MGMT Exam 2 Review

Advantages of unrelated diversification

A business that uses this strategy should have relativity stable performance over time. During any given period, if some businesses owned by the organization are in a cycle of decline, other may be in a cycle of growth. Resource allocation Having many different areas the business can place the highest interest into the highest potential products/businesses

Related diversification (Type of Diversification)

A strategy in which an organization operates in several businesses that are somehow linked with one another Advantages It reduces an organization's dependence on any one of its businesses activities and thus reduces economic risk Even if one or two businesses lose money, the organization as a whole may still survive. By managing several businesses at the same time, an organization can reduce the overhead costs associated with managing any one business. The normal administrative costs required to run a business can be spread over a large number of businesses Allows an organization to exploit its strengths and capabilities in more than one business Organizations who do this successfully capitalize on synergies which are complementary effects that exist among their businesses. Synergy exists among a set of businesses when the business' economic value together is greater than their economic value separately.

Strategy

A strategy is a comprehensive plan for accomplishing an organization's goals

Tactical Plans

Are aimed at achieving tactical goals, are developed to implement specifics parts of a strategic plan. Tactical plans typically involve upper and middle management and, compared with strategic plans, have a somewhat shorter time horizon and a more specific and concrete focus. Tactical plans are concerned more with actually getting things done than deciding what to do. Intermediate plans 1-5 years

Non programmed Decisions making type

Are relatively unstructured and occur much less. Managers faced with such decisions must treat each one as unique, investing enormous amounts of time, energy, and resources into exploring the situation from all perspectives. Intuition and experience are major factors in nonprogrammed decisions Most of the decisions made by top managers EX involving strategy (including mergers and acquisitions, and takeovers) and organization design are nonprogrammed. As well as decisions about new facicilates, new products, labor contracts, and legal issues.

Strategic Plans

Are the plans developed to achieve strategic goals. A strategic plan is a general plan outlining decisions of resource allocation, priorities, and action steps necessary to reach strategic goals. These plans are set by the board of directors and top management generally have an extended time horizon, and address questions of scope, resource deployment, competitive advantage, and synergy. Long term plans cover many years or even decades EX Charmin CEO calls to become the number one toilet paper producer in the world by production.

How are rules and regulations and SOPs are similar in many ways

Both are relatively narrow in scope, and each can serve as a substitute for decision making. An SOPs typically describes a sequence of activities, whereas R&R focus on one activity.

Levels of strategy (2)

Business-level strategy is the set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market Corporate-level strategy is the set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets.

Manufacturing capacity

Capacity decision involves choosing the amount of products, services, or both that can be produced by the organization. The capacity decision is truly a high-risk one because of the uncertainties of future product demand and the large monetary stakes involved. An organization that builds capacity exceeding its needs may commit resources (capital investment, space and so forth) that will never be recovered. An organization can build a facility with a smaller capacity than expected demand Doing so may result in lost market opportunities but it may also free capital resources for use elsewhere in the organization. A major consideration in determining capacity is demand.

Focus (Porter's Generic Strategies)

Concentrate on specific regional markets, product markets, or groups of buyers. This strategy may have either a differentiation focus, whereby the firm differentiates its products in the focus market, or an overall costs leadership focus whereby the firm manufactures and sells its products at low costs in the focus market. Examples Tag heuer (watches) Vosges (chocolate) Ferrari, alfa romeo (automobiles) - but has become more global recently Hasselblad (camera) Waterman (writing instruments)

Declination (product life cycle)

Demand for the product or technology decreases the number of organizations producing the product drops, and total sales drop. Demand often declines because all those who were interested in purchasing a particular product have already done so. Organizations that fail to anticipate the decline stage in earlier stages of the life cycle may go out of business. Those that differentiate their product, keep their costs low, or develop new products or services may do well during this stage. ; Programmed Decisions making type One that is relatively structured or recurs with some frequency or both Many decisions about basic operating systems and procedures and standard organizational transactions are of this variety and can therefore be programmed. EX

Introduction (product life cycle)

Demand may be very high, sometimes outpacing the firm's ability to supply the product. Managers need to focus their efforts on "getting product out the door" without sacrificing quality. Managing growth by hiring new employees and managing inventories and cash flow are also concerned during this stage.

Rules and regulations

Describe exactly how specific activities are to be carried out. Rather than guiding decision making, rules and regulations actually take the place of decision making in various situations. Rules and regulations can become problematic if they are excessive or enforce too rigidly.

