Management Exam Two

Declining barriers to trade and investment

- (1920'3/30's) more barriers to international trade in belief that this was best way to promote economic well-being -used tariffs= tax the government imposes on goods imported from another country, protects domestic industry/jobs from overseas competition by raising price of products from abroad ex. (2009) US government increases tariffs on tires from Chine to protect US makers from unfair competition, tariff expired 2012 (more chinese tires come in- investigation to see if dumping is happening) -remove tariffs because when one country has one, others follow suit and more retaliatory moves as they both raise tariffs, not removing them depressed world demand/ushered in great depression/mass unemployment (long term consequence of tariff battle) -tried not to do this after 2009 economic crisis -capital will move to highly valued use (wherever in the world)

The changing global environment

-21st century got rid of the idea that world made of countries/markets separated physically/economically/culturally -global marketplace= source of opportunity and threats managers respond to -global environment= open (free to buy/sell goods to whoever), free to compete for global consumers -to build global comp adv= internet network of operations/subsidaries ex. comp between Coke/Pepsi and Toyota/Honda

Business

-Business level plan= details long term divisional goals that will allow division to meet corporate goals/divisions business level strategy and structure necessary to achieve divisional goals -Business level strategy= outlines specific methods a division uses to compete effectively against its rivals in an industry ex. Management at GE industry lighting develops strategies to help be number 1/contribute to corporate goals (expanded operations in Hungary, low cost location), reduce costs to lower prices and gain market shares

Cognitive Biases and Decision Making

-Kahnemann/Tversky suggested all decision makers subject to bounded rationality because: -Use heuristics= rules of thumb that simplify decision making, can be useful to make sense of info or systematic errors in how people process info and make decisions -Systematic errors= errors that people make over and over and that result in poor decision making (cause cognitive bias) -4 sources of bias that impact decision making (prior hypothesis/representativeness/illusion of control/escalating commitment)

Regional trade agreements

-NAFTA (94)= aim of abolishing tariffs on 99% of goods traded by 04, did not achieve goal -has removed most barriers on cross-border flow of resources ex. financial institution in US unrestricted access to mexico's marketplace -after NAFTA= more investment in Mexico, Walmart/Costco/Ford expanded and stocks items from mexico in stores -opportunity for manufacturing organization= reduce costs by shifting production to lowest cost location within free trade area or serve whole region from 1 location than establishing separate operations in each country -threat= expose company to high comp from other countries ex. Mexico threatening to US/Canadian labor intensive industries (roofing/textiles/flooring tile- Mexico has cost advantage) -African Union (99)= political and economic purpose (remove remnants of colonization and apartheid, create cooperation for development) -S african Developmental community= economic goals of socioeconomic development and poverty eradication -cooperation council for arab states of gulf= regional cooperation/economic relations -managers take advantage of opportunities other members of agreement provide

Group Decision Making

-Superior to individual making -Choices less likely to fall victim to bias/other errors -Able to draw on combined skills/competencies/accumulates knowledge of group members -process increase info/corrects others errors -Improve ability to generate feasible alternatives -all cooperate in implementation phase (probability of successful implementation increases) -potential disadvantage= take longer to make decisions/getting everyone to agree can be difficult because of different mana interests and preferences/can have biases (groupthink)

Why planning is so important

-absence of a plan= hesitation/false steps/mistaken changes of direction Planning important because: 1. Necessary to give org a sense of direction and purpose -without purpose= managers may interpret own tasks/jobs in ways that best suit themselves (pursuing multiple and conflicting goals, managers that don't cooperate and work well together) -use resources effectively/efficiently 2. Useful way to get managers to participate in decision making on appropriate goals and strategies for an organization -gives all managers opportunity to weigh in on decisions ex. Intel= top manager requests input from lower in annual planning 3. Helps coordinate members of different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve desired future state ex. storms in 13-14 slowed car sales, mass in unsold inventory because manu made more than sales could sell 4. Used as a device for controlling managers in organization -tells who bears responsibility for putting strategies to action to attain goals -managers know they held accountable= more motivated

Gatt and the Rise of Free Trade

-after WW2= decided free trade was best way to foster healthy domestic economy/lower unemployment (committed to remove barriers) -free trade doctrine= predicts that if each country agrees to specialize in the production of goods that it can produce most efficiently, then best use of global capital resources and lower prices ex. India good at textiles/ US at tech (capital invested in each, prices should fall because being produced at lowest cost, best use of scarce capital) -free trade doctrine responsible for global outsourcing/loss of US jobs in manufacturing and textiles -US jobs created because of new capital investments in high tech/IT/Service -tried to achieve removal of barriers to free flow of goods and capital with international treaty (General agreement on tariffs and trade, 8 rounds of GATT negotiations since WW2, last round lowered tariffs by over 30% from previous level, dissolved GATT and replaced with World trade org that has more power to sanction countries that break agreement) -tariff barriers 40% in 1948, 3% today

National Culture and Global Management

-because of cultural differences= management practices effective for one country might be troublesome in another ex. GE acquired Tungsram in Hungary (low wage rate/can export to W Europe), problems: American thought Hungarians lazy and Hungarians thought Americans pushy, Americans wanted strong sales/marketing to pamper customers, in prior command economy sales and marketing activities unnecessary, Hungarians wanted western style wages (GE took adv of low wages), by 2001 problems resolved and GE became major player in European lighting market= invested $1 B -management practices must be tailored to suit the cultural contexts within which an organization operates ex. US style pay for performance systems that emphasize performance of ind won't work in Japan where ind performance in pursuit of group goals is the value that receives emphasis -managers need to be sensitive to value system/norms of that country and behave accordingly ex. Friday is Islamic sabbath, mana must be sensitive to not schedule full busy day -Culturally diverse management team= strength for global marketplace (better appreciation of how national cultures differ/tailor management system and behavior to differences) ex. W companies adv over Japanese is high willingness to create global teams (customized service to needs of different countries) ex. IBM= looking for ways to use talented workforce to lower costs/offer customers specialized service -competency centers= members who have same IT skill, create global self-managed teams to solve clients problems -IBM analyzes skills/experience of employees and then looks at client problem and identifies best fit employees, then selected and work on problem in team, each employee is most highly valued use -expatriate experience

