Business Policy and Strategy- An Action Plan- Critical Book 1727 Essay Example

case analysis respectively. The text concludes with an appendix featuring symbols used in report evaluation and a general index of topics covered in the book.

The authors utilize a variety of graphic techniques such as charts, graphs, forms, etc. to effectively illustrate their points. At the end of each chapter, there is a curated bibliography for further research. However, the lack of color to highlight key concepts and the absence of white space for notes make the book visually congested. Furthermore, the organization of separating key concepts from supporting text could be clearer. Although summaries are provided for each chapter, there is a lack of introductions and listings of important terms or concepts for students to learn from studying each chapter. Including these aids would greatly enhance the value of the book and improve the learning experience for readers.

Chapter 1 explores the reasons behind the failure and success of businesses. The authors clearly state their position on the matter in the first sentence of the book, asserting that "Businesses fail because managers fail" (1). They use a chart to demonstrate how businesses of all sizes can have relatively short periods of success. This chart highlights the ultimate reasons for failure, which are further explained in the text.

According to the authors, managers in business struggle with determining and implementing the necessary action. These shortcomings may be caused by their inability to distinguish between problems and symptoms. To assist readers in effectively managing businesses, Murdick, Moor, and Eckhouse outline five points that they elaborate on in the following 14 chapters.

One, they provide the scope of operation for managers. Two, they outline key issues that need to be addressed

for the success of companies. Three, they offer a framework for establishing a cohesive vision. Four, they give a summary of policies and challenges across different business functions. Five, they provide specific case studies and analytical tools to enhance the reader's problem-solving skills in complex business scenarios.

In the final chapter of 1987, a compilation of business failures and their corresponding causes is provided. This compilation aids in illustrating the significance of strategic management in determining the outcome of a company's success or failure (4).

Chapter 2 of the text focuses on the field of action in which business executives and businesses operate. The authors suggest that a business has seven groups of stakeholders, including customers, shareholders, general public, suppliers, competitors, governments, and special interest groups. It is crucial for a business to act responsibly towards these groups, as they provide legitimacy to the organization. Any of these groups can have enough influence to either force a business to close or support its operation during downturns. Since this field is constantly changing, it is the duty of individual managers to determine the appropriate level of responsibility towards each group of stakeholders.

According to Murdick, Moor and Eckhouse, it is crucial for a business to monitor and predict the business environment's impact on its success. The authors categorize the environment into two parts: remote and immediate. The remote environment includes global economics, political factors, social and demographic features, technology, and physical resources. On the other hand, the immediate environment consists of customers and prospects, competitors, the labor pool, suppliers, creditors, and government agencies (7). The authors argue that even though some managers may think they cannot predict the future

due to current issues, being aware of future possibilities can help minimize present problems.

This chapter concludes with a discussion of opportunities and threats, as suggested by Murdick, Moor and Eckhouse. They propose that opportunities, similar to the environment, can be categorized into immediate and long-term for analysis purposes.

The immediate opportunities mentioned include new applications of existing products, innovative manufacturing processes, and enhancements in customer service (8).

Immediate problems and extremely fragile environmental situations arise from threats. To evade these threats, long-term planning and anticipation of potential problems are essential. Competitors, changes in customer demand, legislation, inflation, recession, and technological breakthroughs can all be considered as environmental threats.

Managers must consider opportunities, threats, and constraints to achieve both short-term and long-term business success. Constraints, alongside the aforementioned factors, demand careful analysis to fully comprehend their implications. While legal constraints are usually evident, political constraints are often unclear. Murdick, Moor, and Eckhouse identified several growth constraints, including a scarcity of natural resources, diminishing productivity, and crumbling transportation systems (13).

Chapter 3 of the book focuses on the business system as the second area of action. The authors argue that solely studying individual functional areas without considering their interrelationships has historically been a limited and problematic approach, leading to numerous business problems and notable failures.

The discussion of the business system begins with the identification of general management. General managers are individuals who are "responsible for a business system" (15). The general manager is accountable for profit and loss and ensuring long-term survival. It is the general manager's role to balance conflicting objectives of subsystems, different value systems of internal and external influences, opposing views of priorities and emphasis, and conflicting proposals

for criteria in all areas. The general manager creates the enterprise concept, oversees the development of a set of visions, goals, values and policies, and carries out the strategic management tasks of renewal and growth (16).

According to Murdick, Moor and Eckhouse, organization serves as the framework for the business system. Certain organizational aspects are mandated by law, such as sole proprietorships, partnerships, limited partnerships, corporations, and joint-ventures. These legal forms of organization can be adopted by businesses, but the choice of which form to use is not determined by the law itself. Deciding on the appropriate legal organization requires careful analysis. As businesses evolve and strategies are modified, managers must also be willing to make changes to the legal organization in order to maintain a competitive and advantageous organizational structure.