Action point 1 (Contingency plan)

Develop plan, considering contingency events. May include strategic, tactical, and operational plans. As part of this development process, managers usually consider various contingency events. EX Some management groups even assign someone the role of devil's advocate to ask, "But what if . . ." about each course of action. A variety of contingencies are usually considered.

Components of strategy

Distinctive Competence is something the organization does exceptionally well. Scope of a strategy specifies the range of markets in which an organization will compete. EX Resource deployment is how it will distribute its resources across the areas in which it competes. The choice companies make as to where and how much to invest reflect issues of resource deployment. EX

Differentiation strategy (Porter's Generic Strategies)

Distinguish products or services. Firms that successfully implement a differentiation strategy can charge more than competitors because customers are willing to pay more to obtain the extra value they perceive. Examples Rolex (watchs) Godiva (chocolate) Mercedes-Benz (Automobiles) Nikon (camera) Cross (writing instruments)

Organizational layout

Facilities are the physical locations where the products or services are created, stored, and distributed. Location is the physical positioning or geographic site of facilities and must be determined by the needs and requirements of the organization. Layout of the facilities is closely related to other operations decisions.

Operational plans

Focuses on carrying out tactical plans to achieve operational goals. Developed by middle and lower level managers, operational plans have a short-term focus and are relatively narrow in scope. Each one deals with a fairly small set of activities. Short range plans 1 year or less

Strategic Goals

Goals set by and for top management of the organization. They focus on broad, general issues. EX

Action point 2 (Contingency plan)

Implement plans and formally identify contingency events. The most important contingency events are also defined. Only events that are likely to occur and whose effects will have a substantial impact on the organization are considered the contingency planning process.

Prospector strategy (Mile and snow typology)

Innovation and growth oriented, searches for new markets and new growth opportunities, encourages risk taking Has employees involved in the process as well. Examples Amazon.com 3M Rubbermaid

Classical decision making model

Is a perspective approach that tells managers how they should make decisions. It rests on the assumption that managers are logical and rational and that they make decisions that are in the best interest of the organization. Decision makers have complete information about the decisions situation and possible alternatives They can effectively eliminate uncertainty to achieve a decision condition of certainty They evaluate all aspects of the decision situation logically and rationally.

Single Use plans

Is developed to carry out a course of action that is not likely to be repeated in the future. Programs (bigger) Is a single-use plan for a large set of activities EX It might consist of identifying procedures for introducing a new product line, opening a new facility or changing the organization's mission. Projects (smaller) Is similar to a program but is generally of less scope and complexity. A project may be a part of a broader program or it may be a self contained single use plan EX

Standard Operating Procedures

Is more specific than a policy, in that it outlines the steps to be followed in particular circumstances. EX

Automation

Is the process of designing work so that it can be completely or almost completely performed by machines. Because automation machines operate quickly and make few errors, they increase the amount of work that can be done. Thus, automation is the most recent step in the development of machines and machine-controlling devices. Automation relies on feedback, information, sensors, and a control mechanism. Example Thermostat test air (sensor), detects either low/high temperature (information), it turns off/on the heater (control), and feedback is sent to thermostat.;

Operations management

Is the set of managerial activities used by an organization to transform resource inputs into products and services. Operations is an important functional concern of organizations because efficient and effective management of operations goes a long way towards ensuring competitiveness and overall organizational performance as well as enhancing quality and productivity. Operations management creates value and utility of one type or another, depending on the nature of the firm's products or services.

Computer aided design

Is the use of computers to design parts and complete products and to simulate performance so that prototypes need not be constructed.

Standing plans

Is used for activities that recur regularly over a period of time. Standing plans can greatly enhance efficiency by making decision making routine. Polices, standard operating procedures, and rules and regulations are three kinds of standing plans. Policies Specifies the organization's general response to a designated problem or situation. A policy is also likely to describe how expectation are to be handled. EX

Analyze (Mile and snow typology)

Maintains current markets and current customers satisfaction with moderate emphasis on innovation Combines both prospector and defender. Most large companies use this approach because they want to both protect their base of operations and create new market opportunities. Examples DuPont IBM Uber

Executing tactical plans (insert pic)

Manager needs to evaluate every possible course of action in light of the goal it is intended to reach. Needs to make sure that each decision maker has the information and resources necessary to get the job done. Vertical and horizontal communication and integration of activities must be present to minimize conflict and inconsistent activities. Managers must monitor ongoing activities derived from the plan to make sure they are achieving the desired results.

