Every company needs management. Fortunately, there are many forms of organizational management.
The fundamental principles of the modern economy presuppose private property and competition as conditions for efficient economic activity. The focus so far has often been solely on private property and trade liberalization, replacing the creation of competitive markets.
Of course, trade liberalization is important, but its effects cannot be fully realized without a competitive economy. And liberalization without a competitive economy leads to abuses in the relationship between business partners.
Because the law of force (and the monopoly position) begins to operate, not the force of law.
Putting privatization in the focus of transformation is justified by motivation.
Privatization is considered to be the only mechanism capable of creating economic motivation for efficient business. Privatization is necessary, but it alone is not enough to create an effective incentive mechanism.
This is true for the family business, but it is not true for medium and large companies, where there is a division between the functions of ownership and management. It is also not true of the quality of privatization.
The quality of company management
The main driver now is the quality of management, and managers may or may not be co-owners. And their income as highly skilled employees – in the form of salaries and bonuses can significantly exceed their income as co-owners – in the form of dividends. Reference: “Management and leadership: theories and approaches”, https://www.nebraskasocialstudies.org/management-and-leadership-theories-and-approaches/
Managers operate in a market environment
Managers operate in a market environment in which consumers are not interested in the type of company producing the product. Only the quality and price of the goods are important for the buyer.
And the quality and the price depend mainly on the competitive environment in which the production takes place and the production is realized. The buyer buys a product not because he prefers one or another type of property of the manufacturer, but because he accepts the quality and price of its product. It does not matter to him whether the manufacturer is private or state-owned.
World management practices
World practice offers thousands of examples of well-managed state-owned companies and poorly managed private companies in developed and especially in developing countries. The opposite is equally true.
Companies go bankrupt not because of the type of their property, but because of poor management. There is a causal link between ownership and the quality of governance, but it is weaker than the causal link between the pressures of the competitive environment and the quality of governance.
And the best private company tends to abuse its monopoly position if there is no competitive environment.
The quality of management is also affected by the pressure of motivated groups or public interests within the law – employees in the enterprise, living in the area of the enterprise, municipal authorities in the same area, trade unions, the budget – as a recipient of taxes and the insurance system – as a recipient of insurance payments.
The company’s suppliers and other partners are also interested in its good performance and put constructive pressure on its managers. Reference: “The groups in the organization and their effectiveness”, https://www.vbprojects.org/the-groups-in-the-organization-and-their-effectiveness/
Nowadays, it is difficult to determine which pressure on the company is greater – the owners – shareholders, especially when they are scattered among thousands of individuals tens of thousands of kilometers around the world or – stakeholders (stakeholders) concentrated in several natural and/or legal persons in the area of the undertaking concerned.
In today’s economy, there are no simple, unambiguous, and forever valid connections. The presence of private property is important but no less important, and often more important – the presence of a competitive environment.
The state monopoly is harmful, but the private monopoly is more dangerous. Therefore, the two instruments – private property and competition – must complement each other, not oppose each other.
The relationship between them is complementary, not completely interchangeable. Competition is a powerful engine of the modern economy, as is private property.
The need for a modern economy
Many countries still need a modern economy capable of catching up in the coming years and decades.
No one has ever proved that the most important feature of the modern economy is 100% private property. Judging by the world experience and especially – from the successful European experience, the experience of Japan, China, East, and Southeast Asia, Chile, and many other newly industrialized countries, the most important features of the future modern economy are two – mixed economy (with the predominant private sector, especially in the production of products and services) and a highly competitive environment.
Such should be the Bulgarian economy to achieve successful catching-up development.
Today, more than ever, society and economic life in the conditions of transition to a market economy need clear theoretical and methodological simulations and specific practical guidelines in the field of business management.
Privatization, restructuring, attracting foreign investors and the legislative regulation of specific conditions place in a new unknown environment the already diverse in form of ownership business entities – enterprises.
This poses a challenge to managers to master and use such management approaches, methods, and skills of theoretical and practical nature, which would allow them to manage the company effectively.
In periods of dynamic change and complete transformation of the social environment and the objects of management, a crisis in management inevitably arises.
It is related to the lack of organizational experience for working in the new conditions; ignorance of the new dynamic processes that influence decision making; the obvious irrationality to borrow mechanically someone else’s experience; they need to apply outdated approaches to managing existing obsolete organizational forms; routine, habits, management style and way of thinking that do not change in parallel with the business environment.
