Role of Managers in Company Management Free Essays

STUDY GUIDE FOR THE Management Role of Managers in Company Management for BMCF TM study – course M_RMCM Role of Managers in Company Management Karel Havlicek Ing. Karel Havlicek, PhD. , MBA Management – Role of Managers in Company Management  © Karel Havlicek, 2011 Management – Role of Managers in Company Management Contents : 1. We will write a custom essay sample on Role of Managers in Company Management or any similar topic only for you Order Now Role of management in hypercompetitive environment 1. 1 Owners and managerial strategy 1. 2 Managerial strategies and managerial planning 1. 3 Involved persons – Stakeholders 1. 4 Key terms 1. 5 Test questions 1. 6 Recommended literature 2. Role of management within marketing management 2. 1 Marketing management 2. 2 Marketing policy 2. 3 Marketing researches 2. 4 Marketing planning 2. 5 Key terms 2. 6 Test questions 2. 7 Recommended literature 3. Role of management within sales management 3. 1 Sales management 3. 2 Sales planning 3. 3 Management of forecasts 3. 4 Trade receivables management 3. 5. Customers communication management 3. 6 Key terms 3. 7 Test questions 3. 8 Recommended literature 4. Role of management within financial management 1. Financial management 2. Financial planning 3. Controlling 4. Management of relations with banks 5. Costing 4. 6 Key terms 4. 7 Test questions 4. 8 Recommended literature 5. Role of management within quality and innovation management 5. 1 Quality management 5. 2 QMS models 5. 3 TQM models 5. 4. Balanced Score Card 5. 5 Innovation management 5. 6 Key terms 5. 7 Test questions 5. 8 Recommended literature 6. Role of management within team building 6. 1 Managerial team building 6. 2 Recruitment of managers 6. 3 Implementation of managers in teams 6. 4 Motivation and education 6. 5 Establishment of organizational designs 6. 6 Key terms 6. 7 Test questions . 8 Recommended literature 1. Role of management in hypercompetitive environment 1. 1 Owners and managerial strategy 1. 2 Managerial strategy and planning 1. 3 Stakeholders 1. 4 Key terms 1. 5 Test questions 1. 6 Recommended literature 1. 1 Owners and managerial strategy The term strategy has been frequently used in various contexts, which often leads to many misunderstandings and confusions. It or iginates from Greek – we can translate it as the art of a leader, general. Within business terminology it used to mean the ability to make decisions on the basis of high expertise and professionalism. However, there is another term with the same root used in English – â€Å"stratagem†. The term is generally translated as an act performed by company management within its top managerial activities. By the term strategy we mean certain scheme (process) that outlines how to achieve the set objectives under given conditions. It is a summary of steps and activities to be adopted â€Å"being aware† of partial lack of knowledge of all the future circumstance, conditions and connections, where not every possible alternative is identified, and individual advantages and disadvantages can’t be determined for the purpose of future decision making. The objective is to establish adequate coordination of all the company’s activities, and create unified complex of its perspectives. The strategy in small or medium enterprise should be defined in a short or mid-term horizon, not for more than 5 years ahead. Such horizon should be sufficient for medium sized enterprises. An enterprise of this size should anticipate a flexible change required by general trends. Flexibility is one of the major competitive advantages of small and medium enterprises compared to multinationals and large corporations. Thus it is not necessary to set up long term strategies, as their continuous changes are likely. The maturity of mid- and long term investment loans can be used for orientation with regards to the period of compiled strategy. In normal practice we discern owners’ and managerial strategic aspects. Owners strategy is basically outlined by owners (shareholders, partners), and has a global character. The owners determine what is their mid- and long term objective. These can be for example: – financial requirements (ROE, EVA, profit, dividend, available CF etc. ), – marketing and sales aspects (market position and share, turnover etc. ), – strategic objectives (market value of the company, synergic effects etc. . Managerial strategy is based on the owners strategy, developing concrete strategic plans in order to achieve the owners’ objectives. This strategy is prepared by the company management at the level of sales, marketing, financial, production, human resources or other directors. strategic objectives and strategies are identified on the basis of analyses, frequently in cooperation between the top management and owners. As mentioned before, the company management is responsible for achievement of strategic objectives, represented by the executive or general director. Controlling body can be an advisory or supervisory board of the company, or board of directors, provided the board is not the management at the same time. This always depends on particular model and organizational design (structure) of the company. 1. 2 Managerial strategies and managerial planning The following steps are usually understood under the term â€Å"company strategy†: a) Description of current status by SWOT analysis. b) Determination of target status in a mid-term horizon. c) Outline of strategic objectives. d) Strategy of achievement of these objectives. ) Establishment of control mechanisms of the achievement. Strategies and strategic objectives are above all the activities and departments of the company. They are the starting point of plans and concepts of individual departments, divisions etc. The objectives of financial, sales, marketing, human resources and production have to be based on global strategy, when formulating partial plans and goals, and the shor t term objectives of these departments have to be modified in accordance with overall strategic objectives, which is an essential precondition of their achievement. This process is illustrated in the Figure 1-1. Figure 1-1 Illustration of the company strategy and its links to the plans of individual departments Individual strategic issues are not definitive, heir implementation in the company depends on its orientation, size, organizational design etc. It is obvious there will be no production strategy implemented in a trading company etc. Another strategies and consequent plans we may come across are innovation, quality, logistic and others. It is possible to combine certain strategies as well. Typical example for the small and medium enterprises is the amalgamation of marketing and sales strategy into one sales and marketing plan. Human resources plan in SMEs is sometimes substituted with a simpler motivation plan. Marketing strategy Marketing strategy is the basis for articulation of all the company’s objectives. We may claim a successfully implemented sales and marketing strategy is decisive for the enterprise’s efficiency. Basis is the marketing mix, from which we derive the following marketing strategies: -product (product mix, life cycles, brand strategies†¦) -price (costing, pricing strategies) distribution (distribution channels mix, approach to the management of distribution conflicts) -communication (strategy of setting up internal and external communication mixes) The strategy consists of analytical and implementation