Single-product strategy (Type of Diversification)

Manufactures or produces just one product or service This product is also often sold in a single market Has one major strength and one major weakness By concentrating on its efforts so completely on one product and market a firm can become successful in manufacturing and marketing the product. Because its has staked its survival on a single product, the organization works very hard to make sure the product is a success.

Manufacturing industry

Manufacturing is a form of business that combines and transforms resources into tangible outcomes that are then sold to others.

Growth (product life cycle)

More firms begin producing the product and sales continue to grow. Important management issues include ensuring quality and delivery beginning to differentiate an organization's product from competitors' products. Entry into the industry during the growth stage may threaten an organization's competitive advantage; thus strategies to slow the entry of competitors are important.

Reactor (Mile and snow typology)

No clear strategy, reacts to changes in the environment, drifts with events These firms usually do not perform as well as organizations that implement other strategies Bad Example (All defunct lol) International Harvester (Navistar) Macy's Kmart

Unrelated diversification (Type of Diversification)

Operate multiple businesses that are not logically associated with one another. Even if there are important potential synergies among their different businesses, organizations implementing a strategy of unrelated diversification do not try to exploit them.

Line (Level of Management)

Operational plans and goals Provide valuable inside info and execute the plans developed by top management Line managers Are those people with formal authority and responsibility for the management of the organization. '

Evaluating an organization's opportunities and threats (OT in SWOT)

Organizational opportunities are areas that may generate higher performance Organizational threats are areas that increase the difficulty of an organization's performance at a high level.

Evaluating Strengths (S in SWOT)

Organizational strengths are skills and capabilities that enable an organization to conceive of and implement its strategies. EX May include things such as a deep pool of managerial talent, surplus of capital, a unique reputation and/or brand name, well-established distribution channels. Organization strengths are in two categories Common Strength Is an organizational capability possessed by a large number of competing firms. Competitive parity exists when a large number of competing firms are able to implement the same strategy. Distinctive competence Is a strength possessed by only a small number of competing firms. Distinctive competencies are rare among a set of competitors. Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performances. Strategic Imitation is the practice of duplicating another firm's distinctive competence and thereby implementing a valuable strategy.

Evaluating Weaknesses (W in SWOT)

Organizational weaknesses are skills and capabilities that do not enable (and may limit) an organization to choose and implement strategies that support its mission. Has two ways of addressing a weakness It may need to make investments to obtain the strengths required to implement strategies that support its mission. Second it may need to modify its mission so that it can be achieved with the skills and capabilities that the organization already has. An organization has a competitive disadvantage when it is not implementing valuable strategies that are being implemented by competing organizations.

Competitive advantage

Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performance. A sustained competitive advantage is a competitive advantage that exists after all attempts at strategic imitation have ceased.

Maturation (product life cycle)

Overall demand for growth for a product begins to slow down and the number of new firms producing the product begin to decline The number of established firms producing the product may also begin to decline This period of maturity is essential if an organization is going to survive in the long run. Product differentiation concerns are still important during this stage, but keeping costs low and beginning the search for new products or services are also important considerations

Defender (Mile and snow typology)

Protects current markets, maintains stable growth, serves current customers Examples: BIC eBay Mrs. Fields

BCG Matrix

Provides framework for evaluating the relative performance of businesses in which a diversified organization operates Explain Further

Overall cost leadership (Porter's Generic Strategies)

Reduce manufacturing and other costs By keeping costs low, the organization can sell its products at low prices and still make a profit. Examples Timex (watches) Hershey (chocolate) Kia (automobiles) Kodak (cameras) BIC (writing instruments)

Disadvantages of unrelated diversification

Research suggests that unrelated diversification usually does not lead to high performance. First corporate level managers in such a company usually do not know enough about the unrelated business to provide help with strategic guidance or to allocate capital appropriately. Failure to exploit important synergies, they are at a competitive disadvantage compared to organizations that use related diversification.

Service industry

Service organization is one that transforms resources into an intangible output and creates time or place utility for its customers. Managers in service organizations have come to see that many of the tools, techniques, and methods that are used in factories are also useful to a service firm.