Declining Barriers of distance and culture

-before these barriers kept managers focused on domestic market ex. Unilever= soap and detergent, british based in early 1990's, hard because communication over long distances was bad (6 weeks to reach India by shop from England), different language/culture, one management approach didn't work in all countries so had to tailor management style, in 1925 decentralized decision making authority to subsidiaries, grew too distant, lowered performance -advances in communications/transportation tech reduces barriers -instant communication (satellites/digital tech/internet/global computer network/teleconferencing) -innovation= growth of commercial jet travel (faster travel) -internet/websites facilitate development of global communication/network/media creates worldwide culture -can watch CNN/MTV/ESPN/BBC/HBO in multiple countries

Diversity among decision makers

-broadens range of life experiences and opinions that group members draw on as they generate/assess/choose among alternatives -less prone to groupthink because they differ/less subject to pressure for uniformity

6. Learn from feedback

-conduct retrospective analysis to learn from past success/failure -don't do stagnation/repeat mistakes, improve continuously Formal procedure to learn from past choices: 1. compare what actually happened to what was expected as a result of decision 2. explore why any expectations for the decision weren't met 3. Derive guidelines that will help future decision making -important for entrepreneurs ex. Jim McCann flower shop

Corporate

-corporate level plan= contains top management decisions concerning the organization's mission and goals, overall strategy and structure -corporate level strategy= specifies in which industry/national markets an organization intends to compete and why ex. GE corporate plan goal= be competitive in market share in every industry in which it competes, in 2015 sold off companies where it lacked comp advantage and rebuilt core franchises in effort to solidify goal of being a digital industrial organization -another goal= acquire companies that help division build its market share (bought Alstom- french energy company)

The Role of national culture

-countries still vary widely because of differences in values/norms/attitudes -similar because of globalization -national culture shapes individual behavior by specifying whats appropriate in behavior/interaction with others (start learning at a young age- continues throughout lives)

The nature of management decision making

-decision making is a basic part of every task manager performs -manage org env (external/inside the org) -Decision-Making= process by which managers respond to opportunities and threats by analyzing the options and making determinations about specific organizational goals/courses of action -good decision= appropriate goals/high org performance -decision making in response to opportunity= mana searches for ways to improve org performance to benefit stakeholder groups ex. Komori acquired medical care company/dev products with firm's strengths -decision making in response to threats= events inside/outside the org affect org performance and mana search to increase performance ex. komori responded to threat of less demand for photo products by more initiatives in other areas (health care/bio tech) ex. of good decision= 1st cell phone (motorola) dev ipod (Apple) ex. of bad decision= launch Challenger (NASA) and Columbia (NASA)

Time constraints and information costs

-don't have time or money to search for alternative solutions and evaluate potential consequences ex. Ford motor company= manager has 1 month to choose a supplier for a small engine part (20,000 potential suppliers in US), can't talk to all suppliers/cost of obtaining info is prohibitive

Functional

-functional level plan= states the goals that the management of each function will pursue to help their division attain its business goals which allow them to meet corporate goals -functional level strategy= plan of action that management of individual functions can follow to improve ability of each function to perform its task-specific activities in ways that add value to an organization's goods and services and increase the value customers receive ex. GE's manu in lighting might adopt goals to reduce production costs by 20% in 3 years, strategies to invest in euro production facilities, develop an electronic global business to business network to reduce costs of input and inventory holdings /strengthen business level strategies -planning across 3 levels is consistent (operating in harmony, activities at one level reinforce and strengthen other levels) -written plans, frequently updated

The process of globalization

-global environment increasingly more open/more competitive -globalization= set of specific and general forces that work together to integrate and connect economy/political/social systems across countries/cultures/geographical regions so nations are more interdependent/similar (factors affect them in the same way) -fates of people in different countries interlinked as world market is more interconnected -develop similar liking to diverse products (ipad/jeans/hybrid cars/green tea) -outcome of globalization= more women in leadership -path of globalization shaped by ebb and flow of capital (valuable wealth generating assets or resources that people move through organizations and countries to seek greatest return and profit)

Characteristics of entrepreneurs

-high on openness to experience (predisposed to be original/open to lots of stimuli and takes risks) -internal locus of control (their actions determine outcomes) -high level of self esteem (competent/capable) -high need for achievement

1. Bounded Rationality

-human decision making capabilities bounded by people's cognitive limitations (limitations in ability to interpret/process/act on info) -constrains ability to det optimum decision -describes a situation in which the number of alternatives a mana must identify is so great/amount of info is so vast= difficult for mana to evaluate it all before making a decision

5. Implement the Chosen alternative

-implemented= many subsequent/related decisions must be made ex. decision to develop line of women's clothes= now recruit designers/get fabric/get manu/get contracts to sell line -top mana must assign mid manager the responsibility for making follow up decisions to achieve goal, give them sufficient resources/hold them accountable and reward if they succeed

The Administrative Model (March/Simon)

-mana don't have access to all info needed for decision -even if info is available= many mana lack mental/psychological ability to absorb and evaluate it right -explains why decision making is inherently risky and uncertain process and why managers rarely make decisions with classical model -Based on 3 Concepts: bounded rationality/incomplete info/satisficing

Be aware of your biases

-mana need to be aware and identify their own personal style of making decisions -ways to analyze how they make decisions= review 2 decisions they made recently (one good and one bad), determine time step on decision steps -another way= list the criteria they use to evaluate alternatives, heuristics they employ, personal biases, then critically evaluate the appropriateness of different factors -have other mana point out your biases