parts. The analytical part describes current status, or history in all the strategic issues defined above, and together with the marketing research they are the basis for identification of strength and weaknesses, opportunities and threats – so-called SWOT analysis. The principles of marketing management of the company are defined in the marketing strategy and its implementation part. Fundamental is the marketing plan, as it includes marketing objectives, strategy of achievement and control mechanisms. Sales strategy The sales strategy is built on the marketing plan, and SWOT analysis. History of sales is described in the analytical part in the following breakdown: – product groups or individual products – customer segments, or individual customers – foreign or local territories The implementation part describes principles of sales management, and with regards to the above mentioned breakdown it includes the sales objectives to be developed further into detailed sales plans. Financial strategy It is created in the context of sales plan, with regards to the marketing research, SWOT analysis, and marketing and sales objectives. The analytical part includes history and updated summary f financial results and indicators in the structure relevant to the size and orientation of the company, and financial requirements of the owners. The implementation part consists of an overview of the required financial objectives in the horizon of several years. The achievement of objectives is defined in the financial management policy, which is the basis for development of financial plans and budgets. The financial plan consists of balance sheet, profit and loss account, and cashflow statement. Annual budget is the basis of company’s operating management. The financial strategy is a result of marketing and sales strategy. The marketing and sales plan has to come before the financial plan. This means the marketing and sales information – to who, for what price, where, in what form and with what marketing cost – has to precede the budget. Sometimes wrongly used reverse process tends to unrealistic forecasts, and may cause existential problems to the enterprise. Financial director is responsible for the financial strategy. In order to be able to prepare it credibly, the director needs timely and correct information from the marketing and sales department, at minimum in the form of sales plan. Production strategy Similarly to the previous cases the production strategy includes analytical and implementation parts. The analytical part describes history of production, namely with regards to capacities, technologies, processes and individual sections, productivity and relation to the fulfillment of sales results. The implementation part describes how many products, in what quality ad structure, time and efficiency will be produced in the strategy’s horizon. The production strategy defines overall management of the production, sometimes also the management of procurement and technologies. Its results are local production plans – basis for dispatch plans (can be included logistic or warehousing plans). The production strategy in smaller companies is usually complemented with procurement policy and investment strategy related to new technologies. The marketing and sales, and financial plans have to come before the production plan. The director of production is responsible for the production plan and strategy. This procedure has to be emphasized once again! In many enterprises so-called manufacturing approach survives: â€Å"The production has produced and now it’s up to you – the salesman – to sell it! † Production directors and managers as the driving forces in companies are a mistake. It is not possible for the production departments to decide on the product range, price and quality. It is the customer who decides, and his decision is mediated in the company through marketing and sales department. As an example we can take the transformation of so-called Eastern bloc. High demand in former East-European countries in early nineties that often exceeded the supply of both traders and manufacturers, was a unique phenomenon, result of the transition towards market environment. Such situation is really unlikely in future. Logical consequence of company management was tremendous pressure of production and financial departments on sales – priority was HOW to produce and HOW to secure funds, WHERE to place the product or service was a secondary concern. The sales (actual sales, not the trading) were often simpler than the very manufacturing concept. Incoming multinationals and consequent growth of competition in general, stricter legislation, more cautious banks, higher pressure on quality and saturation of the market – these are the basic attributes that change the view of still frequent process: manufacture – finance – sales – marketing. The supply today exceeds the demand in most cases. Overproduction and surplus products come as a result. The enterprise capable of assessing market development and placing its products in variants, products that are sold, is more competitive and successful. The priority now is WHERE to place the product, WHAT price is the customer and the consumer willing to accept, WHAT quality is expected by the customer and the consumer, WHAT distribution channel is optimal for customers, WHAT means of communication will be used to offer the product, and only then: HOW and FOR HOW MUCH to produce the required product (to ensure profit at the end of the day). The Figure 1-2 illustrates trends of supply – demand relations in eastern Europe. It means in most cases it is the customer who decides on quality, design, parameters, price and placing of the product, not the manufacturer. The manufacturing approach is thus replaced with customer-oriented, sales/marketing approach. There is gradual transfer from production-oriented marketing towards the modern marketing philosophy of customer relationship management. This process was typical for the whole period of nineteen nineties, and due to the dynamic development of market environment, relations and competition it was very intensive. Figure 1-2 The trends of supply – demand relations in Eastern Europe in 90s Human resources strategy Human resources strategy has an analytical-historic part, and implementation part, too. It consists of human resources policy, followed by the plan of human resources management, so-called human resources plan. The plan describes in detail recruitment system, inclusion of employees in teams, creation of organizational designs, training and motivation of the staff. Personnel (in larger companies human resources) director is responsible for its preparation. In smaller companies, where there is no post of personnel director created, the human resources strategy falls within the executive director’s responsibility. In some medium marketing-oriented companies the bearer of personnel policy can be the marketing and sales director, who includes in his marketing plan the area of so-called internal marketing. Internal marketing in this case is a philosophy that treats the employees as customers – the main point being communication with the staff. They are informed of what is going on, why it is going on and what is required from them in order to ensure efficiency. In smaller companies the human resources plan is often substituted with motivation plan. The importance and sequence of managerial strategies There is a change of priorities and sequences of managerial going on presently. The effects of overproduction and surplus products lead to the necessity of considering the market information first – where to sell the product, under what conditions and quality. This means the marketing and sales plan is a cornerstone of further strategic planning, i. e. human resources, financial, production, quality, logistics, innovations, procurement etc. It is important to understand the planning in relation with the annual budget, as illustrated in the Figure 1-3 Figure 1-3 Strategic planning in small and medium enterprises related to annual budget . 