Management Test 2
3. List the three important concepts of March and Simon's administrative model of decision making?
" Bounded rationality " Incomplete information " Satisficing
2. List and briefly discuss the respective strategies for each of the three levels of planning.
" Corporate-level strategy- This plan suggests what industries and national markets the organization plans to compete in and why. Top or corporate managers are typically responsible for corporate-level strategy. " Business-level strategy- This plan consists of the long-term divisional goals that relate to corporate goals and the methods that will effectively achieve these goals. Managers in each division are responsible for business-level strategy. " Functional level strategy-This plan outlines the goals the managers in each function will work towards to help their division achieve its business-level goals. The plan focuses on improving the organization's functioning and adding value to its goods and services.
1. List the three main steps of the planning process.
" Determining the organization's missions and goals " Formulating strategy " Implementing strategy
5. List the five major threats of Michael Porter's five forces model.
" Level of rivalry among organizations in an industry " The potential for entry into an industry " The power of large suppliers " The power of large customers " The threat of substitute products
2. List the six functions of the value chain.
" Product development function " Marketing function " Materials management function " Production function " Sales function " Customer service function
Brand Loyalty
Customers may prefer products that already exist in the task environment. New entrants to the market will have to devote a significant amount of time and resources to spread awareness of their product and eventually create brand loyalty.
According to Henri Fayol, unity means that managers need to make every attempt to collect and use all available information in the planning process. T/F
False
Define globalization.
Globalization is a set of basic forces that combine economic, political, and social systems across cultures. Overall, this process results in nations becoming more interdependent and similar. Nations begin to prefer the same products and be interested in the same things.
As a part of the controlling process, managers monitor and evaluate the organization's strategy to see if it is working. T/F
True
Bureaucratic control is control by means of a comprehensive system of rules and standard operating procedures. T/F
True
Globalization has increased the levels of interdependence between people and nations. T/F
True
The second and intermediate step in an organization's planning process, which is also called strategy formulation, is to analyze the current situation and develop a strategy. T/F
True
The set of decisions that managers make to assist the organization in attaining its goals is called the strategy of the organization. T/F
True
The three techniques that managers can use to promote creativity in group decision making are the nominal group technique, brainstorming, and the Delphi method.T/F
True
Total quality management is a technique that focuses on improving the quality of an organization's products and services. T/F
True
1. List and briefly explain the four specific ways in which managers can lower costs and/or increase differentiation to obtain a competitive advantage.
" Achieve superior efficiency- Managers can lower costs by reaching superior efficiency. Organizations become more efficient when fewer inputs are required to produce an output. As less inputs are required the overall cost of the output decreases. " Achieve superior quality- Managers can increase differentiation to obtain a completive advantage by providing high-quality products. Quality refers to goods and services that are known for having distinct attributes such as design, styling, and performance that customers perceive superior compared to other products. " Achieve superior innovation, speed, and flexibility- Managers can further differentiate their organization by finding unique and better ways to improve operations. This can consist of products becoming more attractive, useful, sophisticated, or superior production processes. " Attain superior responsiveness to customers- Lastly, managers can obtain a competitive advantage by being responsive to customers and differentiating how they treat customers from competitors. Increased responsiveness occurs when organizations give customers what they want and excellent after- sales service support.
8. List the five steps involved in implementing an organizational strategy
" Assigning responsibility for implementation to the proper individuals or groups " Outlining specified action plans that state how a strategy should be put into effect " Creating a time line for implementation that includes accurate and measurable goals in connection to the attainment of the action plan " Distributing appropriate resources to the right individuals or groups " Holding individuals or groups responsible for the achievement of corporate, divisional, and functional goals
4. List the ten steps necessary to implement a successful Total Quality Management (TQM) program.
" Build organizational commitment to quality " Focus on the customer " Find ways to measure quality " Set goals and create incentives " Solicit input from employees " Identify defects and trace them to their source " Introduce just-in-time inventory systems " Work closely with suppliers " Design for ease of production " Break down barriers between functions
8. Define evolutionary and revolutionary change.
" Change is separated into two categories, evolutionary change and revolutionary change. Evolutionary change is change that is narrow and gradual. Evolutionary change is a constant effort to improve and adapt to the changes in the environment. On the other hand, revolutionary change is change that is broad, quick, and dramatic. Revolutionary change is bold and looks for new ways to be effective.
