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STRATEGIC MANAGEMENT 1. Basic concepts Hungarian competitiveness


STRATEGIC MANAGEMENT 1. Basic concepts Hungarian competitiveness Prof. G bor PAPANEK * * * Introduction 1. The subject of ... – PowerPoint PPT presentation

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Title: STRATEGIC MANAGEMENT 1. Basic concepts Hungarian competitiveness

STRATEGIC MANAGEMENT 1. Basic conceptsHungarian
  • Prof. Gábor PAPANEK

Introduction 1.
  • The subject of strategic management is how to
    manage economic actions. I will present
    principles and methods of economic decision
    making. This topic is general, which is important
    for everybody, e.g. for businessmen, and
    economists interested in regional or national
    economic policy.
  • In addition I will mention some characteristics
    of the EU and Hungarian position.
  • On the slides the most important words,
    statements are written in red, the others in
    black, but some additional information in blue
    colour (figure).

- Iguaçu
Introduction 2.
  • The titles of my presentations during the
  • Basic concepts
  • Techniques of strategic planning 1 -2
  • Strategy implementation
  • Financial strategies
  • Innovation management
  • Regional development strategies
  • Economic policy

Introduction 3. (definitions)
  • Economy is a system of goods, persons,
    organisations which operates to fulfil peoples
  • Main economic actors are households, companies
    and the government (figure).
  • Companies are endowed with the resources used in
    the production from the families and pay for
    them. They produce products and sell these to the
    families. The state controls these processes
    collecting taxes and giving subventions - and
    regulating the markets.
  • Economics Scientific analysis of human
    behaviour, the objective of which is the use of
    the scarce resources for the provision of

Source own figure based on many publications
Introduction 3.
  • Firm (company or enterprise) independent
    business organisation.
  • Creation of a firm can be rational, if
    transaction costs of the given business are
    smaller in case, if the work is organised in the
    frame of one enterprise, than with the help of
    commercial connections of independent firms (R.
  • The life story of a firm can be described by
    its life cycle, which is similar to the
    well-known product life cycle (figure).
  • We can distinguish small, medium- sized
    enterprises and large corporations (table).

Life cycle of a firm
Source own figure based on many publications
1 pre-foundation 2 market entry 3 growth 4
maturity 5 decline 6 renewal
Small-, medium-sized enterprises and large
SME small- and medium-sized enterprise
Source -
La Paz
Introduction 4.
  • The legal forms of firms and their liability.
  • Owners liability in the corporations with legal
    entity is limited, the owners are liable for the
    actions of their enterprise to the extent of
    their ownership only.
  • Owners liability in partnerships without legal
    entity and in the private entrepreneurships (sole
    proprietors) is unlimited, the owners are liable
    to the extent of all their property.

Introduction 5.
  • Two main methodical approaches to research are
  • Induction it is a process of reasoning in which
    some facts (observations) prove the validity of a
  • Deduction it is a process of reasoning in which
    a conclusion follows necessarily from the
    premises presented.
  • We have to use both type of methods, if we prove
    a statement.
  • Literature Babbie, E. The practice of social
    research. Wadsworth P. Co. 1989.

  • Management is a set of activities directed at the
    efficient and effective utilization of resources
    in the pursuit of one of more goals.
  • In management, skills are always important, but
    often the successful manager has to be an
    artist as well.
  • Functions of management are planning, leading,
    organisation, coordination, control (H. Fayol -

  • Some views
  • To manage is to forecast and plan, to organise,
    to command, to coordinate and to control Fayol
  • Management is a social process the process
    consists of planning, control, coordination and
    motivation Brech 1957
  • The five essential managerial functions are
    planning, organising, staffing, directing and
    leading and controlling Koontz-ODonnel 1976
  • Source presentation of Mr. B. Borsi

