Management Exam 2

Centralized Authority

important decisions are made by higher-level managers; an advantage is that there is less duplication of work, because fewer employees perform the same task; rather, the task is often performed by a department of specialists; another advantage is that procedures are uniform and thus easier to control

Decentralized Authority

important decisions are made by middle-level and supervisory-level managers; power has been delegated throughout the organization; an advantage is that managers are encouraged to solve their own problems rather than to buck the decision to a higher level; decisions are made more quickly, with increases the organization's flexibility and efficiency

Big Data

includes not only data in corporate databases but also web-browsing data trails, social network communications, sensor data, and surveillance data; stores of data so vast that conventional database management systems cannot handle them and so very sophisticated analysis software and supercomputing-level hardware are require; "the next frontier for innovation, competition, and productivity"

Unrelated Diversification

Independent Business Lines: operating several businesses under one ownership that are not related to one another; a common big-company strategy

Organizational Structure

a formal system of task and reporting relationships that coordinates and motivates an organization's members so that they can work together to achieve the organization's goals

Management by Objectives (MBO)

a four-step process in which (1) managers and employees jointly set objectives for the employee, (2) managers develop action plans, (3) managers and employees periodically review the employee's performance, and (4) the manager makes a performance appraisal and rewards the employee according to results

Grand Strategy: The Growth Strategy

a grand strategy that involves expansion - as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served

Grand Strategy: The Stability Strategy

a grand strategy that involves little or no significant change

Decision Tree

a graph of decisions and their possible consequences; it is used to create a plan to reach a goal

Nonrational Decision Making

explain how managers make decisions; they assume that decision making is nearly always uncertain and risky, making it difficult for mangers to make optimal decisions; descriptive rather than prescriptive: they describe how managers actually make decisions rather than how they should.

Rational Decision Making

explains how managers should make decisions; it assumes managers will make logical decisions that will be the optimum in furthering the organization's best interests; 4 stages

Single-Use Plans

for activities not likely to be repeated in the future (programs and projects)

Standing Plans

for activities that occur repeatedly over a period of time (policy, procedure rules)

Span of Control

refers to the number of people reporting directly to a given manager

Person-Organization Fit

reflects the extent to which your personality and values match the climate and culture in an organization

Porter's Four Competitive Strategies

(1) cost leadership, (2) differentiation, (3) cost-focus, and (4) focused-differentiation

Porter's Five Competitive Forces

(1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors

Hierarchy of Authority

(chain of command) a control mechanism for making sure the right people do the right things at the right time; if coordinated effort is to be achieved, some people - namely, managers - need to have more authority, or the right to direct the work of others

Organizational Culture

(corporate culture) the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments

Grand Strategy: The Defensive Strategy

(retrenchment strategy) a grand strategy that involves reduction in the organization's efforts

Sunk-Cost Bias

(sunk-cost fallacy) when managers add up all the money already spent on a project and conclude it is too costly to simply abandon it

Division of Labor

(work specialization) the arrangement of having discrete parts of a task done by different people; an organization can parcel out the entire complex work effort to be performed by specialists, resulting in greater efficiency

SWOT Analysis: External

Opportunities and Threats

Related Diversification

Related Business Lines: an organization under one ownership operates separate businesses that are related to one another

Disadvantages of Group Decision Making

a few people dominate or intimidate, groupthink, satisficing, goal displacement

SWOT Analysis: Internal

Strengths and Weaknesses

Evidence-Based Decision Making

The translation of principles based on best evidence into organizational practice, bringing rationality to the decision-making process; 7 implementation principles

The Vertical of Authority

Who Reports to Whom: the chain of command; shows the official communication network - who talks to whom; in a simple two-person organization, the owner might communicate with just a secretary or an assistant; in a complex organization, the president talks principally to the vice presidents, who in turn talk to the assistant vice presidents and so on

The Horizontal Specialization

Who Specializes in What Work: the different jobs or work specialization; the husband-and-wife partners in a two-person desktop-publishing firm might agree that one is the "outside person", handling sales, client relations, and finances, and the other is the "inside person", handling production and research; a large firm might have vice presidents for each task - marketing, finance, and so on

Organization Chart

a box-and-lines illustration showing the formal lines of authority and the organization's official positions or work specializations

