Management Test 1

stakeholder view

- Since 1990s - Key Focus: Serving Multiple Constituencies -realizing other entities like government, communities in which they're situated, customers, supply chains, etc. all have a stake too -want to maximize outcome for stakeholders -decisions with larger implications than just shareholders - A business framework that attempts to organize and analyze multiple groups that interact with the firm -Made popular through E. Edward Freeman's 1984 book Strategic Management: A Stakeholder Approach, the stakeholder view of the firm identifies and analyzes multiple groups that interact with the firm and attempts to align organizational practices to satisfy the needs of these various groups. -A typical firm may have relationships or duties to governments, local community organizations, owners, advocacy groups, customers, competitors, media, employees, environmentalists, and suppliers. While this list is not exhaustive, it demonstrates the various parties and groups with which a firm has relationships. The stakeholder view of the firm helps managers better understand the complex internal and external environment of the firm in today's marketplace.

shareholder view

-1960s-1980s -key focus: financial performance -corportate governance/decison making meant to benefit shareholders -delivering results to owners -the job of top managers was to produce the highest possible stock market valuation of the firm's assets. A series of factors during this period combined to promote this view. In the early 1980s, antitrust restrictions on mergers and acquisitions (M&A) were relaxed, prompting many firms to seek new growth opportunities by acquiring companies. This period saw a huge increase in both M&A activity and corporate takeovers as managers attempted to seek growth in any way possible. Overall, no firm was immune to the pressures of the market and the threat of takeover. -Many managers, like Lorenzo, came to believe that the organization owed allegiance only to shareholders—that employees, communities, and customers were secondary.

threat of substitutes

-A substitute could be a competitor's product or some other product that satisfies the same consumer needs. According to the 5-Forces Model, the very threat of substitute products or services can limit an industry's profit potential by placing a ceiling on the prices the companies in an industry can charge. If they exceed that limit, it can make the industry sufficiently attractive for substitutes to quickly enter the market.

bargaining power of customers

-Depending on the industry, a firm's customers may look and act very differently. Take the case of consumer packaged goods companies that sell their products to large retailers like Walmart and Costco. Because their customers are large and powerful, they are under a lot of pressure to offer their products at the lowest possible cost - A buyer industry will tend to have high power relative to the supplier industry when the buyer purchases in very large volumes or when the supplier's products are largely undifferentiated. In these cases, the buyer or customer has the power to force down prices in an industry.

virtues and characters

-Many argue that a person who follows the rules of obligation is not as trustworthy as a person who exhibits strong moral character and integrity. -character: 1) a person's ability to recognize the moral elements of a situation, (2) how well a person makes moral judgments, (3)how consistent a person's actions are with those judgments, and (4) how well a person can teach others to exhibit character. -In business, some believe that people should rely on decisions made by virtuous individuals, those with good character, rather than focusing on rights and obligations. An individual cannot solve a moral situation if he or she does not first recognize it as such.

utilitarianism

-One of the most popular and widely used ethical frameworks -operates under the "greatest happiness principle" as the foundation to its ethical theory. -behaviors are moral if they produce the greatest good for greatest number of people -obeying the principle of the greatest good for the greatest number can lead to a tyranny of the majority and a failure to respect individuals such as minorities

kantianism

-Rather than focusing purely on the positive and negative consequences of actions, Immanuel Kant believed that motives are critically important when judging moral action. -people must make the right decision for the right reasons -If someone with bad or even neutral intentions produces a good outcome, can we trust that he or she will produce good outcomes in the future?

components of Porter's 5-Forces Model KNOW DIAGRAM

1. Threat of New Entrants (top) 2. bargaining power of customers (right) 3. threat of substitutes (bottom) 4. bargaining power of suppliers (left) 5. rivalry among existing competitors (middle)

threat of New Entrants

-When a new competitor enters an industry, it often means that more of the same products are supplied to the same customer base, which ultimately decreases profits for all players. -the level of threat can differ from industry to industry. -the threat of entry into an industry depends on the barriers to entry that are present and on the reaction from existing competitors that entrants can expect. Barriers to entry tend to vary by industry, and they are the obstacles that a new entrant may face while trying to enter a market or an industry. Some of the most common entry barriers include high capital investments needed to enter the industry and the high costs associated with customers switching from one company to another..

