MGMT 3000 chapter 2

Internal Environment:

The conditions and forces within an organization. -Owners, board of directors, employees, and physical work environment.

Economic Dimension:

The economic dimension of an organization's general environment is the overall health and vitality of the economic system in which the organization operates.

political legal dimension:

The government regulation of business and the relationship between business and government. -the legal system partially defines what an organization can and cannot do. Ex. food prep standards and zoning requirements. -pro or anti business sentiment in government influences business activity. Ex. in periods of trust, firms find it easier to compete. In periods of antitrust, firms find it more difficult to compete and have fewer opportunities for mergers and acquisitions. -regulations for business increased during the recession. -political stability has ramifications for planning. Firms will only set up in countries with good trade relations. A new mayor or governor affects organizations, especially small firms who are subject to zoning and deed requirements and property and school taxes.

Trends in International Business:

The stage for today's itnernational business environment was set at the end of WW2. Germany and Japan had to rebuild from scratch. US companies grew complacent.

Most Favored Nation Principle

Under GATT. This provision stipulates that if a country extends preferential treatment to any other nation that has signed the agreement, then the preferential treatment must be extended to all signees of the agreement.

Philanthropic Giving:

the awarding of funds or gifts to charities or other worthy causes. Many are cutting back, or donating to organizations where the firm will get something in return. Ex. job training over the arts.

Whistle Blowing:

the disclosure, by an employee, of illegal or unethical conduct on the part of others within the organization. -have to go through lots of steps to be heard and may lose job, friends, etc. Ex. Harry Markopolos, a portfolio manager at Rampart Investments spend 9 years trying to convince the SEC that money management firm run by Bernard Madoff was falsifying the results it was reporting to investors. Ex. swedish bank UBS was evading taxes, charged $780 million.

Legal Compliance:

the extent to which the organization conforms to local, state, federal and international laws. -generally assigned to appropriate functional managers. pg. 48 -may not be enough. perfectly legal accounting practices have still resulted in deception and other problems.

Ethical compliance:

the extent to which the organization's members follow basic ethical and legal standards of behavior. -increased efforts in this area. (ethics seminar, code of ethics, formal ethics committees, etc.) The suitability approach by HP.

technological dimension:

the methods available for converting resources into products or services. -although technology is applied within the organization, the forms and availability of that technology come from the general environment. Ex. Computer assisted manufacturing and design techniques allowed Boeing to simulate more than 3 miles of hydraulic tubing that run through its 787. The results included decreased warehouse needs, higher quality tube fittings, lower labor costs, and major time savings. Ex. rapid infusion of internet, integrated business software, social networking.

Competitors:

the other organizations that compete with it for resources. -could compete for customer dollars (adidas and nike) -competition also occurs among substitute products. Ex. Ford and Yamaha and Schwinn. NPS and cruise lines. Universities compete with trade schools, the military and other universities. art galleries compete with one another to attract the best collections.

Owners:

the people who have legal property rights of the business. -single, partners, individual investors who buy stock, or other organizations. Ex. McDonalds has 1.02 billion shares of stock, each representing one unit of ownership in the firm. Mcdonalds also owns other organizations, such as regional bakeries that supply buns. Each of these is a separate legal entity and managed as a wholly owned subsidiary by the parent company.

General Environment:

the set of broad dimensions and forces in an organization's surroundings that determines its overall context.

Social Responsibility in Organizations:

the set of obligations that an organization has to protect and enhance the societal context in which it functions. -Organizations themselves do not have ethics, but they relate to their environments in ways that often involve ethical dilemmas and decisions.

Strategic Partners:

two or more companies that work together in joint ventures or other partnerships. Ex. small McDonalds are built inside walmart. McDonalds promotes disney in its stores, and disney allows McDonalds to open restaurants near its resorts. Many of McDonald's foreign stores are built in collaboration with local investors. -SP help companies to get the expertise they lack from other companies. -Most are international. Ex. Ford and Volkswagen. Ford and GM work together to deign a new 10-speed transmission.

