Programme MBA 3rd Year (CSP)

Date

Translation by English Department

Member Name
MAY MOHAMMED ALHEMELI 
Member Number
13823MBAF

The First Question:

Value chain analysis:

Porter considered the value chain analysis as a method to analyze the strategic activities in order to
understand the cost behavior. According to Porter, the competitive advantage of a company is achieved
when this company conducts the activities of the value chain in a better way than its competitors. There are
internal and external activities of the value chain.

The activities of the value chain are divided into primary activities which comprise the production, sales,
raw material, logistic services and after-sale services. These activities aim to produce and sell a particular
product/service and deliver them to the buyer. The other kind of the activities is the support activities which
support the primary activities by providing the inputs, technology, and human resources. These activities
concern also with other aspects such as planning, finance, research, purchases and development.

Organizations which work in the same field use the primary activities to compete with each other:

1. The services of delivering, distributing and storing. The organizations concern with all related
activities such as raw material processing, the process of storing the products and inventory control.
2. The processes of production: The final product will be produced using a group of related activities.
It is found in the processes of manufacturing the machines, packaging and maintaining the
equipment.
3. Sales: It is to provide the purchasers with the methods which tell them about this product such as
promoting campaigns.
4. Services: It is to provide extra services in order to increase the value of the related activities such as
after-sale services, maintenance and providing spare parts.

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The main kinds of the support activities are:

1. Purchases and material management: It refers to the process of purchasing the inputs which are used
in the value chain activities, purchasing the raw materials, and developing the equipment.
2. Research and development: It refers to the technology which is used in each activity.
3. Human resources management: The related activities here are such as; employing new employees
and providing them with the required trainings, and wage payment systems.
4. The infrastructure of the organization which comprises the capital, building and plant.

VRIO analysis:

This model assists in analyzing each of the main resources of an organization and its role in achieving a
competitive advantage for this organization. VRIO analysis is used to analyze the internal and external data
in order to enable the organization to achieve a competitive advantage in the market. The resources are the
strategic element which influences the strategic decisions. The organization should be aware if this element
is developed or if it differs from the competitors or from the average of the industry.

There are many theories show that there are specific requirements for the competitive advantages such as:

 The organization should have unique and high-value resources such as the financial resources,
natural resources and human resources.
 The organization should have outstanding ability to manage, coordinate and exploit these resources,
and to set good strategy for the human resources.

VRIO is an abbreviation for the characteristics which an organization should have:

Value: It refers to the ability of the organization to seize the available opportunities such as; the
technological development, demographic and cultural changes and the current economic situation, and to
face the threats such as the threats of customers, suppliers and competitors. This assists in increasing the
revenues and reducing the costs.

Rarity: This means that an organization produces a different product which the current and potential
competitors do not produce. An organization should retain its rarity in order to retain its competitive
advantage.

Imitability: A company should develop its unique product continuously. This prevents its competitors
from imitating this product. This helps the organization to retain its competitive advantage. The
competitors might imitate the unique product or they might produce alternative product for the original

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product in order to achieve a competitive advantage. The cost of imitation is very high, thus, the creative
organization could retain its competitive advantage for a long time.

Organization: It refers to the process of organizing the activities of the different enterprises. Sometimes
companies and organizations have to reorganize their resources or have to be restructured from time to
time. This requires an effective management that is able to determine the suitable time for restructuring
based on accurate expectations. Time management and organizing enables the organization to save the time
which is wasted in unessential activities. Good organizing assists in achieving a competitive advantage
such as; the organization is punctual when delivering the production.

The Second Question:

SWOT analysis: it is an analysis that is used as a strategic tool in multiple fields such as business
management, marketing and human development for evaluating the internal as well as external
circumstances faced by a business. Therefore, the analysis is developed during the primary phases of the
business in order to help take the necessary decisions on logical bases without depending upon false
assumptions. The word SWOT – as the name implies – is the abbreviation of the following:

- S: refers to the points of (strength) that distinguish the business and contribute to its success.

- W: refers to the points of (weakness) of the project.

- O: refers to the (opportunities) available that may result in increasing the returns or sales of the business.

-T: refers to the (threats) which may hinder the progress of the business or negatively affect the sales or
profitability rates.

