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Accurate and rapid analysis of the risks and future benefits of an acquisition is necessary in today's market. The planning of corporate strategy with a view toward the economic and technological environment is the initial step of the analysis. The subsequent search and screen process establishes a list of candidates. The financial evaluation process includes an analysis of the worth and future value of both companies according to several hypothetical scenarios. The "discounted cash flow" (DCF) evaluation technique is useful because it includes the acquisition's added cash flow and the cost of capital. Use of such evaluation techniques can determine maximum acceptable acquisition prices quickly and serve as a catalyst for reexamining a company's overall strategy.

Companies achieve marketing success by being active in profitable markets, concentrating on doing important tasks well, and doing these tasks well consistently. The identification of points of leverage in a market depends on the relationship between manufacturing and marketing. The degree of product customization directly influences the manufacturing, inventory, and sales functions. Consistency of purpose and strategy in the product, pricing, communication, and marketing channels yields a synchronized effort which results in a successful production/marketing effort.

The process-product matrix can be used to explain company failures due to lack of coordination and focus on marketing and manufacturing functions. More importantly, however, it provides a framework for describing alternate business strategies. The matrix provides insight for planning product and process changes, coordinating marketing and manufacturing goals and functions, and avoiding internal problems brought about by evolving markets and technologies.

Citibank overhauled its service areas with a minicomputer and processing models copied from the manufacturing industry. However, this system was insufficient to provide personalized customer services. By decentralizing their system and reorganizing along market segments, the bank created National, World, and Industrial groups. The reorganization provides opportunities for advancement, better accountability of individual performance, and greater efficiency which markedly improves morale.

Policy-making executives can take steps to manage growing data processing resources by analyzing the stages of growth in a company's DP function in terms of six projected stages of growth. In 1977, half of the nation's larger companies were found to be in stage three or four. Levels of achievement can be measured against benchmarks, which, in the first stage of analysis, involve assessment of the data processing expenditure curve. Stage two of this analysis involves defining business functions for the organization unit, determining how data processing supports each function, matching the supports given to the system with the benchmarks of development, and finding mismatches between expenditure and need. After developing an effective strategy, the action of the senior management steering committee determines further managerial development.

General managers and chief executive officers generally determine the information they need through four basic approaches: the by-product technique, the null approach, the key indicator system, and the total study process. A new approach, the Critical Success Factors (CFS) Method, focuses on individual managers and on each manager's current hard and soft information needs. The four prime sources of critical success factors are the structure of the particular industry; the competitive strategy, industry position, and geographic location; environmental factors; and temporal factors. The CFS method is useful at each level of general management.

The record-keeping, internal controls, and antibribery provisions of the Act provide the Securities and Exchange Commission (SEC) increased leverage to investigate and prosecute directly the various illegal activities of its registered companies. Enforcement and penalties incurred by violation include injuction by a federal court, imprisonment, fines and a special penalty of one million dollars maximum fine for foreign bribery prohibited by the act.

A survey, covering 25 years, shows that employees are increasingly dissatisfied with pay, supervision, and by lack of equitable treatment. Managers exhibit far greater satisfaction with working conditions than hourly employees do, which shows that a "hierarchy gap" exists. Most employees agree that their companies are declining as desirable places to work and that favorable pay fails to offset growing discontent. They say chances for advancement are poor and that improvement is unlikely.

Focusing on the manufacturing process gives a new dimension to strategy. The "process life cycle," related but distinct from the product life cycle, facilitates the understanding of strategic options available. Most companies occupy a particular region on a natural, diagonal matrix of the stages of the product life cycle and the choices of production process for that product. A company may seek competitive advantage off the diagonal, but should understand the implications of each move.

A survey of 1,250 executives reveals two-thirds of the respondents have had a mentor. Mentor relationships have become more common in business during the last twenty years. These relationships are most likely to occur during the first fifteen years of an executive's career and can develop into enduring friendships, in spite of the competitiveness of the working world. Executives who have had a mentor are on the average better educated, receive higher compensation and express greater satisfaction with their work than their peers who have not had a mentor.

