MGMT 3000 EXAM 1

Traditional Levels of Management

(1) Top Managers ("C-Suite") (2) Middle Managers (3) First-Line Managers

Ethical Frameworks

(1) Utilitarianism (2) Kantianism (3) Fiduciary Responsibility (4) Virtue Ethics

Stakeholder Theory

"a stakeholder is any group or individual who can affect or is affected by the achievement of an organizations purpose"

Managers must be mindful of (unethical behaviors):

(1) Authority & Power - can use company resources for personal use (2) Handling Information - managers expected to deal in truthful info & to keep confidential info confidential (3) Influencing behavior of others - "move it or lose it"; telling employees to perform unethical acts (or face punishment) (4) The goals they set - if managers set unrealistic goals, the pressure to perform & achieve can influence employees to engage in unethical business behavior

Ethical Dilemmas Faced by Individuals

(1) Conflicts of Interest: conflicts that occur when employees or managers engage in activities on behalf of the company & have a personal interest in the outcome of those activities -own interests oppose the company's interest or judgement is biased against their duty to the company -exercising biased judgement, engaging in direct competition with employer, misusing power, violating confidentiality EX: insider trading -EVERY ETHICAL DILEMMA INVOLVES A CONFLICT OF INTEREST (2) Trade Secret: information used in conducting business that is not commonly known by others; it provides strategic advantage over competitors EX: Pharm industry relies on Intellectual Property laws to protect its intellectual assets & secure financial longevity (3) Bribery: offering something valuable to a party to act on her behalf, often to an unfair advantage -causes diversion of resources to inefficient uses, higher costs in doing business, loss of investor confidense (4) Whistle-Blowing: the release of information by a member of an organization that is evidence of illegal or immoral conduct to executives in a company or regulating agencies outside a company -can be blacklisted, fired, threatened, & treated unfairly, & often endure financial hardship

3 Components of Strategy

(1) Defining Core Competencies: choosing a set of activities to deliver value to customer (2) Making Trade-Offs: -maintaining focus & gaining competitive advantage by carefully choosing what to do and what not to do ROE: a measure of the rate of return on the ownership interest of the common stock owners (3) Creating fit among activities: aligning activities to reinforce the differentiation of the firm's products or services such that they cannot be easily copied by competitors

Core Responsibilities of Business in Society

(1) Economic: business's duty to make profit & increase shareholder value (2) Legal: business's duty to pursue its economic responsibilities within the boundaries of the law; obey state & federal laws pertaining to business activity (3) Ethical: business's duty to meet the expectations of society beyond its economic & legal responsibilities (4) Discretionary: business's DECISION to be a good corporate citizen. Give back through philanthropic activities -EX: Whole Foods 5% donation of profits

Moral Dilemmas Faced by Organizations

(1) Environmental: increasing pollution & depletion of natural resources; managers face question of how much they should conserve (2) Privacy: a persons right to determine the type & extent of info that is disclosed about him/her; requires manager to strike balance between respecting privacy & learning about their subordinates -info should be directly relevant to the issue at hand, employees must have opportunity to give consent, & methods of learning info should be ordinary & reasonable

Strategic Framework

(1) External & Internal Environmental analysis --> (2) Vision & Mission --> (3) Objectives --> (4) Strategy Formulation --> (5) Strategy Implementation

Criteria to Evaluate quality of a firms strategy:

(1) External Fit: does the strategy fit with the environmental landscape? (2) Internal Fit: does the strategy leverage the firm's key resources? (3) Differentiation: does the strategy provide a distinct, differentiated & sustainable position in the marketplace? (4) Implementable: can the firm effectively execute the strategy?

4 Step Process for Implementing Strategic CSR

(1) Identify points of intersection between company & society: A company starts by looking for places where the organization has an impact on its surrounding society and where society impacts the organization (2) Select social issue to address: a company identifies which of those issues to address by looking for areas that will increase the value of both society and the company (3) Create a corporate social agenda (incorporate with strategy): the company prepares a specific corporate social agenda to support both societal and company needs (4) Create a social dimension to the value proposition: the company specifies how its new level of corporate social responsibility will add customer-recognized value to the company's products or services

Changing Perspectives on the Purpose of Business

(1) Managerial View (2) Shareholder View (3) Stakeholder View

CSR2 Response Strategies

(1) Reactive: do less than society expects; may deny responsibility for a problem or fight any suggestions that the company should solve a problem (2) Defensive: admit responsibility for a problem but do the least required to meet societal expectations (3) Accommodative: accept responsibility for a problem & take progressive approach by doing all that could be expected to solve the problem (4) Proactive: anticipate responsibility before it occurs, do more than expected to address the problem, & lead the industry in its approach

