POSSIBLE REVERSE STRATEGIES IN MANAGEMENT AND THE SITUATIONS

By: V S RANGARAJAN Posted on: 2008-02-27 ** Print Article ** ** Copy Article ** - Category Feed

Article Summary: The Globalistion , Liberalisation and Privatisation process of the countries have put the companies to work in a dynamic environment.

POSSIBLE REVERSE STRATEGIES IN MANAGEMENT AND THE SITUATIONS



I) INTRODUCTION


The Globalistion , Liberalisation and Privatisation process of the countries have put the companies to work in a dynamic environment.

On one side the Opportunities are huge for the companies to make profit and on the other side the Threats are alarming which may put the companies in sickness

Unlike olden days the companies are expecting quick return on their investments. This may be because of the rate of change that is taking place in the environment in terms of investment, technology, etc

Under the above scenario keeping the environment into consideration companies chart out their plans

The top management of the company decides the objectives to be achieved in the future by the Business strategy process The functional managers of the company ( Production, Finance and other functions ) will all work towards the company’s overall target by contributing to the extent possible by them.

To achieve this the managers perform the following managerial functions in their day to day operations

1) he has to take decision by choosing the best among alternatives
2) he has to extract work from others
3) he has to identify the opportunities and work towards reaping the benefits which are available for the company taking into consideration of available resources
4) he has to do the functions of Planning, Organizing and Controlling with the
available systems

The present day managers of the companies are interested in acquiring all the latest skills available in the industry in managing businesses efficiently and use the skills based on the situation they face while executing their responsibilities

As we all know management is both an Art and a Science, the manager has to play the important role both as an Artist ( keeping cool even during crisis ) and a Scientist ( expecting sales results on the money spent on advertisement )

Since there is no hard and fast rule in practicing management concepts in achieving results, some times managers adopt trial and error method by reversing their strategies towards achieving their objectives. Since the trial and error method is a costly method for taking decisions managers want to learn from others experiences to take decisions

The author in this article wants to high light some of the reverse strategies that were adopted by some of the companies which lead them to achieve their objectives. Along with the reverse strategies adopted by the companies the situation which lead them towards the same is also provided

The author is not trying to discuss the alternate strategies available and he is discussing only on reverse strategies

II) POSSIBLE REVERSE STRATEGIES IN

MANAGEMENT

1) MARKETING

Pricing Strategy

Companies adopt the strategy of arriving at the price of the product based on the cost inputs incurred plus margin that the company wants to add ( depends on the pay back period )

Companies adopt the reverse strategy of finding out how much the buyer is willing to pay for the product through market survey and pricing the product accordingly where substitute competition exists.

Market Targeting strategy

Companies adopt the strategy of selling the product first to the users of the product to sell its brand and also to increase their consumption rate

Companies adopt the reverse strategy of selling the product first to the non users of the product to create awareness among the non users and also to increase the Market size

Customer Relationship Marketing

Companies adopt the strategy of aggressive selling to canvass orders from new customers

Companies adopt the reverse strategy of negative marketing thereby discouraging orders from new customers. But the company will take all efforts to retain the existing customers by satisfying them to the maximum extent adopting selective approach

Pricing

Companies adopt the Market Skimming strategy of pricing the new product high keeping high margin of profit during introduction period and will slowly reduce the price in the subsequent period. This the company adopts to earn high profits during initial period before ‘Me Too’ products developed by ‘Copy Cats’ enter the market

Companies adopt the reverse strategy of Market Penetration pricing the new products low keeping low margin of profit during introduction period and will slowly increase the price in the subsequent periods. This the company adopts to earn less profit during initial period to attract more non users of the product, to make them try the product, ultimately to convert them as loyal customers of the product

Marketing and Selling

Companies adopt the strategy of first finding out what the customers want and then take up production activity of producing the product – Marketing concept

Companies adopt the reverse strategy of producing the product first and later on find ways to sell the product – Selling concept

Companies stared believing that company which comes out with innovative features in their product / innovative method in selling, will find no problem in selling because of the increasing affordability of the buyers

Sales Plan and Production Plan

Companies adopt the strategy of preparing the Sales Plan first and based on the same it prepares the Production Plan to minimize unsold production

Companies adopt the reverse strategy of preparing the Production Plan first and may instruct the Sales department to achieve the targets by using sales promotional strategies to increase the profitability of the company

Indirect Expenses in Marketing

Companies adopt the strategy of being prudent in spending on in - direct expenses when they market their production. ( Like spending less on advertisement, publicity, public relations, etc )

Companies adopt the reverse strategy of spending lavishly on in direct marketing expenses when it is facing the situation of paying huge Income Tax during that particular year. The company will reap the benefits of the expenditure in the next year

Salesmen

Company’s salesmen starts with the tactics of motivating the probable customer to buy the company’s product by educating the customer on the product / company benefits. Later he talks about his personal back ground to reinforce the reliability of the transaction

