Management Exam 2

downfalls of BCG Growth-Share Matrix

(1) various types of risk associated with product development (2) threats that inflation and other economic conditions can create in the future (3) social, political, and ecological pressures

attractiveness of an industry is determined by five alternative forces.

(Five forces model) threat of new entrants buyer power supplier power threat of substitute products intensity of rivalry

disadvantages of division of labor

- focuses solely on efficiency and economic benefit, and overlooks the human variable in organizations - Work that is extremely specialized tends to be boring and therefore will eventually cause production rates to go down as workers become resentful of being treated like machines. - Management coordination increases because tasks are synchronized managers need to find a reasonable balance between specialization and human motivation.

Advantages of division of labor

- when workers specialize in a particular task, their skill at performing that task tends to increase - workers who have one job and one place in which to do that job do not lose valuable time changing tools or locations - when workers concentrate on performing only one job, they naturally try to make the job easier and more efficient - creates a situation in which workers need to know how to perform only their part of the work task rather than the entire process for producing the end product. (task of understanding their work does not become too burdensome)

five main steps of the organizing process

1) reflect on plans and objectives 2) establish major tasks 3) divide major tasks into subtasks 4) allocate resources and directives for subtasks 5) evaluate the results of implemented organizing strategy. managers should continually repeat these steps feedback should furnish information that can be used to improve the existing organization

several basic differences between strategic planning and tactical planning:

1) strategic plans are usually developed by upper-level management and tactical plans by lower-level management. 2) facts on which to base strategic plans are usually more difficult to gather than are facts on which to base tactical plans. - Because strategic planning emphasizes analyzing the future and tactical planning emphasizes analyzing the everyday functioning of the organization 3) strategic plans are generally less detailed than tactical plans - Strategic plans are based primarily on a prediction of the future, and tactical plans are based primarily on known circumstances that exist within the organization; thus, 4) strategic plans cover a relatively long period of time, whereas tactical plans cover a relatively short period of time

criticisms of Weber's bureaucratic model

1) they give short shrift to the human variable within organizations. - The bureaucratic approach without an appropriate emphasis on the human variable is almost certainly a formula for organizational failure 2) is that it may have a negative influence on organizational effectiveness

steps in the strategic management process

1. Environmental analysis - an organization can be successful only if it is appropriately matched to its environment 2. Establishment of an organizational direction - Through an interpretation of information gathered during environmental analysis, managers can determine the direction in which the organization should move 3. Strategy formulation 4. Strategy implementation 5. Strategic control

three distinct levels of environmental analysis

1. General environment 2. Industry/operating environment, 3. internal environment

Four key parts to drive competitive advantage

1. Having an action plan: Composed of the projects initiatives, various things that need to happen, Who's accountable for those, a timeline - Keep up with it, alter it, change it, improve it 2. The strategy itself: Having a strategy that's clear concise motivating - Connect people to why they're doing the strategy 3. Leadership itself to drive the strategy: - To formulate the strategy, Articulated it, communicate it throughout the organization (Needs to happen over and over again, by the time you're tired of communicating strategy that's when you're starting to get through), and Maintaining the focus (identify what a strategy is and what it isn't) 4. Aligning Organization itself: Need to aligning the management practices to match the strategy and to sharply Focus the organization on the strategy (Without this you're losing a lot of efficiency and gaining a lot of distraction) - Need to make sure the organizational structure is the right one for the strategy - Make sure you have the best people in key positions Picture of the strategy forward - Look at key processes/incentives --> make sure aligned with the strategy

four characteristics of a SBU

1. It is a single business or collection of related businesses. 2. It has its own competitors. 3. It has a manager who is accountable for its operation. 4. It is an area that can be independently planned for within the organization. what constitutes an SBU varies from organization to organization - larger organizations, an SBU could be a company division, a single product, or a complete product line. - smaller organizations, it might be the entire company.