Defining the business

-mission= overriding reason it exists to provide customers with goods and service they value -so they can identify what kinds of value customers are receiving -ask 3 questions to define business: 1. who are our customers? 2. what customer needs are being satisfied? 3. how are we satisfying customer needs? -also tells needs they should satisfy in future/who their true competition is

Entrepreneurship and management

-people start business from scratch (take advantage of IT), then have people to help ex. Dell -entrepreneurship= mobilizes resources to take advantage of opportunity to provide customers with new and improved goods, then gives way to management (need to hire, provide effective/efficiency) -founding entrepreneur often lacks skills/patience/experience of managers, hard to delegate authority and risk their company (overloaded and quality of decisions is lowered), lack detailed knowledge to establish state of the art info systems/tech/create operations management procedures

1. Recognize the Need for a decision

-some stimuli usually spark realization that decision needs to be made -becomes apparent as changes in org env= threats/opportunities ex. launch date set when it seemed chips would be ready, now more issues because bugs and supply of chips -stimuli result from actions of mana inside org too (can also be external) -mana who actively pursue competencies (manu/mrkt/R&D/resources) create the need to make a decision -can be proactive or reactive in recognizing need

Levels of Planning

-takes place at 3 levels of management= corp/division or business/departmental or functional ex. General Electric (global organization) -corp level= CEO Immelt/top management team/corporate support staff -business level= divisions or business units where company competes in distinct industry (Aviation/Digital/Energy connections/Oil and Gas), each division has management for planning of that division -functional level= manu/mrkt/HR/R&D in each division, mana is more effective and efficient in each function ex. GE mrkt for lighting increases effectiveness of ads/sales campaigns to improve lighting sales

Promoting group creativity

-use group problem solving techniques to promote creative and innovative solutions -can prevent groupthink and uncover biases 3 group decision making techniques: 1. brainstorming 2. nominal technique 3. delphi technique

Promote Individual creativity

-when certain conditions met= managers more likely to be creative -people must be given the opportunity/freedom to generate new ideas -creativity decreases when mana try to "hurry up" a creative solution -creativity when= opportunity to experiment/risk/make mistakes and learn from them -employees must not fear that they will be looked down on/penalized for ideas that might at 1st seem outlandish (sometimes yield innovative products) ex. Google/Apple/Facebook= wide degree of freedom -creativity fostered by giving them constructive feedback (know how well they're doing), ideas that seem promising= promoted, ideas going nowhere= eliminated -manager should visibly reward employees who come up with creative ideas -creativity demands high level of effort, creative people like to receive acclaim of others (have ceremonies) -employees on frontline in good position for creative ideas/may be reluctant to speak up= managers use contests and rewards to encourage ex. Hammonds candies/borrego solar system

Planning is a 3 step process

1. Determine organization's mission and goals -mission statement= broad declaration of an organization's purpose that identifies the org's products/customers/distinguishes the org from competitors 2. Formulating Strategy -analyze organization's current situation/then conceive and develop strategies necessary to attain the org's mission and goals 3. Implementing Strategy -how to allocate resources/responsibilities

Barriers to entry from

1. Economies of Scale 2. Brand Loyalty 3. Government Regulation

The nature of the planning process

1. Establish and discover where an organization is at the present time 2. Determine where it should be in the future, its desired future state 3. Decide how to move it forward to reach that future state -forecast what may happen in future to decide what to do in present, better predictions= more effective strategies -planning= difficult/risky because incomplete information/limits on time and cognitive capabilities/ext environment uncertain and complex -predictions wrong= strategies fail= org performance fails

4 Principal forms of capital

1. Human= flow of people around world with immigration/migration/emigration 2. Financial= flow of monetary capital across world markets through overseas investment/credit/lending/aid 3. Resources= flow of natural resources/parts/components between companies and countries (ex. metal/minerals/lumber/energy/food/auto parts) 4. Political= flow of power or influence around the world using diplomacy/persuasion/aggression/force of arms to protect the right or access to country/world region/political bloc to the other forms of capital -nations compete to protect and increase standard of living + further political goals + social causes espoused by culture -forms of capital cause economic advantage (+) -faster the flow of capital= more capital being utilized to create most value (people moving to make more money/investors switching to stock with better interest or dividend/organizations finding lower cost inputs) (-) -faster the flow of capital= moving capital to places with low labor cost or rapidly expanding market, capital leaves country (more unemployment/recession/lower SOL)

Hofstede's Model of National Culture

1. Individualism vs Collectivism 2. Low power distance vs High power distance 3. Achievement orientation vs Nurturing orientation 4. Low uncertainty avoidance vs High uncertainty avoidance 5. Short term orientation vs Long term orientation -psychologist for IBM, collected data on employee values and norms from 100,000 + employees and developed a 5 dimensions national culture can be placed

2 Types of norms

1. Mores= norms considered to be of central importance to the functioning of society/societal life -violating mores= serious retribution (no murder/adultery/incest) -most mores enacted into law -some different= US drinks alcohol, Saudi arabia imprisons people for drinking 2. Folkways= routine social conventions of everyday life -customs/practices like dressing appropriately, good manners, neighborly, eat with right utensils -violation= not serious moral matter, maybe eccentric/ill mannered -strangers excused of violating folkways because not accustomed to local culture

Creating a learning organization (5 principles/Peter Senge)