The analysis studies each element separately and eventually gathers the results. An example: company A is
known for manufacturing a product with high quality (a point of strength) and seeks to boost its
productivity in the Middle East (an opportunity). Therefore, the company has launched a new branch in
Dubai for increasing its sales rates. On the other hand, company B manufactures high quality products yet
with expensive prices comparing to its competitors (a point of weakness). Consequently, it searches for
another way to increase its productivity without affecting the selling price.

Over and above, SWOT analysis represents one of the most successful models that can be used in planning
and running any type of business. The implementation of the analysis consists of a number of steps that can
be discussed as follows:

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- Step 1: this step focuses upon analyzing the elements of the whole organization in an organized way
starting with analyzing the points of strength or the advantages of the organization which can be
represented in the creative leadership and cash flow. This is followed by analyzing the points of weakness
or the current problems and drawbacks such as the lack of strategic plan or the weakness in the legal
situation of the organization. The third element to be analyzed is the opportunities available and they refer
to the potential advantages that are not currently provided yet through an effective implementation of the
set plans can be available. The last element the analysis concentrates upon is the potential threats or risks
that may negatively affect the implementation of the set plans and policies.

- Step 2: this step is taken for determining the goals to be achieved by supporting the points of strength and
searching for practical solutions for every point of weakness, making use of every opportunity and
preparing for any potential risk. Generally, the goals determined must be clarified accurately enough, be
attainable and can be easily evaluated. Moreover, they must also be effective, for instance: instead of
seeking to improve the abilities of employees, it is better to develop their communicative abilities. The
goals defined must also be attainable. Finally, it is important to define each goal separately with the
possibility to gather the strategic and operating goals.

- Step 3: selecting the means for each goal and writing it down in separate pages in order to facilitate the
implementation of these goals. In this regard, there are many ways that can be used in carrying out the
defined goals such as the successful old ways, the different means used by competitors and the new
innovated means that encourage creativity.

- Step 4: it prepares for the implementation of goals and determines the costs to be incurred.

- Step 5: it aims at setting a timetable for the defined goals to be achieved according to a chronological
order and writing down the deadline of each goal in formal documents to be kept by the management and
sending a copy to the implementation team.

- Step 6: this step is taken for organizing the application of the set goals by gathering the tasks to be
assigned to each department separately.

However, in order to ensure accurate results and to avoid complicatedness, it is necessary to develop
realistic anticipation of the future situation and of the points of strength and weakness.

Competitive advantage: it refers to all the elements and resources that can distinguish an organization
from its competitors and contribute to boosting its rates of sales and profitability.

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Examples:

 A factory that owns several branches in many countries.

 A trader who has imported the latest technological facilities before his competitors.

 A factory that can manufacture clothes with less costs than other factories that provide the same
products with the same quality.

The competitive advantage of any organization or business can last for a very short period of time or it may
last for years. This is bound by a number of internal as well as external factors that can be discussed in the
next lines.

The external factors: they are mainly represented in the external changes in the needs and requirements of
customers or in the technological, economic or legal circumstances for organizations and the latter’s quick
response to such changes. For instance: a merchant who has applied the highest technological level in
manufacture before his competitors has managed to achieve a competitive advantage by responding quickly
to the market needs. Thus, it is crystal clear that the organization’s abilities to adapt quickly to the external
changes through gathering information and anticipating the future play a significant role in achieving a
competitive advantage.

The internal factors: they refer to the organization ability to acquire resources and capabilities that other
competitors do not possess. Creativity helps in creating a competitive advantage as it plays a significant
role in developing the products or services, improving the work methods, used technology and providing
the customers with a new advantage. For example, a restaurant that offers a meal whose taste attracts the
customers and satisfies them has managed to create a competitive advantage.

Maintaining the competitive advantage:

An organization can create a competitive advantage, but at the same time it may lose it if other competitors
start to copy it. In addition, the resources and capabilities on which the competitive advantage depends
affect the ability of competitors to copy it-in other words, the more these resources and capabilities, the
more the difficulties competitors will face to copy this advantage, and consequently the organization can
maintain the advantage for a longer time. For example, the competitive advantage of one restaurant can be
its good location, but other competitors can establish their own restaurants at the same location therefore
the former has to provide unique services for the customers to gain this advantage such as immediate
serving of food.