3 Stakeholders One of the definitions of modern relations marketing talks about the tool of marketing philosophy of creation and distribution of values for targeted and identified markets – customers. Therefore correct identification of the customer, understanding the desires, values expected from us (the enterprise), for which he is wi lling to pay, are the basis of any marketing approach, and the starting point for the treatment of any marketing case. Basically we recognize two types of users of our products: – customers who buy or pay for the products and services we provide, but they do not necessarily use them (e. . purchase of gift for somebody, pet food, toys for children), – consumers who use the products ad services, but they do not necessarily buy them (husband uses aftershave from his wife, children play with toys from their parents). Another possible interpretation of the term customer is provided by P. Kotler and G. Armstrong (Marketing. Grada Publishing, Praha 2004), working with the following division: – organization whose purchasing behavior includes goods and services for the manufacture of another products to be sold, rented or provided further. These are also wholesale and retail companies. They operate in so-called industrial markets, – consumers (individuals and households) that buy goods and services for their own needs, the transactions take place in so-called consumer markets. Thus every enterprise has several different groups of customers and consumers, each of which expects different values from the relationship. We may even develop this idea further, and include another parties that neither buy nor directly use the services, still influencing the enterprise’s behavior. Those interested in particular company, because they can influence or be influenced by its activities (production, sponsoring, communication etc. are called involved persons, or stakeholders. In the relation marketing theory you may come across one statement – survival of an organization depends on its effective management, and wide range of involved persons. The satisfaction of the may and often conflicting interests of involved persons is a task for every manager within an o rganization. Involved persons – stakeholders, and their expectations are identified in the model shown in the Table 1-1 As seen in the table, the involved persons include several groups not to be called customers in our sense; however, on the other hand we would call the customers stakeholders. The term â€Å"stakeholders† is thus considerably wider than the term â€Å"customers†. The success and managerial skill does not mean maximum satisfaction of just a part of the stakeholders, but adequate satisfaction of everybody, if possible. The word â€Å"adequate† is used on purpose, as it is almost impossible for the reason of often conflicting interests to satisfy everybody to maximum extent. Involved persons |Expectations | |Employees |Financial remuneration, satisfaction from work, sureness | |Shareholders |Growing capital, dividends | |Suppliers |Regular and paid deliveries |Customers, consumers |Quality, value | |Government |Employment, legislative environment, payment of taxes | |Managers |Prestige, acknowledgment, career opportunities | |Minorities |Employment without discrimination, equal approach to values | |Creditors |Payments in time, safety of investments | |Municipality |Employment, taxes | Table 1-1 Involved persons and their expectations 1. 4 Key terms Owners strategy Managerial strategy Marketing strategy Sales strategy Human resources strategy Production strategy Sales plan Marketing plan Financial plan Production plan Human resources plan Industrial market Consumer market Stakeholders Shareholders Customers Consumers SME / Small and medium enterprise 1. 5 Test questions 1. What objectives definitely belong to the owners strategy? ) achievement of the defined turnover b) achievement of higher market share c) achievement of the objectives defined in quality policy d) achievement of the defined ROE 2. What has to precede the financial plan unconditionally? a) quality management plan b) marketing research c) human resources management plan d) logistic management plan 3. Who pursues the market requirements within an organization? a) production director b) sales and marketing director c) financial director d) technical director 4. B2B means to trade in: a) industrial markets b) commercial – consumer markets c) the area of employees’ purchases d) the field of state contracts 1. 6 Recommended literature Havlicek, K: Management, Role of Managers in Company Management, chapter 1 Hellriegel, D. – Jackson, E. S. – Slocum,J. W. (2005) : Management , A Comepetency-Based Approach. Thomson South-Western, Mason, chapters 1, 5, 6, 7. 2. Role of management within marketing management 2. 1 Marketing management 2. 2 Marketing policy 2. 3 Marketing researches 2. 4 Marketing planning 2. 5 Key terms 2. 6 Test questions 2. 7 Recommended literature 2. 1 Marketing management Marketing management is an essential business activity, without which no company can do, even more so if it has an ambition to export its own products, and to conquer new territories. Marketing management in CRM mode is defined as continuous process of analysis, planning, implementation and control of all the company’s activities. (Source: Kotler, P. , Armstrong, G. : Marketing. Grada Publishing, Praha 2004). The goal of marketing management in a company is to satisfy business objectives of the entity or entrepreneur by satisfying the customers’ requirements. K. Havlicek and M. Kasik in their publication Marketing management in small and medium enterprises (Management Press, Praha, 2005 ) created practical model of marketing management (Figure 2-1) when applying the philosophy of managed relations with customers: 2. 2. Marketing policy Each enterprise should have its marketing policy defined by the marketing director. This is a simple document that describes basic philosophy of the department, including product portfolio, customer segments, proposal of corresponding distribution, communication, and human resources. It should be linked to the overall strategy. The purpose of marketing policy is to provide simplified map of the main line of work of the department, what are the current customer segments, what marketing and sales activities are being prepared in the horizon of one year, who implements the current activities, how is the evaluation organized. The policy is prepared once a year, it should be in the form of a document given to every employee of the marketing and sales department, and to the company director. Marketing policy document usually includes: Organizational design of the marketing and sales department. Simple graphic chart of the organizational design is enough, where marketing director is on the top (in smaller companies marketing and sales director), followed by other team members, managers, sales representatives