Decision

a choice made from among available alternatives

Single Product Strategy

a company makes and sells only one product within its market - this is the kind of strategy you all as you drive past small retail businesses in a small town: there may be one shop that sells flowers, one that sells only security systems, and so on

Business Plan

a document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success

The Delphi Technique

a group process that uses physically dispersed experts who fill out questionnaires to anonymously generate ideas; the judgments are combined and in effect averaged to achieve a consensus of expert opinion; useful when face-to-face discussions are impractical; also practical when disagreement and conflicts are likely to impair communication, when certain individuals might try to dominate group discussions, and when there is a high risk of groupthink

Trend Analysis

a hypothetical extension of a past series of events into the future

Strategy

a large-scale action plan that sets the direction for an organization; represents an "educated guess" about what must be done in the long term for the survival or the prosperity of the organization or its principal parts

Vision

a long-term goal describing "what" an organization wants to become; it is a clear sense of the future and the actions needed to get there

Benchmarking

a process by which a company compares its performance with that of high-performing organizations (professional sporting teams do this all the time) "the continuous process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders"

Strategic Management

a process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals; because middle managers are the ones who will be asked to understand and implement the strategies, they should also help to formulate them; involves managers from all parts of the organization

Brainstorming

a technique used to help groups generate multiple ideas and alternatives for solving problems

Forecasting

a vision or projection for the future - used in making long-term strategies; two types of forecasting

Grand Strategy

after the assessment of the current reality, explains how the organization's mission is to be accomplished

Unity of Command

an employee should report to no more than one manager in order to avoid conflicting priorities and demands

The Matrix Structure

an organization combines functional and divisional chains of command in a grid so that there are two command structures - vertical and horizontal; the functional structure usually doesn't change - it is the organization's normal departments or divisions, such as Finance, Marketing, Production, and Research & Development; the divisional structure may vary - as by product, brand, customer, or geographic region

Mission

an organization's purpose or reason for being; determining the mission is the responsibility of top management and the board of directors

System 2 Decision Making

analytical and conscious; our slow, deliberate, analytical, and consciously effortful mode of reasoning, which swings into action when we have to fill out a tax form or park a car in a narrow space

"The Curse of Knowledge"

as our knowledge and expertise grow, we may be less and less able to see things from an outsider's perspective - hence, we are often apt to make irrational decisions

Strategic Positioning

attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company - performing different activities from rivals, or performing similar activities in different ways

Mechanistic Organizations

authority is centralized, tasks and rules are clearly specified, and employees are closely supervised; bureaucratic with rigid rules and top-down communication; this kind of structure is effective in certain aspects of hotel work because the market demands uniform product quality and cleanliness; works best when an organization is operating in a stable environment

Organic Organizations

authority is decentralized, there are fewer rules and procedures, and networks of employees are encouraged to cooperate and respond quickly to unexpected tasks; a "loose" structure; sometimes termed "adhocracies" because they operate on an ad hoc basis, improvising as they go along; information-technology companies favor the organic arrangement because they constantly have to adjust to technological change; companies that need to respond to fast-changing consumer tastes also favor organic arrangements

Environmental Scanning

careful monitoring of an organization's internal and external environments to detect early signs of opportunities and threats that may influence the firm's plans - the process for doing such scanning is SWOT analysis

Strategic Control

consists of monitoring the execution of strategy and making adjustments, if necessary

Flat Organization

defined as one with an organizational structure with few or no levels of middle management between top managers and those reporting to them

Standing Plans: Rules

designates specific required action (ex. No smoking is allowed anywhere in the building") - this allows no room for interpretation

Modular Structure

differs from the network structure in that it is oriented around outsourcing certain pieces of a product rather than outsourcing certain processes of an organization; in a modular structure: a firm assembles product chunks, or modules, provided by outside contractors

Single-Use Plans: Program

encompasses a range of projects or activities

Operational Planning

first-line managers determine how to accomplish specific tasks with available resources within the next 1-52 weeks; direct daily tasks of non managerial personnel; decisions are often predictable, following well-defined set of routine procedures