Strategic Allies:

two or more firms jointly cooperate for mutual gain. Ex. Unisys and Oracle have a SA that provides customers with the service and tech of Unisys and the enterprise software of Oracle.

culture

values, symbols, environment and beliefs and language that guide behavior. Values and beliefs are often unspoken. Trouble can arise when there is no culture overlap.

Customer:

whoever pays money to acquire a good or service. Ex. schools, hospitals, government agencies, wholesalers, retailers, and manufacturers as well as individuals.

Employees:

workforce is becoming more diverse in terms of gender, ethnicity, age and other dimensions. -employees calling for more job ownership. -increased reliance on temporary workers. Temps provide flexibility, earn lower wages and do not get benefits.

Board of Directors:

A corporate BOD is a governing body that is elected by the stockholders and charged with overseeing a firm's general management to ensure that it is run to best serve stockholder's interest. -influence is becoming heavier. -issue of corporate governance: who is responsible for the actions of a business?`

informal organizational dimensions:

-Leadership and organizational culture as well as whistle blowing.

important economic factors:

-general economic growth -inflation -interest rates -unemployment

McDonald's economic dimension

-in 2014, McDonald's US corporation was functioning in an economy characterized by weak growth, moderate unemployment, and low inflation. Moderate unemployment means people are looking for cheap food options. McDonalds pays lower wages, which attracts new employees because few opportunities are available. Low inflation means hat the prices of McDonald's pays for its supplies remain relatively constant, but it also is somewhat constrained from increasing the prices it charges consumers for a burger or milkshake.

Formal Organizational dimensions:

-legal compliance -ethical compliance -philanthropic giving

Five forces Dimension:

-level of rivalry -power of supplies -power of buyers -threat of substitute products -Threat of new entrants All lead to performance of an organization in an industry.

Strategies for internationalization

-licensing -strategic allies (joint venture) -direct investment (maquiladoras)

Controls on international trade:

-tariffs -quotas -export restraint agreements -buy national laws

Managing Social Responsibility

-treat it as a problems that requires careful planning, decision making, consideration and evaluation. Formal or informal.

Advantages of Direct investment:

1. Enhanced control 2. Existing infrastructure

Advantages of strategic alliances/joint ventures:

1. Quick market entry 2. Access to materials technology

Three basic WTO rules

1. To promote trade flows by encouraging nations to adopt nondiscriminatory and predictable trade policies. 2. To reduce remaining trade barriers through multilateral negotiations. 3. To establish impartial procedures for resolving trade disputes among its members. -people protest that it focuses too narrowly on globalization and to the detriment of human rights and the environment.

Arguments for Social Responsibility:

1. business creates problems and should therefore help solve them. 2. Corporations are citizens in our society. 3. business often has the resources necessary to solve problems. 4. Business is a partner in our society, along with the government and general population. The sustainability matters feature. Ex. Dell donates surplus to schools for computers. and restaurants give left over bread to homeless shelters.

Disadvantages of direct investment:

1. complexity 2. greater economic and political risk 3. Greater uncertainty

Changing organizational culture:

1. develop a clear idea of what kind of culture you want to create 2. Bring in outsiders to important managerial positions 3. Adopt new slogans, stories, ceremonies, and purposefully break with tradition.

Advantages of Licensing:

1. increased profitability 2. Extended profitability

Disadvantages of Licensing:

1. inflexibility 2. competition

Advantages of Exporting:

1. small cash outlay 2. Little risk 3. no adaptation necessary

Disadvantages of exporting:

1. tariffs and taxes 2. high transportation costs 3. government restrictions

Managing organizational culture:

1. understand the current culture is necessary to decide whether to maintain or change it. 2. Articulate the culture through slogans, ceremonies, and shared experiences. 3. Reward and promote people whose behaviors are consistent with desired cultural values.

The Recession

2008-2012 energy and related prices jumped. business and economic growth slowed dramatically, and unemployment increased.