Theories of Management

(1) Scientific Management (2) Human Relations Movement (3) Contingent View

4 conditions of RESOURCES to achieve a sustainable competitive advantage:

(1) Valuable Resources: allow companies to improve their efficiency and effectiveness (2) Rare Resources: resources that are not controlled or possessed by many competing firms (3) Imperfectly Imitable resources: resources must be impossible or extremely costly or difficult to duplicate (4) Nonsubstitutable Resources: no other resources can replace them and produce similar value or competitive advantage

Rules for organization to gain a competitive stronghold:

(1) generating better info than rivals (2) analyzing that information to make strong, informed choices (3) quickly selecting among choices (4) converting strategic choices into decisive actions -business leaders must understand their competitors and overall competitive landscape

Measures of virtuous character

(1) persons ability to recognize moral elements of a situation (2) how well a person makes moral judgements (3) how consistent a persons actions are with these judgements (4) how well a person can teach others to exhibit character

Hofstedes 5 cultural dimensions

(1) power distance (2) individualism (3) masculinity and femininity (4) uncertainty avoidance (5) short term/long term orientation

Influences on Ethical Decision Making:

(1) the ethical intensity of the decision (2) the moral development of the manager (3) the approach taken to ethical decision making

Stakeholder Mapping

(1): MAP STAKEHOLDER RELATIONSHIPS with the firm (2): IDENTIFY specific SUBSETS within stakeholders (3): DETERMINE STAKES for each stakeholder (4): DEFINE CONNECTIONS between stakeholders EX: (1): Government (2): EPA (Environmental Protection Agency) (3): Reducing Carbon Emissions (4): Health of affected individuals EX: We should pay attention to what the government expects of us, especially the Securities and Exchange Commission. (This statement identifies both a general stakeholder (the U.S. government), and a more specific stakeholder subset (the Securities and Exchange Commission). These are the first and second steps in the stakeholder mapping process.)

NAFTA

-1994; US, Canada, Mexico -eliminate tariffs -largest trading bloc in the world -maintains trading restrictions on certain agricultural products -many industries have benefitted from the opening of borders & reduction of tariffs (automobile industries, construction equipment, agricultural) EX: Walmart in Mexico, Target in Canada

Top Managers ("C-Suite")

-CEO, COO, CFO, CIO, (CTO) -Monitor business environment -Overall direction of the organization: mission, purpose, organizational goals/strategy -Create context for change -Develop employees commitment to and ownership of company performance -Create a positive organizational culture through language & action

First-Line Managers

-Office Manager, Shift Supervisor, Department Manager -Train & supervise the performance of non-managerial employees -Encourage, monitor, & reward employee's performance -Make detailed schedules & operating plans

Middle Managers

-Plant Manager, Regional Manager, Divisional Manager -Set objectives consistent with top management's goals -Implement subunit strategies for achieving objectives -Plan & allocate resources to meet objectives -Coordinate & link groups, departments, & divisions -Monitor & manage subunits & individual managers

Managers Skills:

-STRATEGIC abilities to recognize a situation -SOCIAL skills to know what to do in a situation -BEHAVIORAL skills to act

STAKEHOLDER MANAGEMENT PROCESS

-Starts with a review of current strategies to determine what the companies current performance & anticipated goals for the future are (STRATEGIC REVEIW PROCESS) -Managers then consider what new strategic projects could be done, while at the same time scanning the environment for information that might help them better define the business context for their organization (NEW STRATEGIC PROJECTS & ENVIRONMENTAL SCANNING) -Environmental scanning involves stakeholder mapping, trend analysis, and contextual intelligence; all of these techniques give managers a better picture of the opportunities & threats that might be facing the company -The info gained in the first three steps of stakeholder management come together to determine the different business scenarios the company may face in the future (SCENARIO BUILDING) -Finally, the managers use these scenarios to plan the strategies the company will need to adopt to remain competitive in each version of the future (CONTINGENCY PLANNING)

Strategic CSR

-Using CSR for competitive advantage -Corporate Social Responsibility activities that are directly related to their business activities so that they can combine social welfare with financial welfare -must be planned specifically to support core business activities, supervised carefully to create value for community & firm, & evaluated regularly to ensure that CSR activities benefit both society & business

Internal Environment (strategy)

-assess goals -assess internal resources -assess culture -assess employees -assess capabilities -(SW)OT

Market Entry Strategies

-depends on market potential: overall market size of a particular region & growth prospects -must consider 2 important dimensions: (1) must decide the extent to which a firm will export its goods or produce them locally (2) must decide whether the firm will own all of the production assets or share ownership with another party