for domestic or foreign markets (so-called front office), sales assistants, background personnel (so-called back office), etc. Everything depends on the orientation, size, and organizational design of the enterprise. It is important to highlight the relations between possible subdivisions and hierarchy, i. e. who report to whom, who is responsible for whom. It is quite easy in smaller enterprise, but tens of staff members in the marketing and sales department are not an exception, of which some are field sales people, others work in branch offices or abroad. In such a case the organizational design is very important – from both control and transparency point of view. Main product groups and territorial division of the customers This means the overall product and territorial division, and major customer segments. The product division does not have to be detailed (individual products), but it should correspond to the group structure according to sales plan, maximum ten basic product groups (depending on the scope and orientation of the products). Territorial design means the division to individual countries, or regions. Customer segments should also be divided to maximum ten categories. It should be clear who is the customer, and what product mix will we offer. It is important to include concrete personal responsibility for all the above mentioned categories in the marketing and trade policy document. Human resources status and activities Complete list of all the department’s employees, their job assignments, classification within the organizational design of the team or projects of marketing and sales character, or projects of another departments and sections. It is useful to include e-mail addresses, mobile and fixed phones in the list. The fact that such document can be a major communication tool for some staff of the marketing and sales department should be taken into account. Motivation system The motivation system represents team motivation, system of evaluation aimed at departments, groups, or projects, concrete motivation instruments leading to the best performance of the staff, and consequently to prosperity. In other words – the system of remuneration should be clear from this document, i. e. nder what conditions, when and for what, in what way and by whom the remuneration will be approved and provided. Summary of individual evaluations, or even individual incomes should definitely not make part of this public document. Communication within the department When and where regular meetings take place, in what intervals, who takes part, what source materials are required, where the minutes are archived etc. The dates of â€Å"brainstorming† meetings, workshops, project sessions, innovation committees etc. can be provided as well. Marketing department directives In case there are directives of any kind used in the department, they should be included to the marketing policy as well. These can be for example directives related to quality policy, or internal directives of the department, such as a directive on the management and administration of trade receivables. 2. 3 Marketing researches For both large companies and small and medium enterprises the continuous market research is a cornerstone of their activities. It should not relate only to a particular goal or immediate plan; its ongoing implementation and monitoring are advisable. Product life cycle gets naturally shorter in the era of growing competition. Endless flow of information on new trends, competition, groups of customers and suppliers are key of further company development. The objective of marketing research is systematic planning, collection, analysis and evaluation of the information needed for an effective solution of marketing problems. This applies to all types of organizations in general. In small and medium enterprises the research is adequate to their possibilities, but even here it is necessary to understand that sound research is a basis for other activities. This implies the necessity of system approach, i. e. to apply the research of external environment aimed at the following aspects (so-called STEEP analysis): – sociological, – technological, – economic, – environmental, – political. This research is crucial, namely in the case of more remote territories, market environment of which is not well known. When researching the internal competitive environment it is convenient to use factor environment analysis (so-called Porter’s model of competitive environment): – number and strength of competitors, – customers, – suppliers, – substitute products, – potential competition. It depends on the purpose, type of business, size of the competitive environment, market share, power of the organization etc. The research includes collection, processing and analysis of the information, and a report has to be prepared, and maybe its results presented. To cover the information needs plan of the research can require collection of secondary data, primary data or both. The secondary data includes information that has been already collected for a different purpose. On the contrary the primary data is collected for a specific purpose. In the first case the enterprise makes use of its databases, and open external sources (public electronic databases, associations, chambers, media etc. ). In the second case ordinary accounting and economic data from the database of deals and customers will be the source, including minutes from meetings. However, it is good to realize that the market research does not mean just some spreadsheet and statistic methods, tens of pages of various papers, and expensive agencies providing professional surveys. The very research can be simplified in the small and medium enterprises under the slogan: â€Å"Collect and use the information from the market and its surroundings†, and it is up to the managers’ abilities to get the information on continuous basis. It means to keep communicating with the customer, to listen, to ask for feedback. It should be a precondition for the managers conducting marketing research to improve their education in this field further, to travel and learn new methods, to extend their general overview. To clinch a good deal is often not a matter of high expertise, but of general overview of politics, culture, sports, history, religion etc. Marketing department personnel should be able to absorb various kinds of information, and use and implement it further. General overview and fast work with information, as well as the ability to recognize their importance, are key criteria of recruitment of people for marketing and sales posts. Apart from the marketing research being performed on continuous basis, and the important data being archived, we obviously organize targeted research, depending on the upcoming events, which can be in the small and medium enterprises for example: – business or investment goal, – opening foreign market, – launching new product groups in the market, – establishing communication with a new customer segment, – expansion of resent production – increase of production capacity. It is also recommendable to update the marketing research on regular basis, when preparing annual sales and marketing plan. As a comprehensive document it should include an opening page and provide reasons why it has been conducted, information on the date and person, or contact to cooperating agency. Sales and marketing directors should be in charge of all the researches, not just relying on heir subordinates to do