MGT 3013 Exam 2 Ch. 5-8
(3) Strategy involves creating a "fit" among activities
"Fit" has to do with the way a companies activities interact and reinforce each other Example: A mutual fund such as Vanguard Group follows a low-cost strategy and aligns all its activities accordingly, distributing funds directly to consumers and minimizing portfolio turnover.
business analytics
- Sophisticated forms of business data analysis - Examples: portfolio analysis, time-series forecast
2 ctn... tools to asses the current reality
- competitive intelligence: gain info about competitors to anticipate their moves, and act accordingly - SWOT analysis: Environmental scanning of org's internal/external environments to detect early signs of threats and opportunities that could influence the firms plans (Strengths, weaknesses, opportunities, threats) - Benchmarking: a process by which a company compares its performance with high-performing organizations; control mechanisms; can use historical data - forecasting: a vision or projection for the future; trend analysis is extension of past events into the future; contingency planning creates hypothetical but equally likely future conditions - Porters 5 Competitive forces: business-level strategies originate in 5 primary competitive forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, rivalry among competitors
3 types of planning for 3 levels of management
- strategic planning = top management - tactical planning = middle management - operational planning = first-line management
uses of big data analytics
-Analyzing consumer behavior and spurring sales -Improving hiring and personnel management -Tracking movie, music, TV, and reading data -Exploiting farm data -Advancing health and medicine -Aiding public policy
knowledge of your decision making style...
-Helps you understand yourself and facilitates self-improvement -Can increase your ability to influence others by being aware of you--and their--style -Gives you awareness of how people can take the same information and arrive at different decisions
Building a Foundation for Execution
-Know your people and your business. -Insist on realism. -Set clear goals and priorities. -Follow through on accountability and results. -Reward the doers. -Expand people's capabilities. -Know and understand yourself
Organizations should adopt planning and strategic management for three reasons which are...
-They can provide direction and momentum -They can encourage new ideas -They can develop a sustainable competitive advantage
(1) Strategy is the creation of a unique and valuable position (from 3 strategy position sources ____needs, ____customers)
-few needs, many customers: Jiffy Lube only offers lubricants but provides them to many customers w/ different cars -broad needs, few customers: Wealth management and investment advisory firm Bessemer Trust focuses exclusively on high-net worth clients -broad needs, many customers: National movie theater operator Carmike Cinemas operates only in cities with populations of fewer than 200,000 people
Planning is...
-setting goals and deciding how to achieve them; -coping with uncertainty by formulating future courses of action to achieve specified results -plan: document that outlines how goals are going to be met
decision making styles
1. Directive: 2. Analytical: 3. Conceptual: 4. Behavioral:
Management by Objectives (MBO) is a four step process
1. Managers AND employees jointly set objectives for the employee 2. Managers develop action plans 3. Managers AND employees periodically review the employee's performance 4. The manager makes a performance appraisal and rewards the employee according to results
3 key principles underlie strategic positioning
1. Strategy is the creation of a unique and valuable position (from 3 strategy position sources ____needs, ____customers) 2. Strategy requires trade-offs in competing 3. Strategy involves creating a "fit" among activities
what makes it hard to be evidence based?