Bureaucratic Organization Structure

-developed in 1900s by Max Weber features of an ideal bureaucracy: -clear differentiation of tasks & responsibilities -coordination through strict hierarchy of authority & decision rights -standardized rules & procedures -vertical separation of planning & execution (plans made in upper ranks & executed in lower ranks) greatest contribution = ability to make organizations more rational and efficient

(1)Strategic Positioning (pillar of management)

-encompasses an understanding of the environmental landscape in which a business competes and the elements of strategy that help organizations align their resources for success in a changing context -strategy involves setting the direction for the organization: determining how the organization will compete in a marketplace that changes with the environment KEY QUESTIONS: -How should a business compete? -How does competitive landscape shape the potential for success or failure? -What strategy will allow a firm to adapt as the context evolves? -How has/will globalization impact the competitive positioning of a business EXAMPLE of a Strategic Positioning Question: -what can we offer to clients that they cant get from any other company?

Firm should pursue alliances or joint ventures based on

-environmental conditions in the market (ex: when the local market is substantially different from the firms home market or when language/cultural habits differ dramatically) -when the potential for integration of global operations is low -countries that require local equity participation

External Environment (strategy)

-industry analysis -customer analysis -supplier analysis -competitor analysis -SW(OT) -Porters 5-Forces Model

Managers role in strategy formulation

-select industries in which to compete -define core competencies and unique activities -make trade-offs -create fit among activities

Questions for Developing Strategy

-what is our purpose? -how will environmental forces impact our business? -what stakeholders are important? -in what business areas will we compete? -who will we serve? -how will we distinguish our firm from competitors

3 Pillars of Management

1) Strategic Positioning 2) Organizational Design 3) Leadership

To whom are organizations socially responsible?

2 major perspectives: (1) Shareholder model: only social responsibility that businesses have is to maximize profits -Milton Friedman: Agency Theory: a corporate executive is an employee- an agent of the corporations owners. As such, executive is the agent of shareholders & has fundamental obligation to maximize profit for the benefit of those who hired (2) Stakeholder model: managements most important responsibility is not just maximizing profits; firms long term survival depends on satisfying the interests of multiple corporate stakeholders

Where to go global

3 factors: -access to growing markets -location to build -minimal political risk

GATT (General Agreements on Tariffs & Trade)

3 main principles: (1) Most favored nation status: a tariff rate granted to one member of GATT would be extended to all members (2) National Treatment: foreign firms would be subject to same rules & regs as domestic firms (3) Consensus: trade disputes would be settled by unanimous agreement of all parties to the dispute -established 1947/48

Corporate Social Responsibility (CSR)

A business obligation to pursue policies, decisions, & actions that align with the objectives & values of society -business has a social contract with public; while the contract may change as society changes, the contract remains a source of legitimacy for business

Sustainable competitive advantage

A competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

Leadership Skills vs. Level within Organization

Entry-level Employees/Frontline Supervisors: TECHNICAL SKILLS Middle-level Managers: focus on INTERPERSONAL SKILLS (motivating & developing teams) & using CONCEPTUAL SKILLS (working w/ senior executives to provide analysis for the development or refinement of the organization's strategy) Senior Executives: rely on CONCEPTUAL SKILLS (setting the vision & agenda for the organization as well as overseeing strategic execution) and INTERPERSONAL SKILLS (to secure buy-in and support in the organization, rely on strong communication)

Corporate Social Responsiveness (CSR2)

How businesses respond when society pressures them to engage in socially responsible ways Behaviors of a responsive firm: -monitor & assess environmental conditions on a constant basis -seek to identify needs of stakeholders -design plans & policies to respond to changing conditions -CSR should be viewed as an investment that will lead to improved efficiency, innovation, & long-term financial success

General Environment

Includes (1) technological (2) political (3) legal (4) economic (5) sociocultural dimensions that affect a firm's external environment; primary external forces

Different Styles of Leadership

Leaders are: -Extroverted/Introverted -Quick & Impulsive/Cautious -Vain/Humble -An effective leader is not someone who uses specific leadership style but whose style enables him/her to obtain results

EU

Single market & common currency (the "Euro") with laws applying in all member states, ensuring freedom of movement of people, goods, services, & capital Existential Challenges: -Greece -Migrant Crisis -Terrorism/closing borders within the EU -UK's referendum on whether to remain a member Three pronged attack on US High Tech: (1) Taxation (2) Anti-Trust (3) Data Privacy Laws

Stakeholder Management

Step (1): identify (map) all important stakeholders of the firm Step (2): design formal processes & systems to deal with various stakeholders