the work. The activities relate to significant, often sensitive data, which may be possibly carried away to a new employment. Successors usually start working on these data, which often represents the only document that provides characteristics of the product, customer segment and particular customers. At the level of small and medium enterprises it is useful when such research is performed by individual experts supervised by their manager, or directly by the marketing and sales director. This means the sales people who will be directly responsible for the researched segment or territory. Sales and marketing departments in SMEs usually do not dispose of a team of market research specialists, which is rather advantage. The research can be very well evaluated by the commercial success or failure of the responsible sales person, in comparably short time. However, this required good skills of the sales people. Apart from usual business skills and sales psychology training these people (often sales representatives) should be regularly trained in the basis of marketing in order to understand mutual connections of marketing, trade and communication. Marketing research is a necessary source document for the marketing and sales plan. 2. 4 Marketing planning Marketing plan belongs to basic pillars and documents needed for a successful management of the whole enterprise. Within SMEs, where we discern sales and marketing management, the sales plan is often part of the marketing plan, called marketing and sales plan. The sales and marketing parts of the plan are still independent, mutually connected documents, use of which can be: – (A) Annual, as a fundamental document for the management of marketing and sales department. – (B) Individual, as one of the basic documents for various activities and fields, for example: – business or investment goals, – opening of new foreign markets, – launching activities in new regional territories, – launching of new products in the market, – restructuring of enterprises. Marketing plan comes before financial plan, production plan, and human resources plan. Marketing plan is developed by the whole sales and marketing team, finalized by the marketing and sales director, who submits it to the enterprise’s director and bears responsibility. Marketing plan has to comply with the selected sales and marketing policy, and to be based on the whole company’s strategy. Within the time sequence of individual plans it is always on the first place, i. e. being developed in September – October of previous year. It is linked to marketing research, good quality of which is fundamental for the success or failure of the marketing and sales plan. The marketing plan (Figure 2-2) includes: SWOT analysis of the enterprise, – department (whole company) objectives, – strategy of achievement, – control mechanism of (assessment) achievement. Figure 2-2 Process of creation of marketing plan SWOT analysis To evaluate the result of enterp rise’s or its department’s activities the frequently used and well-known analysis of strengths, weaknesses, opportunities and threats – SWOT is used. The strengths are compared with opportunities (creative thinking), and the weaknesses with threats and potential risk (basis for risk analysis). SWOT analysis in general is considered to be a very important strategic tool, which exceeds the framework of marketing. It provides information from the viewpoint of customer relationship management on what works (and what doesn’t work), and on the changes in the interface between us and our customers. It is obvious we usually prepare SWOT analysis on the basis of previous research of external and competitive environment. The basis for SWOT analysis has to be thorough prior marketing research, otherwise we will not be able to compare our strengths and weaknesses, neither to define the opportunities and threats. Another danger of SWOT analysis is frequently a long list of wishes and limitations that remain the same for years. That is why it is important to focus on areas we can manage and influence. We use SWOT analysis not only as a necessary part of marketing plans, but also when evaluating personnel, annual reports and the like. Every salesperson and marketing staff member shall know the SWOT analysis and be able to make use of it within trading negotiations. The point s not to make too detailed analyses, 3 – 6 apt facts are enough for each area, expressed in the form of easily remembered slogans. The purpose of marketing plan should be considered. In case it is a regular document (see A) annually prepared for the company management, it is a description of status, opportunities and threats of the marketing and sales department, or the whole enterprise (in smaller companies). In case of plans prepared for certain event (see B) the SWOT analysis relates to one activity only, it is a partial or professional SWOT analysis, which is used for the decision on how and whether to perform the activity. SWOT analysis should be brief (three to five points to every issue), communicated to the whole sales team, which should possibly participate in its preparation. It is not just a basis for next decisions in the sense of feasibility of the set objectives and consequent method of their achievement, but also a good basis for negotiations of sales people with partners. Knowledge of the weaknesses and strengths, opportunities and threats of the enterprise due to its environment should be a matter of course for the whole company management. Strengths generate opportunities, some of which may even become objectives, on the contrary the weaknesses can lead to threats come true, and represent a basis for risk analysis. As well as the whole marketing plan the SWOT analysis should be created by team, while the final version and expressions are task for marketing and sales director. The very form of SWOT analysis within marketing plan can be one page, graphically clear matrix. Following the SWOT analysis we define the export department’s or company’s objectives. To systemize these factors a simple form is used (Table 2-1). SWOT analysis of a food processing company is provided as an example. | | |COMPANY STRENGTHS: |OPPORTUNITIES IN THE MARKET: | |– team of specialists in the company’s |– new customers recruited among chain | |management |stores | |excellent safe input material |– new product range – finished | |– well established network of supplied |food for the exis ting customers | |entities |– CR in EU – new customers | |– modern technological background | | |– wide assortment of products | | | | | | | | |COMPANY WEAKNESSES: |THREATS FROM THE MARKET: | |– language barriers |– strong competition in the market of | |– communication within the company, and |foodstuff suppliers | |towards external customers |– foreign competition | |– no product certified as â€Å"TOP product† |due to Czech Republic in EU | |– efficient approach to sales promotion |– orientation of multinational chains to | |missing |the products of their home countries | Table 2-1 Example of SWOT analysis of a food processing company Marketing objectives When defining the objectives we again differentiate between the plan as a managerial document (see A), or a plan of implementation of particular project (see B). In both cases the objectives should comply with several parameters, initials of which gave the method of their setting its name – SMART. They should be: – Specific (repeatability), – Measurable (turnover, margin, customers numbers), Achievable (in accordance with the enterprise’s objectives), – Realistic (possibilities of the enterprise, market capacity), – Time (realistic delivery terms, possible to control). The objectives are based on SWOT analysis, i. e. on actual possibilities and opportunities of the enterprise. It should not be difficult to set objectives using SMART method, provided the marketing research was performed well, or carefully updated. It is definitely not correct to go deliberately for high targets with the idea they do not have to be really achieved, but still we will have some good results. The proverb â€Å"if you want to go high, you have to aim even higher† does not apply here. It is recommendable to â€Å"stand on the ground† and create safe buffer, while keeping necessary and expected efficiency. It is because motivation plan is linked to the objectives, which would otherwise not make sense – unreal objectives would be rather de-motivating. It is not exceptional that the motivation plan is not related to the achievement, but exceeding the target, which once again confirms the need to set the objectives in a realistic manner. In the first case (A) we set the objectives for one year ahead, maximum of ten easy to remember and measurable objectives are recommended. Considering joint sales / marketing plan, its first objective should be to fulfill the sales (commercial) plan. Other objectives can come from a wide range of marketing activities, depending on the company’s focus, financial possibilities and realistic ambitions in the upcoming year. In the second case (B) fewer objectives are recommended (maximum five). Here the objectives logically relate to a project to be implemented. As one of the first objectives it is advised to set the fulfillment of sales plan for specific project or territory, to which the whole plan refers. Other objectives can be for example aimed at winning certain number of customers, penetrating specific territories, organization of foreign trade fairs, implementation of particular reference deal, launch of a new product etc. It is not the most convenient in small and medium enterprises to set objectives related to achieved percentage of market share, for example to increase the share by x%, because the market share of small entities is hard to measure, and there is not necessarily a possibility of credible verification of its achievement, and the motivation for these objectives is not easy either, as it is not an exception to obtain quite different data on our market share. Specific marketing objectives in individual markets can be expressed as: – given desirable volume of sales, – financial indicators – achieved profit, return on investment, – customers relationship – increase of spontaneous awareness of the brand within the target group, increase of customers’ loyalty. The objectives should fulfill the above mentioned SMART criteria, they have to comply with main company goals, and geographically outlined. Organization of active marketing is quite costly even in domestic markets, and definitely more in foreign markets. Therefore it is necessary to set the amount of anticipated income and revenue for the planned period. The work on formulation of department’s or company’s objectives should be a task for the whole sales and marketing team. Every participant should be able to complete and substantiate own sales plan, depending on the knowledge, market research, last years’ results, skills and experience, and factual data, and provide adequate reasons. This is another reason why a specialist shall perform the marketing research, which consequently addresses the specified segment, or implements the selected product in the territory. The form of objectives: – it is sufficient to describe the chosen objectives in pregnant terms (one page document), – it is necessary to mention who is responsible for the achievement (name, position), – deadline has to be provided with each objective (specific date). Strategy of achievement of objectives The strategy of achievement of the set objectives describes how we shall implement them. In a sense it is a small business plan, â€Å"timetable† of HOW we want to achieve the set objectives. It is the most important part of marketing activity in the company, where creative, analytical and theoretical skills have to be combined, as the method of execution of the set task has its own system and order. When planning the strategy of achievement of objectives it is necessary to select the procedure that not only complies with the character of our business, but also covers the whole marketing area. It is convenient to use 4P or 4C marketing mix. Every step we are going to implement has to be compared back to the company’s possibilities in financial, marketing, personnel, and production sense; sometimes the compliance with quality policy is verified. That is why the team work with financial manager (or quality manager)is good for development of the strategy, it is proper to involve production managers who should create feedback to production and capacity conditions, and give the sales and marketing strategy adequate direction. This process is not in conflict with the previous principle of pressure on production and preferential position of marketing in the sense of product decision making. In case of a dispute the production shall not have veto right, as this should be the power of company’s director to decide on further procedure, based on the views from marketing and sales, finance and production. However, this does not mean that the salespeople will not consult the strategy with financial and production managers. It is considered ideal situation, when there are variants emerging during discussions, acceptable for all parties. One should always be aware of the human resources opportunities of the department, which does not relate strictly to financial matters. Even if we have sufficient resources in budget to pay new salespeople, we do not necessarily find them in the market, and we may thus sacrifice the objectives. Following the above-mentioned, the qualification of sales and marketing staff should not be limited to expertise and general knowledge, they should be able to provide sound arguments and negotiate within internal discussions as well. For this purpose they have to know the company’s environment, capacities and possibilities. Major advantage is their basic knowledge of financial terms, which means at least the ability to read the budget, and defend their sales and marketing procedures properly. Figure 2-3 illustrates possible process of defining the strategies of achievement of objectives. This can obviously vary depending on the focus, size and goals of the enterprise. Figure 2-3 Possible process of defining the strategies of achievement of objectives 2. 5 Key terms Marketing management Marketing policy Marketing director Qualitative marketing research Quantitative marketing research Marketing planning Far environment Near environment Internal environment Product group Product range Pricing policy Pricing strategy Distribution strategy Marketing targets Communication mix Customer segment 2. 6 Test questions 1. SWOT analysis is a basis for: a) marketing research b) managerial plans (sales, marketing, financial) c) establishment of company information system d) company’s annual report 2. Enterprise can’t control in any significant way the factors defined in: a) STEEP analysis b) SWOT analysis c) Porter’s analysis d) customers analysis 3. Questionnaire survey is a part of: a) quantitative marketing research b) qualitative marketing research c) risk analysis d) analysis of strengths 4. CRM is: ) the highest level of marketing management b) database file c) information system d) credit customer system 2. 