Management 3200
Management 3200 Test 1 Notes Extra Credit for Test 1: - Legacy Costs—healthcare and pension costs that you have to pay for retirees. - 3 ways to provide superior customer service: o Make it easy to complain. o Make a timely, personal response to the complaint—by sundown rule. o Make sure your response to the complaint is effective. Invitation to Management I.
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What is Management? a. Definition: process of achieving desired results though the efficient utilization of human and material resources. i. An ongoing process, most productivity for the fewest dollars b. Two Key Concerns of Management i. Effectiveness—achieving desired results; refers to doing the right things at the right time. This means giving the customer what they want, when they want it. ii. Efficiency—refers to minimizing waste or reducing resource costs. As competition increases, efficiency becomes more important. Efficiency is the mean to the ends. a. If you increase productivity and maintain your costs, then you are being efficient. b. If you increase productivity and lower costs, then you are being really efficient. iii. How are these two things related? a. Is effectiveness easier or more difficult to achieve when you become more concerned with efficiency (costs)? It becomes more difficult to be effective when you want to use the least costs possible. b. Example: you want to throw a huge, fun Sugarbowl party, but you only have $5. c. If you are efficient, does that automatically make you effective? NO! Efficient organizations, according to research, tend to be effective ones. They TEND to be; this is not automatic. d. The best management is being effective and efficient at the same time. iv. Is it better to be ineffective but efficient, or effective but inefficient? Being effective but inefficient is better than the first scenario, but neither situation is optimal. v. Injellitance= incompetence + jealousy vi. Good managers need to leave their egos at the door and hire decent employees. When they do good, give back and promote them, give raises, etc so they will stay. You scratch their back, they’ll scratch yours. vii. The best players are not always the best coaches. Do not let yourself get in your own way. viii. Is management art or science? BOTH! a. As a science—refine and reformulate based on data collected and theories being tested with the scientific method. If management was a science, a formula could be given to follow and you would always be successful. You cannot use this alone, because there is not just one type of management that is considered the best. b. As an art—through practice, people do things in their own way based on their personalities. Management that is practiced has the characteristic of equifinality—there are many roads to success; there is no set formula for success in management (not just a science). c. Autocratic d. Democratic e. Laissez-faire hands off, the manager trusts them f. Golden Ruletreat others how you want to be treated g. Platinum Rule(refers to management)Treat other people how THEY want to be treated How did management become important and why is it still important? a. The industrial revolution forever changes how work is performed. Machinery is being added to the production process, which means that the skills of the craftsmen are dedicated to the machines. Factories begin to pop-up, causing the craftsmen job is being divided up; the skill level of the worker went way down. b. The economic effects of the industrial revolution leading to the need for professional management. Workers needed a manager to coordinate the tasks that were broken down because skill level went down. c. Productivity goes way up along with consumption demand, and prices go way down—Capitalism. d. This increase in productivity and demand and decrease in prices leads to a switch from owner management to professional management. Back then, owners managed the whole company, but as factories increased in size, they couldn’t do it themselves so the position of professional manager came into play—pivotal event in business. The Management Pyramid
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First-line Managers—foreman, supervisor i. Function: they are the only managers that do not manage other managers. They manage the workers and tasks. They typically come from labor-operative employees. They enter from the bottom—labor pool. ii. Concern: their concern is efficiency. They cannot determine what the business will do and when, they are just responsible for the transformation process—production. This is done through labor-operative employees. THEY MAXIMIZE EFFICIENCY Middle Managers—department head, plant manager, dean i. Function: there are two “i’s” of middle management: these are integrate and interpret. They take top management terms and communicate them in ways that first-line managers can understand—interpret. They also bring together the first-line managers and make sure that they work together—integrate. ii. Four things that happen in corporate downsizing (apple cored): many middle managers have been eliminated through delayering (flattening, right sizing). Costs are trying to be cut, so corporate downsizing’s concern is efficiency. a. Management levels are eliminated, typically at middle management. b. The managers who remain are asked to do more work. Burnout occurs because some people are doing up to four jobs. This is not long-term efficiency. People who remain go through the survivor’s syndrome—feeling guilty because their friends have been eliminated, but they still remain. They also know that it happened once so it can happen again; next time it could happen to them. They are depressed and anxious/fearful at the same time. When this happens, productivity drops. Accidents occur more frequently because workers are not paying attention to what they are doing—all caused by depression and anxiety. c. The company implements new computer/information technology. This makes it easier for top managers to talk to first-line managers. There is no middle-man needed anymore, eliminates interpretation. d. Staff management jobs are farmed out consulting firms—outsourcing. Top Managers—CEO (Chief Executive Officer), CFO (Chief Financial Officer), CIO (Chief Information Officer) CSO (chief security officer) i. Function: they develop the strategy or “grand plan” for the organization. There is not just one strategy for success (equifinality). They legitimize the organization for society; they show society how this organization is a good corporate citizen. They are making contributions to society. ii. Top managers are most concerned with effectiveness, while first-line and middle managers are more efficiency oriented. You must have both at the same time to survive as a company. iii. Top managers focus on the long range of the business.
Other Types of Managers a. Line vs. Staff managers i. Line managers are responsible for activities that directly affect the transformation process. They are over laborers who are making the product. If you make a decision that makes an impact on how, when, what product is produced, then you are a line manager. Line managers are located on all levels of management —top, middle, etc. The line managers have all the power compared to the staff managers. ii. Staff managers support the line managers’ efforts through their special expertise. They support and guide the line managers. They are typically experts in one area. They present their ideas, but it is up to the line managers to execute those plans only if they choose to do so. Staff managers are usually cut during downsizing. They are outside the chain of command. b. Functional vs. General managers
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i. A functional manager is responsible for one area of activity (e.g., a marketing manager). You must be an expert at one thing. ii. A general manager is responsible for many different areas of activity (e.g., a CEO). These are the “masters of all trades.” General managers have a harder job than functional managers. c. Administrators vs. Managers i. An administrator is just another name for a manager who manages in the public or not for profit sector. ii. A manager manages in the private of profit sector. Five Functions of Management a. Collectively these five functions are known as the management process. It is a series of steps taken to reach the company’s goal. b. What’s the relative emphasis on these five functions as one ascends the management pyramid? c. Five Functions:POSLC i. Planning—involves goal-setting and action planning. Certain actions must be taken to achieve the goals. You must begin with the end in mind—you must know where you are going and how you are going to get there. Top managers spend most of their time planning. MORE FUTURE ORIENTED ii. Organizing—the work must be divided among groups and individuals to make sure that the goal is met efficiently. The groups and individuals must be coordinated in an organized way—they must work together to meet the goals efficiently. The management pyramid is an example of this. Middle managers spend most of their time organizing. iii. Staffing—making sure you get the right people in the right positions. First-line managers spend most of their time staffing and leading. iv. Leading—getting people to go along with you harmoniously and willingly to accomplish goals. This function is all about getting people motivated and inspired. Communication, resolution of conflict, and direction are all part of leadership. Leadership increase people’s performance. First-line managers are most responsible for this. v. Controlling—this is about making sure that the goals are being achieved efficiently. Another name for controlling is feedback. There are three aspects of control (**this is going to be a test question): a. Monitor organizational performance. b. Compare actual performance with “hoped for” performance. c. If actual performance is less than “hope for” performance, diagnose problem and take corrective action. If actual performance is greater than or equal to “hoped for” performance, P-A-R-T-Y! **Planning without controlling does not work—they go hand-in-hand and cannot be separated— they are the Siamese twins of management.** Managerial Roles a. These roles arise from the manager’s authority and status within the company. b. There are three roles that every manager engages in: i. Interpersonal Roles ii. Informational Roles iii. Decisional Roles You meet people, they give you information in order for you to make good decisions. c. Authority gives rise to status (the more authority you have, the higher your status is). Status leads to interpersonal roles which leads to informational roles which leads to decisional roles. d. People are your most important resources. Anybody you come into contact with can teach you something—lessons come from everywhere. You can learn from anybody if you are willing to listen.
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Managerial Skills a. Technical Skills—this is an expertise. It is related to a method, process, or procedure. Technical skills are most important in the first-line management level because they deal with production. This does not necessarily mean that top managers don’t need this skill; if they don’t understand the business then they cannot come up with strategies to keep the business alive. Technical skills just decrease as you go up the pyramid. b. Human Skills—the ability to work well with other people in a coordinated way. You must be able to communicate, lead, and resolve conflict. Empathy and self-awareness are two characteristics that all managers need to have. Human skills are most important in all levels of management. i. Empathy—feel what others feel—“do unto others as they would like to be done unto”—Platinum rule. ii. Self-awareness—know how your behavior affects the behavior of others c. Conceptual Skills—the ability to see the big picture and not get too involved with details. This is the ability to forecast and problem-solve. These are most important in top management because they do the function of planning. d. The most difficult skill to acquire is conceptual skills because you need to have experience to develop these. You must be relatively smart as well. You can speed this process up by learning from others. e. Different combinations are required at different levels of the management pyramid. Managerial Success a. Are effective managers successful managers? i. Only 10% of effective managers were also successful. ii. If you are doing a great job, there is no guarantee of a promotion. b. Activities of Management i. TM=Traditional Management—includes planning, decision making, and controlling. ii. COMM=Communication—involves keeping a good relationship with their workers. iii. HR=Human Resources—involves training, staffing, discipline, motivating, and resolving conflict. iv. NET=Networking—involves socializing with people inside and outside of the organization, including powerful people. c. 70% of the effective managers’ time is spent on COMM and HR. Effective managers manage down. d. Only 40% of the successful managers time is spent on COMM and HR. Successful managers manage up—they try to impress their supervisors so they can get promoted. e. Manager who are both effective and successful manager both up and down! f. Effective managers do best by training their replacement.
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The organization as an open system—open to external environment a. 3 basic characteristics i. Input ii. Transformation iii. Output b. 6 additional characteristics The Open Systems Approach—3 characteristics a. Inputs – a system must gather raw material and resources from the environment. b. Transformation—fancy name for production. This is the organization. c. Outputs—outcome of the transformation. These are the goods and services offered to the customers. d. Suppliers and customers are the two major dependencies in any organization. Competition is a basic threat to these two dependencies because they are high in demand. e. As the environment changes, the company must change as well. It also tries to change the environment to work better with it—this is done through advertisement and persuasion. This makes it more suitable for continued survival of a company. Six Additional Characteristics of an Open System a. Cyclical nature of the transformation process—this is the controlling function of management. This is “feedback.” If there is something going wrong, actions are taken to correct it so the cycle does not stop and the loop can be completed. This means that customers and suppliers are equally important because if one fails, then the business fails. b. Buffering the technical core—we want to buffer the technical core from threatening environment changes. We want stability and production—we change only when it is required. If there is too much change, efficiency goes down. Change is kept to a minimum. c. Negative entropy—entropy is the tendency for a system to cave over time. Businesses have a life cycle. Companies look for the fountain of youth—they want to stop the decline by reinvigorating it and bringing in new people. By doing this, the company can be re-energized and stay successful. d. Role differentiation and specialization—as the organization becomes bigger, there are more specialized units to deal with troublesome aspects of the environment.