Stakeholder View

a business framework that attempts to organize & analyze multiple groups that interact with the firm -typical firm may have relationships or duties to governments, local community organizations, owners, advocacy groups, customers, competitors, media, employees, environmentalists, & suppliers -stakeholder view helps managers better understand the complex internal & external environment of the firm in todays market place KEY FOCUS: SERVING MULTIPLE CONSTITUENCIES

Managerial View

a business framework where the firm is seen as a mechanism for converting raw materials into products to sell to customers -managers focused on relationship between the firm & its suppliers, customers, owners, & employees -up to 1960s KEY FOCUS: PRODUCTION

Shareholder View

a business framework where the job of top managers is to produce the highest possible stock market valuation of the firm's assets -1960s-1980s KEY FOCUS: FINANCIAL PERFORMANCE -brought on by 2 factors: (1) combination of slow economic growth & high inflation (2) increased penetration of foreign competition in the US market -early 1980s, antitrust restrictions on mergers & acquisitions (M&A) were relaxed, prompting many firms to seek new growth opportunities through acquisitions and vertical integration -huge increases in M&A activity and corporate takeovers as managers attempted to seek growth in anyway possible -singular focus on shareholder value resulted in lack of investment in new products & an erosion in quality standards; firms caught off guard as more nimble companies stole market share with new products, greater focus on consumer needs, & commitment to quality -firms environments were increasing in complexity because of foreign competition & pressure from external groups, internal environmental pressure from employee activism

Supplier

a company that provides resources or services for a firm to help it in its creation of products & services

Vision

a concept/picture of what a firm wants to achieve & how it plans to accomplish that

Licensing

a contractual arrangement whereby the licensor (selling firm) allows its technology, patents, trademarks, designs, processes, know-how, intellectual property, or other proprietary advantages to be used for a fee by the licensee (buying firm) -allows firm to test foreign market before seeking higher-impact strategy -risk: potential loss of proprietary advantage

Scientific Management

a focus on how jobs, work, and incentive schemes could be designed to improve productivity using industrial engineering methods (i.e-time & motion studies) -developed by Frederick Taylor in 1910s -organization likened to a well-oiled machine and the manager was seen as machine operator -believed employees were economically driven and rational in their motives

Wholly Owned Subsidiary

a fully operational, independent entity that a firm sets up in a foreign country to conduct business in that market -allows parent company to maintain tight control over new enterpirse -many firms use this mode of market entry exclusively because of the sensitive nature of their technology or processes -expensive/risky to establish

Board of Directors

a group of individuals elected by the shareholders and charged with overseeing the general direction of the firm -serve as intermediate group; oversee managers to ensure they serve the interests of shareholders

Internal Environment

a group of parties or factors that directly impact a firm including: (1) Owners (2) Board of Directors (3) Employees (4) Culture

Fiduciary Responsibility

a person who is entrusted with property, information, or power to act on behalf of a beneficiary -set of legal responsibilities - candor & disclosure, diligence & care, loyalty & self-restraint -obligated to be candid with beneficiary & disclose all relevant info, duty to protect & promote beneficiary interest & avoid putting own interests ahead EX: Hippocratic Oath -Never personally benefit at beneficiaries expense

Strategic position

a place in an industry that a firm occupies by way of the products or services it offers and methods it chooses to deliver them -most common strategic positions are based on: (1) cost leadership: southwest airlines (2) differentiation: gillette (3) focus: narrows scope to focus on a niche market within an industry, not the industry itself -cater to market segments overlooked by larger companies

Mission Statement

a statement that defines a firms reason for existence -often states what activities the firm performs or what markets it is trying to serve & how it distinguishes itself from competitors Benefits: -define purpose of company -build motivation and commitment -provide direction & inspiration -serve as a focal point -assist in making strategic trade-offs

Alliance

a structure where partners come together by contract to engage jointly in activities in a market -pursued when cost of creating an internal entity or developing a capability is higher than the cost associated with establishing alliance

Joint Venture

a structure where two firms come together to form a new company in a market -foreign firm gains from the local firms knowledge of the market & country; both firms contribute resources, sharing risk -challenges involve strategy, governance, and organizational issues

Environmental Scanning

a tool that managers use to scan the business horizon for key events & trends that will affect business in the future -involves: (1) stakeholder mapping (2) trend analysis (3) contextual intelligence

Trend Analysis

a tool where key variables are monitored & modeled to help predict change that might occur in the environment

Contingent View

a view of the firm where effective organizational structure is based on fit or alignment between the organization and various aspects in its environment

Situational Analysis (SWOT)

an assessment of the Strengths & Weaknesses of internal environment, and Opportunities & Threats of external environment

Contextual Intelligence

ability to understand the impact of environmental factors on a firm and the ability to understand how to influence those same factors -managers can enhance contextual intelligence by: (1) understanding historical precedents & how they have impacted an industry (2) staying attuned to trends in environment (3) seizing firsthand experiences & engaging in scenario assessment EX: I've been reading a blog called "Retail Banking Strategies," published by the Peak Performance Consulting Group. They're predicting that the only way for community banks to prosper is to have a growth strategy.