Service systems with high customer contact operate at a lower degree of efficiency than those with limited customer contact. Managers should separate high-contact and low-contact elements of a service system; separate groups of people should perform high- and low-contact activities. Implementation of these concepts will enhance the development of two contrasting classes of worker skills and orientations. It requires, however, answering questions concerning the company's operating system, procedures and potential.

Industrial marketers should set prices according to their customers' perceptions of product benefits and costs. Because price defines a product market, price should be seen as one of the product's several critical performance attributes. Industrial marketers must manage product planning and pricing simultaneously, taking maximum advantage of the company's cost structure and building on the company's competitive competence.

In practice, management makes debt-capacity decisions by drawing on advice from external sources. This method of decision making fails to assess how much risk is actually involved for an individual company. Management must formulate an approach to the measurement of risk applicable to individual corporations. Expressing the limits of long-term borrowing in terms of an income statement of data, rather than the conventional balance sheet relationship between long-term debt and the total of all long-term sources, provides a more meaningful ratio for internal formulation of policy. This article, first published in 1962, is reprinted to include a retrospective commentary by the author.

Bonuses and incentive compensation encourage management's preoccupation with short-term financial results. This emphasis is an important contribution to the United States's lag behind other countries in research and development investment and capital spending. Federal tax policies have failed to provide incentive for investment to further economic growth. Restructured management incentives would reintroduce entrepreneurial spirit without sacrificing the systematic cost-benefit approach to decision making.

A company should acquire another business only when the skills and resources of the two businesses can produce an income, or reduction in the variability of income, greater than what can be realized from a portfolio investment in the two businesses. Seven common misconceptions illustrate fallacies about diversification through acquisition. Acquisition-minded companies may use a set of seven suggested methods to obtain returns greater than those obtainable from simple portfolio diversification.

In order to maintain commitment to ethical standards, companies must foster professional pride and honest business practices in their employees. Examination of the paper industry price-fixing conspiracy in 1976 indicates that a crowded and mature market, declining demand, and absence of product differentiation can create a ripe climate for price collusion. To avoid this, top managers must recognize these dangerous conditions, clearly communicate their intentions, and by their conduct set a good example for their subordinates.

A survey of 380 companies in 34 industries throughout the United States and Canada examined the three basic kinds of compensation plans and found: 1) Salary plans pay fixed rates of compensation and are appropriate when measurements of performance are difficult to ascertain. 2) Commission plans pay salespeople in direct proportion to their sales and are appropriate for maximizing incentives or for predicting sales costs in direct relationship to sales volume. 3) A combination plan includes all variations of salary plans plus other monetary incentive plans. This plan is more complex to administer; however, it allows for greater incentive and flexibility.

Understanding the basic differences between service businesses and manufacturing businesses is essential to the strategic management of a service business. Most managers of service businesses continue to think of strategy in product-oriented terms, despite the fact that much of this approach is actually irrelevant to their companies. Six suggested questions focus on topics these managers should consider about strategic management.

A study of a number of companies employing some form of matrix reveals nine pathologies to which the matrix design is particularly vulnerable, along with prevention and treatment methods. Often there is a mistaken belief that matrix management is the same as group decision making, and there are tendencies toward anarchy and power struggles. The layering of a matrix can frequently result from the dynamics of power rather than from the logic of design, and there is a tendency for matrixes to sink to group and division levels.

Traditional achievement and objective-achievement compensation systems either fail to account fairly for sales territories which have different potentials, or induce salesmen to provide the company with low forecasts in order to meet their quotas. The objective-forecast-actual (OFA) system is a combination of three measurements: the company objective, the forecast of the salesman, and the actual results the salesman achieves. It is an approach that accounts for unequal territories and makes good forecasting possible by rewarding a salesman according to how close his forecasts and actual results are to the company's objective. The system brings about sales volume, payment for performance, and good field information for company planning.