Dr. Maximilian Groh
Dr. Maximilian Groh    Love e-commmerce & brand management, meaningful relationships, and getting things done. Fascinated by people, work, leadership, and strategy.

Advanced Approaches to Management of Enterprise Activities

Advanced Approaches to Management of Enterprise Activities

This article is a part of "Strategic management" series

Effectiveness of management system is typically determined by its compliance with the requirements of the internal and external environment.

From my point of view, mass-market and relatively homogeneous consumer demand were inherent to the industrial age. Power of manufacturers in that period was accounted for unsaturated markets and limited choice available for consumers. In modern times, however, commodities are no longer in short supply. Still, there exists a lack of consumer demand related to the continuous increase in the number of manufacturers and to the maturity of markets. The transition of power from manufacturers to consumers was the result of this trend. When consumers have a choice, they tell the suppliers what goods they want to have as well as how, when, and how much they are ready to pay.

The transition of market power from manufacturers to consumers manifests itself also in the fact that expectations of consumers have sharply increased and competition in price and quality has become keener. Increasing competition presses to find the best ways to meet the demand and terminates the trend of broadening of choice logically.

What’s measured improves.

Peter F. Drucker

Against this background, the reproduction process becomes significantly complicated and depends directly on the capability of an enterprise to satisfy the existing demand. There is a good reason that during less than half-century marketing has turned from sales function to real business philosophy. Currently, it may be said without exaggeration that marketing key decisions serve as the basis for the development of effective strategies of business growth.

Indeed, reproduction of economic system is possible only if products generated by the system are in demand on the market and are sold at the price which ensures defraying of costs and making of profit sufficient for motivating of business activities. Moreover, the higher the level of the earned profit is the greater opportunities for developing the system has. At the same time, the task of marketing as a management function is to search for the most advantageous for the economic system ways and conditions for complying with the requirements of the market, based on the available R&D and production potential, as well as to define the area of development of the latter in line with the forecasted changes of the market environment. Subject to marketing decisions, the most promising fields and types of activity are selected, and the areas of research and technological development of the system are identified.

Peculiarities of the contemporary reproduction process establish asymmetry towards compliance with the requirements of the external environment, although the degree of asymmetry is not the same for different enterprises. The higher the values of parameters and the potentials are, the more considerable influence on the environment it has and the more actively it creates its factors in line with its interests.

However, in the general case, the success of business operations depends on how it can adjust itself to the impact of the external conditions: economic, research and technological, social and political. Competitions, markets, prices, interaction with other systems, risks and a number of other factors determine the current position of the economic system.

Depending on the degree of impact, three types of management systems can be distinguished:

  1. Management in relatively quiet external environment.
  2. Management in dynamic external environment.
  3. Management in crisis situation.

Management in reliance on control and management by intermediate results are the varieties of the management systems of the first type. Management by objectives, project management and management in reliance on anticipation of changes are peculiar to the management systems of the second type. Finally, management systems of the third type are based on management by weak signals and management in response to unexpected events.

Every type of management is characterized by peculiar features and implies a specific technology of making managerial decisions. For example, implementation of mechanistic (bureaucratic) organizational structures, the high degree of centralization of management activities, the existence of rules and standards of carrying out of such activities, strict procedures for control and management style oriented towards the established procedures are intrinsic to the management systems of the first type which have been widely practised at the industrial stage of economy.

Management systems of the second type rely on the implementation of organic (adaptive) organizational structures, decentralization of management activities, intra-corporate democracy and creation of opportunities for reaching of the potential of employees to a greater extent. Management systems of the third type will be characterized by building up of a network of quick response teams and special communication channels as well as by reallocation of management functions related to that.

Selection of management type, as well as a selection of principle of enterprise design, is made, depending on such parameters as field and scope of activities, level of diversification and integration. In the context of the most dynamic and aggressive environment, preference is given to building up of enterprises based on lifecycle and the basis of programmed or tracing control. Application of the technology-based principle of building up of enterprises as well as extreme or adaptive types of management is customary for companies which operate in the environment characterized by limited instability.

It can be easily noticed that enterprises built up under the principle of the technological chain are inherent to economic systems of industrial-type while building up of enterprises based on lifecycle is common for the postindustrial stage of economy.

Long-held beliefs about principles and methods of ensuring of effective presence of enterprises on the market undergo significant changes in the globalized world. Globalization of business and increasing aggressiveness of the external environment contribute to further development of the potential capacity of enterprises and diversification of risks by means of developing new regions and fields of business activities. Furthermore, dealing with various types of products and on different markets has peculiar features, thus predetermining selection of product-specific and region-specific lines of activity and delegation of a part of management functions to managers responsible for the development of these lines of activity.

There emerges a necessity to disintegrate the management corps into managers who support operations of the corporate headquarters and managers of specific product-based and region-based lines of activity. However, corporation headquarters retain the essential functions, such as determining of development strategy, financial and personnel policy, accounting and analysis of results of operations and working out of incentive mechanisms. Functions the contents of which are determined by peculiar features of products (research and technology advancement of a product or technology system, preparation and management of business process, inventory and logistics management and primary accounting of results of operations) are delegated to the level of specific product-based lines of activity. It is within the scope of product-based lines of activity that R&D and manufacturing process is implemented, covering all stages of the product lifecycle from when the necessity emerges to the stage of operation.

These days it is not enough to update business process in some way or another. The objective is to accomplish significant reconstruction of the entire system of business process and to achieve a real breakthrough in its development in compliance with new parameters of performance of the market-driven economy. New philosophy implies abandoning of traditional principles of organization and operation and customary pyramid hierarchy structures. Nowadays production systems shall develop, based on the concept of re-integration of separate operations in unified business processes, i.e., in interconnected and consistent sets of operations (inclusive of management operations) creating an outcome which is of value for consumers.

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