7. List and briefly explain each of the four different corporate-level strategies.
" Concentration on a single industry- A company reinvests its profits to strengthen its completive position in the industry in which it is operating. A company may create new types of products or expand its locations. " Vertical integration- A company expands its business operations forward or backward. A company expands backward into a new industry when it creates inputs for its products. A company expands forward into a new industry when it uses, distributes, or sells its products. " Diversification-A company expands its business operations into a new industry to create new types of goods and services. Diversification can be related or unrelated. Related diversification is a strategy that enters a new industry to create a competitive advantage in one or more of an organization's existing divisions. " International expansion- A company must decide on the best way to compete internationally. Global strategy is used when a company sells the same standardized product in national markets. On the other side, multi-domestic strategy is used when a company customizes products to the national conditions.
3. What is customer relationship management (CRM)?
" Customer relationship management is a technique that aims to develop ongoing relationships with customers through IT to maximize the value an organization can deliver over time. In total, there are three interconnected components that CRM systems have. These components are sales and selling, after-sales service and support, and marketing. Overall, CRM can greatly improve the business by preventing lost sales and promoting the best sales practices.
7. List and briefly explain the two techniques used to counter groupthink and cognitive biases.
" Devil's advocacy- One member of the group critically analyzes the most preferred solution and plays devil's advocate. The purpose of this technique is to uncover any consequences the group may have forgot to consider. " Dialectical inquiry- Two groups are assigned the problem and must evaluate alternatives separately. The top managers then critically analyze both alternatives. The goal of this technique is to find an even better alternative.
5. List and briefly describe three ways in which managers can attempt to control the behavior of subordinates.
" Direct supervision- Managers attempt to control the behavior of subordinates by actively monitoring behavior and taking correctional action when appropriate. Managers become personally involved and mentor their subordinates. " Management by objectives- Managers attempt to control the behavior of subordinates by setting goals with his or her subordinates and evaluating periodically. This is a formal system that evaluates subordinates' ability to meet performance standards. " Bureaucratic control- Managers attempt to control the behavior of subordinates by implementing a system of rules and standard operating procedures. Standard operating procedures are written instructions to follow if a certain situation occurs.
List and briefly describe the five major forces of the general environment.
" Economic forces- Forces that impact the general health and overall well-being of a country. These forces include interest rates, inflation, unemployment, and economic growth. " Technological forces-The results of changes in technology, the combination of tools, machines, computers, and knowledge used to create and distribute a good or service. These forces can pose a threat or open new opportunities for an organization. " Sociocultural forces- Pressures from a social structure of a country or society. Pressures can either constrain or facilitate how an organization operates. As well, social structure and national culture change over time and can differ across countries. " Demographic forces-The outcomes of changes in a population's characteristics. This includes age, gender, ethnic origin, race, sexual orientation, and social class. " Political and legal forces- The outcomes of changes in laws that significantly impact managers and organizations. This includes deregulating industries, privatizing organizations, and emphasizing environment protection
6. List the three steps involved in the management by objective process.
" Establish specific goals and objectives at each level of the organization. " Managers and their subordinates together determine the subordinates' goals. " Managers and their subordinates continually review the subordinates' progress toward reaching goals.
3. List the four steps of the control process.
" Establish the standards of performance, goals, or targets against which performance is to be evaluated. " Measure actual performance. " Compare actual performance against chosen standards of performance. " Evaluate the result and initiate corrective action if the standard is not being achieved.
2. List and briefly explain the type of control used at each of the three stages in the process of transforming inputs into finished goods or services. Be sure to name the stages.
" Feedforward control- This control occurs at the input stage. Managers anticipate issues before they take place, so they do not occur during the conversion stage. An example of this is managers giving specific instructions to suppliers in advance. " Concurrent control- This control occurs at the conversion stage. Managers receive immediate feedback on how well inputs are made into outputs. Managers fix issues as they occur " Feedback control- This control occurs at the output stage. Managers receive customers' reactions to goods and services. An example of this is managers monitoring the number of customer returns. This typically alerts managers that defective products are being produced.