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Synergy—the whole is greater than the sum of its parts. People working together can get more done than if working alone. This is synonymous with teamwork. f. Equifinality—there are many roads to success. i. Example: Wal-Mart 1. Wal-Mart: They buy in bulk so they get things for very cheap, which means the consumer gets it for cheap. They can still make a profit. It is all about number—the more you buy, the cheaper it is. 2. Target: They are a little more selective in their product, the aisles are wider, and quality is a tad bit better. Products are slightly more expensive than Wal-Mart, but still cheap. 3. They are both successful. IV. The Internal Environment a. The Five Organizational Subsets i. Organization 1. Maintenance a. It is responsible for the smooth operation and upkeep of the organization. b. There is physical maintenance and psychological maintenance. c. Maintenance is efficiency oriented, along with production. 2. Managerial a. Contains two levels of management: middle and top. b. This subset resolves the conflict between production and adaptive subsets. Middle management is called in to resolve the conflict. c. This subset gives direction to all the other subsets. d. This involves planning, organizing, legitimize the organization to society (image ads), and resolving conflict. e. This is half internal (middle) and half external (top). ii. Primary 1. Input/Output Boundary Spanning a. These communicate with the environment the most. b. Input=purchasing. c. Output=marketing/sales. d. These deal with your two major dependencies. e. They are externally oriented because they are more effective oriented. 2. Production a. This is completely internally oriented. b. It is efficiency focused. c. Production wants stability, while adaptive wants change—they butt heads constantly. Who decides how to resolve the conflict? Management does!!! 3. Adaptive a. This helps you change with environmental changes. b. This deals with research, development, and technology. c. This keeps you up with changes and trends so that you know what customers want. **Every subsystem provides something essential for business survival. One subset can take on the jobs and characteristics of another subset.**
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Environmental Scanning i. Environmental Scanning—gathering information of the changes and trends in environment. What are the threats and opportunities going to be. ii. Positively related to organizational performance. iii. This is where the foundation on which planning is built. The more you scan, the better you plan. The better you plan, the better you performance. Therefore, more scanning equals better performance. The External Environment a. Direct Action Components—when they change, you can feel the effects immediately. i. Customers 1. How do customers influence organizations? They can buy or not buy. They can vote for your company or not. When they have choices, they have power. Once customers have power, they can start making demands. When you have powerful customers, they can drive down your prices or else they’ll go somewhere else. Once prices are down, revenues are down. Customers are not powerful when there is a monopoly; they don’t care about you because they are the only company to provide for you. Even when there is a monopoly, you must treat your customer well so they’ll stay with you when the monopoly is broken up. 2. How do organizations influence customers? Marketing research keeps on top of what customers want and they produce for the customer. 3. The watchword is quality. Quality is whatever the customer wants, when they want it. Quality is always customer driven. The best companies will get feedback from their customers—this is where customer services come in. Sometimes companies go out and get mystery customers—they go out and get feedback themselves instead of waiting for it. 4. Joint/Product Service Focus—any chance to sell a product is a chance to sell a service. 5. Bonus: three ways to provide superior customer service: a. Make it easy to complain. b. Make a timely, personal response to the complaint—get back to them by sundown. c. Make sure your response to the complaint is effective. 6. **It costs 5 times as much to find a new customer than to keep an old one. It is worth keeping that old customer. ii. Suppliers 1. How do suppliers influence organizations? Suppliers deliver to organizations, and they produce and sell goods to a company. You want a good relationship with your supplier so that you get the best delivery times, prices, and quality. The supplier is the company’s partner—it is a win-win situation. If the supplier becomes an enemy, the company will eventually lose. 2. 3 ways to establish and maintain a positive relationship with suppliers: a. Vertical integration—buy up the supplier and make them a part of the organization. This causes better cooperation—delivery times, costs, and quality of products. b. Lock in long-term contracts—thinking the cost of the supply will go up; the supplier is guaranteed business, and the supplier will continue to do business with the company at a good price. This means that both benefit.
c. Reduce the number of suppliers. 3. How do organizations influence suppliers? iii. Competitors 1. How does one compete? a. There is not only one way to compete—equifinality—there is more than one road to success. b. There are three ways to compete: i. Differentiation—make your product different in terms of design, quality, service, and image. Make it exclusive so that people will pay a high price for it. Examples would be Mercedes, Lexus, BMW, and Jaguar. ii. Overall cost leadership—good product quality at a low price. These types of companies do volume businesses like Wal-Mart and Sam’s. iii. Focus—rather than focusing on the entire market, you focus on a segment of the market. An example of this is Lady Footlocker, where business is focused on women. **Each of these can be effective in the right environment—equifinality.** 2. Law of the market place. a. Organizations unable to compete will be forced to change their product lines, or they will die out. b. This is organizational Darwinism—survival of the fittest. Only the strong survive. 3. The five forces of competition (5-6 questions on the exam from this!!!): a. Top managers use these 5 forces to analyze businesses to make acquisition and divestiture decisions. Two goals of top management in competition are to maximize market share and maximize profitability. b. Competition drives down market share and profitability. We want to get rid of businesses that are competitive because we are not making enough money. c. In general, top managers want to acquire businesses in markets with low competition and divest businesses in markets with high competition. d. Five Forces: i. Rivalry among organizations: 1. Companies are jogging in a customer race—they want the most customers. 2. They try to lower costs to get more customers. When they do this, you lower your costs. 3. A countermove promotes a countercounter move. It is a back and forth deal the whole time—it’s a horse race. 4. We jockey in price, quality, service, and advertisement. 5. The greatest rivalry occurs when there are many organizations. The more organizations there are in an industry, the more competition increases. You would rather be dealing in a monopoly. 6. There is more rivalry in mature, low growth industries, such as soda companies. 7. As demand decrease, competition increases. As the market starts to contract, competition just gets fiercer. ii. Threat of new entrants: 1. When a new company comes into the marketplace, they want to take away business from you or else they won’t survive. 2. They increase the supply of their product, and price goes down. As sales are going down, costs are going up, cutting into profitability. 3. Example: when you graduate with a degree from LSU, you want LSU to increase the requirements to get your degree so that it is harder for more people to come in. 4. 5 barriers to entry into an industry/market (if these are high, number of new entrants is low): a. Government policy—government approval/regulation is necessary before you even get into business. b. Capital requirements—you must have money to start a business. c. Brand identification/loyalty—we are creatures of habit—we find something we like and we stick with it. In order to get into business, you have to break people’s habits.
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Cost advantages—companies that are already in business already have good locations and good relationships with their suppliers, so it takes a lot to overcome this. e. Distribution channels—these are so tied up with existing products that it is very difficult for you to advertise your product. **You want these to be high so new entrants cannot get in.** iii. Threat of substitutes: 1. Substitute products are typically the result of technological innovations. 2. Substitute products generally increase competition and promote product obsolescence. 3. Most of the time one can battle a substitute initially with lower prices and aggressive advertising. 4. Substitutes increase competition, and if they are really good, they will drive you out of business. For example, a sugar substitute now is Splenda. 5. Substitutes have a similar effect as threat of new entrants. iv. Power of suppliers: 1. How do you know if a supplier is good or not? They are one of the few suppliers that offer the product and they have many customers—they don’t need you, you need them. 2. You need two or three suppliers for the same resource so that you can lower their power and have redundancy. You do not want to rely on one supplier. v. Power of customers: 1. How do you know if a customer is good or not? They make large purchases from you and they have many other places to buy what you are selling. 2. You need them more than they need you. 3. They know if they take their business elsewhere, you’re done. In order to keep the customer, you give them what they want, when they want it. 4. You want to diversify your customer base so that the customer doesn’t have so much power. 4. “Good” and “Bad” Competitive Environments from the Organization Standpoint Anything that eliminates competition is Good!!! Anything that increase competition is Bad!!! “Bad” “Good” Rivalry High; many organizations Low; few organizations Threat of New Entrants High; few barriers Low; many barriers Threat of Substitutes High; many Low; few Power of Suppliers High; few Low; many Power of Customers High; few Low; many b.
Indirect Action Components—the effects of these are always delayed. i. Technology 1. The effects of technology on an industry/market—if you can’t stand the heat in the kitchen, you better get the hell out. 2. Two types of innovation. a. Product Innovation—a technological advancement made in the good/service offered to the customer (ex: light beer or beer in cans equals health and convenience). b. Process Innovation—a technological advancement made in the transformation process. c. Product innovations will make the company effective—giving the customer what they want, when they want it. Process innovations are internal and are more efficient. These fall into the category of adaptive—Research and Development. d. Product and process innovations can be one in the same. As example is a winglet on planes—this lowers fuel costs (efficiency) which in turn lowers plane ticket costs (effectiveness). ii. Economy 1. Ask 100 economists what the economy will be in the future and get 100 different answers. 2. What are the effects of the economy on organizations? a. Economy can be a threat or an opportunity.
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Most businesses want moderate, steady growth. Rapid expansion is followed by a rapid decline. Economy is not predictable. If something happens somewhere else in the world, it can affect our economy just like that.
iii. Government 1. Four ways that government influences businesses: a. Regulations i. The purpose of regulations to the government is to improve the quality of life for its citizens. ii. From a business standpoint, this is the cost of doing business. In order to meet the regulations, you must spend time and effort which costs money. iii. Shadow Bureaucracy—an example is that the production of a company is shadowed by the EPA and Occupational Safety. If you do not meet regulations, these things will fine you and possibly shut you down. iv. You must know what the government is doing in order to not be overpriced. v. Regulations can also be opportunities. Consulting firms see this as an opportunity to do business with other companies. b. Taxation and Subsidization i. Taxes are a double-edged sword. In order to encourage businesses, taxes should be dropped. In order to discourage businesses, taxes should be increased. ii. For example, government is trying to increase the taxes on cigarettes in order to cause people to stop smoking. iii. Subsidies—government support of businesses—it is called corporate welfare by its critics. c. Direct Competition i. Sometimes the federal government will go head-to-head with privately-owned businesses. ii. For example, the post office will go head-to-head with Fed Ex and UPS. d. Economic Policy i. Say’s Law—allowed for trade between US, Canada, and Mexico. ii. Supply makes its own demand. 2. Three ways organizations influence government: a. Lobbying i. Sometimes you think lobbying is in your best interest, but it could possibly come back to haunt you. b. Direct Political Action i. Voting is the best form of direct political action. ii. PACs—Political Action Committees. They are formed by shareholders and employees of the company—they make contributions to the PAC, and the PAC contributes to the candidate’s campaign. $5000 is the limit of direct contribution, but there is limitless indirect contribution (soft money). The soft money is what is powerful. c. Illegal Activity i. Bribery, kickbacks, incriminating photographs, blackmail, etc are all forms of illegal activity. ii. Special interest groups have the power because they have the most power. iii. It is all about the power and the money. iv. Society 1. How does one’s society influence an organization? a. A company must know how society is changing in order to know what the customer wants and how they want it. b. As society changes, customer wants change as well. Therefore, the company must change their products and the way they advertise their product in order to attract customers of the new generation. c. Companies fill entry-level positions with retirees. For example, old people go and work at McDonald’s because the company can get away with paying the new worker with little money. 2. The goal is to achieve legitimacy—showing that you are a good corporate citizen, that you want the best for society, and that you are going to give back to society. 3. How does one achieve legitimacy? v. International 1. How does the international component affect organizations?
