leibold, Marius & Voelpel, Sven (2006). Strategic Management in the Innovation Economy: Strategy Approaches and Tools for Dynamic Innovation Capabilities. Wiley – VCH. Hitt, Michael A., Ireland, R. Duane & Hoskisson, Robert E. (2008). Strategic Management: Competitiveness and Globalisation. Cengage. McLoughlin, Damien & Aaker, David A. (2010). Strategic Market Management: Global Perspectives. John Wiley and Sons. Tobin, Joseph Jay (2004). Pikachu’s Global Adventure: The Rise and Fall of Pokemon. Duke University Press. Read More