Competitive advantage

achieved when a firm creates more economic value than competitors by engaging in a strategy that is difficult or impossible for others to duplicate -to be sustainable, strategy must be consistent with external environment, aligned with the firms internal capabilities, and dynamic

Primary activities

activities involved in the physical creation of the product and its sale & transfer to the buyer 5 categories: (1) Inbound Logistics: activities such as material handling, warehousing, & inventory control that are used to receive, store & disseminate inputs to a product (2) Operations: activities necessary to convert inputs into final product form; machining, packaging, assembly, & equipment maintenance (3) Outbound Logistics: activities involved with collecting, storing, and physically distributing the final product to customers. EX: warehousing, material handling, order processing (4) Marketing & Sales: activities completed to provide the means through which customers can purchase products ex: developing advertising & promotional campaigns, select appropriate distribution channels, hire, develop, support sales force (5) Service: activities designed to enhance or maintain a products value; ex: repair, training, adjustment

Support Activities

activities that provide the support necessary for the primary activities to occur 4 main: (1) Procurement: Activities completed to purchase the inputs needed to produce a firm's products (raw materials/supplies, as well as fixed assets: machinery, lab equipment, office equipment, & buildings) (2) Technological development: activities completed to improve a firms product and the processes used to manufacture it ex: process equipment design, basic research, product design servicing procedures (3) Human Resource Management: activities involved with recruiting, hiring, training, developing & compensating all personnel (4) Firm Infrastructure: activities such as general management planning, finance, accounting, legal support, and governmental relations that are required to support the work of the entire value chain

Goal

an organizationally desired result, product or end state

Competitor

any organization that creates goods or services targeted at a similar group of customers

Planning

choosing a goal and developing strategy for achieving that goal Top managers: Mission Middle Managers: tactical plans, management by objectives First-Level Managers: operational plans, standing plans, single-use plans

Franchising

common arrangements in many retail businesses where a firm contracts with individual owners to operate its retail units -corporation sharking management & marketing techniques with the owner in exchange for a fee & some percentage of the units revenue -franchisee assumes most of the capital risk

Punctuated Equilibrium Theory

companies go through long, simple periods of stability (equilibrium), followed by short, complex periods of dynamic, fundamental change (revolutionary periods), finishing with a return to stability (new equilibrium) EX: US airline industry; 3 revolutionary periods: (1) 1978-1982; airline deregulation - intense competition (2) 1989-1993; key expenses (jet fuel & employee salaries) dramatic changes in customer base (business travelers --> leisure travelers); laid off 5-10% of workforce (3) 9/11; 20% drop in scheduled flights, 40% drop in passengers, laid off 25% of workers by 2005, govt bailout

SocioCultural Dimension

demographic characteristics as well as the values & customs of a society -social values: the deeply rooted system of principles that guide individuals in their everyday choices & interactions

Comparative Advantage

economic theory that proclaims countries should specialize in producing goods for which they have the lowest opportunity cost of production -specialization in a particular product helps become more efficient producer -free trade leads to more efficient allocation of resources -all countries involved in trade benefitting from access to cheaper goods ****Comparative advantage is the basic theory/logic behind globalization*****

Task Environment

entities that directly affect a firm on a constant basis and include (1) competitors (2) suppliers (3) customers -have the ability to exert a greater & more immediate influence over a firm

Kohlberg's Stages of Moral Development

ethical decisions are based on a person's level of moral development; three phases with two stages per phase PHASE 1: Preconventional Phase - People decide based on SELFISH reasons -Stage 1-obedience & punishment: rules are seen as fixed or absolute; obeying rules = avoiding punishment (children) -Stage 2-individualism & exchange: make decisions that advance your wants & needs PHASE 2: Conventional Phase - People make decisions that CONFORM TO SOCIETAL EXPECTATIONS -Stage 3-interpersonal relationships: focused on living up to social expectations & roles; emphasis on conforming, being "nice", & considering how choices influence relationships -Stage 4-maintaining social order: people consider society as a whole and focus on maintaining & following the rules, doing their duty, & respecting authority PHASE 3: Postconventional Phase - People use INTERNALIZED PRINCIPLES to solve ethical dilemmas -Stage 5-social contracts & individual rights: people begin to account for differing values, opinions, and beliefs of others. While laws are important for maintaining a society, members should agree on these standards -Stage 6-universal principles: based on universal principles and abstract reasoning, people follow these internalized principles of justice even when they conflict with laws & rules