1. Top management must allow every person in the organization to develop a sense of personal mastery -empower employees/allow them to experiment, create, explore 2. organizations need to encourage employees to develop/use complex mental models (sophisticated ways of thinking that challenge them to find new/better ways to perform task) -deepen understanding of what is involved in particular activity -employees must develop a taste for experimenting/risk taking 3. managers must promote group creativity -team learning is more important than individual -most important decisions made in group 4. Building a shared vision (common mental model all members use to frame problems/opportunities) 5. Encourage systems thinking -recognize effects of one level of learning on another ex. cant create teams to facilitate team learning if no sense of personal mastery developed -not quick/easy ex. Ford -management promote global organizational learning ex. Walmart used lessons of failure/success in one country to promote learning across other countries, Malaysia didn't like one stop shop- likes bazaar and markets, learned need to design store layouts to appeal to specific customers in country, purchase chain in other country (British ASDA), retained what customers valued in local market + take advantage of its accumulated organizational learning ex. Walmart improved ASDA's info tech for inventory/sales, enrolled ASDA in Walmarts global purchasing operations, empowered local ASDA management to run stores

Fayol said effective plans need 4 qualities

1. Unity= only one central guiding plan in operation to achieve goal 2. Continuity= planning is an ongoing process (build/refine/modify on corp/business/functional level) 3. Accuracy= managers make every attempt to collect/use all available information in planning process (recognize information always incomplete) 4. Flexibility= plans can be altered if situation changes

Factors that speed up globalization

1. declining barriers to trade/investment 2. Gatt and the rise of free trade 3.declining barriers of distance/culture 4. effects of free trade on management

How to promote organizational learning and intrapreneurship

1. product champions= managers who take advantage of project/provides leadership and vision that take product from idea to final consumer ex. 3M= champion goes to product development committee to decide funding -responsible for business plan for product 2. Skunkworks= group of intrapreneurs who are deliberately separated from normal operation of organization to encourage them to devote all attention to develop new products -coined at lockheed corp, dev special aircraft, U2 spy plane -less development time/higher quality -come from secrecy in how unit functioned and speculation on goals 3. Rewards for innovation= link performance to rewards for innovation -performance is the outcome of product development process -paid more bonus or granted stock options/promotion to top management (ex. 3M) ex. Microsoft/Google (keep them from leaving)

Determining the Organization's mission and goals

1st step of planning process -guide the next steps by defining which strategies are appropriate

Classical Model

A prescriptive approach to decision making based on the assumption that the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action -have access to all info needed -prescriptive= specifies how decision should be made -optimum decision= most appropriate decision in light of what manager believes to be the most desirable consequences for the org -mana can easily list their own preferences for alternatives/rank them to make decision

3. Achievement vs Nurturing Orientation

Achievement= value assertiveness/performance/success/competition/results ex. Japan/US Nurturing= value quality of life/warm personal relations/service and care for the weak ex. Netherlands/Sweden/Denmark

1. Prior Hypothesis Bias

Cognitive bias resulting from the tendency to base decisions on strong prior beliefs even if evidence shows that those beliefs are wrong -tend to seek/use info that's consistent with prior beliefs (ignore info that contradicts)

2. Representativeness Bias

Cognitive bias resulting from the tendency to generalize inappropriately from a small sample or single vivid event/episode Ex. Bookstore declined partnering with school because initial bad experience (bc if scheduling snafu), lost opportunity to expand sales/gain word of mouth ads

Levels and Types of planning

Corporate/Business/Functional

Patterns of groupthink

Groupthink= pattern of faulty/biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing info relevant to decision -collectively embark on a course of action without developing appropriate criteria to evaluate alternatives -group rallies around one central manager (CEO) -blindly committed without evaluating merits (based on emotional assessment, not objective) Ex. Launch bay of pigs (62-Kennedy)/escalate Vietnam war (64-Johnson)/watergate (72-Nixon)/challengers shuttle -after outcome, usually surprised that decision or outcome is flawed -pressures for agreement within group have unintended effect of discouraging individuals from raising issues counter to majority opinion Ex. Convinced people there's no need to delay challenger launch

1. Individualism vs Collectivism

Individualism= worldview that values individual freedom/self-expression and adherence to principle that people should be judged by individual achievements, not social background ex. Western Countries= admiration for personal success/strong belief in ind rights/high regard for entrepreneurs Collectivism= worldview that values subordination of individuals to goals of group and adherence to principle that people judged by their contribution to group ex. communist countries/Japan= from confucian/buddhism/shintoism thought in tokugawa period, strong attachment to group, more pressure to conform and lack of individuality -org reflect one of these -why Japan/US management practices different

Economic Forces

Interest rates, inflation, unemployment, economic growth, and other factors that affect the general health and well-being of a nation or the regional economy of an organization -low unemployment/falling interest rates= people have more money to spend= can sell more -good econ times affect supply of resources (easier/cheaper to get) ex. high tech companies enjoyed this in 90's because of advances in IT/growing global trade (Sony) -Bad microecon conditions= reduce access to resources organizations need (2010's) ex. hotels drop 14%/retail has less customers/nonprofit donations decrease by 20% -make manager's job more difficult and demanding -organization reduces number of managers/employees/streamline operations/identify ways to get resources more effectively and efficiently

5. Long-term vs. Short-term orientation

Long term= rests on values such as thrifting (saving) and persistence in achieving goals ex. Taiwan/Hong Kong Short term= values personal stability/happiness/living for the present ex. US/France

4. Uncertainty Avoidance

Low= easygoing/value diversity/ tolerate differences in personal beliefs and actions ex. Hong Kong/US High= more rigid/skeptical about people whose behaviors or beliefs differ from the norm ex. Japan/France -uncertainty avoidance= the degree to which societies are willing to tolerate uncertainty and risk -conformity to values of the social/work groups to which a person belongs is the norm structured situations are preferred because they provide a sense of security

nonprogrammed decision making

Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats -no ready made decision rules mana can apply to situation ex. decision to invest in new tech/dev new product/launch new promo campaign/enter new market/expand globally/start new business/invest R&D somewhere -mana may rely on intuition -Intuition= feelings/beliefs/hunches that come readily in on-the-spot decisions, don't have time to carefully consider issues involved -likelihood of error is greater ex. managing firefighters battling out of control fires/decisions made in emergencies (lots of uncertainty/risk/rapidly changing conditions) -reasoned judgment= decisions that require time/effort/result from careful info gathering/generation of alternatives/evaluation of alternatives (more rational process), have time to make judgment but no est rules to guide decisions -management overconfidence can be issue ex. decide whether to proceed with proposed merger -both often flawed and result in wrong decisions -models of decision making reveal assumptions/complexities/pitfalls that impact decision making (reveal factors to be aware of in decision making and in real life the process is typically not cut and dried)