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The main types of competitive advantages:

Michael Porter has divided the competitive advantage to:

Cost advantage: some organizations have the ability to produce or sell the same products at lower prices
than the competitors, which results from the organization capability to reduce costs.

Differentiation advantage: some organizations have the ability to provide unique or different products or
services that have a certain value for the customers.

Thus, Porter believes that there are three main strategies as follows:

Cost leadership strategy: according to this strategy, the organization aims at reducing the cost and
maintaining the good quality.

Differentiation strategy: the organization aims at providing unique products and services that are different
from what other competitors offer, and consequently the customers pay higher prices for these products and
services.

Focus strategy: the organization tries to focus on a certain market segment and meet its requirements. In
this strategy, organizations attempt to achieve differentiation in products or prices or both.

These strategies have been criticized as some believe that the organizations can reduce costs and provide
different products at the same time such as Japanese companies that have managed to offer high-quality
products at a low price. Moreover, differentiation may lead to acquiring a large market share, and
consequently increasing the production and achieving economies of scale (i.e. reducing the cost per unit as
a result of the mass production).

Despite the previous criticisms, Porter's generic competitive strategies have been widely used because they
help in formulating an effective strategy that clarifies the business orientation. Furthermore, it is realized
that the organizations which aim at achieving differentiation will set a price which satisfies the customers
and that the organizations which aim at reducing costs will maintain a quality that attracts the customers.
Thus, these strategies can be re-proposed in this way:

Cost leadership strategy: reducing the cost along with maintaining a satisfactory quality and developing
the products.

Differentiation strategy: providing high-quality products along with reducing the costs.

Focus strategy: offering specific markets segments unique services in terms of the quality or the price or
both of them.
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The coming steps should be considered concerning the competitive advantage:

Organizations should rely on their resources and abilities to be effectively employed for the purpose of
having competitive advantages.

Organizations should work on to maintain these advantages for a long time and create other ones.

Organizations have to fully exploit the external factors to create competitive advantages or at least face the
advantages of competitors.

Organizations have to increase their resources and improve their abilities which are connected to the
competitive advantages at present and in future.

Organizations have to select the strategy they will adopt to create competitive advantages and determine the
methods which can reduce costs and achieve differentiation.

The Third Question: (ِA):

The organizational structures determine the work division and specialization, the persons in charge and the
methods of achieving coordination among the departments. In addition to the complexity, formality and
centralization, there are other factors on which the structures depend such as the persons in the organization
(supervisors, managers and employees), the number of jobs that participate in the decision-making process,
the number of specialized jobs, the authority which the managers delegate to the lower-level managements,
and the responsibilities of the employees. Other factors can be the coordination and cooperation between
the organizational units, the span of control (i.e. the number of individuals a manager supervises), and the
standards which measure the tasks and activities performed.

Complexity: it refers to the interconnection within the organization:

On the horizontal level: it refers to the interconnection between the different departments based on the
nature of tasks; the more the specialized tasks, the more the complexity of the organization.

On the vertical level: the complexity increases when the number of management levels between the top
management and the lower managements increases as well, which results in a breakdown in
communication.

On the geographical level: it refers to the presence of the organization's offices or branches or units at a
wide geographical location and the more the geographical distance between the organizational units, the
more the complexity.
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Formality: it means the work done by persons following certain rules and procedures and the more the
work formality, the less the opportunities persons can seize to determine the methods of perfuming tasks.
Formality can be in the form of official written rules or the procedures adopted at work. The degree of
formality can vary between organizations and within the same organization – even it can vary according to
the management levels. Formality is important because it reduces the differences between the individuals,
facilitates the process of monitoring and controlling and decreases costs.

The strategy: it means setting the long-term goals of the organization and allocating the resources necessary
for attaining these goals. The following studies reveal the influence of the strategy on the organizational
structures:

The study of Chandler: Chandler has studied 100 industrial companies, including their phases of
development and the various stages they have gone through and he has found out that these companies have
established centralized organizational structures at the beginning, but after being developed they have
changed their structures because they could not undertake their business effectively. Furthermore, he has
concluded that the more the company achieves growth, the more its strategies become more ambitious.