Justice

ethical philosophy that provides the framework for society to judge what is morally right & wrong, fair or unfair, & establishes ways to evaluate or punish those who behave in morally wrong ways 2 types: (1) Distributive (2) Procedural

Scenario Building

forecasting the likely results that might occur when several events & stakeholders are linked together

Increase in industry profitability

high barriers to entry limited competitors lack of substitutes low buyer & supplier power

(2)Organizational Design (pillar of management)

involves developing and aligning the organization components to achieve strategic objectives define the manner in which a business is aligned and structured to compete in the changing contextual landscape Structuring company and making optimal use of company resources KEY QUESTIONS: -What structure to optimize resources? -How can culture reinforce key values and lay foundation for strong organizational performance? -How will performance be measured?** -How does an organization remain relevant in a constantly changing competitive landscape? EXAMPLE of a Organizational Design Question: -What kind of business should we create? Would a sole proprietorship, LLP, or a Corporation be the best structure for our company?

(3)Leadership (pillar of management)

involves inspiring & motivating employees to implement organizational strategies

decrease in industry profitability

low barriers to entry many competitors several substitutes high buyer & supplier power

Managers vs. Leaders

manager administers; leader innovates manager is a copy; leader is an original manager maintains; leader develops manager focuses on systems & structure; leader focuses on people manager relies on control; leader inspires trust manager has short-range view; leader has long-range perspective manager asks how and when; leader asks what and why manager has eye always on the bottom line; leader has eye on the horizon manager imitates; leader originates

Economic Dimension

often includes GDP, inflation, unemployment, consumer sentiment, & interest rates in the markets where the firm performs activities -particularly important for business abroad -managers must consider resource position of global regions, investigate currency issues in operating their business across borders, & consider the labor situation in a global market

1950s

organizations were discovered to differ, depending on whether they are designed to execute stable or innovative tasks -firms that emphasized efficiency: stable, mechanistic organizational structures -firms that emphasized innovation: informal, organizational structures

Culture

pattern of basic assumptions about the way in which an organization & individuals in it should work & interact with each other -who and what an organization is or represents -observable characteristics of physical environment (space, way of dress, hours & patterns of schedule) -often a byproduct of the founders personality or the community in which the firm resides -important for attracting, developing, & retaining a competent workforce and creating competitive advantage

Employees

people who make the products & provide the services that allow a firm to exist

Operational effectiveness

performing certain activities that allow a firm to operate more effectively than its competitors do -not a source of long term competitive advantage*

Virtue Ethics

philosophy claiming morality's primary function is to develop virtuous character -concerned with personal virtues; if a person is good, he/she cannot make unethical decision

Utilitarianism

philosophy claiming that behaviors are considered moral if they produce the greatest good, or utility, for the greatest number of people -managers should seek good outcomes for affected parties, be objective in identifying others' interest & the likely consequences of their actions, & be impartial when balancing others' interests w/ their own -"good" things = happiness, utility, pleasure -"bad" things = pain & displeasure

Kantianism

philosophy claiming that motives & universal rules are important aspects in judging what is right & wrong -argue that decisions about right & wrong are guided by the need to protect fundamental rights & freedoms -respect for the human is an obligation -AKA "moral rights" approach -act only on rules that you would be willing to see everyone follow -requires you consider whether rationale for your action is suitable to become a universal law or principle for everyone to follow

Strategy formulation

process of identifying how a firm can best align its resources & carve out a defensible position in the marketplace -objectives = what the firm seeks to achieve strategy = how firm seeks to achieve its objectives Objectives are the ENDS strategy is the MEANS -Planned component: systematic assessment of external & internal environment, creation of plans to react to or impact environmental factors, & establishment of objectives; typically derived from strategic planning resources & line managers who have solid understanding of day-to-day operations of company & competitive landscape; TOP DOWN process -Emergent component: should be flexible and adaptable to changing environmental conditions, frontline managers, inputs are BOTTOM UP