6. Describe the effect of flexible manufacturing and just-in-time inventory on time savings and cost efficiency.
" Flexible manufacturing uses IT to lower costs regarding the product assembly process or the way services are delivered to customers. For instance, changing the way computers are made on the production line may result in time savings and cost efficiency. As well, implementation of the just-in-time inventory results in time savings and better cost efficiency. This is when supplies or inputs arrive at the organization when they are needed instead of before. Inefficiency is increased as inventory turnover is increased and holding costs are reduced. Overall, this system has been a great success as inventory holding costs have significantly decreased, all products are delivered on time, and new products' design-to production- cycles have dropped.
8. List the two primary distinguishing characteristics between entrepreneurs and intrapreneurs?
" High openness to experience " Internal locus of control
List and briefly describe the 4 principle forms of capital that that drive (or spur) globalization.
" Human capital- The movement of people across the world through immigration, migration, and emigration. " Financial capital-The movement of money capital through the world markets through overseas investment, credit, lending, and aid. " Resource capital- The movement of natural resources, parts, and components between companies and countries. " Political capital-The movement of power and influence across the world using diplomacy, persuasion, aggression, and force of arms to defend the access of a country or region to the other types of capital
List the five dimensions upon which Hofstede placed national culture.
" Individualism versus collectivism " Power distance " Achievement versus nurturing orientation " Uncertainty avoidance " Orientation toward life and work
5. List and briefly explain the four criteria used to evaluate the pros and cons of alternative courses of action.
" Legality-Managers must make sure a possible course of action will not violate any laws or regulations. " Ethicalness- Managers must make sure a possible course of action is ethical. Managers should consider how a decision will impact stakeholders. " Economic feasibility-Managers must make sure a possible course of action can be accomplished based off the organization's performance goals. Managers may run a cost-benefit analysis of alternatives to see which one is most beneficial financially. " Practicality- Managers must decide if the possible course of action is realistic given the resources required to implement the alternative. Managers should consider how the alternative impacts other goals the organization has.
6. List and briefly explain the four main types of business-level strategies.
" Low-cost strategy- Costs are driven down below rivals in an effort to gain a competitive advantage. Managers focus on finding ways to lower manufacturing costs to make it more difficult for other companies to enter the industry. " Focused low-cost strategy- Managers serve only one or a few segments instead of many segments in a market. Managers try to make their organization the lowest-cost company serving that segment. " Differentiation strategy- The product is made more distinguishable in an effort to gain a competitive advantage. Managers focus on distinguishing the product's design, quality, or after-sale serve and support to make it more difficult for other companies to enter the industry. This strategy requires more money to be spent on products but may allow organizations to charge a premium price. " Focused differentiation strategy- Managers serve only one or a few segments instead of many segments in the market. Managers try to make their organization the most differentiated company serving that segment.
3. Briefly discuss rolling plans, standing plans and single-use plans.
" Organizations develop plans over different time periods. For instance, rolling plans extend over several years and are updated each year because of changing conditions in the external environment. Overall, rolling plans allow managers to plan several years in advance while still being flexible. Plans can also be standing or single-use. Standing plans are utilized when programmed decision making occurs. If the same situation repeatedly happens managers create standing operating procedures, known as SOPs. On the other hand, single-use plans are created when nonprogrammed decision making occurs. Situations are unique and only occur once.
6. List and briefly explain the four sources of bias that can adversely affect the way managers make decisions.
" Prior hypothesis- The tendency to make decisions based off strong prior beliefs even if there is evidence showing beliefs are wrong. Some people may get into a pattern of making consistent decisions. " Representativeness- The tendency to generalize from a small sample. This can result in missing out because of one bad experience. " The illusion of control- The tendency to be too confident in one's ability to control activities and events. Since managers have already worked their way to the top they may overestimate the likelihood of other favorable outcomes. " Escalating commitment- The tendency to give more resources to a project even if it is failing. Since managers have already greatly invested in a project they may feel obligated to invest more.
4. List and briefly describe the four major types of financial measures.
" Profit ratios- These ratios indicate how well managers utilize an organization's resources to make profits. One example of this is the operating margin. " Liquidity ratios- These ratios indicate how well managers have protected an organization's resources to ensure ability to meet short-term obligations. One example of this is the current ratio. " Leverage ratios- These ratios indicate how much debt or equity is used to finance operations. One example of this is the debt-to-assets ratio. " Activity ratios- These ratios indicate how well managers create value from an organization's assets. One example of this is the inventory turnover.