1. There's too much evidence 2. There's not enough good evidence 3. The evidence doesn't quite apply 4. People are trying to mislead you 5. You are trying to mislead you 6. The side effects outweigh the cure 7. Stories are more persuasive anyway
5 steps of Strategic Management process
1. establish mission, vision, and value statements 2. assess the current reality 3. formulate grand strategy 4. implement the strategy 5. maintain strategic control
planning and strategies management process (steps 1-5)
1. establish the mission, vision, and values 2. assess the current reality 3. formulate grand strategy and strategic, tactical, and operational plans 4. implement the strategy (hardest step requiring a lot of details) 5. maintain strategic control (Feedback system, make sure goals moving in the right direction)
4 stages of rational decision making
1. identify the problem or opportunity: 2. think up alternative solutions: 3. evaluate alternatives and select a solution: -Ethics, feasibility, and effectiveness 4. implement and evaluate the solution chosen -for successful implementation you need to: plan carefully; and be sensitive to those affected
3 types of objectives used in MBO
1. improvement: performance be accomplished is specific way for specific area (inc sales by 10%) 2. personal development: express personal goals be realized (go to 5 day management training course) 3. maintenance: express intention to maintain performance at previously established levels (last month we sold 60,000 cases so sell 60,000 cases again this month)
3 key attributes among successful analytic competitors
1. use of modeling -predictive modeling: data-mining technique used to predict future behavior and anticipate the consequences of change 2. multiple applications 3. support from top management
Advantages and Disadvantages of Group Decision Making
Advantages: -Greater pool of knowledge -Different perspectives -Better understanding of decision rationale -Deeper commitment to the decision Disadvantages: -A few people dominate or intimidate -Groupthink -Satisficing ("good enough" decision to shorten meeting) -goal displacement: other issues could arise from someone trying to prove their point against everyone else
Big data
Includes not only data in corporate databases but also web-browsing data trails, social network communications, sensor data, and surveillance data
escalation of commitment bias
Occurs when decision makers increase their commitment to a project despite negative information about it
Operating plan vs Action Plan
Operating: -a plan that "breaks long-term output into short-term targets" or goals -Turns strategic plan into actionable short-terms goals and action plans Action: -defines the course of action needed to achieve a stated goal -Contains a projected date for completing the desired activities for each tactic
overconfidence bias
People's subjective confidence in their decision making is greater than their objective accuracy
Promoting Consistencies in Goals
SMART goals, management by objectives, Goal cascading
symptoms of groupthink and preventing groupthink
SYMPTOMS ● Sense of invulnerability ("nothing can go wrong") ● Rationalization ● Illusion of unanimity and peer pressure ● "The wisdom of crowds" (pressure to conform leads to censoring oneself) HOW TO PREVENT ● Allow criticism ● Allow other perspectives
Gary Hamel management scholar, says companies like Apple have succeeded because they have been able to unleash the spirit of...
Strategy innovation: the ability to reinvent the basis of competition within existing industries--"bold new business models that put incumbents on the defensive." phones were already in the market, but apple was able to switch from a mainly computer to also a phone company and basically almost took over the already existing market with Strategy innovation
framing bias
Tendency of decision makers to be influenced by the way a situation or problem is presented to them.
Nine Common Decision-Making Biases: Rules of Thumb, or "Heuristics" ON EXAM
The Availability Bias The Representative Bias The Confirmation Bias The Sunk-Cost Bias The Anchoring and Adjustment Bias The Overconfidence Bias The Hindsight Bias The Framing Bias The Escalation of commitment Bias
hindsight bias
The tendency of people to view events as being more predictable than they really are.
representative bias
The tendency to generalize from a small sample or a single event.
anchoring and adjustment bias
The tendency to make decisions based on an initial figure
values statement asks...
What values do we want to emphasize?
sunk cost bias
When managers add up all the money already spent on a project and conclude it is too costly to simply abandon it
availability bias
When managers use only information that is readily available from memory to make judgments
confirmation bias
When people seek information to support their point of view and discount data that does not
the 3 core processes of business
a companies overall ability to execute is a function of effectively executing according to 3 purposes; -people consider who will benefit you in the future -strategy consider how success will be accomplished -operations consider which path will be followed
(2) Strategy requires trade-offs in competing
a company has to choose which strategies to follow and which strategies to NOT follow Example: Neutrogena soap, points out Porter, is positioned more as a medicinal product than as a cleansing agent. In achieving this narrow positioning, the company gives up sales based on deodorizing, gives up large volume, and accordingly gives up some manufacturing efficiencies
the road Map to ethical decision making is shown by
a decision tree: -graph of decisions and their possible consequences; it is used to create a plan to reach a goal -this is what you would read as a little girl in magazines where you have to take the quiz to find out your personality or whatever
business plan
a document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success
relaxed avoidance
a manager decides to take no action in the belief that there will be no great negative consequences
relaxed change
a manager realizes that complete inaction will have negative consequences but opts for the first available alternative that involves low risk
strategic management
a process that involves managers from all parts of the organization (top, middle, and first-line) in the formulation and the implementation of strategies and strategic goals Because strategic planning involves managers from all levels of the organization, planning not only covers strategic planning (done by top managers) but also tactical planning (done by middle managers) and operational planning (done by first-line managers)
goal
a specific commitment to achieve a measurable result within a stated period of time
Strategic Positioning
attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company developed by Michael Porter Performing different activities from rivals or performing similar activities in different ways
defensive avoidance
can't find a good solution and follows by (a) procrastinating: "I'll do it later, (b) passing the buck: "Let jimmy do it", or (c) denying the risk: "How bad could it be?"