Means-End Chain

goals are arranged in a hierarchy because in the chain of management (operational, tactical, strategic) the accomplishment of low-level goals is the means leading to the accomplishment of high-level goals or ends

Advantages of Group Decision Making

greater pool of knowledge, different perspectives, intellectual stimulation, better understanding of decision rationale, deeper commitment to the decision

Market Culture

has a strong external focus and values stability and control; focused on the external environment and driven by competition and a strong desire to deliver results, customers, productivity, and profits take precedence over employee development and satisfaction; employees are expected to work hard, react fast, and deliver quality work on time; those who deliver results are rewarded

Adhocracy Culture

has an external focus and values flexibility; attempts to create innovative products by being adaptable, creative, and quick to respond to changes in the marketplace; employees are encouraged to take risks and experiment with new ways of getting things done; well suited for start-up companies, those in industries undergoing constant change, and those in mature industries that are in need of innovation to enhance growth

Clan Culture

has an internal focus and values flexibility rather than stability and control; encourages collaboration among employees, striving to encourage cohesion through consensus and job satisfaction and to increase commitment through employee involvement; devote considerable resources to hiring and developing their employees, and they view customers as partners

Hierarchy Culture

has an internal focus and values stability and control over flexibility; companies with this kind of culture are apt to have a formalized, structured work environment aimed at achieving effectiveness through a variety of control mechanisms that measure efficiency, timeliness, and reliability in the creation and delivery of products; a drawback: it can lead to information "silos" or "stovepipes" in which different divisions don't share information

Single-Use Plans: Project

has less scope and complexity than a program

System 1 Decision Making

intuitive and largely unconscious; operates automatically and quickly; it is fast, automatic, intuitive, and largely unconscious mode, as when we detect hostility in a voice or detect that one object is more distant than another

Porter's Four Competitive Strategies: Cost-Focus Strategy

keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow market; this is a strategy you often see executed with low-end products sold in discount stores, such as low-cost beer or cigarettes, or with regional gas stations; pressure on managers to keep costs down is even more intense than it is with those in cost-leadership companies

Porter's Four Competitive Strategies: Cost-Leadership Strategy

keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market; puts pressure on R&D managers to develop products or services that can be created cheaply, production managers to reduce production costs, and marketing managers to reach a wide variety of customers as inexpensively as possible

Current Reality Assessment

look at where the organization stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization's mission

Narrow Span of Control

manager has a limited number of people reporting (3 vice presidents reporting to a president instead of nine vice presidents); an organization is said to be tall when there are many levels with narrow spans of control

Wide Span of Control

manager has several people reporting - a first-line supervisor may have 40 or more subordinates, if little hands-on supervision is required, as is the case in some assembly-line workplaces; an organization is said to be flat when there are only a few levels with wide spans of control; spans of about 7 to 10 subordinates were considered best; first-line supervisors directing subordinates with similar work tasks may have a wide span of control

Nonrational Decision Making: Satisficing Model

managers seek alternatives until they find one that is satisfactory, not optimal; may well outweigh any advantages gained from delaying making a decision until all information is in and all alternatives weighed

Availability Bias

managers tend to give more weight to more recent behavior because of the availability bias - managers use information readily available from memory to make judgments; readily available information may not present a complete picture of a situation; may be encouraged by news media, which tends to favor news that is unusual or dramatic

The Analytical Decision-Making Style

managers with an analytical style have a much higher tolerance for ambiguity and are characterized by the tendency to overanalyze a situation; people with this style like to consider more information and alternatives than those following the directive style; analytical individuals are careful decision makers who take longer to make decisions but who also respond well to new or uncertain situations

Competitive Intelligence

means gaining information about one's competitor's activities so that you can anticipate their moves and react appropriately

Tactical Planning

middle managers determine what contributions their departments or similar work units can make with their given resources during the next 6 to 24 months; implement policies and plans of top management, supervise and coordinate activities of first-line managers below, make decisions often without base of clearly defined information procedures

Porter's Four Competitive Strategies: Focused-Differentiation Strategy

offer products or services that are of unique and superior value compared to those competitors and to target a narrow market (ex. The jeweler Cartier); focused-differentiation products need not be expensive