a. International component is both a threat and an opportunity. Management troubles in a strange land—the case of managerial ignorance of foreign cultures. a. Most of us in the US have only been exposed to one culture—we think that if we do it here, then it is the best way. b. Every culture has a different way of doing things—there are many paths to success. c. European countries are exposed to many different ways of doing things, while US managers are only exposed to one way. d. A company must be culturally sensitive. They must know about the nonverbal signals. e. Companies must know how customers like to buy their products. They have to know how people value time as well. 3. Costs of Piracy and Counterfeiting a. According to US Chamber of Commerce in 2005 the cost of piracy and counterfeiting cost a ton of money. b. Counterfeiting—a fake product is sold. c. Piracy—for example, China sells movies that are in theatres right now on DVD on the streets. vi. Planning 1. Planning is said to have primacy as it’s the first of the management functions. 2. Planning involves two basic activities: goal setting and action planning. a. Goal Setting: We set goals of where we want to be in the future. b. Action Planning: This is all about reducing the gap of where we are now to where we want to be in the future. This requires actually carrying out the plan. 3. Planning requires conceptual skills. Planning is future-oriented—problem-solving, intuition, etc. You need conceptual and human skills in order to do this. 4. Three purposes of planning: a. Fundamental purpose is to establish and achieve goals. b. Defensive purpose is to help the organization avoid threats in the environment. c. Offensive purpose is to help the organization exploit opportunities in the environment. 5. Why is planning important? a. Helps organizations succeed, although planning does not guarantee success. Organizations that emphasize planning have higher success rates, though. b. Provides a sense of unity and direction. The top management of the organization sets the goals—now everyone knows what they are working for. This means that everyone will go in the same direction—unity. Organizations begin with the end in mind. c. Helps organizations cope with change. Organizations try to anticipate every base that is possible in the future so they are prepared for change. This does not necessarily mean that a company won’t be caught with their pants down. d. Provides performance standards. This gives people feedback on what they are doing right and what they are doing wrong. e. Helps to develop managerial talent. Coming up with a plan involves conceptual (developing the plan) and human (implementing the plan) skills. Someone must come up with the plan and then it actually has to be implemented. 6. Why do managers resist planning? a. One of the many functions they perform. Other functions include organizing, staffing, leading, and controlling. This is just one more thing they must do. b. It’s hard work—this involves thinking and planning for the future. This can be stressful. c. It can be used to measure results. The poor performing manager uses this as a reason to resist planning—they want to keep things ambiguous so it doesn’t seem like they are doing a poor job. d. Takes time and is expensive. Planning takes several hours without interruption—this much time out of a manager’s day is time consuming and costs a lot of money. e. There’s a lack of immediate feedback. This would be like taking all three exams in a class, and then finding your grade after the end of the semester. f. It involves change (future). There is a great fear of the unknown. g. The manager may fear failure. The manager might lack self-confidence when it comes to planning, and they do not want to fail. This means that they push it back and procrastinate; then they have to throw something together last minute under pressure. The quality is not going to be great, and the outcome will be poor—self-fulfilling prophecy. h. It’s not rewarded by the organization. WIFM—what’s in it for me? If there are no rewards for planning, then why do it? Organizations must provide incentives in order for people to plan properly. 2.
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It goes against the “doer” mentality. Planning is thinking about doing something, not actually doing it. With planning, results might not be seen for years depending on the level of the plan. Managers don’t like to be away from other people for that long, because they wonder what is getting done. *None of these are very good reasons of why to avoid planning. **Gresham’s Law of Planning** a. Planning may be neglected even when the manager has the best intentions to plan. b. It’s the tendency for day to day problems to overshadow planning problems. They day to day stuff never goes away, so planning never gets done. c. The problem is incorrect priorities. A manager should take the planning part first because it is a preventative measure—it makes the day to day stuff go away. More time must be put in the beginning so it doesn’t take a much time later. Planning is more efficient because it prevents later problems. Planning is proactive. What’s the outcome of resisting planning? a. The manager becomes a “firefighter.” b. They become reactive in dealing with problems. You solve problems when they pop up rather than preventing those problems with planning. c. They have an external locus of control or in other words, “denial ain’t just another river in Egypt.” You believe control over your performance is not in your hands—they place the blame in bad luck, difficult situations, other people, etc. It is never their fault. Nonplanners do not think they need to change. Internal local of control—you believe your poor performance is because of what you have done. Your lack of knowledge, planning, etc has caused problems. This is good to an extent—you believe you can control everything—you become a control freak, and you stress out when you figure out you cannot control everything. The Planning Process a. Phase 1: Establishing Objectives i. Goals should be based on environmental scanning—this provides the basis for phase 1. You should identify the threats and opportunities—avoid the threats, and exploit the opportunities. ii. Goals should be set according to the SMART model of goal setting (this is going to be on the test). 1. S-goals should be specific in terms of what is desired and when it is desired by. A sense of urgency must be created so things get done. 2. M-goals should be measurable. If it can’t be measured, it can’t be managed. 3. A-goals should be achievable. The goal has to be challenging yet achievable. If you can’t achieve, self-confidence takes a toll. 4. R-goals should be relevant. This is synonymous with important—goals should only be set in important areas. 5. T-goals should be trackable. Progress should be kept track of relative to the goal. This involves setting checkpoints so feedback can be given about performance. M and T go hand-in-hand. b. Phase 2: Developing Premises i. In this phase, the manager is developing beliefs about what will happen in the organization’s environment. ii. It’s synonymous with “forecasting.” iii. Different forecasts will lead to different plans being developed for accomplishing the same goal. iv. Contingency Planning 1. It involves developing multiple future scenarios and plans to accompany each scenario. a. Scenario APlan 1 b. Scenario BPlan 2 c. Scenario CPlan 3 2. Problems with it: time consuming and expensive. 3. Use contingency planning in a rapidly changing environment. 4. Not all of the plans are utilized—they sometimes go untouched. c. Phase 3: Decision Making i. This phase involves selecting a course of action to accomplish the goals set in Phase 1.
ii. 3 aspects of decision-making: 1. Identifying alternatives 2. Evaluating the alternatives 3. Selecting a course of action d. Phase 4: Implementing a Course of Action i. Managers must assign and direct personnel to carry out the plan. ii. A great plan poorly implements is a ? iii. A great plan never implemented is like a ? iv. This phase involves human skills. v. 3 keys to effective implementation (this is a test question): 1. Tie planning to the budgetary system. 2. Make sure people understand the plan—clear communication is essential. You want people to know what they are doing and why they are doing it so it is easier to commit to it. 3. Motive people to implement the plan—reward people for their behavior. People will support what they helped to create. e. Phase 5: Evaluating Results i. Managers monitor the performance of the plan. ii. Managers compare actual performance with “hoped for performance” and take action accordingly. iii. What’s the basic dilemma in planning? The more commitment you have to a plan, the less flexibility you have in changing the plan because no one wants to admit personal failure. 10. Failures to Avoid in Planning a. Top-down delegation of planning. b. Key line managers are left out. c. Lack of supportive climate. d. Plans that are too rigid and complex—a bad plan admits no modification. KISS—keep it simply stupid…and make it fun. e. Failure to manage your plan—this is neglecting phases 4 and 5 of the planning process. f. Getting bogged down in the details. 11. Unrealistic Expectations Concerning Planning (this is on the test) a. The “Crystal Ball” Syndrome: You see the future and develop a plan for that future. They are good at developing the plan of action, but they are not good at implementing or evaluating the plan. They neglect phases 4 and 5. b. The “Cure All” Syndrome: You think planning is a panacea—a plan will cure all of the problems. When this doesn’t happen, disappointment occurs—planning does not guarantee success. Planning will only cure some of the problems. Unmet expectations are usually unrealistic. c. The “Persian Messenger” Syndrome: When someone brings bad news, they are killed. If you punish people for bringing bad news, that information will stop. Instead of punishment, you should praise and recognize it—you can’t fix a problem until you know what it is. They are actually helping you. 12. Strategic Planning a. The focus of strategic planning is on maintaining a positive relationship with the organization’s external environment (customers, suppliers, government, society, etc). b. A term “strategy” is just another name for an organization’s grand plan. c. Four Components of Strategy i. Scope—range of markets you want to do business in. Narrow means few markets, wide means many markets. ii. Resource Deployment—deciding how we will use money and raw materials to achieve goals. iii. Distinctive Competence—competitive advantage—this sets you apart from your competitors. This is why customers buy your product—gives you place in the market. This is the strength that sets you apart. iv. Synergy—the whole is greater than the sum of its parts. The different elements should work together to make the outcome better. d. Two Levels of Strategy i. Corporate Strategy—it focuses on what businesses does the organization want to own. ii. Business-Level Strategy—it focuses on how we want to compete in a market/industry.
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Approaches to Strategy Formulation i. Business Portfolio Matrix Approach 1. This approach to strategy formulation involves two levels of strategy: corporate and business. This is the only one that deals with both strategies. 2. The corporate strategy is to own that mix of businesses that maximize market share and profitability. 3. The various business level strategies employed are determined via the BCG (Boston Consulting Group) matrix. For the test, he will give us an SBU, and we have to determine what area of the BCG matrix it is.
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You want cash cows to fund new ventures that will hopefully become stars. b. You take the profits from the stars to grow bigger—this is all about profitability—how you spend your money. ii. Porter’s Generic Strategies Approach 1. Porter believed that once top managers have scanned their external environment and have a feel for their industry/market…didn’t get the rest of the slide. 2. Porter’s 3 Generic Strategies a. Differentiation b. Overall Cost Leadership c. Focus iii. Adaptation Model 1. This model of strategy formulation states that an organization’s strategy must be aligned with it’s external environment for the organization to be effective. 2. The process of strategic alignment depends on the organization’s environmental scan which provides the basis the answers to three important questions: a. Entrepreneurial? This question is concerned with how the organization will compete and set itself apart from competitors. b. Engineering? This question is concerned with how the organization will produce and Markey its good/service. c. Administrative? This question is concerned with how the organization will structure itself to achieve the answers to the first 2 questions. 3. 4 Strategic Types a. Defender—environmental scan: the organization sees demand for the product as not growing (stable environment). i. ENTR: seal off market share through overall cost leadership (stable growth). ii. ENG: efficient production to lower costs.
iii. ADM: organizational structure emphasizes use of rules/regulations. Low of budgetary constraints/cost controls (tight control). b. Prospector—environmental scan: the organization sees demand for the product as growing (dynamic environment). i. ENTR: find and exploit new markets. Develop new and different products (growth). ii. ENG: flexible production to take advantage of multiple opportunities. iii. ADM: organization structure has few rules/regulations. Far less budgetary constraints/cost controls (loose control). c. Analyzer—this strategy is a combination of prospector and defender, but it’s a combination “in name only.” There are divisions of the company that are operated as defenders and there are other divisions that are operates as prospectors. The key here is that these divisions are kept separate. Defense and prospector should never mix—they are kept in separate divisions of the company. d. Reactor—this is the worst of the four strategic types. It is constantly reacting to what other companies are doing and as a result, how it answers the three questions is constantly changing. There is no set strategy in place so not much gets done. *Each type as a different environmental scan and this different answers to the three questions. *Strategy only works when there is a production process and organizational design. VI.