Distributors

Organizations that help other organizations sell their goods or services to customers -managerial decisions on distribution impact organizational performance ex. Vital distributors= Federal Express/UPS/US postal service help with online items -changing nature of distribution provides opportunities/threats THREAT= if distributor becomes big and powerful where they control customer access to good= can threaten organization to reduce prices ex. Walmart can demand lower prices from suppliers because controls access to customers (can buy products only from supplier's comp to hurt them, demanded extra fees from US suppliers for using walmart distribution center, changed frequency of payment- tied payment to how quickly supplier inventory sold) ex. Bridgestone corporation pleaded guilty for allocating sales/fixing prices of parts sold/prearrange bids- paid $425 M criminal fine (largest criminal investigation by justice department)

Political/Legal forces

Outcomes of changes in laws and regulations in a nation/in a world region/across the world -political processes shape laws for relations between nations ex. strong trend to deregulate industries controlled by state/privatization (airlines/railways/utility companies) -dereg under fire after 2007 mortgage crisis/recession -political integration of countries influence management/organization (political unions with free exchange of resources and capital) ex. EU= common laws for trade/examine business in global organization and approve mergers -microsoft anticomp practices under scrutiny (bundled internet explorer with them), now has to ship software with choice of 10 web browsers, (2016) negotiations for transatlantic trade and investment partnership, less trade barriers between EU/US -allowing overseas comp= threat because increased comp in domestic market task env but more opportunity to sell internationally ex. US-trans pacific partnership (free trade agreement), US concerned about foreign comp in cars/sugar/textiles, provide companies with incentives to offsource which harms US manu -deregulation/privatization/removal of legal barriers/more emphasis on environmental protection and preservation of animals/workplace safety/legal constraints on discrimination -mana face challenges when they take adv of opportunities by legal/political/economic forces

Demographic Forces

Outcomes of changes in, or changing attitudes toward, the characteristics of a population, such as age, gender, ethnic origin, race, sexual orientation, and social class -most industrial nations have an aging population (less births and death rates+ aging of baby boomers) -more opportunities for organizations that cater to older people (home health care/recreation/medical) -increase in number of people postponing retirement past 65/decrease in number of young people entering the workforce -organizations need to motivate older employees/use their skills and knowledge

sociocultural forces

Pressures emanating from the social structure of a country or society or from the national culture (concern for diversity) -can constrain/facilitate the way organizations operate and manage behavior -Social structure= traditional system of relations established between people/groups in a society -high degree social stratification= many distinctions between individuals ex. caste in India/Tibet, social classes in France/England (top managers from higher class) -low social stratification= fewer distinctions ex. New Zealand/US -societies differ in extent they emphasize individuals over group (dictate how managers motivate and lead employees) -national culture= set of values that society considers important/norms of behavior approved and sanctioned in society ex. US values individualism, Korea/Japan values conforming to group -social structure/national culture change within societies over time ex. US- attitude to women/sex/marriage/gay ex. Asian countries more individualistic (Korea/China/Hong Kong/Singapore) ex. ind values replacing communist values of Eastern Europe -pace of change accelerating -mana must be responsive to changes in/differences among structure and culture -sensitive to diff between societies/adjust their behavior accordingly -mana must respond to social changes within a society ex. Americans most interested in personal health/fitness, mana recognized trend early and took adv of opport= gains for org ex. Organization made food delivery services, Coke's diet drinks/energy drinks popular -health trend hurt some orgs (tobacco companies/high carb food suffered until recession made people buy cheap food like mac and cheese)

Programmed decision making

Routine, virtually automatic decision making that follows established rules or guidelines (rely on long established decision rules) ex. principal hires new teacher when enrollment increases by 40/manu supervisor hires new people when overtime increases by more than 10%/office mana ordering office supplies when inventory low -can dev rules to regulate all routine org activites ex. how a worker should perform task/quality standard of raw materials -most decision making for day to day running is programmed ex. when to buy inventory/pay bills/bill people -little ambiguity involved (have info to create rules)

4. Escalating commitment

Source of cognitive bias resulting from the tendency to commit additional resources to a project even if evidence shows project is failing -feelings of personal responsibility -high investment of time/money/ignore evidence that's unethical/illegal/uneconomical/impractical -better decision= cut their losses and run Ex. mark Gracin- landscape company, kept putting money in landscape design even though no business, abandoned it when he couldn't afford it anymore

3. Illusion of control

Source of cognitive bias resulting from the tendency to overestimate one's own ability to control activities and events -top management prone to this (exaggerated sense of worth/overconfident in ability to succeed) -overestimated odds of good outcome= inappropriate decision Ex. Mergers (most turn out bad)

Global Outsourcing

The purchase or production of inputs or final products from overseas suppliers to lower costs and improve product quality or design ex. Apple contracts with companies in taiwan/china for chips, batteries, LCD displays, contracts with foxcom to assemble, outsources distribution wiht fedex/UPS -some companies specialize in managing others global supply chains -global outsourcing takes adv of different costs/quality of resources in countries -use brokers/intermediaries to find suppliers to meet needs (thousands of suppliers= finding them is difficult) ex. Li & Fung (broker that helps US outsource) -risks with outsourcing ex. GE moved production of water heater to kentucky from China because rising chinese wages/higher transport costs- gave company more control on quality (produced better product at lower cost in US) ex. Apple brought manu of personal computer to TX -some don't outsource but establish their own assembly operations in countries to protect their proprietary technology ex. global automakers own their operation in Chine to retain control over global decision-making/keep operation a secret -websites must accommodate cultures/customs of the world