Porter's Four Competitive Strategies: Differentiation Strategy

offer products or services that are of unique and superior value compared with those of competitors but to target wide market; because products are expensive, managers may have to spend more on R&D, marketing, and customer service - this is the strategy followed by Ritz-Carlton hotels and the makers of Lexus automobiles; this strategy is also pursued by companies trying to create brands to differentiate themselves from competitors

The Simple Structure

often found in a firm's very early, entrepreneurial stages, when the organization is apt to reflect the desires and personality of the owner or founder; has authority centralized in a single person, a flat hierarchy, few rules, and low work specialization (ex. Small mom-and-pop firms running landscaping, construction, insurance sales, and similar businesses)

Diversification Strategy

operating several businesses in order to spread the risk (the answer to the risks of a single-product strategy) - you see this at the small retailer level when you drive past a store that sells gas and food and souvenirs and rents DVD movies

Standing Plans: Policy

outlines general response to a designated problem or situation (ex. This workplace does not condone swearing") - a broad statement that gives managers a general idea about what is allowable for employees who use bad language, but gives no specifics

Standing Plans: Procedure

outlines response to particular problems or circumstances (ex. McDonald's specifies exactly how a hamburger should be dressed including the order in which the mustard, ketchup, and pickles are applied)

The Conceptual Decision-Making Style

people with a conceptual style have a high tolerance for ambiguity and tend to focus on the people or social aspects of a work situation; they take a broad perspective to problem solving and like to consider many options and future possibilities; conceptual types adopt a long-term perspective and rely on intuition and discussions with others to acquire information; they are willing to take risks and are good at finding creative solutions to problems; however, a conceptual style can foster an indecisive approach to decision making

The Directive Decision-Making Style

people with a directive style have a low-tolerance for ambiguity and are oriented toward task and technical concerns in making decisions; they are efficient, logical, practical, and systematic in their approach to solving problems; in their pursuit of speed and results, these individuals tend to be autocratic, to exercise power and control, and to focus on the short run

The Divisional Structure

people with diverse occupational specialties are put together in formal groups by similar products or services, customers or clients, or geographic regions

The Functional Structure

people with similar occupational specialties are put together in formal groups; commonplace structure seen in all kinds of organizations, for-profit and nonprofit (ex. A manufacturing firm will often group people with similar work skills in a marketing department, other in a production department, others in finance, and so on)

The Behavioral Decision-Making Style

people with this style work well with others and enjoy social interactions in which opinions are openly exchanged; behavioral types are supportive, receptive to suggestions, show warmth, and prefer verbal to written information; although they like to hold meetings, people with this style have a tendency to avoid conflict and to be concerned about others; this can lead behavioral types to adopt a wishy-washy approach to decision making and to have a hard time saying no

The Adaptive Cycle

portrays businesses as continuously cycling through decisions about three kinds of business problems: (1) entrepreneurial (selecting and making adjustments of products and markets), (2) engineering (producing and delivering the products), and (3) administrative (establishing roles, relationships, and organizational processes)

SWOT Analysis

provides a realistic understanding of the organization in relation to its internal and external environments so you can better formulate strategy in pursuit of the firm's mission

Operational Goals

set by and for first-line managers and are concerned with short-term matters associated with realizing tactical goals

Tactical Goals

set by and for middle managers and focus on the actions needed to achieve strategic goals (ex. Southwest Airlines' goal of making arrival times more reliable)

Strategic Goals

set by and for top management and focus on objectives for the organization as a whole

Planning

setting goals and deciding how to achieve them; coping with uncertainty by formulating future courses of action to achieve specified results; gives you expectations against which you can compare your performance

Nonrational Decision Making: Intuition Model

small entrepreneurs often can't afford in-depth marketing research and so they make decisions based on hunches - their subconscious, visceral feelings

SMART Goals

specific, measurable, attainable, results-oriented, and has target dates

The Horizontal Design

teams or workgroups, either temporary or permanent, are used to improve collaboration and work on shared tasks by breaking down internal boundaries; when managers from different functional divisions are brought together in teams to solve a particular problem, the barriers between the divisions break down, the focus on narrow divisional interests yields to a common interest in solving the problem that brought them together, yet team members still have their full-time functional work responsibilities and often still formally report to their own managers above them in the functional-division hierarchy