The study of Miles and Snow: they have classified four types of strategies:

1) Defenders: these organizations produce a limited number of goods directed to the market, seek to
fight off competition in the market and ignore the changes occurring in their external environment
or surroundings.
2) Prospectors: unlike the defenders, the strength of these organizations is in manufacturing and
launching new products and they depend on flexibility and innovation to achieve success.
3) Analyzers: these organizations attempt to benefit from the advantages of defenders and prospectors
as they seek to decrease the business risks and maximizing profits at the same time. Moreover, they
do not manufacture new products unless they guarantee that these products have achieved success
by the prospectors.
4) Reactors: organizations adopt this strategy when they fail to implement any of the previous ones,
but this strategy results in poor outcomes and the organizational structure may not be changed or
modified to suit the strategy.
The organization size: it refers to the number of employees within the organization.

The relation between the size and complexity: the size has a direct impact on making changes in the
organizational structure; however, the relation is not equally balanced-in other words, an increase in the
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organization size does not mean that there will be an equal increase or change in the organizational levels
or the work division.

The relation between the size and centralization: it is difficult to manage or run all the activities of the
organization by only the top management or the higher levels therefore decentralization should be applied
when the organization size increases.

The relation between the size and formality: there is a logical and direct relation between them as the
management tries to control and monitor the employee behaviour by enforcing formal rules.

Technology: it means the methods and techniques employed to convert the inputs to outputs. There are
several studies that have tackled the relation between technology and organizational structures as follows:

The study of Woodward: Woodward has studied 100 industrial companies and collected information
related to the organizational structures in addition to financial information. Woodward has classified the
companies according to the production technology to unit technology, mass technology and continuous
process technology. The study results have showed that there is a direct relation between this classification
and the organizational structure and that the organization efficiency depends on the connection between
technology and structures.

The study of Perrow: Perrow has defined technology as the actions or tasks performed by individuals
using machinery and equipment with the aim of making a change. In this regard, Perrow has realized that
knowledge technology is more important than the production technology and the former concentrates on
the number of problems which the employee faces and the methods of solving these problems. Perrow has
tried to prove that the methods of supervision, coordination and monitoring differ according to the type of
technology and has determined the structures that can be modified based on the type of technology such as
the freedom of persons in undertaking duties, the power of groups in controlling the goals of the
organizational unit, the reliance of groups on each other and on the use of feedback to coordinate their work
together.

Technology and structures:

Technology and complexity: the more the routine work, the less the number of the employees, and
consequently there will be no need for training.

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Technology and formality: technology is accompanied with rules and systems to help the management in
following the set principles.

Technology and centralization: the more the technology, the more the centralization of the decision-
making process.

The organizational environment: it means the area in which the members of each unit interact with each
other or it can be defined as the organization surroundings. The environment can be either general or
private. The general environment refers to the external factors or the surroundings in which the
organizations work and it affects all the organizations. The private environment refers to the environment
of one specific organization and it determines its relation with other organizations. Moreover, the private
environment differs from one organization to another.

Studies concerning the organizational environment:

The study of Bronze and Stalker: they have studied 20 industrial companies to determine the influence of
environmental changes on the organizational structures and they have found out that the structure differs
according to the type of environment. Furthermore, they have classified the structures to two types:

The mechanical structure: it is characterized with complexity, centralization, formality, routine and it does
not respond to changes.

The organic structure: it is adaptive, flexible, and employs the horizontal and vertical communications.

They believe that the effective structure is the one which interacts and adapts to the requirements and
changes of the environment – in other words, the mechanical structure can be used when the environment is
stable and the organic one can be used when the environment is unstable.

The study of Emre and Trast: they have divided the environment to four types:

The first type is unchangeable and the changes that may occur are unpredictable and slow.

The second type includes many threats and risks and the changes are slow.

The third type is complicated and includes several competitors who have the same objective.

The fourth type is highly uncertain because it is constantly changing and the changes are fundamental and
unpredictable.

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The study of Lawrence and Lorch: they have studied 10 companies in three different industries to decide
the ability of their internal environments to respond to the external ones and they have supposed that the
environment of successful companies will be more effective and adaptive than others. They have measured
the external environments to determine the level of uncertainty and have measured the internal
environments based on two factors: differentiation (i.e. tasks and responsibilities) and integration (i.e.
mutual cooperation between units or departments). The study results have revealed that the organizational
structure differs from one unit to another one.