Task Environment

The set of forces and conditions that originate with suppliers, distributors, customers, and competitors and affect an organization's ability to obtain inputs and dispose of its outputs because they influence managers daily -have immediate and direct effect on managers (pressure/radio/mail/when they arrive at office)

Changes in nature, number, or type of supplier produces opportunities and threats

Threat= when suppliers bargaining positions are so strong they can raise the price of inputs because: 1. suppliers are the sole source of input 2. input is vital ex. 17 years Searle was the sole supplier of Nutrasweet (used in diet soft drinks/no acceptable substitute/held patent so couldn't introduce competing products for 17 years), charged a lot of money till comp came, then prices fell, Splenda replaced them and demand high prices now, Truvia has also gained more market share and this market grown to $275 M Opportunity= when organization has more suppliers, organization in strong bargaining position and can demand lower cost and higher quality inputs ex. Dell= searches for low cost suppliers abroad, gaining access to low cost products give opportunity to lower input costs -failure to use low cost suppliers abroad= threat, competitive disadvantage ex. Levi Strauss had to outsource because couldn't compete with lower price walmart jeans (now sells in walmart)

Cultural Values/Norms

Values= beliefs about what a society considers good/right/desirable/beautiful- or opposites -underpinnings of notions of individual freedom/democracy/truth/justice/women/love/sex/marriage -values are abstract concepts, invested with high emotional significance (die for freedom) ex. anti-gov demonstrations after Ukraine president took 15 B bailout from Russia over European trade and political offer, eventually voted him out ex. events in Egypt that led president Mubarak to step down- because desired to hold elections -Norms= unwritten/informal codes of conduct that prescribe appropriate behavior in particular situations, considered important by most members of an organization, shapes behavior of people towards each other

Global organization

an organization that operates and competes in more than one country

Government regulation

at industry/country levels -industries deregulated (air transport/trucking/utilities/telecommunications) experienced high level of new entry= forced existing competition to operate more efficiency or risk losing business -admin barriers are government policies (limit imports/barriers to entry) ex. Japan= under intense pressure to relax on regulations, rice in Japan was closed to overseas comp till 93 to protect high cost and low output rice farmers, can only export 8% of annual rice consumption, Nippon converts US rice to Bento Box and sold in japan for less (because no tariff on rice in processed foods), caused protest in Japan (over time restrictive policies whittled away), farmers had to leave rice fields idle and grow less profitable crops, more young Japanese consumers eat less rice= gov subsidies may be reduced -low rivalry= comp pressure moderate/managers can get to resources

Strategy

cluster of related managerial decisions/actions to help an organization attain one of its goals -planning is goal-making/strategy-making process

Economies of scale

cost advantages associated with large operations -result from manu in large quantities/buying inputs in bulk/effective use of organizational resources than competition -if org in task environment has economy of scale= their costs lower than costs of potential entrants (more expensive to enter industry) ex. Amazon has large economy of scale to other internet companies because of efficient distribution system

Devil's Advocacy

counteract group think/cognitive biases -devil's advocacy= critical analysis of a preferred alternative to ascertain its strengths/weaknesses before it is implemented -one member of the group plays this role (critic/challenges the way the group evaluates alternative and chose one over others) -identify what makes preferred alternative unacceptable -devil's advocacy is easier to implement because less management time and effort

Dialectical Inquiry

critical analysis of 2 preferred alternative in order to find an even better alternative for the organization to adopt -2 groups of managers evaluate alternatives and select one -top manager hears them both present, then each group critiques the other -top manager challenges both to uncover potential problems/perils

Bran Loyalty

customer's preference for the products of organization currently in the task environment -if one company has strong loyalty= new entrant has hard time obtaining a share of the market -big cost to build customer awareness of goods they provide ex. Apple/Google/Samsung/Amazon

3. Assess Alternatives

define opportunities/threats exactly and specify the criteria that should influence the selection of alt for responding to decision -mana often fail to specify criteria important to reach decision 4 criteria to evaluate: 1. Legality= ensure this action will not violate any domestic/international laws or government regulation 2. Ethicalness= ensure this action is ethical/will not unnecessarily harm any stakeholder group (clear on potential impact 3. Economic Feasibility= if action can be accomplished, given org's performance goals (cost-benefit analysis to see best net financial payoff) 4. Practicality= whether they have the capabilities/resources required to implement action, won't threaten attainment of other org goals -often consider these simultaneously ex. McNealy faced practicality (ship complete machine) and econ feasibility (beat comp to market), choice based on relative importance he assigned to criteria, did launch -bad mana decision= poor assessment of alternatives ex. decision to launch challenger= econ feasibility (gain more funding)/conflict with ethicalness (safety)= caused deaths, too concerned with scheduling and budget -some have chief sustainability officer to ensure ethicalness ex. Scott Wicker- UPS/Fisher- DuPont/Perez- Coca-Cola

Single Use plan

developed to handle non-programmed decision making in unusual or one of a kind situations ex. programs= integrated sets of plans for achieving certain goals ex. projects= specific action plans to complete various aspects of program ex. NASA launch= launch a rover in 2020 to investigate environmental surface of Mars, project is to develop scientific instruments to bring samples back from Mars, the launch is the program