7 Recommended literature : Havlicek, K : Management, Role of Managers in Company Management, chapter 2. Hellriegel, D. – Jackson, E. S. – Slocum,J. W. (2005) : Management , A Comepete ncy-Based Approach. Thomson South-Western, Mason, chapters 3, 5, 16 3. Role of management within sales management 3. 1 Sales management 3. 2 Management and development of sales plans 3. 3 Management of forecasts 3. 4 Trade receivables management 3. 5. Customers communication management 3. 6 Key terms 3. 7 Test questions 3. 8 Recommended literature 3. 1 Sales management Sales management is linked to the marketing strategy, in many respects complementing the marketing management. It is often quite difficult in SMEs to tell the boundary between marketing and sales management. In any case, it is not possible to simplify the very sales activities only to the purchase – sales level. For example the management of forecasts and receivables belongs to major managerial activities that exceed the borders of sales significantly, being of crucial importance for the company. Karel Havlicek in his publication Marketing management of foreign trade (Eupress, 2006) summed up the basic aspects of sales management to the following four areas ( Figure 3-1 ) : 3. Management and development of sales plans The sales plan is an essential document for the sales department; in smaller companies, where there are mostly joint sales / marketing departments, it is also a part of marketing plan. That is why it is convenient to incorporate the objectives of sales plan in th e objectives of marketing department. This fact of rather technical character does not change a word said about the sales plan being crucial for the budget, strategic document that has to comply with certain requirements. Some enterprises, mainly the smaller ones, often ignore the marketing plan, and use only sales plan for commercial management. From short-term viewpoint this is possible, but it can’t be effective in a long run, as the enterprise is going to lose contact with market reality sooner or later. Such plan is then more or less routinely re-written every year, some per cent added or subtracted here and there according to the current view of sales people. Innovation impulses are missing, as well as new trends and feedback, the control over competition is lost, communication with customers chaotic, distribution without concept, and prices frequently at random, i. e. according to what the customer asks, regardless of the overall market and company situation, not to speak about the prolongation of development trends. In these circumstances the staff can be hardly motivated, and the discussions concerning sales plan figures are difficult. Sales people are not continuously forced to collect new information (which they may like at times), and they lose so important arguments for business negotiations, they have problems describing major competitive advantage of the company, and they face difficulties when defending it against competing offers. It is up to the personality of marketing and sales director and general director to be consistent when requiring the preparation of marketing and sales plans, be it very simple documents of few pages. Absence of such policy is mostly due to the fact that company directors don’t know how to apply it. This â€Å"lack of knowledge† is being argued: â€Å"we have never needed that, we have read the market for a long time, everything has worked fine so far, you are making up useless things†¦Ã¢â‚¬  etc. It is one of serious mistakes and managerial faults to be rigorously eliminated. In case the sales plan makes part of annual budget it should be developed for one year ahead (submitted in October the previous year), divided in months and quarters. In case of export activities it is correct for every conquered territory to have its own sales plan, even very simple one. This brings the possibility of easy monitoring of every market by assigning overhead and personnel cost to each territory, and working actively with the price map. Complete sales plan is then total of all the territories, or other monitored groups. Overall sales plan for foreign markets is usually divided by: – product groups (sometimes we talk about commodities, or product lines), – customer segments or specific major customers (in mix by the product groups and territories), – territories (every foreign territory separately, individual regions can be sub-groups), Detailed sales plan can include other sub-categories, as well as some plans can ignore certain above mentioned points of interest. It is definitely useful to divide the plan at least in two categories, and cross-compare the results and forecasts (see below). This is good for the management of forecasts, and this way we compel the sales people to think about the plan and the prognoses. Sometimes the plan is complemented with â€Å"by sales people† or other category. is logical that the end and total monthly figures have to be equal in the individual categories. From these data we can tell immediately where a major difference occurs, and what should be our focus. For example – if we plan smoothly by product groups, but there are problems with planning and formulation of expectations by customer groups, it means we have a good overall picture of the market, but the work with individual groups of customers and relevant prognosis is difficult. In other words the communication between us and the customer is not exactly perfect one, which can lead to losing them over time. This means we need to respond and look for a remedial measure. Another important aspect of the division is the immediate overview of individual market segments, as we can measure their trends and performance in these segments, and following the data we can develop further marketing activities. These obviously vary depending on the groups and segments, often in all the marketing mix aspects. Sales plan indicators Major indicators of sales plan are turnover, sales, or own output. This indicator is always provided in one measurable currency – CZK, EUR or other. The data regarding measuring units can be also included in the sales plan; they are significant, but not crucial. It can be a major mistake, when some companies use as their main sales plan indicator such measuring units as number of pieces sold, square meters, tons etc. The control gets more complicated, as measuring unit can change its price in a short time, but most importantly – we can’t measure immediate efficiency. The fact that more tons are sold does not mean increasing turnover or output. Sometimes other indicators are measured, such as margin, but once again – it should be measured as a sub-category, and evaluated on continuous basis. This indicator is important namely for trading companies, where the turnover may grow and plan be achieved, but at the expense of lower margin, which can influence the whole company’s economy at certain stage. It is necessary to adopt strategic measures in time. How to develop a sales plan? When compiling a sales plan, we most often utilize mixture of the following primary and secondary methods: Data from previous periods This is the most simple and available method, by which we track our sales results in given product groups, territories and customer segments