How is the firm a value chain

-a unique set of activities that they perform to bring their product or service to market. -divided into two major activities: primary activities and support activities -primary activities: activities involved in the physical creation of the product and its sale and transfer to the buyers. The primary activities of a firm can be divided into five categories: inbound logistics, operations, outbound logistics, marketing and sales, and service. -support activities: provide the support necessary for the primary activities to occur. The support activities of a firm can be divided into four categories: firm infrastructure, human resource management, technology development, and procurement.

economic responsibilities

-business's duty to make a profit and increase shareholder value. Business institutions are the basic economic units in society; therefore, they have a duty to produce goods and services that people want and to sell them at a profit. Most aspects of business are built on this fundamental assumption. Companies engage in a variety of activities to increase profits, both directly and indirectly. Direct activities can include decreasing production costs and improving efficiency. Indirect actions refer to the intangible things that, over time, improve economic performance (for instance, improving employee morale, increasing brand awareness among consumers, and fostering strong leadership throughout an organization).

low-cost focus

-cant get everything you want there -competes on cost, cheap -ex: Aldi

resource-based view of the firm

-comes from strategic resources that the firm has and can lead to high profits over an extended period of time a resource is strategic if: 1. valuable: improves orgs. efficiency and effectiveness 2. rare: held by few or no competitors 3. difficult to imitate: either through legal or other means 4. non-substitutable: other firms cant duplicate resources through alternative means

low-cost leadership

-competes on cost -wide variety of stuff that they sell -ex: Walmart

distributive justice

-deals with the distribution of wealth among members of a society. People who follow this line of thought are egalitarians, and they believe that individual differences are morally insignificant. For example, they support heavily progressive taxes for an equal distribution of wealth.

scientific management

-during manufacturing period -A focus on how jobs, work, and incentive schemes could be designed to improve productivity using industrial engineering methods

bureaucratic organization

-early 1900s -max Weber____ -strict hierarchy, plans made at the top and executed at the bottom, tasks differentiated clearly

corporate social responsibility

-economic: businesses duty to make profit and increase shareholder value -legal: duty to pursue economic responsibilities within boundaries of the law -ethical: duty to meet the expectations of society beyond its economic and legal responsibilities EXPECTED NOT REQUIRED

differentiation focus

-farmers markets -ability to charge huge premium bc they offer an array of products related to animals/animal welfare or fresh, farmers market experience in a way that people like

economic dimension

-general economic environment in markets where firm performs activities -includes GDP, inflation, unemployment, consumer sentiment, and interest rates of all the countries where it sells its products and services.

board of directors

-group of individuals elected by shareholders and charged with overseeing the general direction of the firm. Though shareholders are part owners of the company, it is difficult for them to oversee what managers actually do to serve their interests. As such, the board of directors serves as an intermediate group, and they oversee managers to ensure that they serve the interests of a diverse group of shareholders. Boards come in different shapes and sizes. Some boards are made up mostly of company executives, while others have substantial representation from nonexecutives. More recently, firms have begun to diversify the structure of their boards in response to some of the corporate scandals of the early 2000s. The main criticism of boards at companies such as Enron and WorldCom was a lack of adequate oversight. One of the board's main functions is to provide oversight of the firm's strategies and management practices. Many critics wondered what Enron's board was doing while its executives engineered several financial frauds. Because of these events, many firms have moved to make their boards more independent, with less representation from their executive ranks.

business-level strategy

-how a firm competes in its industry and builds competitive advantage through a clearly articulated strategy. -In setting business-level strategy, a manager evaluates the attractiveness of the industry structure, the opportunities and threats in the external environment, and the firm's internal resources to determine how to compete. In developing a business-level strategy, a manager must answer three fundamental questions: (1) Who do we serve (a broad or narrow market segment)? (2) What do we provide (a small or large range of products or services)? and (3) How do we provide it (our unique production approach or delivery processes)?

task environment

-includes entities that directly affect a firm on a continuous basis and include competitors, suppliers, and customers. -In contrast to the dimensions of the general environment, these parties have the ability to exert a greater and more immediate influence over a firm.