Entrepreneurship and Creativity

entrepreneurs= individuals who notice opportunities and decide how to mobilize resources necessary to produce new and improved goods -important source of creativity -make all plan/org/leading/control decisions to start new business ex. Filo/Yahg (yahoo) -social entrepreneurs= individuals who pursue initiatives and opportunities to address social problems/needs to improve society and well being ex. protect environment/increase literacy/decrease poverty/decrease substance abuse -mobilize resources to solve social problems -intrapreneurs= mana/scientist/researcher who works in organization and notices opportunities to develop new and improved products and manage product development process, notice quantum and incremental product improvements -if intrapreneurs dissatisfied if superiors decide not to support/fund ideas and dev efforts= they leave and become entrepreneurs -must facilitate entrepreneurial spirit in creative employees

Steps in Decision making process

ex. McNealy decision (sun microsystem) to launch camera workstation computer -pros= 1st workstation with new microprocessor and comp adv -cons= production problems and couldn't guarantee steady supply of chips and still had a few bugs -had to make a decision without all the facts

Barriers to Entry

factors that make it difficult and costly for an organization to enter a particular task environment or industry -more difficult to enter task environment= higher barriers to entry= fewer comp in task env= low threat of comp= easy to obtain consumers/keep prices high

2. Generate Alternatives

generate a set of feasible alternative courses of action to take in response to opportunities and threats -failure to do this= bad decision ex. Sun microsys alt= launch/delay launch -problem= mana may find it hard to come up with creative alternative solutions to specific problems, so used to seeing world from single perspective, all trapped within our own ideas of what's important and how the world works -Senge/Bono= popularized techniques for stimulating problem solving/creative thinking (have to abandon existing mindsets)

3. Delphi Technique

group members don't meet face to face but respond in writing to questions posed by group leader ex. videoconferencing -group leader writes statement of problem + series of questions -questionnaire sent to management knowledgeable of problem, generate solutions/mail back to group leader -team of top managers record/summarize responses/results sent back with additional questions -process repeated until a consensus reached/most suitable course of action is apparent

2. Nominal Group technique

group members write down ideas and solutions, read their suggestions to the whole group, discuss/rank alternatives -more structured way/more time/opportunity to come up with solutions -useful when issue controversial/when different management might be expected to champion different courses of action -meet in closed door session -one manager outlines the problem, 30-40 minutes for people to work and ind to write down ideas, encouraged innovation -take turns reading suggestions to group, one manager writes all down on flip chart -no criticism allowed until all alt been read -all alt discussed one by one in sequence suggested (can ask for clarifying information/critique alt with pros and cons) -each member ranks all alt from most to least preferred -highest ranking chosen

1. Brainstorming

group problem solving technique in which managers meet face to face to generate and debate a wide variety of alternatives from which to make a decision -5 to 15 managers meet in closed door session -one manager describes in broad outline the problem -members share ideas/generate alternative courses of action -withhold judgment until all alt have been heard, one member records alt on flip chart -encouraged to be innovative/radical, more ideas= better and encouraged to piggyback on ideas -group members debate pros and cons of each, dev a short list of alt ex. manager trying to find new name for perfume/care model production blocking= group members cannot always simultaneously make sense of all alt being generated, think of additional alt, remember what they were thinking= loss of productivity

Intrapreneurship and organizational learning

important because intense comp from small agile companies -org can continuously experiment/improve/increase its ability to provide customers with goods -more intrapreneurship= high level of learning and innovation

Customers

individuals and groups that buy the goods and services an organization produces ex. Dell's customer segments= individuals who purchase for home use/small companies/large companies/government agencies and educational institutions -change in #/types of customers or customer tastes and needs create opportunities and threats -organizational success based on responsiveness to customers (to satisfy need) ex. PC industry= customers want smaller computer/longer battery life/new apps/low prices (need to respond to demand with things like voice command over bulky keyboard) ex. School= if more spanish speaking students, need more english classes -managers need to identify main customer group/make products for their needs -global market= lots of new customers ex. Amazon/Accenture/Cap Gemini (large consulting firms) -many products have gained global acceptance (creates opportunity) ex. Coca Cola/Apple ipads/McD/Samsung phones -large global markets for business products (telecommunication equipment/electronic components/cpu and finance services) ex. Cisco/Siemens/Intel/Oracle/SAP

Suppliers

individuals and organizations that provide an organization with the input resources (raw materials/component parts/employees) it needs to produce goods and services -in return they receive payment -manager must ensure reliable supply of input resources ex. Dell= suppliers of component parts like microprocessors (Intel)/ pre-installed software (Microsoft, Chrome, Adobe)/Dell's provider of capital (Banks)/Supplier of labor (educational institute and trade unions) -trade unions control supply by employees exercising their right to strike, unions can influence terms and conditions of employement -Dell= not unionized, not as hard to layoff people -where unions are strong= managers must negotiate/administrate agreements with unions and representatives

2. Incomplete Information

info incomplete because the full range of decision making alternatives is unknowable in most situations, and consequences associated with the known alternatives are uncertain -info incomplete because risk/ambiguity/time constraints

Ambiguous Info

info that can be interpreted in multiple and often conflicting ways -mana interpret same info differently and make decisions based on their own interpretations

Problem with suppliers

management development of global supplier network with keeping costs down and quality up -downside to global outsourcing= loss of US jobs ex. Boeing- pick people with best quality -It/internet make it easier to coordinate complicated long distance exchange (consolidate number of suppliers to reduce costs)

Effects of free trade on management

more opportunities to sell but also buy ex. Ralph Lauren's uniforms for 2012 olympic teams made in China= criticism -more opportunity to expand market

