Management Science/Quantitative Approach 

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Management Science/Quantitative Approach

Management science is a quantitatively oriented discipline, studying such topics as time-and-motion experiments, inventory control, work flow, computers and systems theory.

This approach builds mathematical models and uses a wide range of mathematical techniques that have been developed to help organizations solve problems and optimize the supply. The tools used in Operation Research are probability theory, queuing and game theory, linear programming, decisions tree.

Integrating Approaches. Two integrative trends have developed: Systems Approach.

The approach is built around the idea of system. The idea is called synergy.

Within every organization there are many systems, from the company at large to the various departments and units within it. Division, departments and individuals all influence each other.

The systems concept is useful to managers because it helps them understand how their organizations function. The key features of systems: Holism. The system which has should be viewed as a whole; Open system. The system interacts with other systems; Hierarchy. An organization is a subsystem of the entire industry.

Contingency Approach. The focal point of this approach is the situation, the specific set of circumstances that influences the organisation most at a particular time. By this approach, managers can better understand exactly which techniques will best contribute to the achievement of organizational objectives in a particular situation. The methodology of the contingency approach can be expressed as a four-step process. The manager must become familiar with the tools of the management profession; Every management concept and technique has both advantages and disadvantages; The manager needs to be able to interpret the situation properly; The manager must be able to match the specific techniques with the fewest potential drawbacks to the specific situation.

Management: Art or Science? Science and art go hand in hand. Science is organised knowledge. Art is the application of knowledge to achieve a desired result in practice. As an art, management requires the use of behavioural and judgmental skills that cannot be quantified or categorised the way scientific information in the fields of chemistry, biology and physics can be. When dealing with people, managers approach management as an art, when dealing with material things, they approach it as a science.




Market – a set of conditions permitting buyers and sellers to work together. A market for a product is the people or organizations who buy it or may buy it, that is all the potential customers sharing a particular need or want. A market-driven (market-led or market-oriented) company is a company that responds quickly to the needs of a market. Marketing is the process of developing, pricing, distributing and promoting the goods or services that satisfy such needs. Salesmanship is the art of manufacturing something and making another person want it. Marketing is the art of finding out what the other person wants, then manufacturing it for him. The ‘selling concept’ assumes that resisting consumers have to be persuaded (убеждать) by hard-selling techniques to buy non-essential goods or services. Products are sold rather(а не) than bought. On the other hand, the ‘marketing concept’ assumes that the producer’s task is to find wants and fill them. In other words, you don’t sell what you make – you make what will be bought. The marketing concept rests on the importance of customers to a firm and states that: 1) All company policies and activities should be aimed at satisfying customer needs, and 2) Profitable sales volume is a better company goal than maximum sales volume. In a market of multiple choice, it is no longer sufficient to produce a product and show your customers that it satisfies one of their basic needs. You must show them it provides benefits other products fail to provide, that it can be supplied at a competitive price and above all, supplied reliably.

Market research – collecting, analyzing and reporting data relevant to a specific marketing situation (such as a proposed new product). Relevant information includes size of potential market, consumers’ reaction to a product or service, trends that affect sales, population shifts, local economic situation, competitors’ activity and strategies.

Market segmentation means dividing a market into distinct into segments or, in other words, into separate groups of consumers with different needs according to different variables. These can include geographical factors region, population density, country size and climate; demographic factors such as age, sex, family life cycle; and other variables as income, occupation (профессия), education, social class, and personality. The major ways to segment a market are: 1 ) Geographical segmentation – specializing in serving the needs of customers in a particular geographical area (for example, a neighborhood convenience store may send advertisements only to people living within one-half mile of the store). 2) Customer segmentation – identifying and promoting to those groups of people most likely to buy the product. In other words, selling to the heavy users before trying to develop new users.

Market opportunities – profitable possibilities of filling unsatisfied needs or creating new ones in areas (sectors) in which the company can profitably produce goods or services and enjoy a differential advantage due to its distinctive competencies (the things it does particularly well). Market opportunities are generally isolated by market segmentation.

Marketing mix – the set of all the various elements of a marketing program, their integration and the amount of effort that a company can expend on them in order to fill the target market

There are four principal factors that provide the most effective choice for the consumer – known as the 4 P’s: product, price, place and promotion. Aspects to be considered in marketing a produc t include its quality, its features, style, brand name, size, packaging, services and guarantee; price includes consideration of things like the basic list price, discounts, the length of the payment period and possible credit terms; place in a marketing mix is comprised of such factors as distribution channels, coverage of the market, locations of points of sale, inventory size and so forth; and eventually, promotion groups together advertising, publicity, sales promotion and personal selling.

Marketing strategies – sets of principals designed to achieve long-term objectives.Marketing strategy encompasses(вкл. В себя) identifying customer groups (Target Markets), which a business can serve better than its larger competitors, and tailoring its product offerings, prices, distribution, promotional efforts and services towards that particular market segment.

Marketing strategies of: 1)Market leaders. The aim of a market leader is obviously to remain the leader. There are two main ways to achieve this goal. The first way is to increase market share even further. The second way is to protect a current market share. 2)Market challengers. Market challengers can either attempt to attack the leader, or to increase their market share by attacking various market followers. 3)Market followers. Market followers are in a difficult position. One possibility for followers is to imitate the leaders’ products. The innovator has borne the cost of developing the new product, distributing it, and making the market aware of its existence. The follower can clone this product (copy it completely), depending on patents and so on, or improve, adapt or differentiate it. Whatever happens, followers have to keep their manufacturing costs low and the quality of their products and services high.