According to Murdick, Moor, and Eckhouse (18), small firms are defined as those guided by a single individual or two partners. The imposition of a tight, formal structure from medium and large companies can prove fatal for smaller firms. For optimal performance, small companies require loose organizational structures that foster maximum creativity. As small firms transition into medium-sized firms, it is advisable to refrain from hiring managers from other medium-sized firms. Instead, the focus should be on training current company associates in the necessary skills for the expanded organization. In all instances, the objective is to keep the owner-manager engaged in areas where their expertise benefits the company the most. This may involve delegating certain responsibilities to allow the owner-manager time to concentrate on strategic planning.

In their analysis of medium-sized firms, Murdick, Moor and Eckhouse highlight the difficulty in clearly distinguishing between medium

and large companies. They propose using factors such as assets, sales, equity, and number of employees to make this distinction. They argue that one distinguishing characteristic of medium-sized firms is their need for a functional manager for each functional area, in contrast to small companies which may have one manager overseeing multiple areas. Additionally, medium-sized firms may employ full-time specialists like lawyers or treasurers, whereas small firms typically do not. The authors recommend that medium-sized companies adopt "flat" organizational charts with few hierarchical levels, where functional managers report directly to the president. They also suggest a span of management of at least six people without crossover responsibilities (22-23).

Large companies typically have intricate organizational structures, which can take on various forms. These companies are distinguished by their "staff" and "line" personnel, with staff members offering support services to line staff, who are in charge of the company's products or services. Large companies typically have more levels of management compared to medium and small businesses, and they often have subdivisions or subsidiaries that fall under a single parent organization.

According to the authors, organizations can adhere to six different "pure" forms: people, product, geographic area, process, function, or phase of activity (33). Large companies often integrate multiple forms.

Organizational policies, in contrast to personnel and staffing policies, establish guidelines for various aspects of the company. This includes principles for organizing different parts of the organization, defining relationships between major components, determining position titles, describing the functions of various components, and specifying spans of management.

In the concluding part of this chapter, the authors discuss decision problems, which refer to situations that necessitate action based on executive decision in order

to follow a specific course of action (41).

In Chapter 4, the authors finally define and delve into the concept of strategic management, which has been crucial throughout the text.

Murdick, Moor, and Eckhouse (45) outline seven essential tasks in the strategic management process that must be addressed: establishing the philosophy of management and defining corporate purpose and goals; conducting an analysis and forecast of the external environment; conducting an internal analysis to identify strengths and weaknesses; formulating a strategy; evaluating the effectiveness of the strategy; implementing the strategy; and finally, maintaining strategic control.

The focus of management philosophy is on the long-term goals of the company, rather than short-term objectives. Environmental and internal analysis have been covered in previous chapters. Developing and implementing strategy are challenging tasks for a firm. According to the authors, strategy is defined as

The text outlines three key elements for an organization's long-term plan: 1) the strategic objectives, 2) the courses of action to achieve those objectives, and 3) the policies and standards of conduct to be followed throughout a defined period (46).

When companies lack understanding of strategic management, there is a noticeable shift in tactical strategies. These companies do not have proper procedures for developing strategies and plans and may have subsidiaries or products that are no longer profitable. As a result, these companies are likely to experience a decline in market share and a weakening of their financial position. Additionally, disagreements among top managers regarding the company's direction or desired direction are common. Lastly, there is usually no long-term, written strategic plan in place for the organization, including strategic goals and the methods for achieving those goals (46-48).

In their

research, Murdick, Moor, and Eckhouse outline a four-step process for developing strategic directions in business. The first step involves top management engaging in open and honest discussions to establish the company's personality. The second step is conducting an analysis of the external environment to identify potential opportunities and threats. The third step involves conducting an internal analysis to assess available resources and capabilities. Finally, the fourth step entails aligning internal capabilities with external opportunities (49).

According to Murdick, Moor, and Eckhouse, strategic planning and implementation are closely related. They claim that planning is essentially the initial step of implementation. Strategic plans entail documenting the tasks, deadlines, methods, and responsible individuals. These plans significantly improve the chances of successful implementation by minimizing uncertainties.

The authors conclude the chapter by emphasizing the importance of implementing well-designed plans. They highlight the fact that even though companies may appear efficient, they may not be following their strategic plan. They assert that comprehensive company control is essential for long-term survival. In order to achieve this, they propose that long-term plans should involve identifying Key Performance Areas (KPAS) and establishing a monitoring system that ensures these areas align with top management's strategic vision (61).