  • Todays in strategic management one of the most
    cited author is Michael PORTER. He put
    competition in the centre of his analysis. But he
    mentioned that in many cases the co-operation can
    be important as well.
  • The oldest manual about the management
    knowledge is the Panchatantra (an old Indian book
    from the II. century B. C.). It says that the
    King has to be skilled first of all in
    acquisition and loss of friends, war, loss of
    properties, and they have to avoid rash actions.
    All these are important even todays market

Plans 1.
  • Planning is the first function of the management.
  • A plan is a document which defines the goals of
    an organisation (or a person) and the way of
    their fulfilment.
  • The main types of enterprises plans are the
    mission, the strategy and the tactics.
  • The mission is a brief description of the reason
    for the firms existence. It is always fixed by
    the owners.
  • Example B. Gates mission was to give
    personal computer to all US families.
  • The strategy formulates the broad goals, and the
    tools of realisation of an organisation in an
    extended time frame.
  • The tactics focus the people and actions which
    implement the strategy.

  • The most important strategy concepts
  • Vision what does the company see for the future?
  • Mission why does the company exist?
  • Strategy covers the definition of objectives as
    well as the methods and tools to help reaching
    the objectives.
  • Objective they say, what does the company want
    to implement in a given time?
  • Tools the way defined to fulfil the mission and
    objectives, at the end of which the vision
    becomes reality.
  • Strategic action a main task derived from
    strategic objectives ? often formulated as
  • Source presentation of Mr. B. Borsi

  • The interdependence of different plans,
    especially the feedback is always important
  • Example
  • The late 1800s a US railway co. said, that its
    mission is the transport of persons and
    commodities by train. It was successful for a
    long time.
  • In the 1950s the Co. went bankrupt. The analysis
    stated, that the cause was leaving the mission
    unchanged after the general use of automobiles.
    The failure could have been avoided, if the
    mission changed to include transport by all
    transport vehicles.

Interdependence of different plans
Source own figure based on many publications
Plans 2.
  • In small enterprises decision making and other
    tasks of planning are the duty of the owner(s)
    and (if there is) of the top manager(s). The
    development of the mission and the strategy can
    be informal (it is not obligatory to write them).
    The only plan which has to be formal can be the
    business plan.
  • In small firms the business plan projects the
    revenues and costs of a given period, or program.

  • In all big companies, there is a division of
    labour between the top manager (the boss) and the
    managers of functional departments or divisions.
  • Subsidiarity is an old, but EU conform principle
    of this division of labour, in accordance of
    which the decisions must be made on the specific
    level, where the potential decision makers have
    the maximum information.
  • The organisational form of a large companys
    management can be functional, divisional or
    matrix type (figure).

Source own figure based on many publications
  • In all type of management the main goals are
    always indicated by the boss, the details are
    developed by the departments (divisions). Their
    harmonisation process is a sort of bargaining,
    the boss has to take the principle of
    subsidiarty, the other managers the
    responsibility of the boss into consideration.

Competitiveness of the EU especially Hungary
  • Nowadays the most competitive regions of the
    World are USA, Japan and, in spite of their
    backwardness, China and India.
  • In Europe the most developed economic space is
    the blue banana (figure). But competitiveness
    (GDP per capita) of the majority of EU-15
    countries is weak (table).
  • Example Europe does not have good market
    positions in the nuclear, military or IT
  • Central Europe have always fighted, and is still
    fighting for catching-up. Actually Hungary is not
    successful (in spite of the high machinery
    production and export) .

The blue banana
GDP per capita, USD
Source IMD (Institute for Management
Development) World Competitiveness Yearbook
In 2009 per capita GDP was 14 900 Euros in
Hungary (at the official exchange rate). It is
very low in comparison with the West-Europeans,
but higher than in the East.
  • Distribution of the gross value added by
  • 2009
  • Agriculture, hunting, forestry, fishing 3
  • Mining, manufacturing, gas etc. supply 25
  • Constructions 5
  • Services 67
  • Total 100
  • Source Hungary in statistics.

(No Transcript)
  • Thank you for your attention!