Evaluation of the alternatives for application of new management approaches
When evaluating alternatives for the application of new management approaches, management methods, and techniques, the following should be taken into account:
High activity of changes and processes of management transformation
Dynamic development requires the high activity of changes and processes of management transformation. In practice, the pace of change and the number of transformations are much faster than the change of generations of managers.
Even when they master top management techniques for the time of their qualification, modern conditions provoke them constantly with the emergence of new problems. They can be solved only through modern avant-garde and fundamentally new solutions.
The modern management of the company can be realized only by highly qualified management teams, which work in conditions of continuity of organizational and managerial innovations.
Management culture is important for managers
Good organization of actions, clear rules of the game, and freedom of choice are interrelated, and determining the measure between them is primarily a scientific problem.
Determining the basic parameters of behavior and survival in the market depends on the management culture and ability of management to navigate and adapt to the requirements and impact of the environment.
Management culture is important for the individual leader, but this concept is largely becoming a characteristic of the entire organization.
To achieve stable economic success, each company must have and implement a comprehensive long-term (flexible) line of behavior, operation, and development.
This is especially important in the context of economic crisis and strong inflation. Companies and firms can form economic groups to implement the strategy in a particular area: to develop basic investment decisions, for marketing, for managing innovation processes, for attracting capital, etc.
12 basic management strategies
Depending on the place where the company is in the life cycle of its development, 12 main strategies can be determined, which should be applied according to the circumstances consistently or by ignoring any of them:
- 1. Concentration – the most common for the current business strategy. It is applied in the initial period of the company’s development.
- 2. Market development – applied when the market is saturated.
- 3. Product development – the strategy is related to the product life cycle.
- 4. Innovation – a new or completely improved product.
- 5. Horizontal integration – it protects companies from emerging markets and eliminates competition.
- 6. Vertical integration.
- 7. Joint venture – these are companies with mixed participation, cooperative arrangement. For example, the Scandinavian SAS airlines in 1946. – Denmark 2/7, Norway 2/7, Sweden 3/7 – founded a multinational union. VOLVO.
- 8. Concentric diversification – includes gathering business of companies with technologies, markets, products. The ideal case is the combination of companies with high profits and technological capabilities and low risk. Reference: “Information technology and inventory management”, https://60yearsnato.info/information-technology-and-inventory-management/
- 9. Conglomerate diversification – concern. It is most often applied between companies with too high or too low cash flow.
- 10. Reduction – reducing the volume of the company’s business.
- 11. Withdrawal – to find a buyer for the company’s assets.
- 12. Liquidation – to sell the business in parts and rarely the whole.
Management through a market economy
The restructuring of state ownership is a fundamental issue of the transition to a market economy. Its successful solution would not be possible without the application of antitrust regulations.
This is necessary at least because in the last 50 years. the market as such is missing in some countries and we have mostly monopolies. This led to action by the state, which until then had been the largest owner, to regulate itself by withdrawing from active economic activity, restructuring its property.
And this, in turn, should be done by breaking the monopoly in the country, creating the necessary legislation to overcome monopoly, and building real market conditions and mechanisms.
This means that companies can overcome their business problems and try to survive in the real market conditions in our country.
On this basis, the leading research thesis in this thesis can be formulated as follows: “Management forms of company management”.
The object of the research is the main types of management forms, namely: management contract, franchising, leasing, joint venture, full withdrawal of rights, and the main subject is their nature, method of application, positive and negative sides.
Contract management and joint venture
We will analyze the statement that the management contract is one of the best tools for companies that have problems with both management and technology.
Franchising or joint ventures should be used in case of problems that arise both in the technology and the company’s relations with government institutions.
The complete refusal of direct state intervention, also known as the complete revocation of rights, can be applied to problems in management, technology, and relations with state institutions.
The effectiveness of the choice of these or other management forms largely depends on the skills of the team on a micro-scale and the specific political and economic situation on a macro scale.
Here we must emphasize that in cases of particularly severe problems (poor or irrational management, inefficient or uncompetitive technology, outdated or inefficient systems and procedures of interaction, institutional problems inherent in the relationship with the government, etc.) the above forms of management can be applied in the following order: state waiver, joint venture, lease, franchise, and management contract.
However, if there is political receptivity, the state can apply for the reverse order, starting with the management contract. In this case, it is imperative to develop a government ideology for privatization.
In these circumstances, the thesis aims to substantiate the main forms of management that are applied in developed countries for business problems such as attitudes and relationships with state property and control, to justify and construct methodological tools for analysis and evaluation of analyzed forms and to the theoretical and methodological formulations are applied by presenting analysis and evaluation of the management forms at different companies.