The chapter includes three appendices by the authors. These appendices cover key merger and acquisition terms, value-based planning, and discounted cash flow valuation.

In chapter 5 of their book, Murdick, Moor and Eckhouse discuss the topic of survival and prosperity among firms. They acknowledge that new firms are at the highest risk of failure but emphasize that even old, well-established firms like Packard Motors and Baldwin Locomotive can also vanish from the business landscape. To gain a deeper understanding

of the reasons behind the success or failure of firms, the authors examine small, medium, and large companies. They highlight that there are numerous causes for failure that cannot be fully explored in a single text or chapter.

According to Murdick, Moor and Eckhouse, it is important for small firms to carefully analyze the competitive edge that determines their survival. Instead of relying on hunches and guesses, these firms should prioritize factual information. Owner-managers should actively seek qualified professional advice and make the most of it. It is crucial for small firms to avoid pursuing growth just for the sake of it, as well as undercapitalization. Additionally, small companies often face challenges such as lack of cash planning and managerial issues.

Chapter 5 examines why medium and large companies succeed and fail. The authors discover that successful companies have comprehensive objectives and policies that encompass all aspects of the company, including its internal and external environment (92). On the other hand, failing companies in this size category usually lack a cohesive sense of direction (94). Their failure can be attributed to deficiencies in key functional areas or unresolved personnel issues. These companies may have inadequate controls or attempt to implement an excessive number of controls simultaneously. Ultimately, medium and large companies that do not operate with an "international" mindset may encounter challenging circumstances (100).

Chapter 6 marks the start of a four-part section on functional areas, beginning with a discussion on marketing. Murdick, Moor and Eckhouse argue that successful firms embody a marketing-oriented culture, with every individual in the company being involved (103). The authors emphasize that a company's comprehension of marketing principles alone is insufficient; its

marketing team must also possess an understanding of the subjective aspects. Murdick, Moor and Eckhouse adopt a philosophical rather than mechanistic approach to marketing, enhancing the reader's comprehension and practical application in real-world scenarios.

The authors introduce the concept of a "marketing concept" as a guiding philosophy for all employees in the organization (104). This concept emphasizes treating the customer as a top priority, identifying a target market, achieving a competitive advantage, and prioritizing profits (105-106).

Murdick, Moor, and Eckhouse conducted research to determine the qualities of successful marketers. They concluded that effective marketers possess the ability to identify important factors related to their industry, predict the future behavior of these factors, and develop exceptional strategies based on these insights. Moreover, successful marketers are able to consistently satisfy a significant number of customers, generating substantial profits over an extended period, typically spanning at least a decade. These adept marketers acknowledge that the field of marketing combines elements of art and science, leveraging scientific knowledge to elevate their artistic approach.

When analyzing a company's marketing position, it is crucial to assess its marketing philosophy, policies, strategy, and operations. The primary focus is to ensure that the company adheres to its marketing concept. Establishing broad marketing policies is essential, and within these policies, a clear definition of the company's marketing strategy should be outlined. Additionally, effective and efficient execution of marketing operations is necessary (109).

According to Murdick, Moor, and Eckhouse, strategic marketing policies are created by senior managers based on top-level marketing policies. These policies encompass seven key areas, including morality and public service, products, markets, profits, personal selling, customer relations, and promotion (111).

According to the authors, marketing

policy can be approached in three ways. The first option is to expand sales by targeting new customer classes. The second option is to increase market penetration within existing segments. Lastly, rather than pursuing marketing innovations, the third option focuses on maintaining current market share through product design and manufacturing innovations.

Murdick, Moor, and Eckhouse emphasize the importance of discussing plans and tactics in order to adhere to the marketing concept and strategy. They propose various ways to analyze an organization's marketing, including the need to establish and maintain a competitive edge. Marketing research plays a crucial role in providing quantitative information for the company's direction. The authors also highlight the need to consider advertising, sales promotion policies, customers, industry, and environmental factors. It is important to account for personal selling as well. Distribution and pricing strategies should be regularly reviewed and modified to optimize the company's efficiency.

The chapter concludes with a summary of the marketing mix and a discussion of the potential pitfalls that companies facing marketing challenges may encounter.

The authors emphasize the significance of accounting and finance in Chapter 7, which is considerably longer than any other chapter. This indicates the authors' recognition of the apprehension many readers may have towards these subjects. The authors focus on fundamental finance and accounting concepts that can be easily grasped and offer the most value in a strategic business approach. For readers needing additional review, three appendices cover business arithmetic, break-even analysis, and definitions of accounting terms.