Operational Goals

Set by and for lower-level managers. Their concerns are with shorter-term issues associated with tactical goals. EX

Tactical Goals

Set by and for middle managers. Their focus is on how to operationalize actions necessary to achieve the strategic goals. EX

Action point 3 (Contingency plan)

Specify indicators for the contingency events and develop contingency plans for each possible event Indicators might be a 3 month consecutive drop of .5% in each As indicators of contingency events are being defined, the contingency plans themselves should also be developed. After this stage, the managers of the organization monitor the indicators identified at action point 3. If the situation dictates, a contingency plan is implemented.

SWOT Analysis

Stands for Strength Weakness Opportunities Threats In SWOT analysis, the best strategies accomplish an organization's mission by Exploiting an organization's opportunities and strengths while Neutralizing its threats and Avoiding (or correcting) its weaknesses

Top (Level of Management)

Strategic Plans and goals Provide input to the CEO and review strategic plans

Action point 4 (Contingency plan)

Successfully complete plan or contingency plan

Middle (Level of Management)

Tactical Plans and goals Planning task force Often comprises line managers with a special interest in the relevant area of planning. Often created when the organization wants to address a special circumstance Board of directors Establishes the corporate mission and strategy

Contingency plan

The determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. Comes into play at four action points Contingency planning is becoming increasingly important for most organizations, especially for those operating in particularly complex environments. This is a useful technique for helping managers cope with uncertainty and change.

Developing tactical plans

The manager needs to recognise that tactical planning must address a number of tactical goals derived from a broader strategic goal. Although strategies are often stated in general terms, tactics must specify resources and time frames. EX A strategy can call for being number one in a particular market or industry, but a tactical plan must specify precisely what activities will be undertaken to achieve that goal. Tactical planning requires the use of human resources. Managers involved in tactical planning spend a great deal of time working with other people. They must be in a position to receive information from others within and outside the organization, process that information in the most effective way, and then pass it on to others who might make use of it.

Rational decision making process

These steps help keep the decision maker focused on facts and logic and help guard against inappropriate assumptions and pitfalls Recognizing and defining the decision situation Some stimulus indicates that a decision must be made. The stimulus may be positive or negative. EX A plant manager sees that employees turnover has increased by 5 percent. Identifying alternatives Both obvious and creative alternatives are desired. In general, the more important the decision, the more alternatives should be generated. EX The plant manager can increase wages, increase benefits, or change hiring standards Evaluating alternatives Each alternative is evaluated to determine its feasibility, its satisfactoriness, and its consequences. EX increasing benefits may not be feasible. Increasing wage and changing hiring standards may satisfy all conditions. Selecting the best alternative Consider all situational factors and choose the alternatives that best fits the manager's situation EX changing hiring standards will take an extended period of time to cut turnover, so increased wages Implementing the chosen alternative The chosen alternative is implemented into the organizational system EX the plant manager may need permission from corporate headquarters. The human resource department establishes a new wage structure. Following up and evaluating the results At some time in the future, the manager should ascertain the extent to which the alternative chosen in step 4 and implemented in step 5 has worked. Example: the plant manager notes that, six months later, turnover dropped to its previous level.

Goals serve four purposes

They provide guidance and a unified direction for people in the organization Goal setting practices strongly affect other aspects of planning. Goals can serve as a source of motivation for employees of the organization Goals provide an effective mechanism for evaluation and control.

Scope

When applied to strategy, it specifies the range of markets in which an organization will compete.

Effective Strategies

are those that promote a superior alignment between the organization and its environment and the achievement of strategic goals.

Process layouts

are used in operations settings that create or process a variety of products or activities. The needs of each incoming job are diagnosed as it enters the operations system, and the job is routed through the unique sequence of workstations needed to create the desired finished product. Each type of conversion task is centralized in a single workstation or department. Examples: x-rays, surgeries in another, and all physical therapy in seperate locations.

Cellular Layouts

are used when families of products can follow similar flow paths. EX A clothing manufacturer, for example, might create a cell or designated area, dedicated to making a family of pockets, such as pockets for shirts, coats, blouses, and slack.

Diversification (Corporate-level strategy)

describes the number of different businesses that an organization is engaged in and the extent these businesses are related to one another.

Strategic Management

is a way of approaching business opportunities and challenges; it is a comprehensive and ongoing process aimed at formulating and implementing effective strategies

Fixed position layout

is used when the organization is creating a few very large and complex products. Examples: Boeing aircrafts need a lot of room so the airplane stays still and the workers work around it.

Product layout

is when large quantities of a single product are needed. It makes sense to custom design a straight-line flow of work for a product when a specific task is performed at each workstation as each unit flows past. Most assembly lines use this format. Examples: Dell's personal computer factory