list of stakeholders of a firm

-local community, shareholders, customers, advocacy groups, competitors, media, employees, suppliers, government

legal responsibilities

-obey the state and federal laws pertaining to business activity. Just as society allows business to assume the role of producer, it also lays down the boundaries in which a business must operate. There are several ways in which a company can maintain this responsibility. The most common are complying with laws, anticipating future laws, and avoiding civil litigation. For example, Toyota avoided heavy lawsuit costs by voluntarily recalling more than five million cars worldwide when it was reported that accelerators would stick to the floor of the car.

forward integration

-occurs when a firm owns or controls the customers or distribution channels for its main products. -ex: buying wholesalers, networks of delivery trucks -bottling, whole sale, sales force, retail stores, vending, restaurants

backward integration

-occurs when a firm owns or controls the inputs it uses. -ex: go into supply chain, buy companies that help you with products? -raw materials -manufacturing ex: could even buy a sugar cane farm

vertical integration

-occurs when one corporation owns business units that make inputs for other business units in the same corporation. -not diversification but invest in your own company -two types: backward integration and forward integration

reasons for diversification

-opportunity to leverage core assets and skills between businesses -opportunity for growth ex: bud light seltzer to grow -potential to manage or minimize risk: during covid-19 Lyft has been in a holding pattern in how to make money while uber is moving away from ride sharing to uber eats bc area of growth and investment -potential for personal gain:

organizational design

-organization wide -organization structure (network, hierarchal, division) that influences how competitive your organization is

individual leadership

-organizations are made up of individuals -how do they interact and behave

competitor

-part of task environment -any organization that creates goods or services targeted at a similar group of customers.

customers

-part of task environment -people or organizations that buy the firm's products and services. To many managers, the customer represents the most important aspect of the firm's environment.

supplier

-part of task environment -provides resources or services for a firm to help in its creation of products and services.

culture

-pattern of basic assumptions about the way an organization should work and the manner in which individuals in an organization should interact with each other. -For many firms, the culture is a by-product of the founder's personality. In these cases, the company is based on the values, beliefs, and assumptions of an individual or a small group of individuals.

owners

-people or institutions that maintain legal control of the organization. In many instances, firms are owned by one person or a small group of people (see Figure 2.10). In fact, sole proprietorships make up the majority of businesses in the United States; more than 79% of U.S. firms employ fewer than 10 individuals (e.g., the local dry cleaner or pizza shop). Other firms may be larger in size, yet still remain under private ownership.

political and legal dimension

-political events and activities in a market that affect a firm. -regulations and laws that a firm encounters in its markets ex: juul

what are drivers of globalization?

-political: Some leaders focus their efforts on lobbying to influence the government's role in business. -technological: other leaders invest in research and development to commercialize technological innovations -markets: increasing globalization of markets has hastened the pace and intensity of change. To remain competitive, companies can no longer sell exclusively in their domestic markets. Firms such as McDonald's, Starbucks, Apple, and Facebook have experienced slowing growth at home. -cost: -competitive: emergence of new, powerful competitors in many industries.

How do businesses apply PESTEL?

-provides a lens for you to focus on things that are most likely to threaten or provide opportunities for your organization

justice

-provides the framework for society to judge what is morally right or wrong, fair or unfair, and establishes ways to evaluate or punish those who behave immorally. Justice is the notion that moral behaviors must be based on standards of equity, fairness, and impartiality to preserve order in society. -2 types: distributive and procedural

external environment

-represents all of the external forces that affect the firm's business -two separate components: the general environment and the task environment 1. general environment 2. task environment

procedural justice

-rules should be clearly stated, consistently obeyed, and impartially enforced. It provides the framework for societies to develop laws and procedures that result in fair or just outcomes.

egoism aka objectivism

-self-interest (even selfishness) is the foundation of morality -for you to be moral/make good decisions = act in your own interest -if you don't, you could be less self-reliant and dependent on people

leader

-set a direction for a firm, align people to focus on the organization's vision, and motivate and inspire people

