Lesson 1: strategies of growth

Reading:

One of the methods to manage various businesses within the company is creating the so-called strategic business units (the SBUs) – one or several businesses that can be planned and managed separately from the rest of the company. In order to manage them properly, it is necessary to classify them by their profit potential and deal with them accordingly. Usually it is done with the help of the techniques known as the growth / share matrix, developed by the Boston Consulting Group (BCG). The vertical axis of this matrix indicates the annual growth rate of the market in which the business operates: whether it is low or high. The horizontal axis shows a relative market share that may also be high or low. The current size of the businesses making up a company is shown by a bigger or smaller circle representing it. The location of each circle indicates the market growth rate and relative market share. In such a way, the growth/share matrix is divided into four cells, each indicating a different type of business.

Question marks operate in high-growth market but have low relative market

share. So the company has to think hard whether to keep investing into these businesses. Most businesses start off as a question mark. If the question-mark business is successful, it becomes a star –the market leader in the high-growth market. This does not necessarily mean that the star produces a positive cash flow for the company, but in future they promise profit. When a market's annual growth rate falls greatly, the star becomes a cash cow if it still has the largest relative market share. A cash cow produces a lot of cash for the company. The company uses it to pay its bills and support the stars and question marks. The least profitable businesses are called dogs. They have weak market shares in low-growth markets, and consume more management time that they are worth.

Having located its various businesses in the growth / share matrix, the managers then think whether the business portfolio is healthy or unbalanced, which determines a strategy to choose toward each SBU. Four alternative policies can be pursued: building, holding, harvesting, and divesting.

 

Exercises:

1. Find in the text the following topical words and phrases, make sure that you are able to explain in English what they mean, and add them to your working vocabulary:

the SBUs, the growth / share matrix, the annual growth rate, question marks, stars, cash cows, dogs, harvesting, divesting.

 

2. Write out from the text the parts of the sentences which contain the following words and expressions and translate them into Russian:

appropriate, the market growth rate, to start off, cash flow.

 

3. Answer the following questions using the topical words and phrases:

1. What does the growth/share matrix help to understand?

2. What does the vertical axis of the matrix indicate?

3. What does the horizontal axis indicate?

4. How is the current size of the businesses shown on the model?

5. What does the location of circles indicate?

6. Draw the growth / share matrix of an imaginary company and explain its structure with the help of this model.

7. What companies are called "question marks"? Why is it difficult for a company to keep many businesses of this type?

8. What businesses are called "stars"? Is it profitable for a company to keep many businesses of this type?

9. What conditions are necessary for a "star" to become a "cash cow"?

10. What businesses are called "dogs"? What is the best thing the company can do with them?

11. What is meant by healthy portfolio?

 

LESSON 2: DECISION-MAKERS

Reading:

As it implements its strategy, the firm needs to track results and monitor new developments in the environment. Peter Drucker pointed out that it is more important to do the right thing (being effective) than to do things right (being efficient). And doing the right things right means making the right decisions at the right levels.

Top managers tend to focus most of their time on strategic planning, the organization mission, and controlling the activities of the corporation. They do not get involved in day-to-day aspects of the operation. They fall to supervisory management. In hospitality lingo, one would not expect Bill Marriott to pull a shift behind the bar at the local Marriott hotel. Thus, although the head bartender and Bill Marriott may be both considered managers, the levels of their decision-making are different. The success of all organizations depends on the quality of decision making. There are two types of decisions: programmed and nonprogrammer. Programmed decisions recur on a regular basis – for example, when the number of steaks goes below a specified number, an order for more is automatically placed. Programmed decisions generally become a standard operating procedure (SOP). A nonprogrammer decision is nonrecurring and made necessary by unusual circumstances, such as which computer software a restaurant should install, or whether to expand by franchising or company-owned restaurants. Nonprogrammer decisions call for greater analysis, innovation, and problem solving. When decision-making is centralized, the decisions are made at the corporate level and are channeled down the chain of command. Lower-level employees simply follow policies and procedures. Marriott is an example of such company. However, even centralized corporations have adopted initiatives, which have given more leeway to the front-line employees to do whatever it takes to satisfy the guest. The more decisions made at lower levels, the more decentralized an organization is said to be.

The term span of management (or span of control) refers to the number of people that one manager can effectively manage. The number of people that a manager can supervise depends on the type of organization (centralized versus decentralized) and the degree of its sophistication in terms of efficiency and effectiveness. The trend today is for the span of management to increase to twelve or more, instead of six to eight subordinates. It reduces costs and increases efficiency by allowing a greater say in the operation at all levels.

 

 

Exercises:

1. Find in the text the following topical words and phrases, make sure that you are able to explain in English what they mean, and add them to your working vocabulary:

to monitor the developments, an organization mission, a bartender, programmed and nonprogrammer decisions, to place an order, SOP, to be channeled, span of control.

 

2. Write out from the text the sentences or their parts which contain the words and phrases given below and translate them into Russian:

to track results, in hospitality lingo, to pull a shift, a front-line employee, the degree of sophistication, a subordinate, to recur on a regular basis, nonrecurring.

 

3. Answer the following questions using the topical words and phrases:

1. Why is it necessary for a company to revise its strategies?

2. Which is more important for a manager – to be effective or to be efficient? What is the difference between these two synonyms?

3. What decisions are called programmed and what nonprogrammer? What type of decisions would you think more typical to make for managers in big organizations? Why?

4. What are the supervisory managers expected to do?

5. How are decisions channeled in centralized organizations?

6. How are the decisions made and spread in decentralized organizations?

7. What is meant by a span of control? Why has it increased recently in hospitality corporations?