Compare and contrast programmed and nonprogrammed decision-making in organizations
" Programmed decision making is an automatic process for managers. Since these decisions have already been made in the past there are already established rules and guidelines for the next managers to follow. For instance, when managers run out of office supplies they order the same amount every time. On the other hand, nonprogrammed decision-making is used when managers face new threats or opportunities that have not been decided on in the past. One example of this is managers making a decision whether or not to invest in new technology.
8. List and briefly describe the two principal types of innovation.
" Quantum product innovation- Innovation that develops new and radically different types of goods and services because of major shifts in technology. One example of quantum product innovation is the creation of the internet. " Incremental product innovation- Innovation that produces gradual improvements and refinements of products over time. Technology that already exists and functional managers learn how to perform value chain activities that increase the value of products. One example of incremental product innovation is making improvements to the internet since it was invented.
4. List the six steps in the step-by-step model of the decision making process.
" Recognize the need for a decision " Generate alternatives " Assess alternatives " Choose among alternatives " Implement the chosen alternative " Learn from feedback
5. What is Six Sigma? What is the primary difference between Six Sigma and TQM?
" Six Sigma is a total quality management technique that has become more popular, especially because of GE's success after implementing. Six Sigma aims to greatly improve a company's quality by only having three defects per million. This is accomplished by systematically altering performance in all processes in the value chain. Improvement is then measured statistically. Although Six Sigma also focuses on improving value chain processes to increase quality, it is different from TQM. Six Sigma focuses on creating teams of expert change agents. These teams take control of the problem and then train other employees in implementing solutions. On the other hand, TQM utilizes top-down organization-wide employee involvement.
4. List and briefly explain the four parts of a SWOT analysis.
" Strengths- Part of a planning technique in which managers recognize internal advantages " Weaknesses- Part of a planning technique in which managers recognize internal difficulties " Opportunities- Part of a planning technique in which managers recognize external openings " Threats- Part of a planning technique in which managers recognize external risks
7. Discuss the problems associated with bureaucratic control.
" The first problem that arises with bureaucratic control is managers doing everything based off the rule book. When this occurs, organizations can become overly bureaucratic and decision making slows. This can greatly hurt an organization if competitors enter. Another problem that arises is decreasing employees' creativity, innovation, and learning taking place. This may occur because as more rules are implemented more people begin to act automatically instead of thinking for themselves.
7. What are self-managed teams?
" The use of self-managed teams is a functional strategy to increase efficiency. These teams may consist of 5 to 15 employees who make an entire product instead of just parts of it. As teams move from job to job, team members learn each task. Overall, this technique results in a more flexible and efficient workforce because members can easily fill in for others. Additionally, the organization saves money because supervisors are eliminated.
1. Explain the relationship between organizational control and the four building blocks of competitive advantage.
" Through organizational control, managers monitor progress and ensure an organization stays on track. Organizational control is critical as it helps managers obtain the four building blocks of competitive advantage. To begin with, managers must be able to correctly measure how many units of inputs are used to produce an output. Control systems tell managers how well an organization is performing and what changes can be made to improve. As well organizational control allows managers to get feedback on product quality. For instance, a good control system tells managers how many products were returned. Organizational control also plays a role in responsiveness to customers. Managers can find ways to improve employees' performance and employees are more likely to consistently perform better if they know they are being monitored. Lastly, controls lead to innovation when employees are encouraged to be creative.
What are barriers to entry?
Factors that make it difficult for organizations to enter are barriers to entry. Higher barriers to entry results in a task environment with few competitors and a lower threat of competition. Lower barriers to entry results in a task environment with many competitors and a higher threat of competition Economies of scale Brand loyalty Government regulations
Bureaucratic rules constrain and standardize behavior and encourage people to think for themselves. T/F
False
National culture is the traditional system of relationships established between people and groups in a society. T/F
False
Nonprogrammed decision making is a routine, virtually automatic process. T/F
False
SWOT analysis is a planning exercise in which managers identify external environmental strengths and weaknesses. T/F
False
Societies high on uncertainty avoidance, according to Hofstede, value diversity and tolerate differences in personal beliefs and actions. T/F
False
Tariffs are taxes that governments impose on goods in the domestic market that are only circulated within the nation.T/F
False
The classical decision-making model assumes that managers require very little or no information in order to make an optimum decision. T/F
False
The subjectivity of financial measures of performance is the reason why managers use them to measure the efficiency and effectiveness of their organizations.T/F
False
Financial information provides managers with all the information required to measure the four building blocks of competitive advantage. T/F
False-Although financial information is an important output control, financial information by itself does not tell managers all they need to know about the four building blocks of competitive advantage.