in previous periods. In case we have been in the market for a longer time, we follow trends in specific categories, overall turnover figures, the margin and seasonal trends. Such information is definitely important for the development of plans, but not crucial. The precondition here is we’ve already made business in the territory. Market research from the viewpoint of competitive and external environment The basis is continuous or specific research of a foreign market, which is described in previous chapters. Apart from other data we are interested in the sales of our competition, trends and purchasing behavior of our customers, price policy of our suppliers, the threat of substitute products, capacity of foreign markets etc. In more remote territories we would track sociological, technological, economic, environmental, or political factors. The market information collected during marketing research of external and competitive environment is usually the most important basis for correct estimation of revenues. Professional intuition, experience and market estimates This is rather complementary method of estimation of revenues, which is nevertheless very valuable. Only the experienced sales staff can afford this, capable to foresee the behavior of consumers in selected markets. Foreign traders who operate in foreign territories on our behalf, and know the purchasing behavior of local population very well, can serve as an example. These experienced managers are priceless, but even here we need to think of their estimates and intuition, prognoses and forecasts as a complementary factor for plan development. Form, reporting and approval of the sales plan The sales plan has to be well arranged with regards to given period – usually prepared for individual months. The best would be to fit it within one page for the sake of good orientation. Budget, forecast (see below) and reality columns should be included. Differences have to be regularly monitored and evaluated. The sales plans of individual sales persons should be regularly (usually once a week) reported (e. g. lectronically via the company’s information system) to the marketing and sales director, and made part of regular meetings of the marketing and sales department, or export department. To tal annual sales plan is a work f the whole export team, marketing and sales director is responsible for its completion on the basis of individual plans. Individual sales persons are responsible for their partial sales plans. It is the task for marketing and sales director to evaluate each individual plan objectively, to provide a healthy opponency and cooperate on the final figure, which can be either the revenue, turnover, or margin. The sales persons bear absolute responsibility, and their motivation aspects are derived from the plan. It is recommended to set motivation bonuses for exceeding the plan, as the financial budget should be built on basic salary and fulfillment of the sales plan, or achievement of economic result. This means bonus shall be paid on the basis of exceeding the plan in certain ratio determined by the company’s management, with a reserve for marketing and sales directors (following the logic: exceeding the sales plan = exceeding the total economic result). 3. 3. Management of forecasts The importance of management of forecasts is bigger than generally perceived, and it goes far beyond the framework of marketing and sales department. The term â€Å"forecast† is used in foreign companies in the meaning of â€Å"estimate†. Other used terms are â€Å"sales prognosis†, or â€Å"expectancy†. Foreign companies have learned to use the forecasts as an essential managerial act – basis for the whole company’s strategy . There is some lack of willingness of sales persons and managers regarding forecasts in our country. It is a strategic mistake, which should be avoided by marketing and sales directors. This insufficient willingness is more or less due to the fact that the sales people don’t know how to prepare the forecasts, or how to estimate the purchasing behavior of their customers, and sales of their products in the horizon of few upcoming months. But first let’s have a look at the sequence and importance of the management of forecasts. Sales person submits and substantiates the following data within the sales plan development: a) sales plan – usually one year ahead, by months (territories, segments or product groups), b) continuous forecasts – always several months ahead, prepared every month (tracking the differences between the plan and forecasts), c) reality – i. e. actual result by months (tracking how the reality differs from budget and continuous forecasts). Importance of the management of forecasts We prepare the forecasts usually every month, always for 3-6 months ahead, i. e. in January for Jan-Jun period (six-month prognosis), in April for Apr-Sep period, in November for Nov-Apr period (in this case we overlap in two sales plans – of the current and following year), etc. We see the importance of management of forecasts in the following aspects: 1. We monitor the differences from budget sales plan By continuous monitoring of the trends and preparing prognoses (e. g. sic months ahead) we track the differences between actual and budget figures, i. e. the effects on budget economic result. There are basically three options: – Continuous forecasts do not vary from the budget – it means we have prepared the budget very precisely, there will be likely no effects on the economic result. – Forecasts are higher than the budget – it means our revenues will be probably higher than the budget expects, which may leads to many positive effects, but possible negatives should be considered. These can include higher receivables due to larger volume of sales, and consequently possible need to supply external resources to cover operating capital, which is not necessarily a matter of short time (guarantees). Moreover, the overdue receivables may grow, which is another complication when supplying external bank resources. However, there can be a reverse effect, i. e. cash surplus, which is obviously a positive. Even in such a case it s good to know in advance, as we can cancel loans, change funding or develop another investment project, where the resources can be used. This is a matter of several months, therefore continuous information on higher forecasts in the horizon of months is very important for us. Continuous forecasts are lower than the budget – undoubtedly negative message, in such situation the economic result is at stake, sometimes even general company’s existence. Here the timely indication in the form of six-month advance is twice as important, as it is necessary to adopt immediate measures. These may include an application for external resources, which is a matter of several weeks, or even months in banks. These may also be considerable cost cuts, such as layoffs, which is once again a matter of months (considering the compensations and notice periods). 2. We force the sales people to collect market information and communicate with customers This is another very significant aspect of both marketing and psychological importance. It requires prognoses in six-month advance (there are companies, namely multinationals, which require even annual forecasts with monthly breakdown). This means the sales people have to collect new, updated information on regular basis, i. e. to work with the market. On How to cite Role of Managers in Company Management, Essay examples