Discussion of the outside readings: a. “Avoid pricing yourself short.” i. When you lower your prices to attract customers, telling your customers that the original price was BS. Therefore, they think that you are a liar—they switch because they think you are hiding something. ii. Sometimes companies just switch customers by lowering their prices back and forth. iii. Quality, price, and service—you can have two of the three. You must give one up in order to survive. For example, great quality and great service cost money! Therefore, price is high. iv. For many people, price is an indication of quality. If you lower prices too much, your image will take a hit because customers do not think that your product is of quality. b. “When competitive advantage is neither.” i. This article talks about competitive benchmarking—you find out what your competitors are doing and then you try to do it a little bit better to gain more market-share and profitability. ii. Researchers found that this could actually cost you market-share and profitability because the focus is taken away from the customer. You are so worried about beating the competition that you lose the customer. iii. Great coaches always teach that if you take care of our business and focus on what we need to do, then we don’t need to know about the other team. iv. The customer must value the innovation in order for it to be successful—you should innovate on what customers want. Some innovations are unnecessary. v. Doing what everyone else is doing is low risk. Low risk provides low reward. Going against what the competition is doing is a greater risk but it provides a greater reward.
**Practice Questions** 1. What’s the manager’s most important resource a. Human Resources b. Material Resources c. Informational Resources d. Financial Resources 2. Which of the following managers is responsible for implementing plans through operative employees (labor)? a. First-line managers b. Middle managers c. Top managers d. All of the above 3. Which of the following is not true concerning the Industrial Revolution? a. There was an enormous increase in productivity.
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b. The skills of the craftsmen were transferred to the machines. c. The increase in demand required the switch from owner management to divided management. d. Prices for goods increased as a result of the Industrial Revolution. Which of the following is true concerning effectiveness and efficiency? a. Efficiency is concerned with doing the right thing at the right time. b. The more a company wants to be effective the easier it is for the company to be efficient. c. Efficiency is a guarantee of effectiveness. d. Effectiveness is concerned with minimizing cost. e. Efficient organizations tend to be effective ones. The CEO of Syngenta Inc. is a ? a. Top manager b. General manager c. Line manager d. All of the above Injellitance most adversely affects which function of management? a. Planning b. Organizing c. Staffing d. Leading e. Controlling A manager is conducting an annual performance appraisal with one of her employees. This is an example of the ______. a. Planning function b. Organizing function c. Staffing function d. Leading function e. Controlling function What is the primary function of top, middle, and first-line managers? Top managers= planning Middle managers= organizing First-line managers= staffing and leading *All levels do all five functions.* Which of the following is true concerning corporate downsizing? a. It’s primarily effectiveness oriented. b. More line managers than staff managers are eliminated. c. Managers who remain are asked to do more with less. d. The management level primarily affected is top management. e. 1 and 3 are true. Bill is an assistant manager at Raising Cane’s/. he spends most of his time as a manager communicating with, motivating, and resolving conflict among his subordinates. One which of the following functions of management does Bill spend most of his time doing? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Which of the following pairs of management functions represents the conjoined twins of management? Planning and Controlling Which function of management is synonymous with “feedback”? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Which function of management is most important to a middle manager? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Karen is a Human Resource Manager at Blue Cross and Blue Shield. She primarily provides advice to managers dealing with disciplinary and termination issues. Karen is a ____ manager. a. Functional
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b. Staff c. General d. Line e. Function and Staff Emotional intelligence is the manager’s ability to manage his emotions and the emotions of others to produce the best results for the company. a. EQ is a technical skill. b. EQ is a conceptual skill. c. EQ is a human skill. Effective manager spend the majority of their day in COMM and successful managers spend most of their day in NET. Which is more important to the success of a business, customers or suppliers? a. Customers b. Suppliers c. Both are equally important. Ford and GM’s actions best exemplify what open system principle? a. Synergy b. Equifinality c. Role Differentiation d. Negative Entropy According to Luthans’ real manager study, promotions were not based on performance. Successful managers in Luthans study spent the majority of their time on what activity? a. Traditional b. Communication c. Human resources d. Networking *Effective managers spent most of their time communicating. Which of the following pairs of environmental components represent the organization’s two major dependencies? a. Technology and competitors b. Customers and competitors c. Technology and customers d. Customers and suppliers e. Suppliers and competitors *The biggest threat is competition. Which of the following terms would suggest that suppliers and customers are equally important to an organization’s success? a. Equifinality b. Cyclical nature of the transformation process c. Synergy d. Buffering the technical core e. Negative entropy Which of the following characteristics of an open system promotes efficiency in production? a. Role differentiation and specialization b. Synergy c. Equifinality d. Buffering the technical core Which organizational subsystem deals directly with the organization’s two major dependencies? a. Adaptive b. Managerial c. Maintenance d. Production e. Boundary-spanning Buffering the technical core refers to maintaining stability in what organizational subsystem? a. Boundary-spanning b. Production c. Maintenance d. Managerial e. Adaptive The managerial subsystem is comprised primarily of: a. Top managers b. Middle managers c. 1st line managers d. All of the above e. 1 and 2
27. How much more does it cost to find a new customer than to keep an old one, according to TQM experts? a. 2 times b. 3 times c. 5 times d. 10 times 28. Which of the following would lead to a positive relationship with your suppliers? a. Lock-in long-term contracts for the supply. b. Increase the number of suppliers. c. Vertical integration forward. d. All of the above. 29. Which of the following would promote a good competitive environment? LOOK AT CHART FOR ANSWER!!! 30. As Kodak enters the inkjet-printer market, which of the following do you believe will happen, given your knowledge of new entrants and competition? a. Kodak will increase product supply b. Kodak will drive prices down. c. Kodak will seek market share. d. Kodak will increase the power of the customer. e. Cause other competitors’ resource costs to side. f. All of the above. 31. Which of the following is true concerning thretat of substintutes? a. They’re usually the result of a technological innovation. b. They can reduce another organization’s market share and profitability. c. They’re typically introduced at a higher price than other products/services. d. They promote product obsolescence. e. All of the above are true. 32. Which of the following would lead to the greatest amount of rivalry among organizations? a. Few organizations in the marketplace. b. A new, high growth market. c. Many organizations in the marketplace. d. A mature, low growth Markey. e. 3 and 4. f. 1 and 2. 33. Which of the following is not a barrier to an entry into a market/industry? a. Government patents. b. Low start-up costs. c. Brand loyalty. d. Cost advantages of companies already in business. e. Distribution channels are tied up. 34. Which of the following would lead to a good competitive environment from the organization’s perspective? a. Being dependent on a powerful supplier. b. High threat of substitute products. c. Low barriers to entry into the marketplace. d. A customer who is very powerful. e. None of the above. 35. The term “shadow bureaucracy” is associated with which of the following government influences n business? a. Government regulation b. Government taxation c. Government subsidy d. Government economic policy 36. Which of the following is not true concerning PACs? a. They are comprised of employees and shareholders of the company b. They are allowed to directly contribute $5,000 to a candidate per campaign. c. They are a way of influencing government. d. They are allowed only $10,000 in indirect contributions. 37. All of the following are true concerning technological innovations except a. They increase competition. b. Process innovation improve transformation process. c. Product innovations increase efficiency. d. The adaptive subsystem deals primarily with such issues. e. Production innovations can lead to product obsolescence. 38. Which of the following is known as corporate welfare? Corporate subsidies—this is bonus! 39. “Planning has primacy” means
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a. Planning is logically the first of the management functions. b. Planning guarantees success. c. Planning is the most important function of management. d. All of the above. Which of the following is a reason a manager may resist planning? a. Planning is not rewarded by the organization. b. Planning can be used to measure the manager’s performance. c. The manager may have a gear of failure related to planning. d. Planning doesn’t give the manager immediate feedback. e. All of the above. What do non-planners typically blame for their poor performance? a. Lack of skill b. Lack of effort c. Bad luck d. Lack of motivation e. All of the above. Gresham’s law of planning…? a. Is the tendency for planning problems to overshadow day-to-day problems. b. Happens only when managers don’t realize the value of planning. c. Is a problem of misplace priorities. d. All of the above. In developing a plan a manager relies primarily on ___ skills whereas with implementing the plan a manager primarily relies on ___ skills. a. Technical, conceptual b. Conceptual, technical c. Conceptual, human d. Human, technical Phase V: Evaluating Results is most similar to what function of management? a. Planning b. Organizing c. Staffing d. Leading e. Controlling When a manager engages in the crystal ball syndrome, she is neglecting what aspect of planning? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action e. None of the above When a manager engages in the “Persian Messenger” syndrome is most directly affects which aspect of planning? a. Establishing objectives b. Developing premises c. Decision-making d. Implementation e. Evaluating results Which phase of the planning process is synonymous with forecasting? a. Developing premises b. Establishing objectives c. Decision-making d. Implementing a course of action Evaluating results in planning process is similar to what function of management? a. Planning b. Organixing c. Staffing d. Leading e. Controlling Which of the following is key to success in implementing one’s plan? a. Make sure your planning process is tied to budgetary system. b. Clearly communicate your plan. c. Motivate employees through WIFM and participating in the planning process. d. All of the above. e. Only 2 and 3.
50. When a manager falls victim to the “crystal ball” syndrome what phase of the planning does he/she neglect? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action. e. Evaluating results f. Both 4 and 5. 51. When a messenger falls victim to the “Persian messenger” syndrome what phase of planning does he/she adversely affect? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action e. Evaluating results 52. Which element of a well-thought out strategy is concerned with “competitive advantage?” a. Scope b. Resource development c. Distinctive competence d. Synergy 53. What do you think would happen if you had the following scenario? Org X wants to compete through overall cost leadership because of the intense competition in the marketplace. Org X has a flexible production process to keep its options open. Org X also has an organization structure which has few rules/regulations and not many cost controls. What do you think would happen if you had the following scenario? Org Y wants to compete by exploring new markets and developing innovative products. Org Y has invested heavily into a highly efficient production process to keep its costs down. Org Y also has an organizational structure which has many rules/regulations and lots of cost controls. Both organizations will fail because you cannot have both defense and prospector strategies. 54.
