MGMT Test 2

develop an effective action plan

- Action plan lists the specific steps, people, resources, and time period for accomplishing a goal.

• Managers must sponsor and be involved in ethics and compliance training (3 objectives)

- First objective ethics training is to develop employee's awareness of ethics and help them recognize which issues are ethical issues and to avoid rationalizing unethical behavior by thinking. - Second objective of ethics training programs is to achieve credibility (gain trust) with employees. This occurs when top managers teach the initial ethics classes to their subordinates. - Third objective of ethics training is to teach employees a practical model of ethical decision-making.

develop commitment to goals

- Goal commitment is the determination to achieve a goal. - Managers can do this by setting goals collectively as a team, having employees make the goal public to others, and obtaining top managements support.

• Establishing an ethical climate through....

- Leadership. Managers should act ethically - Top management should be active in and committed to the company ethics program - A reporting system put in place that encourages managers and employees to report potential ethics violations -Management to fairly and consistently punish those who violate the company's code of ethics

• To increase your chances of hiring an honest person give job applicant's integrity test & how to encourage ethical behavior

- Overt integrity tests: estimate job applicant's honesty by directly asking them what they think or feel about theft or about punishment of unethical behaviors. - Personality based integrity tests: indirectly estimate job applicant's honesty by measuring psychological traits such as dependability and conscientiousness. • Two things that must occur to encourage ethical decision making and Behavior: - First, a company must communicate its code of ethics inside and outside the company. - Second, in addition to having an ethics code with general guidelines, management must also develop practical standards and procedures specific to the company's line of business.

Know what must happen for managers to make a decision satisfycing

Decision-making: is the process of choosing a solution from available alternatives. • Rational decision-making: is a systematic process in which manager define problems, evaluate alternatives, and choose optimal solutions that provide max. Benefits to their organizations. (classic) • Limits to Rational Decision Making: - Managers face time and money constraints. - Sometimes don't have the resources to test each criteria - In practice, limited resources, attentions, memory and expertise problems make it nearly impossible to maximize decisions. So instead they satisfice. Satisficing: choosing the "good enough" alternative

Understand what distinctive competence and core capabilities are and why they are important to a firm

Distinctive competence: is something that a company can make, do or perform better than its competitors can. (Tangible) Core capabilities: are the less visible, internal decision making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs. -Distinctive competencies cannot be sustained for long without superior core capabilities -- internal environment (strengths, weaknesses)

Explain the components of sustainable competitive advantage and why it is important.

Resources: are assets, capabilities, processes, employee time, information, and knowledge that an organization controls. - Used to improve organizational effectiveness and efficiency - Can create and sustain a completive advantage · Competitive advantage: are achieved by using company resources to provide greater value for customers than competitors can. · Sustainable competitive advantage when other companies cannot duplicate the value a firm is providing to customers. It is not the same as long lasting competitive advantages. It is sustained if other companies failed to duplicate it and give up for a period of time. - Four conditions must be met to achieve this; resources must be: 1. Valuable: allow companies to improve efficiency and effectiveness. 2. Rare: not controlled or possessed by other firms 3. Imperfectly imitable: are impossible or extremely costly or difficult to duplicate 4. Nonsubstitutable: no other resources can replace them and produce similar value

Be able to identify and develop SMART goals

S.M.A.R.T. goals -Specific -Measurable -Attainable -Realistic -Timely

Be able to explain and apply steps managers can take to improve ethical decision making.

Steps to ethical decision making 1. Selecting and hiring ethical employees 2. Establishing a specific code of ethics 3. Training employees to make ethical decisions 4. Creating an ethical climate

Be able to "plan" for an ethical organization

codes of conduct, culture

• Whistleblowing

reporting others ethics violations. - Management should punish those who violate the companies code of ethics fairly and consistently to allow whistle blowers to report problems easier.

Know how to gain goal commitment

• Second step is to develop commitment to goals - Goal commitment is the determination to achieve a goal. (losing weight, just really wanting to do it) - Managers can do this by setting goals collectively as a team, having employees make the goal public to others, and obtaining top managements support.