Despite the fact that it is the changes occurring in the internal environment that affect the structure of
organizations, the strategic decisions taken by managers as well as the technological level applied are also
very effective. For instance: managers are free to select alternatives and add the plans and strategies
necessary when needed. This can affect the hierocracy of the organizational structure. However, not all
organizations are prone to change and are influenced by the changes in their external environments and
subsequently, the assumption that the organizational structure must change as response to external changes
in the environments surrounding can not be applied upon all types of organizations. Theoretically speaking,
the process of decision-taking is carried out by the top management which is regarded the dominating
power in any organization. The process must begin with determining the problem occurring, taking the
suitable decisions and then highlighting the points of strength and weakness of each alternative. In general,
all decision makers are supposed to own a common goal focusing upon serving the organization and
ignoring the personal interests.

Power and authority: there is an old misconception between the definition of power and authority.
Authority is the right given to carry out a certain task or give orders to lead others towards achieving a
number of targets. It is a legitimate right derived from the functional position of the organization while
power refers to a man’s ability to influence others. In the world of business, the higher the organizational
level, the more authority and power provided. Yet, an individual entitled an authority is not necessarily able
to exert power since power can be gained through one of the following means:

- The official authority entitled to certain individuals according to the managerial level they belong to
within the organization’s hierarchy is regarded one of the sources for gaining power. However, some
individuals who may belong to lower levels may be able to have leading roles through their official
effective decisions.

- When an organization owns scarce resources, which exist in quantity less than their desired use, can
represent a source of power and be bale to influence others and control them.
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- When the suitable and qualified individuals occupy the appropriate jobs and their potential and abilities
are being exploited as efficiently as possible, they can be a source of power for their organizations.

Those who believe in the influence of power and authority focus upon the structure of the organization
believing that the latter represents the source of their influence. They also do not believe in the power of
technology in running business and improving the general performance.

For understanding how organizations establish their structures, it is necessary to figure out the main
sections and divisions of each organization and their functions which can be discussed in brief as follows:

- Top management: it represents the highest strategic and managerial level in the organization and it is in
charge of the whole organization. It is represented by the executive manager who is in charge of declaring
the shared vision to all members and meeting their needs. In addition, he supervises the implementation and
development of the set plans and strategies, coordinates between the different sections and departments and
connects the external environment surrounding the organization with its internal one.

- The middle management: it represents the managers and heads of departments who occupy managerial
posts and exert direct control and supervision upon employees and laborers.

- The technical division: they are the groups of consultants and expertise who provide their technical
support and recommendations when needed.

- The operating device: they include the individuals who carry out certain tasks such as:

1. Ensuring the deliverance of the production inputs.

2. Converting the inputs into outputs.

3. Distributing the outputs in the target markets.

4. Carrying out maintenance and supervision upon the production operations.

Types of the organizational structures:

1- Simple structure:

This structure has little details and it is somewhat an informal structure. Thus, it fits the organizations in
their earlier stages when there are a small number of employees and the organizations that work in a simple
environment. The management with this structure asserts the centralized authority. Only the owner has the
authority to make the decisions. This structure is very simple, highly flexible and does not incur the
organization a lot of costs. It does not imply any complicated managerial levels, focuses upon the simple

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and well-defined goals and helps organizations face critical times. However, it is not suitable for large-size
organizations with complicated divisions and managerial levels.

2- Machine bureaucracy structure:

The machine bureaucracy structure fits the large organizations which work in a simple and stable
environment. This structure depends on standards, formal rules and the centralized authority. It enables the
management to control the employees. It is very effective in executing standard tasks with high efficiency,
reduces the duality of performance and achieves psychological satisfaction for laborers. However, it can be
attacked for depending upon specialty and focusing upon the objectives of the organization only. This may
arouse conflicts and disagreements between the different sections and divisions and laborers start to
disobey the applied rules and regulations.

3- Professional bureaucracy structure:

This structure has appeared during the last decades for the aim of recruiting employees with a high degree
of specialty and training to carry out operating and production tasks. This type of structure is known for
centralization and adopting strict standards for assessing performance and can be very suitable for dealing
with large complicated external environments. it helps carry out the specialized tasks with the same
efficiency of the machine bureaucracy and it helps restrict the authority and influence exerted by the top
management. On the other and, it can be attacked for the same reasons highlighted as points of weakness of
machine bureaucracy.