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What is Management? a. Definition: process of achieving desired results though the efficient utilization of human and material resources. i. An ongoing process, most productivity for the fewest dollars b. Two Key Concerns of Management i. Effectiveness—achieving desired results; refers to doing the right things at the right time. This means giving the customer what they want, when they want it. ii. Efficiency—refers to minimizing waste or reducing resource costs. As competition increases, efficiency becomes more important. Efficiency is the mean to the ends. a. If you increase productivity and maintain your costs, then you are being efficient. b. If you increase productivity and lower costs, then you are being really efficient. iii. How are these two things related? a. Is effectiveness easier or more difficult to achieve when you become more concerned with efficiency (costs)? It becomes more difficult to be effective when you want to use the least costs possible. b. Example: you want to throw a huge, fun Sugarbowl party, but you only have $5. c. If you are efficient, does that automatically make you effective? NO! Efficient organizations, according to research, tend to be effective ones. They TEND to be; this is not automatic. d. The best management is being effective and efficient at the same time. iv. Is it better to be ineffective but efficient, or effective but inefficient? Being effective but inefficient is better than the first scenario, but neither situation is optimal. v. Injellitance= incompetence + jealousy vi. Good managers need to leave their egos at the door and hire decent employees. When they do good, give back and promote them, give raises, etc so they will stay. You scratch their back, they’ll scratch yours. vii. The best players are not always the best coaches. Do not let yourself get in your own way. viii. Is management art or science? BOTH! a. As a science—refine and reformulate based on data collected and theories being tested with the scientific method. If management was a science, a formula could be given to follow and you would always be successful. You cannot use this alone, because there is not just one type of management that is considered the best. b. As an art—through practice, people do things in their own way based on their personalities. Management that is practiced has the characteristic of equifinality—there are many roads to success; there is no set formula for success in management (not just a science). c. Autocratic d. Democratic e. Laissez-faire hands off, the manager trusts them f. Golden Ruletreat others how you want to be treated g. Platinum Rule(refers to management)Treat other people how THEY want to be treated How did management become important and why is it still important? a. The industrial revolution forever changes how work is performed. Machinery is being added to the production process, which means that the skills of the craftsmen are dedicated to the machines. Factories begin to pop-up, causing the craftsmen job is being divided up; the skill level of the worker went way down. b. The economic effects of the industrial revolution leading to the need for professional management. Workers needed a manager to coordinate the tasks that were broken down because skill level went down. c. Productivity goes way up along with consumption demand, and prices go way down—Capitalism. d. This increase in productivity and demand and decrease in prices leads to a switch from owner management to professional management. Back then, owners managed the whole company, but as factories increased in size, they couldn’t do it themselves so the position of professional manager came into play—pivotal event in business. The Management Pyramid
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First-line Managers—foreman, supervisor i. Function: they are the only managers that do not manage other managers. They manage the workers and tasks. They typically come from labor-operative employees. They enter from the bottom—labor pool. ii. Concern: their concern is efficiency. They cannot determine what the business will do and when, they are just responsible for the transformation process—production. This is done through labor-operative employees. THEY MAXIMIZE EFFICIENCY Middle Managers—department head, plant manager, dean i. Function: there are two “i’s” of middle management: these are integrate and interpret. They take top management terms and communicate them in ways that first-line managers can understand—interpret. They also bring together the first-line managers and make sure that they work together—integrate. ii. Four things that happen in corporate downsizing (apple cored): many middle managers have been eliminated through delayering (flattening, right sizing). Costs are trying to be cut, so corporate downsizing’s concern is efficiency. a. Management levels are eliminated, typically at middle management. b. The managers who remain are asked to do more work. Burnout occurs because some people are doing up to four jobs. This is not long-term efficiency. People who remain go through the survivor’s syndrome—feeling guilty because their friends have been eliminated, but they still remain. They also know that it happened once so it can happen again; next time it could happen to them. They are depressed and anxious/fearful at the same time. When this happens, productivity drops. Accidents occur more frequently because workers are not paying attention to what they are doing—all caused by depression and anxiety. c. The company implements new computer/information technology. This makes it easier for top managers to talk to first-line managers. There is no middle-man needed anymore, eliminates interpretation. d. Staff management jobs are farmed out consulting firms—outsourcing. Top Managers—CEO (Chief Executive Officer), CFO (Chief Financial Officer), CIO (Chief Information Officer) CSO (chief security officer) i. Function: they develop the strategy or “grand plan” for the organization. There is not just one strategy for success (equifinality). They legitimize the organization for society; they show society how this organization is a good corporate citizen. They are making contributions to society. ii. Top managers are most concerned with effectiveness, while first-line and middle managers are more efficiency oriented. You must have both at the same time to survive as a company. iii. Top managers focus on the long range of the business.
Other Types of Managers a. Line vs. Staff managers i. Line managers are responsible for activities that directly affect the transformation process. They are over laborers who are making the product. If you make a decision that makes an impact on how, when, what product is produced, then you are a line manager. Line managers are located on all levels of management —top, middle, etc. The line managers have all the power compared to the staff managers. ii. Staff managers support the line managers’ efforts through their special expertise. They support and guide the line managers. They are typically experts in one area. They present their ideas, but it is up to the line managers to execute those plans only if they choose to do so. Staff managers are usually cut during downsizing. They are outside the chain of command. b. Functional vs. General managers
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i. A functional manager is responsible for one area of activity (e.g., a marketing manager). You must be an expert at one thing. ii. A general manager is responsible for many different areas of activity (e.g., a CEO). These are the “masters of all trades.” General managers have a harder job than functional managers. c. Administrators vs. Managers i. An administrator is just another name for a manager who manages in the public or not for profit sector. ii. A manager manages in the private of profit sector. Five Functions of Management a. Collectively these five functions are known as the management process. It is a series of steps taken to reach the company’s goal. b. What’s the relative emphasis on these five functions as one ascends the management pyramid? c. Five Functions:POSLC i. Planning—involves goal-setting and action planning. Certain actions must be taken to achieve the goals. You must begin with the end in mind—you must know where you are going and how you are going to get there. Top managers spend most of their time planning. MORE FUTURE ORIENTED ii. Organizing—the work must be divided among groups and individuals to make sure that the goal is met efficiently. The groups and individuals must be coordinated in an organized way—they must work together to meet the goals efficiently. The management pyramid is an example of this. Middle managers spend most of their time organizing. iii. Staffing—making sure you get the right people in the right positions. First-line managers spend most of their time staffing and leading. iv. Leading—getting people to go along with you harmoniously and willingly to accomplish goals. This function is all about getting people motivated and inspired. Communication, resolution of conflict, and direction are all part of leadership. Leadership increase people’s performance. First-line managers are most responsible for this. v. Controlling—this is about making sure that the goals are being achieved efficiently. Another name for controlling is feedback. There are three aspects of control (**this is going to be a test question): a. Monitor organizational performance. b. Compare actual performance with “hoped for” performance. c. If actual performance is less than “hope for” performance, diagnose problem and take corrective action. If actual performance is greater than or equal to “hoped for” performance, P-A-R-T-Y! **Planning without controlling does not work—they go hand-in-hand and cannot be separated— they are the Siamese twins of management.** Managerial Roles a. These roles arise from the manager’s authority and status within the company. b. There are three roles that every manager engages in: i. Interpersonal Roles ii. Informational Roles iii. Decisional Roles You meet people, they give you information in order for you to make good decisions. c. Authority gives rise to status (the more authority you have, the higher your status is). Status leads to interpersonal roles which leads to informational roles which leads to decisional roles. d. People are your most important resources. Anybody you come into contact with can teach you something—lessons come from everywhere. You can learn from anybody if you are willing to listen.
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Managerial Skills a. Technical Skills—this is an expertise. It is related to a method, process, or procedure. Technical skills are most important in the first-line management level because they deal with production. This does not necessarily mean that top managers don’t need this skill; if they don’t understand the business then they cannot come up with strategies to keep the business alive. Technical skills just decrease as you go up the pyramid. b. Human Skills—the ability to work well with other people in a coordinated way. You must be able to communicate, lead, and resolve conflict. Empathy and self-awareness are two characteristics that all managers need to have. Human skills are most important in all levels of management. i. Empathy—feel what others feel—“do unto others as they would like to be done unto”—Platinum rule. ii. Self-awareness—know how your behavior affects the behavior of others c. Conceptual Skills—the ability to see the big picture and not get too involved with details. This is the ability to forecast and problem-solve. These are most important in top management because they do the function of planning. d. The most difficult skill to acquire is conceptual skills because you need to have experience to develop these. You must be relatively smart as well. You can speed this process up by learning from others. e. Different combinations are required at different levels of the management pyramid. Managerial Success a. Are effective managers successful managers? i. Only 10% of effective managers were also successful. ii. If you are doing a great job, there is no guarantee of a promotion. b. Activities of Management i. TM=Traditional Management—includes planning, decision making, and controlling. ii. COMM=Communication—involves keeping a good relationship with their workers. iii. HR=Human Resources—involves training, staffing, discipline, motivating, and resolving conflict. iv. NET=Networking—involves socializing with people inside and outside of the organization, including powerful people. c. 70% of the effective managers’ time is spent on COMM and HR. Effective managers manage down. d. Only 40% of the successful managers time is spent on COMM and HR. Successful managers manage up—they try to impress their supervisors so they can get promoted. e. Manager who are both effective and successful manager both up and down! f. Effective managers do best by training their replacement.
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The organization as an open system—open to external environment a. 3 basic characteristics i. Input ii. Transformation iii. Output b. 6 additional characteristics The Open Systems Approach—3 characteristics a. Inputs – a system must gather raw material and resources from the environment. b. Transformation—fancy name for production. This is the organization. c. Outputs—outcome of the transformation. These are the goods and services offered to the customers. d. Suppliers and customers are the two major dependencies in any organization. Competition is a basic threat to these two dependencies because they are high in demand. e. As the environment changes, the company must change as well. It also tries to change the environment to work better with it—this is done through advertisement and persuasion. This makes it more suitable for continued survival of a company. Six Additional Characteristics of an Open System a. Cyclical nature of the transformation process—this is the controlling function of management. This is “feedback.” If there is something going wrong, actions are taken to correct it so the cycle does not stop and the loop can be completed. This means that customers and suppliers are equally important because if one fails, then the business fails. b. Buffering the technical core—we want to buffer the technical core from threatening environment changes. We want stability and production—we change only when it is required. If there is too much change, efficiency goes down. Change is kept to a minimum. c. Negative entropy—entropy is the tendency for a system to cave over time. Businesses have a life cycle. Companies look for the fountain of youth—they want to stop the decline by reinvigorating it and bringing in new people. By doing this, the company can be re-energized and stay successful. d. Role differentiation and specialization—as the organization becomes bigger, there are more specialized units to deal with troublesome aspects of the environment.