Set goals

- To direct behavior and increase effort goals should be specific and challenging. SMART goals

• Basic Model of Ethical Decision Making:

-Identify the problem - Identify the constituents (who has been hurt, who could be helped?) - Diagnose the situation - Analyze your options - Make your choice - Act

Differentiate between absolute and relative criteria

-Under weigh the criteria • Absolute comparisons: in which each criterion is compared to a standard or ranked on its own merits. Different individuals rank criteria differently. ("graded" out of level of importance to me) • Relative comparison: each criterion is compared directly to every other criterion. (ranked cereal 1,2,3,4,5)

Talk about corporate level strategy- portfolio & grand

1. Corporate-level strategy: is the overall organizational strategy that address "what business or businesses are we in or should we be in?" 1. Portfolio strategy- minimizes risk by diversifying investment amount various business or product lines. Similar to investing in stocks, it guides the strategic decisions of corporations that compete in a variety of businesses. • Diversification- strategy for reducing risk by buying a variety of items (stocks or, in the case of a corporation, types of businesses), so that the failure of one stock or one business does not doom the entire portfolio. Guidelines: • The more businesses a corp. compete with, the smaller its overall chances of failing. Can develop new businesses internally or buy acquisitions, other companies to buy. • Predicts that companies can reduce risk though unrelated diversifications, creating or acquiring companies in a completely unrelated business. • Investing the profits and cash flows from mature, slow-growth business into newer, faster growing businesses can reduce long-term risk. Best known is the BCG matrix, that managers use to categorize their corporations businesses by growth rate and relative market share, helping them decide how to invest corporation funds. (Stars, questions mark, cash cow, dog) ? * Market growth (y-axis) dog cash cow (inertia) Market share (x-asis) - Drawbacks: - Acquiring unrelated businesses in not useful -Dysfunctional consequences that occur when companies are categorized. - Related diversification creates or acquires companies that share similar products, manufacturing, marketing, technology, or cultures.

Understand the various "positioning strategies" and how they can be applied.

1. Cost Leadership (LOW COST) • Producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product or service at the lowest price in the industry • Protects companies from industry forces by deterring new entrants, who will have to match low costs and prices • Forces down the prices of substitute products and services, attracts bargain-seeking buyers, and increases bargaining power with suppliers • Ex: Walmart, kroger 2. Differentiation • Providing a product or service that is sufficiently different from competitors offerings that customers are willing to pay a premium price for it • Protects companies form industry forces by reducing the threat of substitute products • Protects companies by making it easier to retain customers and more difficult for new entrants trying to attract new customers • Ex: Nieman Marcus, Publix 3. Focus strategy • Using cost leadership or differentiation to product a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segmentation • Ex: Petsmart, Whole foods

Understand the various "grand strategies" and how they can be applied.

2. Grand Strategy- is broad strategic plan used to help an organization achieve its strategic goals and guide the strategic alternatives that managers of individual businesses or subnits may use. a. Three kinds: 1. Growth strategy: is to increase profits, revenues, market share, or the number of places in which the company does business. Can grow externally by merging or internally by expanding. 2. Stability strategy: is to continue doing what the company has been doing, just doing it better. 3. Retrenchment/Recovery Strategy: is to turn around very poor company performance by shrinking the size or scope of business, by closing different lines of business. After this is done recovery takes place. It consists of the strategic actions that a company takes to return to a growth strategy. Cutting and recovery similar to roses.

Apply the "strategy-making process" (assessing the need for change, situational analysis [SWOT], and choosing alternatives). competitive inertia strategic dissonance distinctive competence core capabilities strategic group benchmarking core firms secondary firms

Strategy is used to create a sustainable competitive advantage • Three steps of strategy making process: 1. Determining the need for strategic change - Competitive inertia: a reluctance to change strategies or competitive practices that have been successful in the past. - Signs of strategic dissonance: is a discrepancy between a company's intended strategy and the strategic actions managers take when implementing that strategy. Executing a strategy that doesn't work. 2. Conduct a situational analysis (SWOT): strengths, weaknesses, opportunities, and threats; is an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment. - Internal environment Distinctive competence: is something that a company can make, do or perform better than its competitors can. (Tangible) Core capabilities: are the less visible, internal decision making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs. "smart guys in union pacific" - External environment Strategic group: is a group of other companies within an industry that top managers choose in order to compare, evaluate, and benchmark their company's strategic threats and opportunities. -Benchmarking- identifying outstanding practices, processes, and standards at other companies and adapting them to your own company (Chick-fil-a stole Marriots ideas) -Core firms: are the central companies in strategic group. (Home Depot, Lowes) -Secondary firms: are firms that use strategies related to but somewhat different from those of core firms. (84 Lumber) 3. Choose strategic alternatives

How do managers overcome pitfalls

Structured conflict: - Leads to improved decision quality and greater acceptance of decides and less a type conflict. - Cognitive conflict (C-type): focuses on the problem and issue related differences of opinion. Willingness to examine, compare and reconcile different potential solutions the produce the best one. - Affective conflict (A-type): refers to emotional reactions that can occur when disagreements become personal rather than professional. Results in hostility, anger, distrust and apathy. It undermines team effectiveness. Too much focus on individuals rather than issues and ideas. - Devil's advocacy is an approach used to create c type conflict by assigning roles to members in the group. The five steps are: 1. Generate a potential solution 2. Assign a devil's advocate to criticize and question he solution 3. Present the critique of the potential solution to key decision makers. 4. Gather additional relevant information 5. Decide whether or not to use the original proposed solution.

