The MBA Primer

We now come to the formal foundation of business understanding… the MBA.

Needless to say, many Business Leaders have taken great strides in pursuing
their Master’s. And this is for the simple fact that having such a degree is
an added armor in our profiles. However, more than just the paper factor,
the MBA provides us with that necessary knowledge in the ins-and-outs of
business administration.

This post would be tackling the five (5) core subjects in the MBA yet
the question is… “Can we actually touch on every aspect of the curriculum?”

The answer is No.
It’s just too lengthy and perhaps complex to some that we would need
to do a series on it. Nonetheless to make this primer layman-friendly,
we will try to use the most common terms in a concise presentation.

...

STRATEGIC MANAGEMENT encompasses the activities of Executives
in attempts to influence the overall direction of their organization.
This is mainly about defining the mission of the enterprise and ensuring
that the right things happen to execute the mission. These two activities
constitute the two (2) dimensions of Strategic Management –
Domain Definition which is basically what type of business, activity or
venture would the organization get into; and
Domain Navigation which is the process of rationalizing the stream of
activities within each domain by formulating and implementing business strategies.

As we are reminded that Domain Definition and Navigation refers
to the process of Strategic Management… of equal importance is
the content of a company’s strategy and for business purposes is in
reference to the organizational level at which strategic decisions
are made. (L.J. Bourgeois)

Here now are the three (3) levels of Strategy:

1. Corporate Strategy determines what businesses a corporation
will enter or exit and how to allocate resources among the various
businesses. This strategy is done at headquarter level.

2. Business Strategy refers to the competitive decisions made within a
particular product-market with an eye to achieving competitive
advantage and developing distinctive competences within an industry.
This strategy is performed at the General Manager or CEO level.

3. Functional Strategies in marketing, operations, finance, R & D,
and so on, while formulated at the department manager level,
should provide support for the business strategy.

In any way, it is important to note that formulating a great strategy
is one thing while managing its execution is another. Hence, it is
highly possible that a great plan on paper can fail in implementation.
Therefore, we then have to examine areas such as information sharing,
knowledge transfer, and the management of culture, which happens
to be where many promising strategies fall short.
(Wharton Executive Education)

Keep in mind that if we are able to coalign the organization and
its environment… proactively and constantly, then we have come
a long way in anticipating and solving the strategy problem.

For another perspective on Strategic Management, please refer to
“A Glimpse At The Strategist” (April 21, 2008) of this blog site.

FINANCIAL MANAGEMENT. For those of you who have seen the
“Entrepreneurial Success Model”, managing money in keeping
with some plan or objective is what this subject is all about.
And although a number of objectives or goals could be advanced,
the conceptual foundation of finance is based on the notion that a
corporation directs its activities in order to maximize shareholder
wealth. So, we now have an idea on why Financial Policy can
determine whether a company flourishes or languishes in the
competitive arena… which is what makes Finance an interesting
and important business subject.

Who is the quintessential person responsible for such policy?
The CFO or the Chief Financial Officer of a corporation.
His/her vital duties mainly fall under two (2) broad headings:
(James C. Van Horne)

1. The allocation of funds among different assets. Here we consider
capital budgeting under conditions of risk and the required rate
of return for a project with valuation issues taken into account.

2. The raising of funds both externally and internally. In this area,
the nub would be with leverage, capital structure and actual financing
including the analysis of retained earnings as a source of funds.

It is important to note, however, as a special concern for finance leaders,
we have to take into account Mergers and Acquisitions.

Now with the volatility times, Financial Leaders should always be on
the alert to the changing interest-rate and equity-cost environment.
Take note, many of the financial innovations that occur are in response
to the precarious inflation and interest rates, regulatory changes that
permit increased competition among financial institutions, technological
advances that prompt improved electronic fund transfers, changes in
the level of economic activity, and tax law changes.

ACCOUNTING. For non-accountants, there are essentially two (2)
sides to the coin – “Financial Accounting” which deals with reporting
to individuals and entities external to the organization; and
“Managerial Accouting” which deals with reporting to individuals
inside the organization. In broad terms, accounting provides a financial
picture of an organization’s activities. (Joel S. Demski)

In other words, “Accounting” is about the measurement of cost and
revenue; with the accounting system as an important source of managerial
information. As for the corporation’s expenditures, spendings vary as to
the type of business each entity are into… as revenues do differ as well.
Therefore, planning, monitoring, and controlling is often imperative to
optimize business operations.

If there’s a field in business where words are few… it’s accounting.
It is simply about numbers.