Sarbanes Oxley Act of 2002

A law that required CEO's and CFO's to vouch personally for the truthfulness and fairness of their firm's financial disclosures and imposes tough new measures to deter and punish corporate and accounting fraud and corruption. Ex. When Ryan Howard mislead the shareholders.

Direct Investment:

Another level of commitment to internationalization is direct investment. DI occurs when a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country. The foriegn operations then become wholly owned subsidiaries of the firm. Ex. British Petroleum's acquisition of Amoco, Dell's factory in China, and Disney theme park in Hong Kong. Coke recently invested $150 million to build a bottling facility in India. Pepsi paid 4.2 billion for a yogurt company.

Economic dimensions of the general environment:

During weak economic conditions, funding for state universities may drop, and charitable organizations such as the salvation army are asked to provide greater assistance at the same time that their incoming contributions dwindle. Hospitals are affected by the availability of government grants and the number of low income patients they must treat free of charge.

Task Environment:

Specific organizations or groups that affect the organization. -competitors, customers, suppliers, strategic partners and regulators. -provides useful information more readily than the general environment because the manger can identify environmental factors of specific interest to the organization.

Managerial ethics: organization to other economic agents:

Economic Agents: customers, competitors, stockholders, suppliers, dealers, and unions. Behaviors that may be subject to ethical ambiguity include: advertising and promotions, financial disclosures, ordering and purchasing, shipping and solicitations, bargaining and negotiation, and other business relationships.

Leadership and organizational culture

Ethical leadership often sets the tone for the entire organization. Ex. Johnson and Johnson puts customers first, so when poisoned Tylenol hit the shelves, they did not wait for orders from HQ, they pulled it off the shelves. Ex. Walmart charged with bribing officials in other countries for building permits. CEO, H. Lee. Scott, knew and did nothing.

External Environment:

Everything outside an organization's boundaries that might affect it. -general environment -task environment

Managerial ethics: firm to employee:

Ex. treatment of employees: hiring and firing, wages and working conditions, and employee privacy and respect.

Arguments Against Social Responsibility:

Famous Economist, Milton Friedman, argues that the widening of the interpretation of social responsibility will undermine the US economy by detracting from the basic mission of earning profits for owners. Dividends vs. Social causes. 1. the purpose of business is to generate profit for owners. 2. Involvement in social programs gives business too much power. 3. There is potential for conflicts of interest. 4. Business lacks the expertise to manage social programs.

Organization and its Environment Circle chart:

Inner circle: Internal environment --> board of directors, culture, employees, owners, physical environment. Middle Circle: Task environment --> regulators, competitors, customers, suppliers, strategic partners. Outer Circle: general environment --> International dimension, technological dimension, economic dimension, sociocultural dimension, political-legal dimension.

Interest Group:

Lack official power of government agencies, but can exert influence by using the media to call attention to their positions. Ex. MADD puts considerable pressure on alcoholic beverage producers (to put warning labels on their products), on automobile producers (to make it more difficult for drunk people to start their cars) and local government (to stiffen drinking ordinances) and bars (to refuse to sell to minors.) ex. The National Organization for Women (NOW), Mothers Against Drunk Driving (MADD), the National Rifle Association (NRA), the League of Women Voters, the Sierra Club, Ralph Nader's Center for the study of responsive Law, Consumers Union, and industry self regulation groups such as the Council of Better Business Bureaus.

Unethical corporate leaders:

Mark Hurd (Hewlett Packard), Dennis Kozlowski (Tycho), Kenneth Lay (Enron) and Allen Stanford (Stanford Financial group) have increased the scrutiny aimed at executives.

Advantages and disadvantages of different approaches to industrialization:

Page 52

Disadvantages of strategic alliances/ joint ventures

Shared ownership limits control and profits.

Managerial Ethics:

Standards of behavior that guide individual managers in their work. Ex. paying minimum wage in San Francisco or New York.

