Organisation that faced short-term pressures Essay
Organisation that faced short-term pressures, 484 words essay example
There are several situations where the organisation was faced with short-term pressures which are extensively argued in the literature. For instance, time and again it should have been noticed that capital markets were held responsible for setting improper short-term pressures on the organisation, thus, will affect negatively on the manufacturing industry and its product innovation (Innovation Advisory Board, 1990). A questionnaire was prepared for the purpose of assessing the view of respondents concerning short-termism, where the response to one of the questions received a rate of 3.121 which signifies a large proportion of respondents observe pressure from the capital markets (Demirag, 1995). Also, there was another questionnaire which was concerning whether major shareholders and institutional investors frequently show signs of extreme prejudice in opposition to a long-term study that signified high risk favouring short-term product growth which has a lower risk. As a result, 3.578 broadly have accepted that they have faced short-term pressures from capital markets (Demirag, 1995). In addition, managers generally get concerned as regards their companies share prices, thus, the organisation will confront short-term pressures by financial institutions. Therefore, institutional investors will decide to make a choice of 'exit' instead of 'voice', where shareholders who are not pleased with organisation's performance and strategy will be seen vending their possessions in those organisations instead of working with them (Tylecote & Demirag, 1992). Also, shareholders will strive for changing them by placing force on the board of directors and ultimately voting against them, which will raise the threat of hostile takeover. As a result, there might occur modification in management strategy and eventually to the dismissal of management by the new owners (Jenkinson & Mayer, 1993). Additionally, Frank & Mayers (1990), disclosed the outcome of having a mixture of take-overs and institutional 'exits' that has produced a high level of recorded executive dismissals in the UK. Besides, a number of economists have supported the thought of having takeover risk that is promising for achieving efficient management, where Micheal Porter also favoured the threat of a takeover by describing it as "a second best solution" (Porter 1990, p. 661). Whereas, Jonathan Charkham portrayed takeover unreasonably costly and provides irrational results. Also, he indicated that the major recipient when takeover takes place are generally the investment banks, that plays the role of consultants (Charkham 1994, p.229). Furthermore, questionnaires were done as regards to views of R&D managers in the occurrence of short-term pressures, where 26.1% of managers have agreed that companies are experiencing takeover (Demirag, 1995). The percentage is not considered as high, however, it demonstrates that at least some of the managers have accepted of experiencing it in the company. Nevertheless, one of the major sources due to the existence of short-termism is the result of the continuous takeover risk as managers are forced in order to reduce investment, particularly in the area of research and development due to enhancing short-term profits and to maintain share price as high as possible to avoid a bid to take place (Porter, 1990).