Sustainable Competitive Advantage

the ability of an organization to produce goods or services more effectively than its competitors and outperform them

Overconfidence Bias

the bias in which people's subjective confidence in their decision making is greater than their objective accuracy; arises because people are often blind to their own blindness; we should not take assertive and confident people at their own evaluation unless we have independent reasons to believe they know what they're talking about

Nonrational Decision Making: Bounded Rationality

the concept suggests that the ability of decision makers to be rational is limited by numerous constraints, such as complexity, time and money, and their cognitive capacity, values, skills, habits, and unconscious reflexes

Coordinated Effort

the coordination of individual efforts into a group or organizationwide effort; the common purpose is realized through coordinated effort

Contingency Planning

the creation of alternative hypothetical but equally likely future conditions; equips an organization to prepare for emergencies and uncertainty and gets managers thinking strategically

Virtual Structure

the internet is a tool that dramatically lowers the cost of communication - that means it can radically alter any industry or activity that depends heavily on the flow of information - one consequence of this is the virtual organization: an organization whose members are geographically apart, usually working with e-mail, collaborative computing, and other computer connections, while often appearing to customers and others to be a single, unified organization with a real physical location; allows the form of boundaryless structure known as the virtual structure: a company outside a company that is created "specifically to respond to an exceptional market opportunity that is often temporary"; the structure in which members meet and communicate with each other by e-mail and videoconferencing instead of face to face, is valuable for organizations that want to grow through partnerships with other companies

Network Structure

the organization has a central core of key functions and outsources other functions to vendors who can do them cheaper or faster; a company with a network structure might retain such important core processes as design or marketing and outsource most other processes, such as human resources, warehousing, or distribution, thereby seeming to "hollow out" the organization; might operate with extensive, even worldwide operations, yet its basic core could remain small, thus keeping payrolls and overhead down; the glue that holds everything together is information technology, along with strategic alliances and contractual arrangements with supplier companies

Strategy Formulation

the process of choosing among different strategies and altering them to best fit the organization's needs; time consuming process both because it is important and because the strategy must be translated into more specific strategic plans, which determines what the organization's long-term goals should be for the next 1-5 years

Big Data Analytics

the process of examining large amounts of data of a variety of types to uncover hidden patterns, unknown correlations, and other useful information

Decision Making

the process of identifying and choosing alternative courses of action

Framing Bias

the tendency of decision makers to be influenced by the way a situation or problem is presented to them; framing is important because how a problem is presented to us, may influence us to consider a certain solution simply because of the way it was framed

Hindsight Bias

the tendency of people to view events as being more predictable than they really are; sometimes called the "I knew it all along" effect, this occurs when we look back on a decision and try to reconstruct why we decided to do something

Representativeness Bias

the tendency to generalize from a small sample or single event; the bias here is that just because something happens once, that doesn't mean it is representative - that it will happen again or will happen to you

Anchoring & Adjustment Bias

the tendency to make decisions based on an initial figure; the bias is the initial figure may be irrelevant to market realities; this phenomenon is sometimes seen in real estate sales

Analytics

the term used for sophisticated forms of business data analysis; the purest application of evidence-based management

Strategic Planning

top management determine what the organization's long-term goals should be for the next 1-5 years with the resources they expect to have available; make long-term decisions about overall direction of organization, managers need to pay attention to environment outside the organization, be future oriented, deal with uncertainty and highly competitive conditions

Operating Plan

typically designed for a one-year period, defines how you will conduct your business based on the action plan; it identifies clear targets such as revenues, cash flow, and market share (ex. Marketing plan)

Common Purpose

unifies employees or members and gives everyone an understanding of the organization's reason for being; an organization without purpose begins to drift and become disorganized

Confirmation Bias

when people seek information to support their point of view and discount data that do not

The Escalation of Commitment Bias

whereby decision makers increase their commitment to a project despite negative information about it; the bias is that what was originally made as perhaps a rational decision may continue to be supported for irrational reasons - pride, ego, the spending of enormous sums of money, and being "loss averse" prospect theory, which suggests that decision makers find the notion of an actual loss more painful than giving up the possibility of a gain

Action Plan

which defines the course of action needed to achieve a stated goal, such as a marketing plan or sales plan