Business Strategy: Audits, Control, and Mergers

Social and Environmental Audits

Social audit: A formal review of a company's endeavors in social responsibility. It looks at factors such as the company’s record of charitable giving, volunteer activity, energy use, transparency, work environment, and worker pay. A social audit is optional.

Environmental audit: An independent third-party assessment of the current status of an organization’s compliance with local environmental laws and regulations. (Basically the same thing as a social audit in terms of process).

Span of Control

The number of subordinates that a manager or supervisor can directly control. For example, if one production manager has ten subordinates, his span of control is ten.

Narrow Span of Control

• Advantage for a firm of tight and close supervision.
• Gives managers time to think and plan without having to be burdened with too many day-to-day problems.
• Ensures better communication with subordinates.

Wide Span of Control

• Offers great decision-making authority for subordinates and may improve job satisfaction.
• Lower costs involved in supervision.

Aims, Strategic Objectives, and Operational Objectives

Strategic Objectives

The main objectives of a business. They are the objectives which will help a business achieve its aims. They will most certainly be long-term objectives, most likely to be achieved in 3 to 5 years.

Operational Objectives

Very short-term objectives, which are typically small-scale and cover the day-to-day running of the business.

Mergers

The joining together of two businesses, usually to create a third new company.

Reasons for a Merger

• Exploit synergies: This means that two businesses joined together form an organization that is more powerful and efficient than the two operating companies on their own.
• Expansion: A quick and easy way to expand the company.
• Cost-effectiveness: Buying a business is often cheaper than growing internally.
• Economic response: In response to economic changes.

Types of Merger Integration

• Horizontal integration: When two firms that are in exactly the same line of business and at the same stage of production join together.
• Vertical integration: Two firms at different stages of production. The main motives for such a merger are to guarantee and control the supply of components and raw materials.