Recognizing the hesitation and discomfort that businesses often feel when dealing with accounting and finance, Murdick, Moor, and Eckhouse emphasize the importance of understanding financial analysis. They highlight how financial analysis

serves as a straightforward method to identify potential difficulties within a company. While it may not always pinpoint the underlying cause of the problem, financial analysis can effectively establish its existence.

Although the authors emphasize the importance of financial analysis in comprehending businesses, they also caution about its limitations. They point out that financial analysis often tends to be retrospective rather than forward-looking, and relying on past trends to predict future ones can be risky.

Technological changes, changes in consumer demand and other environmental factors that are outside the realm of financial analysis can be neglected if there is an excessive focus on historical financial performance. Companies operating in high technology or rapidly expanding industries may have irregular financial figures that are not a reliable representation of their actual performance. Additionally, there is the chance that these figures do not accurately depict the company's true position, whether intentionally or unintentionally. Ultimately, the authors propose that financial analysis is an art that only a select few have truly mastered, thus questioning its status as the ultimate analysis tool.

The authors present the limitations of financial analysis, followed by the advantages of using it. One advantage is spotting trends, as financial analysis is effective in this area. It can also highlight symptoms of problems and is important for potential investors in decision-making. Managers should keep a financial picture in mind to avoid surprises. Financial analysis helps identify actual problem areas. Additionally, quantitatively weighing exclusive courses of action provides managers with more tools for strategic decision-making.

The authors then discuss various sources of financial information that readers can utilize, including general sources like Moody's and Standard & Poor's, as

well as ratio reports.

Ratios hold significant importance to the authors as they dedicate four pages of a chart to calculate ratios and extensively discuss their appropriate usage. Murdick, Moor, and Eckhouse recommend comparing performance among departments within an organization and across companies within an industry to obtain the most accurate comparison. They emphasize the significance of comparing similar industries and companies within those industries when conducting industry comparisons. Choosing an incorrect category can invalidate the value of the ratio comparison.

The authors now shift their attention from finance to accounting and explore the ways in which accounting can assist decision-makers. In their opinion, financial accounting should provide answers to five fundamental queries. Firstly, it should give an overall indication of the company's performance. Secondly, it should help determine which of various plans is the most appealing. Thirdly, it should identify any issues and their specific locations, as well as provide guidance on how to resolve them. Fourthly, it should aid in coordinating activities. Lastly, it should evaluate whether the company is operating at its maximum effectiveness within its environment (144-145).

According to the authors, in order to start their analysis, readers should take financial information from the most recent ten years. The authors believe that any trends observed during this time period are likely to continue, unless there are unexpected circumstances.

According to the authors, there are four key questions to consider when analyzing the profit and loss statement. These include: (1) the sales trend, (2) the trend of cost of goods sold as a percentage of sales, (3) the trend of operating expenses as a percentage of sales, and (4) the trend in profits. If

there is an upward trend in sales but a downward trend in profits, it is highly probable that the company is already facing significant difficulties (147).

The authors emphasize the significance of analyzing four key areas, namely profitability, liquidity, leverage, and turnover, when conducting ratio analysis. Additionally, they underscore the importance of taking into account any other relevant questions that are specific to the company and industry.

Murdick, Moor and Eckhouse emphasize the importance of break-even analysis in various scenarios. These include determining whether to increase sales or advertising expenses to drive volume, comparing the benefits of lowering prices versus increasing volume, assessing the feasibility of borrowing for capital improvements to expand capacity, and evaluating office automation. According to them, the initial step in break-even analysis involves categorizing costs into fixed (constant) and variable.

Murdick, Moor and Eckhouse provide examples of inventory valuation and its impact on a company's financial position. They highlight that the choice of valuation method or changes in valuation can lead to either an overstatement or understatement of the company's actual position.

Next, the reader is presented with the concept of funds flow, which outlines the amount of funds required for projects and where these funds can potentially come from.

The authors emphasize the significance of budgets in assessing a company's managerial performance. Budgets are crucial for both planning and evaluating past performance. They reflect the company's expectations and their ability to predict their own performance. Additionally, budgets can identify present challenges and problematic areas as well as highlight past issues.

After providing extensive information on finance and accounting, the authors conclude the chapter with a detailed chart aimed at aiding the reader in utilizing

their newly obtained skills. Additionally, they stress that regular and frequent analysis is key to enhancing one's financial analysis abilities. The three appendices accompanying this chapter offer tools intended to support this improvement.

Chapter 8 focuses on the production aspect of businesses, including those that produce goods and provide services. The authors explain that production is the process of bringing a design of a product or service into its physical form (177).

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