Components of the general environment

1. economic component 2. social component 3. political 4. legal 5. technological 6. international

Break down of SWOT

S = strengths (build on them) W = weaknesses (shore them up) (those of the manager's firm) - internal perspective (can impact and directly influence) Data from execs and Leadership boards, employees, customers, Key performance indicators (Current performance) O = opportunities (invest in), T = threats (monitor) (exist in the firm's external enviro) - external perspective (can influence but not directly impact) - Data from mega trends, industry association, marketing (Geographic or Target), competitors (top 3) Don't confuse weaknesses with opportunity (can't control op.) Change weakness to areas of improvement Processing SWOT: opportunities → growth goals Threats → watch Weaknesses → operational and people goals/initiatives Strengths → competitive advantages

Generic strategies can be defined by two key dimensions

Scope of the strategy - Target a broad market or a narrow and focused market source of competitive advantage - The company could be either a low cost Leader or a differentiator

situational factors influence the appropriateness of the size of an individual's span of management

Similarity of functions Geographic contiguity Complexity of functions Coordination Planning

BCG Growth-Share Matrix

Step 1 - identifying the organization's strategic business units (SBUs) Step 2 - categorize each SBU within one of the following four matrix quadrants (star, cash cow, question mark, or dog)

strategic workforce planning (SWP)

To formulate a recruitment strategy, managers need a thorough awareness of the demographics of the groups from which employees eventually will be hired. helps organizations identify the workforce they need to achieve their strategic goal many employers adopted a wait-and-see attitude toward workforce planning until business stabilized.

Questions of the Critical question analysis

What are the purposes and objectives of the organization? answer tells management where the organization should be going Where is the organization presently going? answer tells managers whether the organization is achieving its goals and, if it is, whether the level of progress is satisfactory. - focuses on where the organization is actually going. In what kind of environment does the organization now exist? Both internal and external environments included What can be done to better achieve organizational objectives in the future? - answer results in the strategy of the organization - should be answered only after managers have had an adequate opportunity to reflect on the answers to the previous three questions.

Boston Consulting Group (BCG)

a leading manufacturing consulting firm, developed and popularized a portfolio analysis tool that helps managers develop organizational strategies based on market share of businesses and the growth of markets in which businesses exist

Demographics

are statistical characteristics of a population.

Social values

are the relative degrees of worth a society places on the manner in which it exists and functions. Can change over time (slowly or quickly) which causes impact

an appropriate strategy reflects

both organizational purpose and organizational objectives

Classical organizing theory

comprises the cumulative insights of early management writers on how organizational resources can best be used to enhance goal attainment. three major components - Weber's bureaucratic model - division of labor - Structure

Long range

defined as a period of time extending about three to five years into the future

Supplier Power

denotes the power that suppliers have over the firms operating in an industry; as supplier power increases, industry attractiveness decreases.

Why org mission is important to an org

helps increase the probability that the organization will be successful by: -helps management direct human effort in a common direction. - serves as a sound rationale for allocating resources. → gives general but useful guidelines about how resources should be used to best accomplish organizational purpose. - helps management define broad but important work areas within an organization and therefore the critical jobs that must be accomplished

Strategy development tools

include critical question analysis, SWOT analysis, business portfolio analysis, and Porter's Model for Industry Analysis.

Strategy

is a broad and general plan developed to reach long-term objectives; it is the end result of strategic planning. - focuses on many different organizational areas, such as marketing, finance, production, research and development, and public relations - gives broad direction to an organization - the end result of strategic planning - must be consistent with organizational objectives/purpose

Mechanistic structure

is a formal organizational structure. better for large companies and those operating in stable industries

Organization chart

is a graphic illustration of organizational structure. - The relative positioning of individuals within boxes on the chart indicates broad working relationships - lines between boxes designate formal lines of communication between individuals. can also communicate to outsiders the complexity of the organization (to specifying formal relationships within the firm). Structure involves two primary dimensions: vertical dimension, horizontal dimension

Organic structure

is a less formal organizational structure and represents loosely coupled networks of workers. better for smaller companies and those operating in more volatile industries informal structure

Commitment principle

is a management guideline that advises managers to commit funds for planning only if they can anticipate, in the foreseeable future, a return on planning expenses as a result of long-range planning analysis.