OPERATIONS. For this expanse, focus would be on Quality and
Productivity as well as Supply Chain Management. And so we begin
with a framework for understanding operations, a general structure
proposed by Abernathy et al. and refined by Hayes and Wheelwright
that provided a useful starting point. However, for this piece, we would
be presenting the Perspectives on the Competitiveness of Product
Operations in a descriptive manner. (Steven C. Wheelwright)

The framework’s first quadrant has its foremost emphasis on institutional
laws or policies that can be employed to encourage and support various
objectives in the manufacturing sector. These are actually aspects that
are “macro” (country-wide) and structural where these facets are considered
the pivotal point of industrial policy.

The second quadrant which is also macro in nature, deals with infrastructure
or “software aspects” that includes culture, traditions, and social behaviours.
Consideration here is on the work ethic and the willingness of workers to
submit to and adopt group objectives.

The third quadrant represents the more traditional “micro” or company-level
views which contains the structural features of production operations –
such as plant equipment, technology and vertical integration.

The fourth quadrant consists of infrastructure elements of production operations
within the individual firm that includes measurement and control systems,
work-force policies, management selection and training, and attention to detail
which are essential to competitiveness.

And to gain that competitive advantage, we have to address three (3) major
problems in managing production operations:

1. Deciding upon the set of production operation resources that the
firm needs to accomplish its overall objectives and purposes
with consequence to quadrant 3.

2. Providing the day-to-day systems and procedures that will make
the most efficacious use of that set of production operation resources
in weight to quadrant 4.

3. Coordinating the production operations function with the other
functions in the firm.

As we improve our processes, we improve on our Productivity and eventually
Quality; which is truly more than just having the specifications met but
guaranteeing consumer satisfaction.

And to achieve Leadership in our industry…
We not only improve our processes but we have to make certain of the
highest possible standards our products and services.

Still, given that our products have excellent Quality, sustaining Leadership
is another matter as this would now fall on how we manage our Supply Chain.
See, although Logistics is a support activity which is really the sum of
physical supply and physical distribution… if we could only ascertain that
our customers could have our products whenever and wherever possible,
then Industry Leadership would be realized.

MARKETING. While operations is the ‘machine’, marketing is the ‘voice’.
Previously, “marketing” was simply advertising and in many cases,
it’s also selling. This is why the attention has particularly been on the
consumer, the competitors, and the economy… while at the same time
being guided by two (2) principles:

1. Meeting customer needs, and;

2. Providing a product or service superior to that of competition.

To meet needs, we got to be able to hear our customers; and we do so
by effective customer analysis.
To provide a superior product or service versus competition, we do a
thorough competitive analysis coupled with an innovative product development.

Now with the changing times where customer and competitive positioning
is not enough, stress then should be given to Image Building…
from "organizational reengineering" to "public relations."

And yes, given that the 4 P’s has been properly attended to and with
consideration to the ‘bargaining power of suppliers and customers’ as
well as to ‘threats of substitutes’…

Image Building would now become a crucial marketing strategy;
and by "positioning ourselves as partners of growth –
we have set ourselves as the Key to their Success."

...

KNOW YOUR FIELD OF ACTIVITY

Another quality common to leaders is their willingness to work hard,
to prepare themselves, to know their field of activity thoroughly.
I have often heard it said of some individual: “Oh, he’ll get by on
his personality.” Well, he may ‘get by’ for a time, but if a charming
personality is all he has, the day will come when he will find himself
looking for a job.

I never knew President Roosevelt as well as I did some of the other
world leaders, but in the few conferences I had with him I was
impressed, not only by his inspirational qualities, but by his amazing
grasp of the whole complex war effort. He could discuss strategy on
equal terms with his generals and admirals. His knowledge of the
geography of the war theatres was so encyclopedic that the most
obscure places in faraway countries were always accurately sited
on his mental map. President Roosevelt possessed personality,
but as his nation’s leader in a global conflict, he also did his
homework – thoroughly.

Dwight D. Eisenhower

...

Mastering Business Administration is never a daunting quest for the
diligent and determined. Technical competence or professional
knowledge is a key strand to our authority. Yet expertise in a
particular job is not enough; other more general skills are required.
These focus upon Leadership, decision-making, and communication.
These can be ‘transferred’ as we move into a different situation in
our field or change to a new sphere of work. Within our field, we
should aim to widen our knowledge of the work and develop the
general abilities of leading others. Doing so will increase our
flexibility within it, so that we master reading the changes in
situations and responding with the appropriate Leadership style.

Erudition can be gained through readings; and
On-the-job experience is not the only way to practice management.

Use your imagination and act on it.

Remember…
To be that Expert in Business Administration… Do your Homework.