STRATEGIC MANAGEMENT 1. Basic concepts Hungarian competitiveness

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STRATEGIC MANAGEMENT 1. Basic conceptsHungarian
competitiveness

• Prof. Gábor PAPANEK
• www.ektf.hu/papanek
• papanek_at_gki.hu

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Introduction 1.

• The subject of strategic management is how to
  manage economic actions. I will present
  principles and methods of economic decision
  making. This topic is general, which is important
  for everybody, e.g. for businessmen, and
  economists interested in regional or national
  economic policy.
• In addition I will mention some characteristics
  of the EU and Hungarian position.
• On the slides the most important words,
  statements are written in red, the others in
  black, but some additional information in blue
  colour (figure).

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Source www.gt2006.freeblog.hu/albumunk/argentina
- Iguaçu
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Introduction 2.

• The titles of my presentations during the
  semester
• Basic concepts
• Techniques of strategic planning 1 -2
• Strategy implementation
• Financial strategies
• Innovation management
• Regional development strategies
• Economic policy

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Introduction 3. (definitions)

• Economy is a system of goods, persons,
  organisations which operates to fulfil peoples
  needs.
• Main economic actors are households, companies
  and the government (figure).
• Companies are endowed with the resources used in
  the production from the families and pay for
  them. They produce products and sell these to the
  families. The state controls these processes
  collecting taxes and giving subventions - and
  regulating the markets.
• Economics Scientific analysis of human
  behaviour, the objective of which is the use of
  the scarce resources for the provision of
  households.

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Source own figure based on many publications
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Introduction 3.

• Firm (company or enterprise) independent
  business organisation.
• Creation of a firm can be rational, if
  transaction costs of the given business are
  smaller in case, if the work is organised in the
  frame of one enterprise, than with the help of
  commercial connections of independent firms (R.
  Coase).
• The life story of a firm can be described by
  its life cycle, which is similar to the
  well-known product life cycle (figure).
• We can distinguish small, medium- sized
  enterprises and large corporations (table).

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Life cycle of a firm
Source own figure based on many publications
1 pre-foundation 2 market entry 3 growth 4
maturity 5 decline 6 renewal
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Small-, medium-sized enterprises and large
companies
SME small- and medium-sized enterprise
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Source www.gt2006.freeblog.hu/albumunk/bolivia -
La Paz
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Introduction 4.

• The legal forms of firms and their liability.
• Owners liability in the corporations with legal
  entity is limited, the owners are liable for the
  actions of their enterprise to the extent of
  their ownership only.
• Owners liability in partnerships without legal
  entity and in the private entrepreneurships (sole
  proprietors) is unlimited, the owners are liable
  to the extent of all their property.

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Introduction 5.

• Two main methodical approaches to research are
• Induction it is a process of reasoning in which
  some facts (observations) prove the validity of a
  conclusion.
• Deduction it is a process of reasoning in which
  a conclusion follows necessarily from the
  premises presented.
• We have to use both type of methods, if we prove
  a statement.
• Literature Babbie, E. The practice of social
  research. Wadsworth P. Co. 1989.

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Management

• Management is a set of activities directed at the
  efficient and effective utilization of resources
  in the pursuit of one of more goals.
• In management, skills are always important, but
  often the successful manager has to be an
  artist as well.
• Functions of management are planning, leading,
  organisation, coordination, control (H. Fayol -
  citations).

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• Some views
• To manage is to forecast and plan, to organise,
  to command, to coordinate and to control Fayol
  1916
• Management is a social process the process
  consists of planning, control, coordination and
  motivation Brech 1957
• The five essential managerial functions are
  planning, organising, staffing, directing and
  leading and controlling Koontz-ODonnel 1976
• Source presentation of Mr. B. Borsi

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• Todays in strategic management one of the most
  cited author is Michael PORTER. He put
  competition in the centre of his analysis. But he
  mentioned that in many cases the co-operation can
  be important as well.
• The oldest manual about the management
  knowledge is the Panchatantra (an old Indian book
  from the II. century B. C.). It says that the
  King has to be skilled first of all in
  acquisition and loss of friends, war, loss of
  properties, and they have to avoid rash actions.
  All these are important even todays market
  competition.