4- Divisional structure:

An organization establishes this kind of structure when it wants to produce various products or to enter
several markets. This structure is a group of independent units. The strength of this structure is represented
in the middle management. In order to establish this structure, the organization should be large and work in
a stable and complicated environment and it should depend on the modern technology.

The weaknesses and strengths:

According to this type of structure, almost all responsibilities regarding the different goods and services are
assigned to the head of the department. Consequently, this structure can be very effective in solving any
problems and in developing and improving the general performance of managers.

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5- Adhocracy structure:

This structure prevents the top management from imposing centralized control. Adhocracy fits
diversification strategies and the high level of risks because they require the flexibility which is found in
the adhocracy structure. This structure uses non-routine technology which requires high-experienced
specialists.

The management establishes adhocracy structure in the earlier stage of the organization. At this time the
organization needs high degree of flexibility in order to be able to determine its target markets and its route.
This structure is able to adapt to fast changes and to coordinate between all specializations. Adhocracy is
more common in the modern industries such as electronic industry and it is important for the organizations
which work in the field of scientific researches. The disadvantage of this structure is the lack of a clear
vision which is should be common between the manager and his subordinates. There are unclear
responsibilities for each individual inside the organization. In addition, it is difficult to divide the activities.

Adhocracy can be classified into operational adhocracy and managerial adhocracy. Operational adhocracy
aims at solving problems which are faced by its clients and customers and encouraging its members to be
creative. It runs its projects by carrying out administrative and executive tasks. On the other hand,
administrative adhocracy distinguishes between the operational and administrative work. Thus, an
organization which seeks creation yet wants to keep its bureaucratic system can apply the administrative
adhocracy. This provides an opportunity for the management to deal with external organizations as well.

The Third Question: (B):

Management by objectives:

It is a method for planning, managing and evaluating. By this method the objectives of each manager could
be determined for a particular period of time. At the end of this period, the achieved results are compared
with the expected ones in order to determine the deviations to be corrected. The management by objectives
differs from the tools of the financial management such as the budget, cost accounting, and standard costs.
The management by objectives guides the managers at all levels towards the objectives of the organization
in order to be achieved at low costs.

In other words, the management by objectives is the way to perform the main functions of management
such as; planning, organizing, guiding, and controlling. The management by objectives is distinguished
with its simplicity and its ability to adapt to the environment in order to achieve the desired objectives. It

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emphasizes the importance of motivating the employees and involving them in determining the objectives
which they should achieve. These objectives should be agreed by each manager and his subordinates.

Accordingly, there are several specific elements of the management by objectives:

 There are objectives for each managerial position. A managerial position without specific goals
means that it is not important, so it should be terminated.
 The management encourages the employees to unify their interests in order to achieve the
organization's objectives efficiently.
 This management concerns only with the performance and the achieved results.
 It links the objectives of the individuals with the organization's ones.
 It assists in setting suitable system for wages and rewards.
 It enhances the effective coordination and control.
 It evaluates the performance continuously and objectively.

The four main steps to apply the management by objectives:

1- Setting the objectives:

This step comprises three stages. At the beginning the centers of the activities and the potential results
should be determined. Then the methods by which the achievements could be measured should be
determined. At the end, the standards of the objectives should be set.

Each employee should read his job description carefully in order to determine his responsibilities. Then he
discusses them with his supervisor.

2- Setting a practical plan:

The function of planning is based on the predetermined objectives. The following step is to set the
strategies and policies which assist in achieving these objectives. Each employee sets in the light of the
general objectives a group of individual goals for a coming particular period of time, three or six months.
The individual objectives are such as achieving the sales target, attracting customers or producing a
particular amount of products. Then an employee discusses with his supervisor these objectives in order to
select the suitable method to achieve them.

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3- Controlling the work:

It is important for the management by objectives to establish a good control system in order to ensure that
the organization is on track and that it is able to achieve the predetermined objectives. The control system
comprises the standards based on which the actual results are measured. It includes also feedback system.

4- Evaluating the annual achievement:

The last step is to evaluate what have been achieved during the current year and to prepare for the
following year. In case of failure in achieving some of the desired objectives, the employee and his
supervisor should determine the reason for that failure. There are several reasons for the poor performance.
Sometimes, the employee does not know what exactly he has to do, sometimes because of lack of
experience and training the employee cannot accomplish his tasks. The poor performance could be because
there are no motivation or because of the poor supervision. Once the reasons for failure or poor
performance are determined, they could be corrected.