Licensing:

a company may prefer to arrange for a foreign company to manufacture or market its products under a licensing agreement. Factors leading to this decision may include: excessive transportation costs, government regulations, and home production costs. Licensing is an arrangement whereby a firm allows another company to use its brand name, trademark, tech, patent, copyright or other assets. In return, the licensee pays a royalty, usually based on sales. Franchising, a special form of licensing, is used internationally. Ex. Kirin brewery wanted to expand internationally, but couldn't keep the beer fresh for delivery. Kirin entered into a number of licensing agreements with breweries in other markets. These breweries make beer under the guidelines set by the Japanese firm and market it as Kirin beer. They pay a royalty to Kirin for each case sold. Molson sells it and Charles Wells.

economic community:

a set of countries that agree to markedly reduce or eliminate trade barriers among member nations. The first and most important of these economic communities is the EU.

Organizational Culture:

a set of values, beliefs, behaviors, customs and attitudes that helps the organization's members understand what it stands for, how it does things, and what it considers important. Ex. dress. Starbucks and Procter & Gamble have strong culture whereas Kmart does not. -starts with the founder. Ex. James Cash Penny: called employees associates. What would Walt have done? The hallmark family for many, culture is no longer a strength. Delta and Northwest airlines culture clash.

Joint Venture:

a special type of strategic alliance in which the partners actually share ownership of a new enterprise. SA have enjoyed a tremendous upsurge in the past few years. Ex.Kellogg Company entered into a joint venture agreement with Wilmar International Limited for the purpose of selling and distributing cereal and snack foods to consumers in China. While Kellogg brings to the table an extensive collection of globally renowned products as well as their expertise in the industry, Wilmar offers marketing and sales infrastructure in China, including an extensive distribution network and supply chain. Joining together allows both companies to profit from a synergistic relationship.

Tariff:

a tax collected on goods shipped across national boundaries. Collected by the exporting country, countries through which goods pass, or by the importing country. Import tariffs, which are most common, can be levied to protect domestic companies by increasing the cost of foreign goods.. Japan charges US tobacco producers a tariff on cigarettes imported into Japan as a way to keep their prices higher than the prices charged by domestic firms. Tariffs can be levied by less developed countries, to raise money for the government. **checked by customs.

Ethics:

an individuals beliefs on whether an action is right or wrong. -people have ethics, organizations do not.

Determinants of individual ethics:

family influences situational factors values and morals experiences peer influences

Ethical Behavior:

behavior that conforms to generally accepted social norms.

Unethical behavior

behavior that does not conform to social norms.

Importing:

bringing a good, service, or capital into the home country from abroad. Ex. automobiles like Mercedes and Volkswagen are exported by their manufacturers to other countries. Likewise, wine distributors buy products from vineyards in France, Italy and the US and import them into their own country for resale.

World Trade Organization:

came into existence on Jan. 1, 1995. The WTO replaced the GATT and absorbed its mission. The WTO is headquartered in Geneva, Switzerland and currently includes 140 member nations and 32 observer countries.

European Union

can be traced to 1957 when Belgium, France, Luxembourg, Germany, Italy and the Netherlands signed the Treaty of Rome to promote economic integration. Between 1973 and 1986, Denmark, Ireland and the UK, Greece, Spain, and Portugal were added. Austria, Finland and Sweden joined in 1995. 12 additional countries mostly from communist controlled Eastern Europe joined between 2004 and 2007, bringing the EU's membership to 27 countries. -no trade barriers. -eliminated home curreny and adopted the euro on January 1, 2002.

Managerial Ethics: employee to firm:

conflicts of interest (benefits the individual but harms the org.), secrecy and confidentiality, and honesty. buyers cannot accept gifts from suppliers.

Regulatory Agency:

created by the government to protect the public from certain business practices or to protect organizations from one another. Ex. EPA, Securities and Exchange Commission (SEC), the FDA, and the Equal Employment Opportunity Commission (EEOC) -protect the rights on individuals. -regulatory agencies may provide contradictory mandates. -firms pay $$$$ to comply with regulations.

Export Restraint Agreements:

designed to convince other governments to VOLUNTARILY limit the volume or value of goods exported or imported from a particular country. An export quota. Ex. Japanese steel producers voluntarily limit the amount of steel they send to the US every year. -provides a measure of protection for the importing countries domestic businesses.