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Plans 1.

• Planning is the first function of the management.
• A plan is a document which defines the goals of
  an organisation (or a person) and the way of
  their fulfilment.
• The main types of enterprises plans are the
  mission, the strategy and the tactics.
• The mission is a brief description of the reason
  for the firms existence. It is always fixed by
  the owners.
• Example B. Gates mission was to give
  personal computer to all US families.
• The strategy formulates the broad goals, and the
  tools of realisation of an organisation in an
  extended time frame.
• The tactics focus the people and actions which
  implement the strategy.

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• The most important strategy concepts
• Vision what does the company see for the future?
• Mission why does the company exist?
• Strategy covers the definition of objectives as
  well as the methods and tools to help reaching
  the objectives.
• Objective they say, what does the company want
  to implement in a given time?
• Tools the way defined to fulfil the mission and
  objectives, at the end of which the vision
  becomes reality.
• Strategic action a main task derived from
  strategic objectives ? often formulated as
  projects.
• Source presentation of Mr. B. Borsi

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• The interdependence of different plans,
  especially the feedback is always important
  (figure).
• Example
• The late 1800s a US railway co. said, that its
  mission is the transport of persons and
  commodities by train. It was successful for a
  long time.
• In the 1950s the Co. went bankrupt. The analysis
  stated, that the cause was leaving the mission
  unchanged after the general use of automobiles.
  The failure could have been avoided, if the
  mission changed to include transport by all
  transport vehicles.

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Interdependence of different plans
Source own figure based on many publications
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Plans 2.

• In small enterprises decision making and other
  tasks of planning are the duty of the owner(s)
  and (if there is) of the top manager(s). The
  development of the mission and the strategy can
  be informal (it is not obligatory to write them).
  The only plan which has to be formal can be the
  business plan.
• In small firms the business plan projects the
  revenues and costs of a given period, or program.

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• In all big companies, there is a division of
  labour between the top manager (the boss) and the
  managers of functional departments or divisions.
• Subsidiarity is an old, but EU conform principle
  of this division of labour, in accordance of
  which the decisions must be made on the specific
  level, where the potential decision makers have
  the maximum information.
• The organisational form of a large companys
  management can be functional, divisional or
  matrix type (figure).

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Source own figure based on many publications
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• In all type of management the main goals are
  always indicated by the boss, the details are
  developed by the departments (divisions). Their
  harmonisation process is a sort of bargaining,
  the boss has to take the principle of
  subsidiarty, the other managers the
  responsibility of the boss into consideration.

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Competitiveness of the EU especially Hungary

• Nowadays the most competitive regions of the
  World are USA, Japan and, in spite of their
  backwardness, China and India.
• In Europe the most developed economic space is
  the blue banana (figure). But competitiveness
  (GDP per capita) of the majority of EU-15
  countries is weak (table).
• Example Europe does not have good market
  positions in the nuclear, military or IT
  industries.
• Central Europe have always fighted, and is still
  fighting for catching-up. Actually Hungary is not
  successful (in spite of the high machinery
  production and export) .

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The blue banana
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GDP per capita, USD
Source IMD (Institute for Management
Development) World Competitiveness Yearbook
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In 2009 per capita GDP was 14 900 Euros in
Hungary (at the official exchange rate). It is
very low in comparison with the West-Europeans,
but higher than in the East.
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• Distribution of the gross value added by
  industries,
• 2009
• Agriculture, hunting, forestry, fishing 3
• Mining, manufacturing, gas etc. supply 25
• Constructions 5
• Services 67
• Total 100
• Source Hungary in statistics. www.ksh.hu

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• Thank you for your attention!

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