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Synergy—the whole is greater than the sum of its parts. People working together can get more done than if working alone. This is synonymous with teamwork. f. Equifinality—there are many roads to success. i. Example: Wal-Mart 1. Wal-Mart: They buy in bulk so they get things for very cheap, which means the consumer gets it for cheap. They can still make a profit. It is all about number—the more you buy, the cheaper it is. 2. Target: They are a little more selective in their product, the aisles are wider, and quality is a tad bit better. Products are slightly more expensive than Wal-Mart, but still cheap. 3. They are both successful. IV. The Internal Environment a. The Five Organizational Subsets i. Organization 1. Maintenance a. It is responsible for the smooth operation and upkeep of the organization. b. There is physical maintenance and psychological maintenance. c. Maintenance is efficiency oriented, along with production. 2. Managerial a. Contains two levels of management: middle and top. b. This subset resolves the conflict between production and adaptive subsets. Middle management is called in to resolve the conflict. c. This subset gives direction to all the other subsets. d. This involves planning, organizing, legitimize the organization to society (image ads), and resolving conflict. e. This is half internal (middle) and half external (top). ii. Primary 1. Input/Output Boundary Spanning a. These communicate with the environment the most. b. Input=purchasing. c. Output=marketing/sales. d. These deal with your two major dependencies. e. They are externally oriented because they are more effective oriented. 2. Production a. This is completely internally oriented. b. It is efficiency focused. c. Production wants stability, while adaptive wants change—they butt heads constantly. Who decides how to resolve the conflict? Management does!!! 3. Adaptive a. This helps you change with environmental changes. b. This deals with research, development, and technology. c. This keeps you up with changes and trends so that you know what customers want. **Every subsystem provides something essential for business survival. One subset can take on the jobs and characteristics of another subset.**
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Environmental Scanning i. Environmental Scanning—gathering information of the changes and trends in environment. What are the threats and opportunities going to be. ii. Positively related to organizational performance. iii. This is where the foundation on which planning is built. The more you scan, the better you plan. The better you plan, the better you performance. Therefore, more scanning equals better performance. The External Environment a. Direct Action Components—when they change, you can feel the effects immediately. i. Customers 1. How do customers influence organizations? They can buy or not buy. They can vote for your company or not. When they have choices, they have power. Once customers have power, they can start making demands. When you have powerful customers, they can drive down your prices or else they’ll go somewhere else. Once prices are down, revenues are down. Customers are not powerful when there is a monopoly; they don’t care about you because they are the only company to provide for you. Even when there is a monopoly, you must treat your customer well so they’ll stay with you when the monopoly is broken up. 2. How do organizations influence customers? Marketing research keeps on top of what customers want and they produce for the customer. 3. The watchword is quality. Quality is whatever the customer wants, when they want it. Quality is always customer driven. The best companies will get feedback from their customers—this is where customer services come in. Sometimes companies go out and get mystery customers—they go out and get feedback themselves instead of waiting for it. 4. Joint/Product Service Focus—any chance to sell a product is a chance to sell a service. 5. Bonus: three ways to provide superior customer service: a. Make it easy to complain. b. Make a timely, personal response to the complaint—get back to them by sundown. c. Make sure your response to the complaint is effective. 6. **It costs 5 times as much to find a new customer than to keep an old one. It is worth keeping that old customer. ii. Suppliers 1. How do suppliers influence organizations? Suppliers deliver to organizations, and they produce and sell goods to a company. You want a good relationship with your supplier so that you get the best delivery times, prices, and quality. The supplier is the company’s partner—it is a win-win situation. If the supplier becomes an enemy, the company will eventually lose. 2. 3 ways to establish and maintain a positive relationship with suppliers: a. Vertical integration—buy up the supplier and make them a part of the organization. This causes better cooperation—delivery times, costs, and quality of products. b. Lock in long-term contracts—thinking the cost of the supply will go up; the supplier is guaranteed business, and the supplier will continue to do business with the company at a good price. This means that both benefit.
c. Reduce the number of suppliers. 3. How do organizations influence suppliers? iii. Competitors 1. How does one compete? a. There is not only one way to compete—equifinality—there is more than one road to success. b. There are three ways to compete: i. Differentiation—make your product different in terms of design, quality, service, and image. Make it exclusive so that people will pay a high price for it. Examples would be Mercedes, Lexus, BMW, and Jaguar. ii. Overall cost leadership—good product quality at a low price. These types of companies do volume businesses like Wal-Mart and Sam’s. iii. Focus—rather than focusing on the entire market, you focus on a segment of the market. An example of this is Lady Footlocker, where business is focused on women. **Each of these can be effective in the right environment—equifinality.** 2. Law of the market place. a. Organizations unable to compete will be forced to change their product lines, or they will die out. b. This is organizational Darwinism—survival of the fittest. Only the strong survive. 3. The five forces of competition (5-6 questions on the exam from this!!!): a. Top managers use these 5 forces to analyze businesses to make acquisition and divestiture decisions. Two goals of top management in competition are to maximize market share and maximize profitability. b. Competition drives down market share and profitability. We want to get rid of businesses that are competitive because we are not making enough money. c. In general, top managers want to acquire businesses in markets with low competition and divest businesses in markets with high competition. d. Five Forces: i. Rivalry among organizations: 1. Companies are jogging in a customer race—they want the most customers. 2. They try to lower costs to get more customers. When they do this, you lower your costs. 3. A countermove promotes a countercounter move. It is a back and forth deal the whole time—it’s a horse race. 4. We jockey in price, quality, service, and advertisement. 5. The greatest rivalry occurs when there are many organizations. The more organizations there are in an industry, the more competition increases. You would rather be dealing in a monopoly. 6. There is more rivalry in mature, low growth industries, such as soda companies. 7. As demand decrease, competition increases. As the market starts to contract, competition just gets fiercer. ii. Threat of new entrants: 1. When a new company comes into the marketplace, they want to take away business from you or else they won’t survive. 2. They increase the supply of their product, and price goes down. As sales are going down, costs are going up, cutting into profitability. 3. Example: when you graduate with a degree from LSU, you want LSU to increase the requirements to get your degree so that it is harder for more people to come in. 4. 5 barriers to entry into an industry/market (if these are high, number of new entrants is low): a. Government policy—government approval/regulation is necessary before you even get into business. b. Capital requirements—you must have money to start a business. c. Brand identification/loyalty—we are creatures of habit—we find something we like and we stick with it. In order to get into business, you have to break people’s habits.
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Cost advantages—companies that are already in business already have good locations and good relationships with their suppliers, so it takes a lot to overcome this. e. Distribution channels—these are so tied up with existing products that it is very difficult for you to advertise your product. **You want these to be high so new entrants cannot get in.** iii. Threat of substitutes: 1. Substitute products are typically the result of technological innovations. 2. Substitute products generally increase competition and promote product obsolescence. 3. Most of the time one can battle a substitute initially with lower prices and aggressive advertising. 4. Substitutes increase competition, and if they are really good, they will drive you out of business. For example, a sugar substitute now is Splenda. 5. Substitutes have a similar effect as threat of new entrants. iv. Power of suppliers: 1. How do you know if a supplier is good or not? They are one of the few suppliers that offer the product and they have many customers—they don’t need you, you need them. 2. You need two or three suppliers for the same resource so that you can lower their power and have redundancy. You do not want to rely on one supplier. v. Power of customers: 1. How do you know if a customer is good or not? They make large purchases from you and they have many other places to buy what you are selling. 2. You need them more than they need you. 3. They know if they take their business elsewhere, you’re done. In order to keep the customer, you give them what they want, when they want it. 4. You want to diversify your customer base so that the customer doesn’t have so much power. 4. “Good” and “Bad” Competitive Environments from the Organization Standpoint Anything that eliminates competition is Good!!! Anything that increase competition is Bad!!! “Bad” “Good” Rivalry High; many organizations Low; few organizations Threat of New Entrants High; few barriers Low; many barriers Threat of Substitutes High; many Low; few Power of Suppliers High; few Low; many Power of Customers High; few Low; many b.
Indirect Action Components—the effects of these are always delayed. i. Technology 1. The effects of technology on an industry/market—if you can’t stand the heat in the kitchen, you better get the hell out. 2. Two types of innovation. a. Product Innovation—a technological advancement made in the good/service offered to the customer (ex: light beer or beer in cans equals health and convenience). b. Process Innovation—a technological advancement made in the transformation process. c. Product innovations will make the company effective—giving the customer what they want, when they want it. Process innovations are internal and are more efficient. These fall into the category of adaptive—Research and Development. d. Product and process innovations can be one in the same. As example is a winglet on planes—this lowers fuel costs (efficiency) which in turn lowers plane ticket costs (effectiveness). ii. Economy 1. Ask 100 economists what the economy will be in the future and get 100 different answers. 2. What are the effects of the economy on organizations? a. Economy can be a threat or an opportunity.
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Most businesses want moderate, steady growth. Rapid expansion is followed by a rapid decline. Economy is not predictable. If something happens somewhere else in the world, it can affect our economy just like that.
iii. Government 1. Four ways that government influences businesses: a. Regulations i. The purpose of regulations to the government is to improve the quality of life for its citizens. ii. From a business standpoint, this is the cost of doing business. In order to meet the regulations, you must spend time and effort which costs money. iii. Shadow Bureaucracy—an example is that the production of a company is shadowed by the EPA and Occupational Safety. If you do not meet regulations, these things will fine you and possibly shut you down. iv. You must know what the government is doing in order to not be overpriced. v. Regulations can also be opportunities. Consulting firms see this as an opportunity to do business with other companies. b. Taxation and Subsidization i. Taxes are a double-edged sword. In order to encourage businesses, taxes should be dropped. In order to discourage businesses, taxes should be increased. ii. For example, government is trying to increase the taxes on cigarettes in order to cause people to stop smoking. iii. Subsidies—government support of businesses—it is called corporate welfare by its critics. c. Direct Competition i. Sometimes the federal government will go head-to-head with privately-owned businesses. ii. For example, the post office will go head-to-head with Fed Ex and UPS. d. Economic Policy i. Say’s Law—allowed for trade between US, Canada, and Mexico. ii. Supply makes its own demand. 2. Three ways organizations influence government: a. Lobbying i. Sometimes you think lobbying is in your best interest, but it could possibly come back to haunt you. b. Direct Political Action i. Voting is the best form of direct political action. ii. PACs—Political Action Committees. They are formed by shareholders and employees of the company—they make contributions to the PAC, and the PAC contributes to the candidate’s campaign. $5000 is the limit of direct contribution, but there is limitless indirect contribution (soft money). The soft money is what is powerful. c. Illegal Activity i. Bribery, kickbacks, incriminating photographs, blackmail, etc are all forms of illegal activity. ii. Special interest groups have the power because they have the most power. iii. It is all about the power and the money. iv. Society 1. How does one’s society influence an organization? a. A company must know how society is changing in order to know what the customer wants and how they want it. b. As society changes, customer wants change as well. Therefore, the company must change their products and the way they advertise their product in order to attract customers of the new generation. c. Companies fill entry-level positions with retirees. For example, old people go and work at McDonald’s because the company can get away with paying the new worker with little money. 2. The goal is to achieve legitimacy—showing that you are a good corporate citizen, that you want the best for society, and that you are going to give back to society. 3. How does one achieve legitimacy? v. International 1. How does the international component affect organizations?