SWOT

-simple tool allows managers to take a snapshot of their firm's internal strengths and weaknesses as well as the opportunities and threats that are evident in the external environment (see Figure 5.8). Internal strengths might include specific human resources skills, proprietary technology, or lean manufacturing techniques. These items generally enable the organization to function more efficiently than its competitors do and are key aspects in the company's value chain. Weaknesses are potential vulnerable aspects in a firm's operations. These may include an older plant and equipment, an aging workforce, or a dependence on a certain supplier for core materials. The opportunities and threats aspect of the analysis encompasses many of the techniques discussed in Chapter 1, including environmental scanning and contingency planning. These activities are core components of gaining a better understanding of the contextual landscape. -To be effective, the analysis should be revisited on a regular basis and should be the basis of strategic action, not just an isolated academic exercise. Firms that adapt their strategic approaches to the realities of the context in which they operate tend to perform better than those that stick to a rigid strategy

differentiation continued

-still sell a broad amount -also compete on differentiation -higher price -better shopping experience and customer service -ex: wegmans

ethical responsibilities

-the expected behaviors of the general population. Although ethical responsibilities are difficult to define, managers can use the ethical frameworks discussed earlier in this chapter to understand how to make ethical decisions based on their stakeholders' expectations. For example, it is no longer good enough just to practice fair hiring and provide a safe work environment. Today's ethical climate calls for businesses to address issues of sustainability and pollution.

globalization

-the integration and interdependence of economic, technological, sociocultural, and political systems across diverse geographic regions. -

employees

-the people who make the products and provide the services that allow the firm to exist.

managerial view

-up to 1960s -key focus: production -manager focused, not focused on external entities -global position just starting -no long-term strategic lens -not a lot of competitors -firm as a mechanism for converting raw materials into products to sell to customers. In this framework, managers focused on relationships between the firm and its suppliers, customers, owners, and employees. -managers did not face many threats from shareholders to improve performance or seek business in other industries.

components of the strategic framework

-vision:concept/picture firm wants to achieve and how -mission: activities they'll do to reach vision -external environment -internal environment -mission statement:statement that defines firms reason for existing -objectives: quantifiable milestones or benchmarks a firm can base progress off of

strategic positioning

-what are you doing differently than your competitors? -how you align your resources -how do you decide businesses/activities to participate in -how do you compete within

3 strategies to compete

1. do something cheaply 2. differentiate your product 3. find a niche for your product to be in

responsibilities of the firm in terms of corporate social responsibility?

1. economic 2. legal 3. ethical

components of a firm's business environment?

1. external environment 2. internal environment

Four-Step Process for implementing CSR?

1. identifying points of intersection between company and society: where society and business overlap -value chain analysis -competitive environment -need inputs, supports, demands 2. select social issues to address: opportunity to generate a benefit for society while also benefiting the business. 3. create a corporate social agenda: that supports both inside-out and outside-in dimensions. Whole Foods' business model is built around the notion that people will pay a premium for food that is healthy, tasty, and environmentally friendly. Whole Foods uses its buying power to change modern factory farming so that animals are treated humanely before slaughter. -achieve social and economic benefits at the same time 4. create a social dimension to the value proposition: the unique set of needs a firm can meet for its customers?

test for diversification

1. is the industry profitable or or capable of being profitable? 2. how costly is it to enter industry? 3. will new industry provide firm with competitive advantage?

3 main perspectives on the purpose of a business?

1. managerial view 2. shareholder view 3. stakeholder view

What contributes to strategic positioning (i.e. 3-components of strategy)

1. managing trade-offs: without these companies will never achieve a sustainable competitive advantage 2. choosing a set of activities 3. creating fit: aligning activities to reinforce differentiation of firms product or services such that they cannot easily be copied by competitors

components of PESTEL?

1. political 2. economic 3. socio-cultural 4. technological 5. environmental 6. legal

diversification strategies

1. single product strategies: only one product in one market -ex: crocs 2. related diversification: most common, set of tangible or intangible resources that can help you compete in other business segments -ex: core that are really good and keep diversification strategies close to core 3. unrelated diversification: firm manages several businesses that are completely unrelated, no connection

three different diversification strategies and advantages/disadvantages of each

1. single product strategy 2. related diversification 3. unrelated diversification

pillars of management

1. strategic positioning 2. organizational design 3. individual leadership

difference between leader and manager

leaders: set direction, align people, motivate and inspire managers: plan and budget, organize and staff, and control and problem solve

What are the ethical frameworks discussed in the chapter and in the video (e.g. objectivism/egoism)?