Decision
choice made from among available alternatives
VRIO is a framework for analyzing a resource or capability to determine its ___________ by answering four questions about its ___________ A "Yes" to each question means the business idea _____ a competitive advantage
competitive strategic potential; Value, Rarity, Imitability, Organization; does have (Pg. 2 of mgt exam review has example)
execution
consists of using questioning, analysis, and follow-through in order to mesh strategy with reality, align people with goals, and achieve results promised
non rational models are
descriptive -describe how managers actually make decisions rather than how they should -
non-rational models of decision making
explain how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions descriptive
rational model of decision making
explains how managers should make decisions, it assumes managers will make logical decisions that will be optimum in furthering the organization's best interests AKA Classical Model
3. formulate grand strategy
explains how mission should be accomplished 3 common Grand strategies are.... 1. growth: expansion in sales, revenues, etc.. 2. Stability: involves little to no significant change 3. Defensive: involved reduction in org's efforts, retrenchment (strategy to reduce company size or cut expenses
short-term goal
generally span 12 months and are connected to strategic goals in a hierarchy known as a means-end chain (AKA tactical or operational goals)
conceptual
high TFA, people/social concerns -Tend to focus on the people or social aspects of a work situation. They take a broad perspective to problem solving and like to consider many options and future possibilities
analytical
high TFA, task/technical concerns -Careful decision makers who take longer to make decisions but who also respond well to new or uncertain situations
3 effective reactions to decision making
importance "How high priority is this situation" credibility "how believable is the info about the situation?" urgency "how quickly must I act on the information about the situation?"
tolerance for ambiguity
indicates the extent to which a person has a high need for structure or control in his or her life
a group can help with decision making when...
it can increase quality it can increase acceptance it can increase development
behavioral
low TFA, people/social concerns -Supportive, receptive to suggestions, show warmth prefer verbal to written information; have a tendency to avoid conflict
directive
low tolerance for ambiguity (TFA), task/technical concerns -Efficient, logical, practical, and systematic in their approach to solving problems action oriented, decisive, and like to focus on facts
Satisficing
non rational decision making model -"Satisfactory is good enough" -ability of managers to make rational decisions bounded by several constraints -b/c of constraints, managers DONT make an exhaustive search for best alternative -managers seek alternative until they find one that is satisfactory, not optimal
Intuition
non rational decision making model that stems from two things...expertise AND automated experiences -intuition is making a choice without the use of conscious thought or logical inference -Tips for improving intuition: ■ Trust your intuitive judgements ■ Seek feedback ■ Test your intuitive success rate ■ Try visualizing solutions ■ Challenge your intuition
business model
outlines the needs the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses
two planning steps and two control steps of the planning control cycle
planning 1. make the plan 2. carry-out the plan control 3. control the direction by comparing the results with the plan 4. control the directions in two ways: by correcting deviations and improving future plans
Management process involves the four management functions:
planning, organizing, leading, and controlling (DEFINE AND DESCRIBE EACH)
single-use plans
plans most likely only used once and not in the future
standing plans
plans used repeatedly to handle frequent recurring events
Big Data Analytics
process of examining large amounts of data of a variety of types to uncover hidden patterns, unknown correlations, and other useful information
Decision Making and its 2 systems
process of identifying and choosing alternative courses of action - System 1 - largely unconscious and intuitive. Operates automatically and quickly -System 2 - analytical and conscious. Our slow, deliberate, analytical, effortful mode of reasoning
decision making style
reflects the combination of how an individual perceives and responds to information
value orientation
reflects the extent to which a person focuses on either tasks and technical concerns or people and social concerns when making decisions
Four Ineffective Reactions to a Decision Situation:
relaxed avoidance relaxed change defensive avoidance panic
Two non-rational models are
satisficing and intuition
Strategy or strategic plan
sets the long-term goals and direction for an organization Usually reconsidered every year due to ever changing business decisions
panic
so frantic to get rid of problem that one can't deal with situation realistically
ethics officer
someone trained about matters of ethics in the workplace, particularly about resolving ethical dilemmas
ethics
standards of right or wrong that can help influence behavior
5. Maintain Strategic Control
strategic control consists of monitoring the execution of strategy and making adjustments, if necessary to keep a strategic plan on track you need to... -engage people -keep it simple -stay focused -keep moving
4. Implement the Strategy
strategic implementation is the act of putting strategy plans into effect they implement grand strategies by either growth, stability, or defense
long-term goal
tend to span from 1 to 5 years and focus on achieving the strategies identified in the company's strategic plan (AKA strategic goals)
Sustainable competitive advantage is...