Company marketing strategies often address long-run activities for the next three to five years. But the marketing manager who implement these strategies are usually rewarded for short-run sale, growth, or profits.Some companies are taking steps to attain a better balance between short- and long-run goals. They are making managers more aware of strategic goals, evaluating managers on both long-run and short-run performance, and rewarding managers for reaching long-run objectives.

The “SBU-concept” means breaking the company into business units. There are four classifica­tions of SBUs that can be identified:

1. Star – is an SBU that has a high share of a high-growth market. Obviously, stars need a great deal of financial resources because of their rapid growth. When growth slows, they become cash cows and become important generators of cash for the organization.

2. Cash cow – is an SBU that has a high share of a low-growth market. They produce a great amount of cash for the organisation but, since the market is not growing, do not require a great amount of fi­nancial resources for growth and expansion. As result, the cash they gener­ate can be used by the organisation to satisfy current debt and to support SBUs in need of cash.

3. Question mark – is an SBU that has a low share of a high-growth market, the organisation must decide whether to spend more financial resources to build it into a star, or to phase it down or eliminate it altogether.

4. Cash trap – is an SBU that has a low-growth market, it may generate enough cash to maintain itself, or it may drain money from other SBUs. The only certainty is that cash traps are not great sources of cash.

After classifying each SBU according to the business portfolio matrix, management must then decide which of the four alternative strategies should be pursued for each.

If an organisation has an SBU that it believes has the potential to be a star, “ building ” would be an appropriate objective. On the other hand if an SBU is a very successful cash cow, a key objective would cer­tainly be to hold or preserve the market share so that the organisation can take advantage of the very positive cash flow.

Question marks and cash traps arc particularly suited for the divesting. This objective helps the company to get rid of SBUs with low shares of low-growth markets.

The last objective is acceptable for all SBUs except those classified as stars – harvesting. It is especially worthwhile when more cash is needed for a cash cow whose long-run prospects arу not good because of a low market growth rate.



There are five forms of International Business: International trade An exchange of goods, results of intellectual labour, services and work force on the international level. The main reason for people and nations to trade is the benefit derived from specialization. International production cooperation Production relations for joint activities in terms of international labour division. Joint ventures and multinationals are the examples of this form. International services Economic goods which do not take a tangible and storable form but bring benefit to the consumer. They include consulting, transport, insurance, scientific and technical, tourist and other services. International finance and credit relations World business related to the operations with money and securities. International investments The activity based on international capital transfer from one country to another aiming at profit gaining and social effect.

Direct sales imply trade based on continual ties between a producer and an ultimate consumer of the product without any intermediary. Such sales mean direct delivery from the seller to the buyer and are practiced by well-established large companies which have good experience of foreign trade and which can gain from the economy of scale. Indirect sales are sales through intermediaries or mediators. This method is used by less experienced or smaller firms because of absence of their own sales network abroad. Associations and companies at the government level deal in raw materials such as oil, gas, ores and some foodstuffs and consumer goods, as well as carry out all kinds of construction work. Commodity exchanges are the places where raw materials, some manufactured goods and some items of produce, such as cotton, wheat, vegetable oils, etc. are bought and sold. The goods that can be accurately graded are bought and sold at commodity exchanges according to grades or standards, and on the basis of standard contract terms. An auction is the way of buying and selling things by offering them up for a bid. It is the sale where the price is fixed by an auctioneer who invites bids and awards the article being auctioned to the highest bidder. Competitive tendering trade bytendersimplies one buyer and a number of sellers. Trade fairs and exhibitions are also very important tools of promoting goods in international trade. They usually attract thousands of visitors and many prospective buyers among them. They provide a great variety of services, such as stands to display, warehouses, etc.

Selling firms turn to commercial agents for their services mostly when they try to develop a new market for their goods in a foreign territory. Agents are instrumental in distributing the principal’s product as they know the commercial conditions and changes in the market of their country. They have their own storehouses, showrooms, repair workshops, or service stations for providing after-sales services. However, sales through agents have certain disadvantages as sellers are not in a direct contact with the market. They also completely depend on agents’ diligence, efficiency and experience in handling business. The main purpose of an agent is seeking out customers and contracting with them on the principal's behalf for the sale of the principal's products in their country. A sales agent comes as an intermediary between the principal who sells and the customer who buys. The relations between commercial agents and their principals can be determined by agency agreements either on a commission or a consignment basis. The commission agent buys and sells goods in the principal’s name and for the principal’s account and charges a commission for their work. The consignment agent also sells goods in the principal’s name and for the principal's account and operates like a commission agent but the consignment agent performs a wider range of functions

D istributor operates on their own account as an independent purchaser for sale of the supplier's products As the distributor is a specialist trader, their knowledge of local trading conditions and possession of a distributive network in a given territory will be of invaluable assistance to the supplier wishing to enter into or expand in that market.

A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activities together. A joint venture is created on the basis of capital of two or more countries. Internal reasons for forming a joint venture are as follows: build on company's strengths;spreading costs and risks; improving access to financial resources; economies of scale and advantages of size; access to new technologies and customers; and access to innovative managerial practices; Joint ventures are established on the basis of joint capital with the share of foreign participation not exceeding 49%, and with being normally 51% of capital belonging to residents




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