A supervisor should evaluate the performance of his subordinate and compare his achievements with the
determined goals. He should also determine the trainings which his subordinate needs. The subordinate
should also give his opinion about this assessment and he should offer suggestions about how can his
supervisor be more effective.

The benefits of the management by objectives:

1. The management by objectives allows the lower managerial levels to participate in setting the
organization's objectives. It listens to their suggestions about the modifications which should be
made. Thus, the management by objectives provides a comfortable work environment and it
prevents problems and conflicts.
2. The efforts of the management by objectives assist in link the individuals' objectives with the
organization's ones.
3. The management by objectives directs the individuals' efforts towards the desired objectives of the
organization. It emphasizes the importance of achieving these objectives in order to retain the
organization's position.
4. The management by objectives obliges the employees to set planning for their work. Thus, the skill
of planning will be improved by all employees.

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 5. It assists in improving the control. The objectives are the benchmark for the required results. Thus,
the achievement will be improved.
6. The participation of the employees in setting the objectives stimulates them because these objectives
will be in the light of their capabilities.
7. The meetings between the supervisors and the subordinates to discuss the problems which retard the
work increase their interactions between them. This assists in determining the deviations in order to
be corrected.
8. It helps the managers to improve their ways of work in order to be more efficient.
9. The management by objectives sets specific objectives and that assists in making the activities of the
specialized organizations complementary.
10. It fosters the relationship between the manager and his subordinates.

The principles of management by objectives:

1- The principle of participation: The management by objectives emphasizes the importance of the
participation of both managers and subordinates in determining the organization's objectives. According to
this principle, a manager encourages his subordinates to be initiative. It increases the trust of the managers
in their subordinates.

2- The principle of commitment: All employees participate in making the decision and determining the
objectives, so they will be committed to them.

3- The principle of undertaking the responsibility: There are common responsibilities among all
employees, so all of them will carry out all responsibilities.

4- The principle of raising the spirit: The spirit of an employee will be raised when he found himself
involved in determining the objectives of the organization. Then they will feel job satisfaction.

The requirements to apply the management by objectives successfully:

 The objectives should be achievable and specific. In case of sales, the objective should be the sales
ratio which is specified by numbers. The objective could be also the number of the produced units
or the amount of the return on investment.
 The program of the management by objectives should fit the general strategy of the organization.
This assists both managers and subordinates in setting the plans and coordinating them with other
plans.
 The top management should support all managements inside the organization.
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  The objectives should be measurable and able to be modified according to changeable situations.
 All information which the manager requires to assess the achievement should be provided.
 All managerial levels should participate in setting the objectives.
 The responsibilities and authority which are delegated to a manager should fit his objectives in order
to prevent conflicts with other managers.
 The management by objectives differs from the traditional management. Thus, managers should get
the suitable trainings in order to be able to set good, reachable and measurable objectives.
 Flexibility should be provided in order to be able to adapt to the changeable situations.
 The manager should be aware of how to treat his subordinates in the light of the concept of the
management by objectives. If a manager depends on giving orders to his subordinates, the approach
of the management by objectives cannot be applied.
 The manager should be open-minded and able to learn new skills which enable him to apply the
management by objectives. He should also act as a member in a team and interact and communicate
with his team.
 In order to apply the management by objectives, the manager should be able to trust his subordinates
and delegate some of his responsibilities to them.

The problems of applying the management by objectives:

Although there are several benefits of applying the management by objectives, there are many problems
which limit the spread of this concept such as:

 The objectives could be unclear which makes it difficult to be measured. For example; improving
the training is not a specific goal, while promoting four employees during a year is a specific
objective.
 It takes a long time of the management to determine the desired goals and to discuss them with the
subordinates.
 The management could be not aware of its situation.
 Sometimes the process of setting the objectives becomes a fight between the manager and his
subordinates. A manager is ambitious and wants to achieve outstanding goals while the subordinates
look for low-performance tasks.
 Sometimes it is difficult to unify the individuals' objectives and the general objectives of the
organization.

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The reasons of inability to apply the concept of management by objectives:

 The lack of commitment.

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