Porters 5-Forces Model

provides a framework to assess an industry's long-run profit potential (1) Threat of new entrants - depends on barriers to entry that are present: obstacles that a firm may face while trying to enter a market or industry -Supply-side economies of scale: arise when a firm manufactures products in high volumes resulting in lower production costs which deter entry by newer firms since they will not be able to generate the same production scale at the time of entry -demand-side benefits of scale: arise in situations where the buyers' willingness to pay for a product increases as the number of other buyers for the industry's product increases; sense of safety buying from a reputable source -customer switching costs: fixed costs that buyers encounter when they change suppliers; often arises because the consumer has to make changes to their product or operating procedure when using a new supply source EX: investment brokerage industry = high switching costs -capital requirements -incumbency advantages independent of size -unequal access to distribution channels -restrictive gov't policy (2) Bargaining Power of Suppliers: most common aspects of supplier power - no substitutes for suppliers product, supplier limits production, supplier does not consider the industry as one of its major customers characteristics of a powerful supplier group - supplier industry is more concentrated than the industry it sells to, industry participants in the buyer industry face switching costs in changing suppliers, no substitutes exist, supplier group can threaten to integrate forward into the buyer industry, supplier group does not depend heavily on the industry (3) Threat of Substitutes: substitute products limit an industry's profit potential by placing a ceiling on the prices the companies in an industry can charge (4) Bargaining Power of Customers: higher power when the buyer purchases in very large volumes or when the suppliers products are largely undifferentiated characteristics of a powerful customer group - group is concentrated or purchases in large volumes relative to the supplier, the industry's products are undifferentiated, buyers face few switching costs in changing vendors, buyers could potentially integrate backward to produce the industry's product (5) Rivalry among Existing Competitors conditions that promote rivalry & price competition: -product/service lacks differentiation or switching costs, fixed costs are high and marginal costs are low (ex: airline industry, movie theatre business), capacity must be expanded in large increments, the product is perishable, competitors are numerous or roughly equal in size & power, industry growth is slow (cereal), exit barriers are high

Strategy

pursuing a set of unique activities that provide value to customers; making trade-offs about which businesses to pursue, what products to produce, and which customers to serve; and aligning resources to achieve organizational objectives -managers "game plan" for the organization specifying how the firm intends on achieving its goals - viewed as a framework to allocate resources and evaluate activities rather than a fixed plan

Dynamic Environment

rate of environmental change is fast - decision makers must be nimble & quick EX: EA Sports, Crude Oil, Anheuser-Busch Marked by LOW barriers to entry, MANY competitors, SEVERAL substitutes, HIGH buyer & supplier power

Stable environment

rate of environmental change is slow - decision makers can be more deliberate EX: Delta, Apple Marked by HIGH barriers to entry, LIMITED competitors, LACK of substitutes, LOW buyer & supplier power

Political Dimension

refers to the political events & activities in a market that affect a firm

Legal Dimension

regulations and laws that a firm encounters in its markets

External Environment

represents all of the external forces that affect a firms business 2 parts: (1) General environment (2) Task environment

The resource view of sustainable competitive advantage

resources: the assets, capabilities, processes, employee time, information, and knowledge that an organization controls the goal: use company resources to provide greater value for customers than competitors can, creating a sustainable competitive advantange

Objectives

series of quantifiable milestones or benchmarks by which a firm can assess its progress -outline what the firm hopes to achieve within a specific time frame in a number of areas

Exporting

shipping a firms products form its domestic home base to global markets -inexpensive & low risk -loss of control over sales & marketing

Transnational strategy

strategies that balance a firms international activities among EFFICIENCY, LOCAL RESPONSIVENESS, AND ORGANIZATIONAL LEARNING -centralizes some resources at home & distributes other resources among global units -must have the ability to share & diffuse information and learning across entire firm ISSUES: -Complex configuration of assets & capabilities -some firms become too dispersed among their activities -certain global markets may call for an alternative global strategy -company can spend large amounts of $$ implementing diverse strategies -may be difficult to choose which strategy to adopt for which environment

Multinational Strategy

strategy in which the parent company organizes local subsidiaries and gives them autonomy to develop products tailored to local tastes -used when it is important to be responsive to local needs; usually invovles significant customizaiton -local subsidiary may perform all corporate functions at a local level -coordination among units difficult

International strategy

strategy that combines elements of multinational & global strategies by using foreign subsidiaries to produce & distribute products -firm maintains control over subsidiaries but allows them to develop new products/ideas to match local tastes -firms that pursue this strategy compete in markets that do NOT require high levels of local customization or low-cost production through economies of scale

Global Strategy

strategy that focuses on developing overall scale economies & global efficiency instead of catering to local tastes -primary goal is cost management -standardized product to all markets -take advantage of scale economies in production; manufacturing in one centralized location on a large scale, firm can take advantage of efficiencies and cost savings -must consider preferences & the minimum efficient scale needed to make the product profitable EX: apple