the ability of an organization to produce goods and services more effectively than its competitors do, thereby outperforming them
Strategic Planning
the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities long term, top manager, 1-5 years
tactical planning
the process of developing detailed, short-term statements about what is to be done, who is to do it, and how it is to be done short term, middle managers, 6-24 months
operational planning
the process of setting work standards and schedules necessary to implement the company's tactical objectives short term, first-line managers, 1-52 weeks`
evidence based management
the translation of principles based on best evidence into organizational practice, bringing rationality to the decision-making process
5 ctn...BCG Matrix is a means of evaluating strategic business units on the basis of...
their market growth rates (vertical Y-axis) and their share in the market (horizontal X-axis) -Star: top left, high growth, high market share -Cash cows: bottom left, slow growth, high market share -Dogs: bottom right, low growth, low market share -Question mark: top right, risky venture. some will become stars and others will become dogs
"The curse of knowledge"
those who are specialized in a field often have tunnel vision and blind spots, less likely to see things from outside perspectives
For goal setting to be successful, three things have to happen
top management must be committed goals must be applied organization wide goals must "cascade" - be linked consistently down through the organization
Vision statement asks...
what do we want to become
Mission statement asks
what is our reason for being?
3 ctn...Porters 4 competitive strategies
■ Cost-Leadership Strategy - keeps costs and prices below those of competitors; target a wide market ■ Cost-Focus Strategy - Keep the costs and prices below competitors; target a narrow market ■ Differentiation Strategy - Offers products that are unique and superior value compared to those of competitors but to target a wide market ■ Focused-Differentiation Strategy - Offers products that are unique and superior value compared to those of competitors but to target a narrow market
3ctn... single product strategy vs. Diversification strategy
■ Single-Product Strategy -Company makes and sells one product within its market -Benefit is company can focus on one product -Risk is vulnerability, entire business can go under quick ■ Diversification Strategy -Operating several businesses in order to spread the risk -Products may be related or unrelated -Vertical Integration firms expand into businesses that produce the supplies it needs to make its products or that distribute and sell its products -The Blue Ocean Strategy refers to a company's creating a new, uncontested market space that makes competitors irrelevant, creates new consumers value, and decreases costs
Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas:
○ In being responsive to customers ○ In innovating ○ In quality ○ In effectiveness
2. assess the current reality
○ Look where the organization stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization's mission
1. establish mission, vision, and value statements
○ Mission is the organization's purpose/reason for being ○ Vision is the long-term goal of what the organization wants to become ○ Values statement should describe what the organization stands for
Strategic goal, operational plan, and action plan example
○ Strategic goal: increase revenue from new customers by 10% over the next 12 months. ○ Operational goal: introduce (roll out) two new product offerings over the next 12 months ○ Action plan: 1.Product development team to propose two new products by March 31 2.Products to be produced and pilot-tested in selected markets by May 1 3.Products to be modified as needed and a marketing plan prepared to support their introduction (rollout) by May 31 4.Sales force to be trained to sell products and execution of marketing plan: begun by June 30 5.Sales managers to meet with sales force to discuss progress and receive comments on marketing plan: ongoing
7 (evidence-based) Implementation principles
○ Treat your organization as an unfinished prototype ○ Don't brag, just use facts ○ See yourself and your organization as outsiders do ○ Evidence-based management is not just for senior executives ○ Like everything else, you still need to sell it ○ If all else fails, slow the spread of bad practice ○ The best diagnostic question: what happens when people fail?
SMART goals and how they're implemented
● Specific - goal should be specific rather than vague ● Measurable - goals should be measurable, or quantifiable ● Attainable - goals should be challenging but, above all, they should be realistic ● Results-Oriented - only a few goals should be chosen for each work unit and they should be results-oriented -- they should support the organization's vision ● Target Dates - goals should specify the target dates, or deadlines, when they are to be attained
What Managers Need to Know about Groups and Decision Making
● They are less efficient, taking longer to make decisions ● Their size affects decision quality, keep it 5-7 people and odd numbers ● They may be too confident ● Knowledge counts (members should know a good deal about relevant information)