a. International component is both a threat and an opportunity. Management troubles in a strange land—the case of managerial ignorance of foreign cultures. a. Most of us in the US have only been exposed to one culture—we think that if we do it here, then it is the best way. b. Every culture has a different way of doing things—there are many paths to success. c. European countries are exposed to many different ways of doing things, while US managers are only exposed to one way. d. A company must be culturally sensitive. They must know about the nonverbal signals. e. Companies must know how customers like to buy their products. They have to know how people value time as well. 3. Costs of Piracy and Counterfeiting a. According to US Chamber of Commerce in 2005 the cost of piracy and counterfeiting cost a ton of money. b. Counterfeiting—a fake product is sold. c. Piracy—for example, China sells movies that are in theatres right now on DVD on the streets. vi. Planning 1. Planning is said to have primacy as it’s the first of the management functions. 2. Planning involves two basic activities: goal setting and action planning. a. Goal Setting: We set goals of where we want to be in the future. b. Action Planning: This is all about reducing the gap of where we are now to where we want to be in the future. This requires actually carrying out the plan. 3. Planning requires conceptual skills. Planning is future-oriented—problem-solving, intuition, etc. You need conceptual and human skills in order to do this. 4. Three purposes of planning: a. Fundamental purpose is to establish and achieve goals. b. Defensive purpose is to help the organization avoid threats in the environment. c. Offensive purpose is to help the organization exploit opportunities in the environment. 5. Why is planning important? a. Helps organizations succeed, although planning does not guarantee success. Organizations that emphasize planning have higher success rates, though. b. Provides a sense of unity and direction. The top management of the organization sets the goals—now everyone knows what they are working for. This means that everyone will go in the same direction—unity. Organizations begin with the end in mind. c. Helps organizations cope with change. Organizations try to anticipate every base that is possible in the future so they are prepared for change. This does not necessarily mean that a company won’t be caught with their pants down. d. Provides performance standards. This gives people feedback on what they are doing right and what they are doing wrong. e. Helps to develop managerial talent. Coming up with a plan involves conceptual (developing the plan) and human (implementing the plan) skills. Someone must come up with the plan and then it actually has to be implemented. 6. Why do managers resist planning? a. One of the many functions they perform. Other functions include organizing, staffing, leading, and controlling. This is just one more thing they must do. b. It’s hard work—this involves thinking and planning for the future. This can be stressful. c. It can be used to measure results. The poor performing manager uses this as a reason to resist planning—they want to keep things ambiguous so it doesn’t seem like they are doing a poor job. d. Takes time and is expensive. Planning takes several hours without interruption—this much time out of a manager’s day is time consuming and costs a lot of money. e. There’s a lack of immediate feedback. This would be like taking all three exams in a class, and then finding your grade after the end of the semester. f. It involves change (future). There is a great fear of the unknown. g. The manager may fear failure. The manager might lack self-confidence when it comes to planning, and they do not want to fail. This means that they push it back and procrastinate; then they have to throw something together last minute under pressure. The quality is not going to be great, and the outcome will be poor—self-fulfilling prophecy. h. It’s not rewarded by the organization. WIFM—what’s in it for me? If there are no rewards for planning, then why do it? Organizations must provide incentives in order for people to plan properly. 2.
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It goes against the “doer” mentality. Planning is thinking about doing something, not actually doing it. With planning, results might not be seen for years depending on the level of the plan. Managers don’t like to be away from other people for that long, because they wonder what is getting done. *None of these are very good reasons of why to avoid planning. **Gresham’s Law of Planning** a. Planning may be neglected even when the manager has the best intentions to plan. b. It’s the tendency for day to day problems to overshadow planning problems. They day to day stuff never goes away, so planning never gets done. c. The problem is incorrect priorities. A manager should take the planning part first because it is a preventative measure—it makes the day to day stuff go away. More time must be put in the beginning so it doesn’t take a much time later. Planning is more efficient because it prevents later problems. Planning is proactive. What’s the outcome of resisting planning? a. The manager becomes a “firefighter.” b. They become reactive in dealing with problems. You solve problems when they pop up rather than preventing those problems with planning. c. They have an external locus of control or in other words, “denial ain’t just another river in Egypt.” You believe control over your performance is not in your hands—they place the blame in bad luck, difficult situations, other people, etc. It is never their fault. Nonplanners do not think they need to change. Internal local of control—you believe your poor performance is because of what you have done. Your lack of knowledge, planning, etc has caused problems. This is good to an extent—you believe you can control everything—you become a control freak, and you stress out when you figure out you cannot control everything. The Planning Process a. Phase 1: Establishing Objectives i. Goals should be based on environmental scanning—this provides the basis for phase 1. You should identify the threats and opportunities—avoid the threats, and exploit the opportunities. ii. Goals should be set according to the SMART model of goal setting (this is going to be on the test). 1. S-goals should be specific in terms of what is desired and when it is desired by. A sense of urgency must be created so things get done. 2. M-goals should be measurable. If it can’t be measured, it can’t be managed. 3. A-goals should be achievable. The goal has to be challenging yet achievable. If you can’t achieve, self-confidence takes a toll. 4. R-goals should be relevant. This is synonymous with important—goals should only be set in important areas. 5. T-goals should be trackable. Progress should be kept track of relative to the goal. This involves setting checkpoints so feedback can be given about performance. M and T go hand-in-hand. b. Phase 2: Developing Premises i. In this phase, the manager is developing beliefs about what will happen in the organization’s environment. ii. It’s synonymous with “forecasting.” iii. Different forecasts will lead to different plans being developed for accomplishing the same goal. iv. Contingency Planning 1. It involves developing multiple future scenarios and plans to accompany each scenario. a. Scenario APlan 1 b. Scenario BPlan 2 c. Scenario CPlan 3 2. Problems with it: time consuming and expensive. 3. Use contingency planning in a rapidly changing environment. 4. Not all of the plans are utilized—they sometimes go untouched. c. Phase 3: Decision Making i. This phase involves selecting a course of action to accomplish the goals set in Phase 1.
ii. 3 aspects of decision-making: 1. Identifying alternatives 2. Evaluating the alternatives 3. Selecting a course of action d. Phase 4: Implementing a Course of Action i. Managers must assign and direct personnel to carry out the plan. ii. A great plan poorly implements is a ? iii. A great plan never implemented is like a ? iv. This phase involves human skills. v. 3 keys to effective implementation (this is a test question): 1. Tie planning to the budgetary system. 2. Make sure people understand the plan—clear communication is essential. You want people to know what they are doing and why they are doing it so it is easier to commit to it. 3. Motive people to implement the plan—reward people for their behavior. People will support what they helped to create. e. Phase 5: Evaluating Results i. Managers monitor the performance of the plan. ii. Managers compare actual performance with “hoped for performance” and take action accordingly. iii. What’s the basic dilemma in planning? The more commitment you have to a plan, the less flexibility you have in changing the plan because no one wants to admit personal failure. 10. Failures to Avoid in Planning a. Top-down delegation of planning. b. Key line managers are left out. c. Lack of supportive climate. d. Plans that are too rigid and complex—a bad plan admits no modification. KISS—keep it simply stupid…and make it fun. e. Failure to manage your plan—this is neglecting phases 4 and 5 of the planning process. f. Getting bogged down in the details. 11. Unrealistic Expectations Concerning Planning (this is on the test) a. The “Crystal Ball” Syndrome: You see the future and develop a plan for that future. They are good at developing the plan of action, but they are not good at implementing or evaluating the plan. They neglect phases 4 and 5. b. The “Cure All” Syndrome: You think planning is a panacea—a plan will cure all of the problems. When this doesn’t happen, disappointment occurs—planning does not guarantee success. Planning will only cure some of the problems. Unmet expectations are usually unrealistic. c. The “Persian Messenger” Syndrome: When someone brings bad news, they are killed. If you punish people for bringing bad news, that information will stop. Instead of punishment, you should praise and recognize it—you can’t fix a problem until you know what it is. They are actually helping you. 12. Strategic Planning a. The focus of strategic planning is on maintaining a positive relationship with the organization’s external environment (customers, suppliers, government, society, etc). b. A term “strategy” is just another name for an organization’s grand plan. c. Four Components of Strategy i. Scope—range of markets you want to do business in. Narrow means few markets, wide means many markets. ii. Resource Deployment—deciding how we will use money and raw materials to achieve goals. iii. Distinctive Competence—competitive advantage—this sets you apart from your competitors. This is why customers buy your product—gives you place in the market. This is the strength that sets you apart. iv. Synergy—the whole is greater than the sum of its parts. The different elements should work together to make the outcome better. d. Two Levels of Strategy i. Corporate Strategy—it focuses on what businesses does the organization want to own. ii. Business-Level Strategy—it focuses on how we want to compete in a market/industry.
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Approaches to Strategy Formulation i. Business Portfolio Matrix Approach 1. This approach to strategy formulation involves two levels of strategy: corporate and business. This is the only one that deals with both strategies. 2. The corporate strategy is to own that mix of businesses that maximize market share and profitability. 3. The various business level strategies employed are determined via the BCG (Boston Consulting Group) matrix. For the test, he will give us an SBU, and we have to determine what area of the BCG matrix it is.
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You want cash cows to fund new ventures that will hopefully become stars. b. You take the profits from the stars to grow bigger—this is all about profitability—how you spend your money. ii. Porter’s Generic Strategies Approach 1. Porter believed that once top managers have scanned their external environment and have a feel for their industry/market…didn’t get the rest of the slide. 2. Porter’s 3 Generic Strategies a. Differentiation b. Overall Cost Leadership c. Focus iii. Adaptation Model 1. This model of strategy formulation states that an organization’s strategy must be aligned with it’s external environment for the organization to be effective. 2. The process of strategic alignment depends on the organization’s environmental scan which provides the basis the answers to three important questions: a. Entrepreneurial? This question is concerned with how the organization will compete and set itself apart from competitors. b. Engineering? This question is concerned with how the organization will produce and Markey its good/service. c. Administrative? This question is concerned with how the organization will structure itself to achieve the answers to the first 2 questions. 3. 4 Strategic Types a. Defender—environmental scan: the organization sees demand for the product as not growing (stable environment). i. ENTR: seal off market share through overall cost leadership (stable growth). ii. ENG: efficient production to lower costs.
iii. ADM: organizational structure emphasizes use of rules/regulations. Low of budgetary constraints/cost controls (tight control). b. Prospector—environmental scan: the organization sees demand for the product as growing (dynamic environment). i. ENTR: find and exploit new markets. Develop new and different products (growth). ii. ENG: flexible production to take advantage of multiple opportunities. iii. ADM: organization structure has few rules/regulations. Far less budgetary constraints/cost controls (loose control). c. Analyzer—this strategy is a combination of prospector and defender, but it’s a combination “in name only.” There are divisions of the company that are operated as defenders and there are other divisions that are operates as prospectors. The key here is that these divisions are kept separate. Defense and prospector should never mix—they are kept in separate divisions of the company. d. Reactor—this is the worst of the four strategic types. It is constantly reacting to what other companies are doing and as a result, how it answers the three questions is constantly changing. There is no set strategy in place so not much gets done. *Each type as a different environmental scan and this different answers to the three questions. *Strategy only works when there is a production process and organizational design. VI.