SWOT analysis

is a strategic development tool that matches internal organizational strengths and weaknesses with external opportunities and threats. Purpose: Create a synthesized view of your current state based on the assumption that, if managers carefully review such strengths, weaknesses, opportunities, and threats, a useful strategy for ensuring organizational success will become evident to them. Should be concise (fit on one page) Always more weaknesses then threats

growth

is a strategy adopted by management to increase the amount of business that a strategic business unit is currently generating. - generally applied to star SBUs or to question mark SBUs that have the potential to become stars. - Management generally invests substantial amounts of money to implement this strategy and may even sacrifice short-term profit to build long-term gain - can also pursue a growth strategy by purchasing an SBU from another organization

Stability

is a strategy adopted by management to maintain or slightly improve the amount of business that a strategic business unit is generating. generally applied to cash cows because these SBUs are already in an advantageous position. Management must be careful, however, that in its pursuit of stability, it does not turn cash cows into dogs.

Retrenchment

is a strategy adopted by management to strengthen or protect the amount of business a strategic business unit is currently generating. generally applied to cash cows or stars that are beginning to lose market share

Divestiture

is a strategy adopted to eliminate a strategic business unit that is not generating a satisfactory amount of business and has little hope of doing so in the near future. - organization sells or closes down the SBU in question - usually applied to SBUs that are dogs or question marks that have failed to increase market share but still require significant amounts of cash

Critical question analysis

is a strategy development tool that consists of answering basic questions about the present purposes and objectives of the organization, its present direction and environment, and actions that can be taken to achieve organizational objectives in the future.

Focus

is a strategy that emphasizes making an organization more competitive by targeting a particular customer.

Differentiation

is a strategy that focuses on making an organization more competitive by its developing a product or products that customers perceive as being different from products offered by competitors. includes uniqueness in areas such as product quality, design, and level of after-sales service

Cost leadership

is a strategy that focuses on making an organization more competitive by its producing products more cheaply than competitors can.

Mission statement

is a written document developed by management, normally based on input by managers as well as nonmanagers, that describes and explains what the mission of an organization actually is. expressed in writing to ensure that all organization members have easy access to it and thoroughly understand exactly what the organization is trying to accomplish.

star

is an SBU that has a large share of a high-growth market and typically needs large amounts of cash to support rapid and significant growth. generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.

cash cow

is an SBU that has a large share of a market that is growing only slightly. provide the organization with large amounts of cash, but because the market is not growing significantly, the cash is generally used to meet the financial demands of the organization in other areas

Dog

is an SBU that has a relatively small share of a low-growth market. barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs. Examples of dogs are SBUs that produce typewriters or cash registers.

Question mark

is an SBU that has a small share of a high-growth market. uncertain whether management should invest more cash in them to gain a larger share of the market or deemphasize or eliminate them. - choose the first option when it believes it can turn the question mark into a star - choose the second when it thinks further investment would be fruitless.

Business portfolio analysis

is an organizational strategy formulation technique that is based on the philosophy that organizations should develop strategy much as they handle investment portfolios. sound organizational activities should be emphasized and unsound ones deemphasized. Two business portfolio tools are BCG Growth-Share Matrix GE Multifactor Portfolio Matrix.

Short range

is defined as a period of time extending about one year or less into the future.

Informal structure

is defined as the patterns of relationships that develop because of the informal activities of organization members. evolves naturally and tends to be shaped by individual norms and values and social relationships is the system or network of interpersonal relationships that exists within, but is not usually identical to, the organization's formal structure

Formal structure

is defined as the relationships among organizational resources as outlined by management. represented primarily by the organization chart

Tactical planning

is short-range planning that emphasizes the current operations of various parts of an organization. used to indicate what the various parts of the organization must do for the organization to be successful at some point one year or less into the future usually developed in the areas of production, marketing, personnel, finance, and plant facilities. Tactical planning should focus on what to do in the short term to help the organization achieve the long-term objectives determined by strategic planning

Organizing skill

is the ability to create throughout the organization a network of people who can help solve implementation problems as they occur. primary focus of organizing is determining what individual employees will do in an organization and how their individual efforts should best be combined to advance the attainment of organizational objectives

Interacting skill

is the ability to manage people during implementation.