Competitors

organization that produces goods and services similar/comparable to a particular organization's goods and services -trying to attract the same customers ex. Dell's comp= Apple/HP/Sony/Toshiba/Lenovo/Acer ex. Stockbroker E Trade= Ameritrade/Scottrade/Schwab -most threatening force= dealing with comp -high level of rivalry results in price comp= falling prices= less customer revenues and profits ex. early 2000's = comp with Dell/IBM/HP- 1st Dell doing good by cutting costs then in 2006 HP recovered and Apple came on scene, Dell shrunk, now Dell more of a tech company and less a PC Maker -Potential Competition= organization not presently in task environment but have resources to enter if they so choose (Threat= when they enter there us higher comp/price and profits decline) ex. Amazon in 2010 not in furniture/large appliance business but could enter, in 2012 started selling (comp for best buy)

Organizational learning and creativity

organizational learning= process through which managers seek to improve employee desire/ability to understand and manage the organization and its task environment so employees can make decisions that continuously raise organizational effectiveness -learning organization= one in which managers do everything possible to maximize the ability of individuals/groups to think and behave creatively and maximize potential for organizational learning to take place -creativity= ability of a decision maker to discover original and novel ideas that lead to feasible alternative courses of action -encourage creativity= pressing organizational concern, may hire outside experts to develop programs to train managers in creative thinking and problem solving

Technological forces

outcomes of changes in the technology managers use to design, produce, or distribute goods and services -Tech= combo of tools/machines/cpu/skills/info/knowledge to design, produce, distribute goods -pace of tech change accelerated a lot because of advances in microprocessors/cpu hardware/software -tech change can make established products obsolete ex. Cathode Ray Tube computer monitors/TV/bound set encyclopedia/newspaper/magazines -have to find new way to satisfy need -new opportunities for designing/making/distributing new and better goods ex. (2014) AMD launched processors for games/ increased performance on apps (speed up PC's) -IT alters nature of work itself in organization (telecommuting/video conferencing/texts to coordinate employees- can work from home)

Planning

process managers use to identify and select appropriate goals and courses of actions for an organization -org planning that results from planning process details the goals of the org/specific strategies managers will implement to attain goals

4) Choose among alternatives

rank alternatives and make a decision -must be sure all info available is brought on issue -identifying all relevant info doesn't mean manager has complete info, can't ignore critical information

Risk and Uncertainty

risk= when managers know the possible outcomes of a course of action/can assign probabilities to them ex. mana in biotech industry= new drugs have 10% probability of successfully passing advanced clinical trials, probabilities reflect experiences of many drugs -Uncertainty= probabilities of alternative outcomes cannot be determined/future outcomes unknown (unpredictability), little info to use in making a decision ex. (1993) Apple cpu introduced Newton (personal digital assistant), totally new product so didn't know probability of success, initial launch was a disaster due to tech problems, improved version was more successful

3. Satisficing

searching for and choosing an acceptable or satisfactory response to problems/opportunities, rather than trying to make the best decision -exploring a limited sample of all potential alternatives ex. Ford asking a limited # of suppliers questions, trusting they rep all suppliers, make a choice, potentially better supplier could be overlooked -decision making= more an art than science

Task Environment result from actions of

suppliers/distributors/customers/competitors both at home and abroad

2. Power distance

the degree to which societies accept the idea that inequalities in power/well-being of their citizens are due to differences in individual physical/intellectual capabilities and heritage -degree to which they accept econ/social differences in wealth/status/well-being More power distance= inequalities allowed to grow, successful workers pass wealth to kids, wealth gap grows ex. Guatemala/Panama/Malaysia/Philippines Less power distance= large inequalities between citizens not allowed to develop, uses tax/social welfare programs to reduce inequality ex. US/Germany/Netherlands/UK -cultural values of richer countries protect rights of the ind/provide fair chance to succeed

The General Environment

the economic, technological, sociocultural, demographic and political/legal trends that indirectly affect all organizations, effect ability to obtain resources ex. introducing derivatives (lending instruments) + speculative boom in commodities and housing prices + lax gov regulation + exploit derivatives for short term profit = economic crisis (2000) -hurt retirement savings/more layoffs/less customer spending -how well a manager analyzes forces= how quick an organization can respond to changes

Scenario Planning

the generation of multiple forecasts of future conditions followed by an analysis of how to respond effectively to each of those conditions (contingency planning) -based on assumptions about conditions that might prevail in future ex. Shell= used this, many thought gas would go up, planned for just in case it went down, did end up going down and they did better than comp -learning tool/raises the quality of planning process and benefit to organization -adv= ability to anticipate challenges in future + educate management to think about future strategically

Time horizons of plans

the period of time over which they are intended to apply or endure -long term plan= 5 years or more (corp/business level) -intermediate plans= 1-5 years (corp/business/functional level) -short term plans= 1 year or less (business/functional level) -managers don't undertake major planning only once every 5 years -most orgs have annual planning cycle that is linked to the annual financial budget -rolling plan= plan that is updated/amended every year to take account of changing conditions in external environment (plan over several years), essential to use because increased rate of change + difficulty of predicting comp conditions in future, can make midcourse corrections/be flexible + plan for long term

Global environment

the set of forces and conditions in the world outside an organization's boundary that affect how it operates and shapes its -present managers with threats or opportunities ex. development of new production tech/availability of low-cost components/opening of new global markets= opportunity for manager to make/sell more products and obtain more resources and overall strengthen the organization ex. rise of global comp/global economic recession/oil shortage= Threat if manager can't sell products -managers need to understand/respond to forces appropriately (need to distinguish between task environment and general environment)

Standing Plans

used in situations in which programmed decision making is appropriate -when same situations occur repeatedly= managers develop policies/rules/SOP's to control the way employees perform their tasks -policy= general guide to action -rules= formal, written guide to action -SOP= written instruction describing the exact series of actions that should be followed in a specific situation ex. standing plan on ethical behavior by employees, report expensive gifts from customers/ethical behavior with suppliers and customers, SOP to make recipient of gift disclose it in writing in 30 days

General Environment

wide ranging global/economic/technical/sociocultural/demo-graphical/political/legal forces that affect organization and its task environment -more difficult to identify and respond to than task environment