Regulators:

elements of the task environment that have the potential to control, legislate, or otherwise influence an organization's policies and practices. -Regulatory agencies -interest groups

North American Free Trade Agreement:

eliminates many of the trade barriers, such as quotas and tariffs. more than 80% of Mexico's exports go to the US and more than 65% of Mexico's imports are from the US.

Corporate Governance

ethical issues start with a breakdown in corporate governance. Ex. World Com's board of directors approved a loan for $366 million dollars though there was evidence he couldn't pay it back. Tycho's board approved a $20 million bonus for one of it own members for helping with acquisition of another firm. -BoD are criticized when they are seen as not being sufficiently independent from senior management. -only 4/14 members of McDonald's BoD are members of senior management.

Managerial Ethics: financial reporting by e-commerce firms.

firms will overstate their earnings. Ex. Diamond Foods had to restate its earnings twice after improperly accounting for 80 million in payments to almond growers. Ex. Hilton stealing files from Starwood hotels on how they started W hotels.

General Agreement on Tariffs and Trade:

first negotiated following WW2 in an effort to avoid trade wars that would benefit rich nations and harm poor ones. A trade agreement intended to promote international trade by reducing trade barriers and making it easier for all nations to compete in international markets. Major stimulus to international trade after it was first ratified in 1948 by 23 countries, 117 countries had signed by 1994.

Buy National legislations:

gives preference to domestic producers through content or price restrictions. Several countries have this type of legislation. Ex. Brazil requires that Brazilian companies only use Brazilian made computers. The US military requires that all uniforms are made in the US.

volume of international trade:

increased 1300% between 1960 and 2013. 184 of the world's largest corporations are located in the US, but there are 34 in Japan 24 in France 23 in China 36 in Britain. only three of the world's ten largest banks and one of the largest electrics companies are US firms. On the other hand, US has 7/9 of the largest aerospace firms, 4/10 largest IT companies, 6/7 largest diversified financial companies and 6/10 largest retailers. pg. 51

Ethics and Information Technology

individual rights to privacy. FB and google have come under fire after trying to track people logging into their websites. Solutions: post privacy policy, allow people the choice of having their info shared, Pg. 46.

Maquiladoras:

light assembly plants build in northern Mexico close to the US border. Theyre given special tax breaks by the Mexican government, and the area is populated by workers willing to earn a small wage.

The business cycle:

long periods of growth and prosperity with periods of cutbacks and retreats.

Exporting

making a product in the firm's domestic marketplace and selling it in another country, can involve both merchandise and services. (importing and exporting are the first type of international business in which a firm gets involved.

Quota:

most common form of trade restriction. a limit on the number or value of goods that can be traded. designed to ensure that domestic competitors will be able to maintain a certain market share. Ex. Honda is allowed to import 425,000 autos each year into the US. This quota is one reason Honda opened up manufacturing facilities in the US. The quota only applies to the import, not domestic production.

Supplier:

organizations that provide resources for other organizations. Ex. McDonals buys softdrinks from Coca Cola. -businesses also rely on suppliers for information (such as economic statistics), labor (in the form of employment agencies), and capital (from lenders such as banks). -Some business avoid using a single supplier, while other businesses create a strong relationship with one supplier. Ex. Dundermifflin!!

Physical Work Environment:

physical environment and the work that people do. Is the business in a skyscraper or a rural warehouse? Ex. Pitney Bowes Credit Corporation created its office space to look like an indoor theme park. -health regulations have caused organizations to pay more attention to the internal environment. -also creates more opportunity. The emergence of the body posture chair by Rebecca Boenigk.

Codes of Ethics:

prepared by General Mills an Johnson and Johnson. written statements of values and ethical standards that guide the firm's actions. Enron's board of directors voted to set aside the firm's code of ethics to implement a business plan that was in violation of the ethics code.

Managing ethical behavior

starts from top management. Ex. ethics training, ethics committee. -increased unethical behavior (employees calling in sick when they want a day off)