Allocating skill

is the ability to provide the organizational resources necessary to implement a strategy.

Monitoring Skill

is the ability to use information to determine whether a problem has arisen that is blocking strategy implementation.

Division of labor

is the assignment of various portions of a particular task among a number of organization members. Division of labor calls for specialization. -production is divided into a number of steps, with the responsibility for completing various steps assigned to specific individuals - individuals specialize in doing part of a task rather than the entire task

Strategy implementation

is the fourth step of the strategy management process and involves putting formulated strategy into action. requires four basic skills: - interacting skill - allocation skill - monitoring skill - organizing skill

Strategic control

is the last step of the strategy management process and consists of monitoring and evaluating the strategy management process as a whole to ensure that it is operating properly. focuses on the activities involved in environmental analysis, organizational direction, strategy formulation, strategy implementation, and strategic control itself is a special type of organizational control

Internal environment

is the level of an organization's environment that exists inside the organization and normally has immediate and specific implications for managing the organization. includes marketing, finance, and accounting. - management viewpoint, it includes planning, organizing, influencing, and controlling within the organization.

general environment

is the level of an organization's external environment that contains components normally having broad, long-term implications for managing the organization; its components are economic, social, political, legal, and technological.

Industry environment

is the level of an organization's external environment that contains components normally having relatively specific and immediate implications for managing the organization.

Unity of command

is the management principle that recommends that an individual have only one boss.

Span of management

is the number of individuals a manager supervises. also called span of control, span of authority, span of supervision, and span of responsibility - The more individuals a manager supervises, the greater the span of management. - the fewer individuals a manager supervises, the smaller the span of management. has a significant effect on how well managers carry out their responsibilities. central concern is to determine how many individuals a manager can supervise effectively

Coordination

is the orderly arrangement of group effort to provide unity of action in the pursuit of a common purpose. It involves encouraging the completion of individual portions of a task in an appropriate, synchronized order. - a means for achieving any and all organizational objectives - involves encouraging the completion of individual portions of a task in a synchronized order that is appropriate for the overall task

Strategy Formulation

is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing the organizational purpose. reflect environmental analysis, lead to fulfillment of the organizational mission, and result in the attainment of organizational objectives.

Strategic management

is the process of ensuring that an organization possesses and benefits from the use of an appropriate organizational strategy.

Organizing

is the process of establishing orderly uses for resources within the management system.

Organizational mission

is the purpose for which, or the reason why, an organization exists. The most common initial act in establishing organizational direction is determining an organizational mission - it reflects information such as what types of products or services it produces, who its customers tend to be, and what important values it holds. - Is a broad statement of organizational direction - is based on a thorough analysis of information generated through environmental analysis

economics

is the science that focuses on understanding how people of a particular community or nation produce, distribute, and use various goods and services.

Environmental analysis

is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations. Preformed to - help them understand what is happening both inside and outside their organizations - to increase the probability that the organizational strategies they develop will appropriately reflect the organizational environment.

Bureaucracy

is the term Max Weber used to describe a management system characterized by detailed procedures and rules, a clearly outlined organizational hierarchy, and impersonal relationships among organization members.

retrench

is used in the military sense: to defend or fortify

Competitive Advantage

is when a company achieves higher profits than the average competitor in the product Market Levers: expenses and revenues

Strategic business unit (SBU)

is, in business portfolio analysis, a significant organizational segment that is analyzed to develop organizational strategy aimed at generating future business or revenue. SBUs vary in form, but all are a single business (or collection of businesses), have their own competitors and a manager accountable for operations, and can be independently planned for.