1. utilitarianism 2. kantianism 3. virtues and character 4. justice

strategic position

A place in an industry that a firm occupies by way of the products or services it offers and the methods in which it chooses to deliver them

bargaining power of suppliers

If the suppliers are strong compared to the buyers in that industry, they can dictate their terms and, in turn, reduce the profitability of that industry. -ex: utility company, raw material producers (e.g., steel producers), employees (supplying labor inputs), manufacturers of preassembled components, and services ranging from security to consulting. -when there are no substitutes for the supplier's product, when the supplier limits production, or when the supplier does not consider the industry as one of its major customers.

how should companies use SWOT

SWOT analysis is one way to combine a manager's understanding of the external environment in relation to his or her firm's capabilities and competitive advantage. Like the 5-Forces Model, the SWOT analysis presents a snapshot of the firm at one point in time but requires managers to think about current and future opportunities and threats. To be effective, the analysis should be revisited on a regular basis and should be the basis of strategic action, not just an isolated academic exercise. Firms that adapt their strategic approaches to the realities of the context in which they operate tend to perform better than those that stick to a rigid strategy. By doing so, a firm can maintain a higher level of strategic flexibility—the capability to identify and react to changes in the external environment and to mobilize internal resources to deal with those changes.

Human Relations

The belief that organizations must be understood as systems of interdependent human beings who share a common interest in the survival and effective functioning of the firm

differentiation

When pursuing a differentiation strategy, a firm seeks to be unique in its industry along a dimension or a group of dimensions that are valued by consumers and can command a premium price. To accomplish this, a firm must position itself to offer certain product attributes or services that customers value and competitors cannot easily replicate. In contrast to cost leadership, consumers should be willing to pay a premium price for that firm's product.Differentiation can be based on a broad range of factors, including product features, service offerings, distribution systems, and marketing approaches.

synergy

created when a firm generates sustainable cost savings by combining duplicate activities or deploying under utilized assets across multiple businesses -ex: layoffs

relativism

ethics are dependent on the situations or having more than one ethical viewpoint

manager

focus their efforts on planning and budgeting, organizing and staffing resources, and controlling and problem solving.

consequentialism

moral worth of an action to be judged by its outcome/consequences -intentions dont matter

triple p

people, planet, profits

corporate social responsiveness

practice of businesses responding to pressure from society tot engage in a socially responsible way -ex: Macdonalds had to change bc of health impacts

sociocultural dimension

refers to demographic characteristics as well as to the values and customs of a society. Some of the more prominent demographic forces that can impact a firm are the aging and changing racial composition of a population.

technological dimension

refers to the processes, technologies, or systems that a firm can use to produce outputs.

Will a company be better off with particular diversification strategy

related

most common/best diversification strategy

related diversification ex: pepsi or coke

general environment

represents the primary external forces that affect a firm. Some of these factors will have a stronger impact on the firm than others. For instance, the political/legal forces in the healthcare sector of the United States are potent; they have a significant impact on the manner in which health insurers and pharmaceutical firms operate. Sociocultural and technological forces have played a large role in the proliferation of social networking enterprises such as Facebook, Twitter, and LinkedIn. Political forces have impacted companies that rely on access to affordable raw materials such as oil, gas, and timber for their manufacturing processes.

internal environment

several dimensions that affect the firm from within its boundaries. The typical components of a firm's internal environment include owners, the board of directors, employees, and culture.

environment

short-term and long-terms effects on the environment

corporate-level strategy

the way a company seeks to create value "through the configuration and coordination of multimarket activities." Corporate-level strategy includes decisions on how many industries to compete across, whether to vertically integrate, whether to buy or sell companies, and how to share resources across divisions. In essence, these choices can be summarized into three categories: (1) scope, the markets, and businesses that the firm will compete in; (2) organizational design, the manner in which resources of the firm will be coordinated; and (3) ownership, the relationship between business units; that is, whether businesses should be acquired (owned) or aligned through other means (partnerships, alliances, or joint ventures). The ultimate goal of developing a corporate-level strategy is to build a corporate advantage, which occurs when a firm maximizes its resources to build a competitive advantage across its various business units. In other words, a company derives a corporate advantage when it is able to secure collective benefits from its businesses that would not exist if the businesses were owned independently.

How has the view of business changed since the early 1900s

went from bureaucratic to scientific management to Human Resources