Company’s salesman starts with the tactics of motivating the customer to buy the product telling first about himself and his background and later only about the product / company

Sales Forecasting

Companies adopt reverse strategy of forecasting the sales by getting the opinion of the Bottom level management when the company is forecasting the sales of the existing product

Companies adopt the strategy of forecasting the sales by getting the opinion of the Top level management especially when the company introduces the new product

2) HUMAN RESOURCE MANAGEMENT

Recruitment and Selection

Companies recruit and select only trained employees to put them on the job Companies believe that the cost of training is eliminated

Companies recruit fresher and provide training before they are put on the job. Companies believe that their skill expectations from the employee is special / unique and not being practiced in the industry. Company believes that the training will be more effective when provided to fresher

Attrition rate

Companies adopt the strategy of retaining the employees with them by offering fringe benefits, incentives, etc to retain the employees with them to manage the crisis situation of shortage of skilled man power

Companies adopt the reverse strategy of sending the employees out of the company to reduce the work force in the company by providing Voluntary Retirement Schemes ( Golden Hand shake ), development of Intrapreneurs, etc the situation of Change of Technology in the industry would have resulted in the companies adopting this strategy

3) PRODUCTION

Standardisation

Companies adopt the strategy of increasing the range of products of production by increasing the list of products in the Product Mix to meet the variety seeking requirements of the customers

Companies adopt the reverse strategy of reducing the range of products of production from its existing range to avail the benefits of standardization like cost reduction, specialization, etc

Capacity utilization of the Plant

Companies adopt the strategy of maximizing the utilization of its installed capacity of the Plant and Machinery to minimize the fixed cost component of the factory which goes into the production of the product

Companies adopt the reverse strategy of wantonly reducing the capacity utilization of the installed capacity of the Plant and Machinery, not bothering the loss in capacity utilization , to minimize the loss which may occur due to the sluggish demand for the product during recession period

Speed of the Machines

Companies adopt the strategy of running the machines at the maximum speed to achieve high production out put

Companies adopt the reverse strategy of running the machines at lower speeds than recommended by the industry to achieve quality standards required by the important buyers even sacrificing on the out put

Inventory

Companies adopt the strategy of maintaining Just minimum inventory ( or ) even prefer to maintain Just in Time inventory of raw materials and other materials

Companies adopt the reverse strategy of holding huge stocks very much above the Maximum level, even one year’s stock, by purchasing the stock when the material cost is low in the suppliers market ( example, the agricultural product cotton fibre price varies from Rs 16/ per kg to Rs 36/ -per kg, the Textile spinning mills buy the cotton when it is cheapest during the month of Nov and Dec from agriculturalist )

Suppliers List

Companies adopt the strategy of buying from many suppliers initially and to finally choose the best suppliers among them ( especially when the company is new )

Companies adopt the strategy of enlarging the list by studying the suppliers carefully to include in the suppliers list. To create confidence and achieve win win situation among the company and the suppliers

4) MANAGEMENT

Revival of Sick units

Companies adopt the strategy of reducing its operations by selling its investments, down sizing the work force, etc thereby reducing the interest components, fixed cost, etc to avoid further losses and to wipe off accumulated loss

Companies adopt the reverse strategy of increasing its operations to tap the opportunities by means of additional investments to increase the turn over and profitability of the company

Delegation of Power

Companies adopt the strategy of decentralizing the decision making process to increase the speed of decision making by employing highly paid employees and by delegating powers to them and thus increase profitability of the company

Companies adopt the reverse strategy of centralizing the decision making process to increase the speed of decision making and thus improving profitability by introducing computer software systems which are operated employing less paid computer professionals only for follow up activities

System manages Managers

Companies adopt the strategy of managing men by managers where work has to be extracted from unqualified people by qualified managers

Companies adopt the strategy of managing people with the help of systems introduced by the management , eliminating men managing men where both the employees and the managers are qualified

5) FINANCIAL MANAGEMENT

Debt Equity Ratio

Companies adopt the strategy of increasing the equity funds to meet the cost of the project

Companies adopt the reverse strategy of reducing the equity funds when the borrowed funds are cheaper

Working Capital Funds

Companies adopt the strategy of providing more credit to the customers pricing the product higher thereby maintaining higher margin

Companies adopt the reverse strategy of cash and carry sales to the customers by pricing the product with minimum margin compared to competitors thereby increasing the sales manifold and thus increasing the profit

III) CONCLUSION

There are many more reverse strategies available and practiced by the managers in the field which are not covered in this article.

The manager of the company has to adopt the appropriate strategy to be successful in executing his function

As management concept says innovation is the style and the way in which a person executes his job from others differently

Managers need to think in different ways to achieve the results

Article Source: http://www.upublish.info

About the Author:
V S RANGARAJAN
EDUCATIONAL QUALIFICATION BTECH,MBA, M PHIL, ( PH D ) EXPERIENCE INDUSTRIAL COSULTANCY 18 YEARS INDUSTRY 3 YEATRS TEACHING 5 YEAR

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