importance of Organizing

it is the primary mechanism that managers use to activate plans creates and maintains relationships among all organizational resources by indicating which resources are to be used for specified activities and when, where, and how they are to be used

Strategic Planning

long-range planning that focuses on the organization as a whole managers: -consider the organization as a total unit - ask what must be done in the long term to attain organizational goals

useful organizational objectives

must reflect and flow naturally from an organizational mission, which in turn was designed to reflect and flow naturally from the results of an environmental analysis

efficiently and effectively

must understand how organizational environments are structured

Five Forces Model

outlines the primary forces that determine competitiveness within an industry and illustrates how those forces are related; perhaps the best-known tool for industry analysis, it was developed by internationally acclaimed strategic management expert Michael E. Porter. Ability to make good profit in business depends on Strength of your position in the market Tools like porter's five forces help determine - who has the most power in a given situation - show if a good or service is likely to be profitable

social component

part of the general environment that describes the characteristics of the society in which the organization functions. important features of a society studied: demographics and social values.

Competitor awareness

refers to how mindful a company is of its competitor's actions.

Threat of new entrants

refers to the ability of new firms to enter an industry; as the threat of new entrants increases, the attractiveness of the industry decreases.

Scalar relationship

refers to the chain-of-command positioning of individuals on an organization chart.

Structure

refers to the designated relationships among resources of the management system. purpose is to facilitate the use of each resource, individually and collectively, as the management system attempts to attain its objectives two basic types: formal and informal

Vertical dimensioning

refers to the extent to which an organization uses vertical levels to separate job responsibilities. organization is built on the premise The individual at the top possesses the most authority and that other individuals' authority is scaled downward according to their relative position on the organization chart. related to the concept of the scalar relationship

Threat of substitute products

refers to the extent to which customers use products or services from another industry instead of the focal industry. As the threat of substitutes increases, which implies that customers have more choices, the attractiveness of the industry decreases.

Competitor motivation

refers to the incentives that an organization has to take action.

Intensity of rivalry

refers to the intensity of competition among the organizations in an industry; as the intensity of rivalry increases, the attractiveness of the industry decreases.

Buyer Power

refers to the power that customers have over the firms operating in an industry; as buyer power increases, the attractiveness of the industry decreases.

Competitive dynamics

refers to the process by which firms undertake strategic and tactical actions and how competitors respond to these actions.

Organization

refers to the result of the organizing process.

Sound organizational objectives

reflect and flow naturally from the purpose of the organization, which is expressed in its mission statement.

political component

that part of the general environment related to government affairs (ex: type of government in existence, government's attitude toward various industries, lobbying efforts by interest groups, the status of the passage of laws, and political party platforms and candidates)

Legal component

that part of the general environment that contains passed legislation comprises the rules or laws that society's members must follow. ex: Clean Air Act, which focuses on minimizing air pollution; - Occupational Safety and Health Act, which aims at ensuring a safe workplace - Affordable Care Act, which provides all Americans with access to affordable health care - Consumer Products Safety Act, which upholds the principle that businesses must provide safe products for consumer

international component

the operating environment segment that is composed of all the factors relating to the international implications of organizational operations. Factors: other countries' laws, cultures, economics, and politics Not all companies Deal with international issues

technological component

the part of the general environment that includes new approaches to producing goods and services (new Procedures or equipment)

organizational objectives

the targets toward which the open management system is directed.

Managers cannot develop an appropriate organizational strategy unless

they have a clear understanding of where the organization wants to go, where it is going, and in what environment it exists. This understanding is typically achieved through discussion, negotiation, and compromise

establish and maintain coordination

through bargaining, formulating a common purpose for the group, or improving on specific solutions so that the group will know what to do when it encounters those problems - may require close supervision of employees - Each of these efforts is considered a specific management tool.

economic component

what indicates how resources are being distributed and used within the environment based on economics Important issues to consider: - wages paid to labor - Inflation - taxes paid by labor and businesses - cost of materials used in the production process - the prices at which produced goods and services are sold to customers.