Discussion of the outside readings: a. “Avoid pricing yourself short.” i. When you lower your prices to attract customers, telling your customers that the original price was BS. Therefore, they think that you are a liar—they switch because they think you are hiding something. ii. Sometimes companies just switch customers by lowering their prices back and forth. iii. Quality, price, and service—you can have two of the three. You must give one up in order to survive. For example, great quality and great service cost money! Therefore, price is high. iv. For many people, price is an indication of quality. If you lower prices too much, your image will take a hit because customers do not think that your product is of quality. b. “When competitive advantage is neither.” i. This article talks about competitive benchmarking—you find out what your competitors are doing and then you try to do it a little bit better to gain more market-share and profitability. ii. Researchers found that this could actually cost you market-share and profitability because the focus is taken away from the customer. You are so worried about beating the competition that you lose the customer. iii. Great coaches always teach that if you take care of our business and focus on what we need to do, then we don’t need to know about the other team. iv. The customer must value the innovation in order for it to be successful—you should innovate on what customers want. Some innovations are unnecessary. v. Doing what everyone else is doing is low risk. Low risk provides low reward. Going against what the competition is doing is a greater risk but it provides a greater reward.
**Practice Questions** 1. What’s the manager’s most important resource a. Human Resources b. Material Resources c. Informational Resources d. Financial Resources 2. Which of the following managers is responsible for implementing plans through operative employees (labor)? a. First-line managers b. Middle managers c. Top managers d. All of the above 3. Which of the following is not true concerning the Industrial Revolution? a. There was an enormous increase in productivity.
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b. The skills of the craftsmen were transferred to the machines. c. The increase in demand required the switch from owner management to divided management. d. Prices for goods increased as a result of the Industrial Revolution. Which of the following is true concerning effectiveness and efficiency? a. Efficiency is concerned with doing the right thing at the right time. b. The more a company wants to be effective the easier it is for the company to be efficient. c. Efficiency is a guarantee of effectiveness. d. Effectiveness is concerned with minimizing cost. e. Efficient organizations tend to be effective ones. The CEO of Syngenta Inc. is a ? a. Top manager b. General manager c. Line manager d. All of the above Injellitance most adversely affects which function of management? a. Planning b. Organizing c. Staffing d. Leading e. Controlling A manager is conducting an annual performance appraisal with one of her employees. This is an example of the ______. a. Planning function b. Organizing function c. Staffing function d. Leading function e. Controlling function What is the primary function of top, middle, and first-line managers? Top managers= planning Middle managers= organizing First-line managers= staffing and leading *All levels do all five functions.* Which of the following is true concerning corporate downsizing? a. It’s primarily effectiveness oriented. b. More line managers than staff managers are eliminated. c. Managers who remain are asked to do more with less. d. The management level primarily affected is top management. e. 1 and 3 are true. Bill is an assistant manager at Raising Cane’s/. he spends most of his time as a manager communicating with, motivating, and resolving conflict among his subordinates. One which of the following functions of management does Bill spend most of his time doing? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Which of the following pairs of management functions represents the conjoined twins of management? Planning and Controlling Which function of management is synonymous with “feedback”? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Which function of management is most important to a middle manager? a. Planning b. Organizing c. Staffing d. Leading e. Controlling Karen is a Human Resource Manager at Blue Cross and Blue Shield. She primarily provides advice to managers dealing with disciplinary and termination issues. Karen is a ____ manager. a. Functional
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b. Staff c. General d. Line e. Function and Staff Emotional intelligence is the manager’s ability to manage his emotions and the emotions of others to produce the best results for the company. a. EQ is a technical skill. b. EQ is a conceptual skill. c. EQ is a human skill. Effective manager spend the majority of their day in COMM and successful managers spend most of their day in NET. Which is more important to the success of a business, customers or suppliers? a. Customers b. Suppliers c. Both are equally important. Ford and GM’s actions best exemplify what open system principle? a. Synergy b. Equifinality c. Role Differentiation d. Negative Entropy According to Luthans’ real manager study, promotions were not based on performance. Successful managers in Luthans study spent the majority of their time on what activity? a. Traditional b. Communication c. Human resources d. Networking *Effective managers spent most of their time communicating. Which of the following pairs of environmental components represent the organization’s two major dependencies? a. Technology and competitors b. Customers and competitors c. Technology and customers d. Customers and suppliers e. Suppliers and competitors *The biggest threat is competition. Which of the following terms would suggest that suppliers and customers are equally important to an organization’s success? a. Equifinality b. Cyclical nature of the transformation process c. Synergy d. Buffering the technical core e. Negative entropy Which of the following characteristics of an open system promotes efficiency in production? a. Role differentiation and specialization b. Synergy c. Equifinality d. Buffering the technical core Which organizational subsystem deals directly with the organization’s two major dependencies? a. Adaptive b. Managerial c. Maintenance d. Production e. Boundary-spanning Buffering the technical core refers to maintaining stability in what organizational subsystem? a. Boundary-spanning b. Production c. Maintenance d. Managerial e. Adaptive The managerial subsystem is comprised primarily of: a. Top managers b. Middle managers c. 1st line managers d. All of the above e. 1 and 2
27. How much more does it cost to find a new customer than to keep an old one, according to TQM experts? a. 2 times b. 3 times c. 5 times d. 10 times 28. Which of the following would lead to a positive relationship with your suppliers? a. Lock-in long-term contracts for the supply. b. Increase the number of suppliers. c. Vertical integration forward. d. All of the above. 29. Which of the following would promote a good competitive environment? LOOK AT CHART FOR ANSWER!!! 30. As Kodak enters the inkjet-printer market, which of the following do you believe will happen, given your knowledge of new entrants and competition? a. Kodak will increase product supply b. Kodak will drive prices down. c. Kodak will seek market share. d. Kodak will increase the power of the customer. e. Cause other competitors’ resource costs to side. f. All of the above. 31. Which of the following is true concerning thretat of substintutes? a. They’re usually the result of a technological innovation. b. They can reduce another organization’s market share and profitability. c. They’re typically introduced at a higher price than other products/services. d. They promote product obsolescence. e. All of the above are true. 32. Which of the following would lead to the greatest amount of rivalry among organizations? a. Few organizations in the marketplace. b. A new, high growth market. c. Many organizations in the marketplace. d. A mature, low growth Markey. e. 3 and 4. f. 1 and 2. 33. Which of the following is not a barrier to an entry into a market/industry? a. Government patents. b. Low start-up costs. c. Brand loyalty. d. Cost advantages of companies already in business. e. Distribution channels are tied up. 34. Which of the following would lead to a good competitive environment from the organization’s perspective? a. Being dependent on a powerful supplier. b. High threat of substitute products. c. Low barriers to entry into the marketplace. d. A customer who is very powerful. e. None of the above. 35. The term “shadow bureaucracy” is associated with which of the following government influences n business? a. Government regulation b. Government taxation c. Government subsidy d. Government economic policy 36. Which of the following is not true concerning PACs? a. They are comprised of employees and shareholders of the company b. They are allowed to directly contribute $5,000 to a candidate per campaign. c. They are a way of influencing government. d. They are allowed only $10,000 in indirect contributions. 37. All of the following are true concerning technological innovations except a. They increase competition. b. Process innovation improve transformation process. c. Product innovations increase efficiency. d. The adaptive subsystem deals primarily with such issues. e. Production innovations can lead to product obsolescence. 38. Which of the following is known as corporate welfare? Corporate subsidies—this is bonus! 39. “Planning has primacy” means
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a. Planning is logically the first of the management functions. b. Planning guarantees success. c. Planning is the most important function of management. d. All of the above. Which of the following is a reason a manager may resist planning? a. Planning is not rewarded by the organization. b. Planning can be used to measure the manager’s performance. c. The manager may have a gear of failure related to planning. d. Planning doesn’t give the manager immediate feedback. e. All of the above. What do non-planners typically blame for their poor performance? a. Lack of skill b. Lack of effort c. Bad luck d. Lack of motivation e. All of the above. Gresham’s law of planning…? a. Is the tendency for planning problems to overshadow day-to-day problems. b. Happens only when managers don’t realize the value of planning. c. Is a problem of misplace priorities. d. All of the above. In developing a plan a manager relies primarily on ___ skills whereas with implementing the plan a manager primarily relies on ___ skills. a. Technical, conceptual b. Conceptual, technical c. Conceptual, human d. Human, technical Phase V: Evaluating Results is most similar to what function of management? a. Planning b. Organizing c. Staffing d. Leading e. Controlling When a manager engages in the crystal ball syndrome, she is neglecting what aspect of planning? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action e. None of the above When a manager engages in the “Persian Messenger” syndrome is most directly affects which aspect of planning? a. Establishing objectives b. Developing premises c. Decision-making d. Implementation e. Evaluating results Which phase of the planning process is synonymous with forecasting? a. Developing premises b. Establishing objectives c. Decision-making d. Implementing a course of action Evaluating results in planning process is similar to what function of management? a. Planning b. Organixing c. Staffing d. Leading e. Controlling Which of the following is key to success in implementing one’s plan? a. Make sure your planning process is tied to budgetary system. b. Clearly communicate your plan. c. Motivate employees through WIFM and participating in the planning process. d. All of the above. e. Only 2 and 3.
50. When a manager falls victim to the “crystal ball” syndrome what phase of the planning does he/she neglect? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action. e. Evaluating results f. Both 4 and 5. 51. When a messenger falls victim to the “Persian messenger” syndrome what phase of planning does he/she adversely affect? a. Establishing objectives b. Developing premises c. Decision-making d. Implementing a course of action e. Evaluating results 52. Which element of a well-thought out strategy is concerned with “competitive advantage?” a. Scope b. Resource development c. Distinctive competence d. Synergy 53. What do you think would happen if you had the following scenario? Org X wants to compete through overall cost leadership because of the intense competition in the marketplace. Org X has a flexible production process to keep its options open. Org X also has an organization structure which has few rules/regulations and not many cost controls. What do you think would happen if you had the following scenario? Org Y wants to compete by exploring new markets and developing innovative products. Org Y has invested heavily into a highly efficient production process to keep its costs down. Org Y also has an organizational structure which has many rules/regulations and lots of cost controls. Both organizations will fail because you cannot have both defense and prospector strategies. 54.