Procedural Justice

subset of justice claiming that rules should be clearly stated, consistently obeyed, & impartially enforced -framework for societies to develop laws & procedures that result in fair/just outcomes -DUE PROCESS: bedrock principle of society -employer-employee -erosion since 9/11 -NSA Monitoring US citizens -Guantanamo Bay Prisoners

Distributive justice

subset of justice that deals with distribution of wealth among members of society -balance of basic rights with wealth inequality -Healthcare Reform Act, Minimum Wage, Taxes, CEO Pay

WTO (World Trade Organization)

successor to GATT -Created in 1995 by the Uruguay Round to supervise & liberalize international trade; formed to deal with rules of trade between nations, responsible for negotiating and implementing new trade agreements & policing member countries' adherence to them

Contingency Planning

systematic assessment of the external environment to prepare for a possible range of alternative futures for an organization -manager typically assigns probabilities to these alternative futures & begins to map out a series of actionable steps to prepare the firm EX: If taxes on high-net-worth depositors increase, we will need to attract foreign clients in order to continue to grow. We will increase our advertising in international financial publications, emphasizing investments that will produce a tax advantage for foreign investors. If taxes on high-net-worth depositors remain low, we will start an aggressive advertising campaign emphasizing how we can work with them to invest their funds in a way that improves the overall economy. (This is an example of a contingency plan, because it identifies the specific strategies the bank will adopt under two different taxation scenarios. Note that this goes beyond scenario building because it doesn't just speculate about what the future will look like—it says what needs to be done in different versions of the future)

Leadership

the ability to drive change & innovation through inspiration & motivation leaders: set direction, align people, motivate & inspire

Management

the act of working with & through a group of people to accomplish a desired goal or an objective in an efficient & effective manner managers: plan & budget, organize & staff, control & problem solve

Mission

the activities a firm performs for its customers

History of Strategy

the art of war - sun tzu: more important to out think than to out maneuver the opponent through physical force the roman empire: tactical implementation of military strategies that were contingent on internal and external assessments

Human Relations Moement

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 -emphasis shifted from output of the firm to the informal/social side of the firm -organization served as a means for people to interact & learn as well as to produce profit -1930s

Business Environment

the combination of all contextual forces and elements in the external & internal environment of a firm

Business-Level Strategy

the determination of how a company will compete in a given business and position itself among competitors -manager evaluates attractiveness of the industry structure and the firms resources to determine how the firm should compete based on these evaluations -manager typically chooses among 3 generic strategic approaches: (1) Low cost (2) Differentiation (3) Focus -focus on competitive advantage; how do we compete? who do we serve, what do we provide, how do we provide it?

Uncertainty

the extent to which managers can understand or predict which environmental changes & trends will affect their business -uncertainty is a function of: (1) Environmental Change -stable vs. dynamic -punctuated equilibrium (2) Environmental Complexity -resource scarcity

Globalization

the integration & interdependence of economic, technological, sociocultural & political systems across diverse geographic regions -Following WWII, push for globalization & less protectionism; this movement led to the creation of several international trade agreements & institutions: (1) GATT (2) WTO (3) EU (4) NAFTA (5) IMF

Environmental Complexity

the number & intensity of external factors in the environment that affect organizations -simple environments: dairy & liquor distribution industry; key systems have not changed -complex environments: more difficult for managers to make decisions Contextual Factor impacting complexity = RESOURCE SCARCITY: the degree to which an organizations external environment has an abundance or scarcity of critical organizational resources

Owners

the people or institutions that maintain legal control of an organization

Customers

the people or other organizations that buy a firms products and services -can have different sets (retail & commercial)

Strategic Review Process

the process by which senior leaders of a corporation meet with business unit managers to review progress toward specific goals -generally includes information on financial performance & targets, new business prospects, R&D updates, manufacture capacity, talent management, & competitive threats Primary Goal: strategy formulation & target setting Two branches: (1) new strategic projects (2) environmental scanning

Technological dimension

the processes, technologies, or systems that a firm can use to produce outputs; often includes technology behind a firm's manufacturing line or the hardware/software used to run its distribution system

Morality

the standards that people use to judge what is right or wrong, good or evil

Ethics

the study of moral standards & their effect on behavior and conduct

Corporate-level strategy

the way a company seeks to create value through the configuration & coordination of multimarket activities -decisions include how many industries to compete across, whether to vertically integrate, whether to buy or sell companies, & how to share resources across divisions -industry attractiveness; what industries should we be in? allocation of resources among businesses

Core competencies

ultimate goal is to create core competencies; a network of unique activities that strategically fit together and are difficult to replicate

Conglomeration

when businesses grow through unrelated diversification, essentially by acquiring companies in different industries