Social Responsibilities and Economic Performance

There is a small, positive, relationship between social responsibility and economic performance that strengthens with corporate reputation. • There is no tradeoff between the two. - A better product or an improved corporate reputation, which results in stronger sales or higher profit margins, can offset the costs of being socially responsible. (CVS and cigarettes) • It usually does pay to be socially responsible. -That relationship becomes stronger particularly when a company or its products have a stronger reputation for social responsibility. • There is no guarantee that socially responsible companies will be profitable. -These companies experience the same up and downs in economic performance that traditional business do. (GM Volt, cost them money)

Apply advantages and pitfalls of group decision-making.

• Advantages of group decision making: - Better at defining the problem - Better at generating alternative solutions. • Pitfalls of group decision making: 1. Groupthink: occurs in highly cohesive groups of which members feel intense pressure to agree with each other so that the group can approve a proposed solution. Usually leads to poor decisions because of the limited alternatives and restricted discussion. 2. It takes considerable time. -It's difficult in picking a time to meet with every body's busy schedules. ---Doesn't hold productive task oriented meetings. 3. Strong willed group members - Don't feel as responsible for the decisions made 4. Equality bias- individuals to treat all group members as equally competent Abilene paradox- group with no conflict, wind up in suboptimal solution, "where do you want to eat", get to restaurant and no one wanted to eat there) Paralysis of analysis- 40-70% of relevant information, overthinking a situation so a decision/action is never taken (paralyzing the outcome)

Be able to understand the difficulties in applying ethical "models" and their limitations long-term self interest personal virtue religious injunctions gov requirements utilitarian benefits individual rights distributive justice

• Ethical principles encourage managers and employees to take others' interest into account when making ethical decisions. • Ethical principles used to make business decisions: - Long-term self-interest: you should never take any action that is no in your or your organization's long term self interest. Such as save more and exercise every day. - Personal virtue: you should never do anything that is not honest, open and truthful and actions that you would not be glad to see reported in the newspapers or on TV. - Religious injunctions: you should never take an action that is unkind or harms a sense of community. (didn't agree w/book) - Government requirements: you should never take action that violates the law, for the law represents the minimum moral standards of society. - Utilitarian benefits: you should never take action that does not result in the greater good for the society. You should do whatever creates the greatest good for the greatest number. (limitation- you can't figure out if the action is resulting in a greater good) - Individual rights: you should never take action that infringes on someone's agreed-upon rights. - Distributive justice: you should never take an action that harms that least fortunate among us in someway. It is designed to protect the poor, uneducated and the unemployed.

Steps to set goals

• First step is to set goals • Second step is to develop commitment to goals • Third step is to develop an effective action plan • Fourth step is to track progress toward goal achievement

track progress toward goal achievement

• Fourth step is to track progress toward goal achievement - Two methods: -Distal goals are long-term goals or primary goals. (get to graduate school) -Proximal goals, which are short, term goals or sub goals. Achieving these goals will be motivating and rewarding than waiting to reach far off goals. They are less intimidating and more attainable. They help you achieve distal goals one little piece at a time. (how am I going to get there) - Gather and provide performance feedba

Apply the rational decision-making model and "framing" to the strategic process.

• Framing- two frames, same picture in both, shows up differently • When you fram a situation differently, people respond differently • "if we wernt already in this business would we start it" • circumstances don't change but perspective does

Understand Milton Friedman's approach to Social Responsibility and be able to articulate and apply your own ethical code

• Milton Friedman, Nobel Prize winning economist, believed the only social responsibility that organizations have is to satisfy their owners, that is, company shareholders. Matches the shareholder's perspective. - Argued its irresponsible for companies to divert time, money and attention from maximize profits to social causes and charities. - First problem, organizations can't act effectively as moral agents for all shareholders. Not all would have common views on what social causes to support. Shareholders can individually use their time and profits to contribute to social cause of their choosing. - Second problem is that time, money, and attention diverted to social causes undermines market efficiency. It gives a company less money to spend to purchase quality materials or to hire talented workers who can produce a valuable product at a good price. In the end this hurts customers, employees, suppliers and shareholders.

Understand what planning accomplishes (benefits of planning).

• Planning encourages people to work hard for extended periods of time and to engage in behaviors directly related to goal accomplishment, but also encourages them to think of better way to do their jobs. • Four important benefits: - Intensified effort (specific plan will work harder) - Persistence (working hard for long periods of time) - Direction (planning through goal setting) - Creation of task strategies (think of better ways to do their jobs) • Pitfalls: - Impede change and prevent or slow needed adaptation - Create a false sense of certainty - Detachment of planners to plan things they do not understand

Differentiate between strategic and tactical plans (plans from top to bottom)

• Planning works best when everybody pulls in the same direction • Top Management is responsible for: - long term Strategic plans: that make clear how the company will serve customers and position itself against competitors in the next 2 to 5 years; It begins with the creation of an organizational vision or purpose. -Purpose statement (vision or mission): is a statement of a company's purpose or reasoning for existing. They should be brief, inspirational, and clear. -Strategic objective: is a more specific goal that unifies company wide efforts, stretches and challenges the organization, and possesses a finish line and a time frame. • Middle Management is responsible for: - Tactical Plans: are used to accomplish the organizations strategic objectives that specify how a company will use resources, budgets. And people to accomplish specific goals related to its strategic objective. They are use to direct behavior, efforts and attentions over the next 6 months to 2 years. -Management by objectives (MBO): used to develop and carry out tactical plans, use a four step process in which managers and their employees 1. Discuss possible goals 2. Select goals that are challenging, attainable and consistent with the company's overall goals 3. Develop tactical plans that lead to the accomplishment of tactical goals 4. Meet regularly to review progress toward accomplishment of goals • Lower level managers are responsible for: - Operational plans: which are the day-to-day plans for producing or delivering the organizations products and services. They direct the behavior, efforts, and priorities of the operative employees for periods ranging from 30 day to 6 months. 1. Single use plans: deal with unique one, one time only events 2. Standing plans: can be used repeatedly to handle frequently recurring events. For example if you run into a problem some one has before; there is probably a written plan on how to handle it. 1. Policies: indicate the general course of action that company managers should take in response to a particular event or situation. (sick days) 2. Procedures: indicate a series of steps that should be taken in response to a particular event. (Cleaning airplane) 3. Rules and Regulations: specify what must of must not happen and how a particular action should be performed. 3. Budgeting: is quantitative planning because it forces managers to decide how to allocate available money to best accomplish company goals.

Understand the use and boundaries of the rational decision making model (and the contribution of the bounded rationality model) 6 steps

• Six steps to rational decision making process: 1. Identify and define the problem. (cereal) - Problem: exists when there is hap between desired state and an existing state. - Three things must happen to solve this: 1. Managers have to be aware of the gap 2. Managers must be motivated to reduce the gap, must want to solve it (Coke freestyle machine) 3. Managers must also have knowledge, skills, abilities, and resources to fix the problem 2. Identify decision criteria (price, type, taste, brand) - Decision criteria: are the standards used to guide judgments and decisions. 3. Weight the criteria (relative vs. absolute) - Decide which criteria are more and less important. - Absolute comparisons: in which each criterion is compared to a standard or ranked on its own merits. Different individuals rank criteria differently. - Relative comparison: each criterion is compared directly to every other criterion. 4. Generate alternative courses of action 5. Evaluate each alternative 6. Compute the optimal decision - Do this by deterring the weighted average for each alternative

Social Responsibility

• Social responsibility is a business's obligation to pursue policies, make decisions, and take actions that benefit society. • Two Perspectives: - Shareholder model: the only social responsibility that a company has is to maximize profits. By doing this, the firm maximizes shareholder wealth and satisfaction. (Friedman) - Stakeholder model: management's most important responsibility is not just maximizing profits, but the firm's long-term survival, which is achieved by satisfying not just shareholders, but the interest of multiple corporate stakeholders. Stakeholders are persons/groups with interest in the company

Be able to contrast the Stakeholder model to other ideas of ethical thinking.

• Stakeholders are persons or groups who are interested in and affected by the organizations actions. They have a stake in what those actions are. May try to influence the firm to advance their own interest. - Primary stakeholders: are groups on which the organization depends for its long-term survival. They include shareholders, employees, customers, suppliers, governments, and local communities. The stakeholder model states that they take precedence over secondary stakeholders. -Secondary stakeholders: such as media and special interest groups, can influence or be influenced by a company. They don not in regular transactions wit the company and are not critical to its long-term survival. They can however affect the public perceptions and opinions about a company's socially responsible behavior. Majority of opinion makers believe that companies must be socially responsible to their stakeholds.

Differentiate between corporate, industry, and firm level strategies

• To formulate effective strategies, companies must be able to answer: 1. What business are we in- Corporate 2. How we should compete in this industry?- industry 3. Who are our competitors, and how should we respond to them?- firm level