A newsletter publisher in a small town accepts subscription requests and handles queries only through the town's mail services. The publishing unit keeps track of its customers by entering or modifying customer information in a book. This publisher is using a customer relationship management technique. T/F
False-Customer relationship management is a technique that uses IT and technology to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time.
Flexible manufacturing is a strategy based on the use of manual labor to reduce the costs associated with the product assembly process or the way services are delivered to customers. T/F
False-Flexible manufacturing is a strategy based on the use of IT to reduce the costs associated with the product assembly process or the way services are delivered to customers
Profit ratios measure how well managers have protected organizational resources to be able to meet short-term obligations. T/F
False-Liquidity ratios measure how well managers have protected organizational resources to be able to meet short-term obligations.
Quality is a concept that can be applied to manufacturing but not to service organizations. T/F
False-Quality is a concept that can be applied to the products of both manufacturing and service organizations.
Innovation refers to producing goods and services that have attributes—such as design, styling, performance, and reliability—that customers perceive as being superior to those found in competing products. T/F
False-Quality means producing goods and services that have attributes—such as design, styling, performance, and reliability—that customers perceive as being superior to those found in competing products.
The just-in-time view of inventory leads an organization to stockpile excess inputs in a warehouse in case it needs them to meet sudden upturns in demand. T/F
False-The just-in-time inventory system is a system in which parts or supplies arrive at an organization when they are needed, not before.
Economies of scale
Many cost advantages exist if an organization has large operations. Amazon experiences economies of scale because it is able to fully utilize their distribution system.
Government regulations
Organizations that do not follow government regulations are at risk of being shut down or put out of business. Some industries even experience global regulations.
In what way can suppliers with a strong bargaining position threaten managers and their organizations
Suppliers typically have a strong bargaining position when they are the main source of an input and when the input is crucial to the organization. This is a big threat to the organization because the supplier can raise or even double prices. Since the input is crucial, the organization would have to either pay a high price or find an alternative. However, the alternative may sacrifice the product.
Discuss the premise of the classical model of decision-making.
The classical model of decision-making is a very early model that assumes managers have available all the information they need to make the best possible decision resulting in the most favorable outcome. The model also believes managers can choose the best decision by making a list and ranking each alternative.
What is the global environment?
The global environment is a set of factors outside an organization's boundary that continually impacts how it operates and molds its behavior. These outside forces create opportunities and threats to the organization.
The goal of Six Sigma is to improve a company's quality to only six defects per million. T/F
The goal of Six Sigma is to improve a company's quality to only three defects per million.
Briefly describe the task environment.
The task environment is another set of factors and conditions that influence managers. However, these factors are immediate and have a direct effect on managers daily. They derive from global suppliers, distributors, customers, and competitors. These forces impact how the organization can obtain inputs and get rid of its outputs.
A tax that is imposed on imported goods is called a tariff. T/F
True
A value chain is a chain of functional activities that transform inputs into finished goods or services customers value. T/F
True
A written set of instructions that describes the series of actions that a manager should take in a specific situation is called the standard operating procedure (SOP) of an organization.T/F
True
Customer relationship management is a technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time. T/F
True
Faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing the information relevant to a particular decision is called groupthink. T/F
True
Global outsourcing has grown enormously to take advantage of differences in the cost and quality of resources available in different countries. T/F
True
Groupthink causes the unintended effect of discouraging individuals from raising issues that run counter to majority opinion. T/F
True
If goals are set at an impossibly high level, managers might work only half-heartedly to achieve them because they are certain they will fail. T/F
True
It is more challenging for managers to measure outputs or behavior when an organization and its members perform nonroutine activities.T/F
True
Opportunities and threats that result from changes in the task environment are easier to identify and respond to than events in the general environment. T/F
True
Specific goals that are difficult and challenge a manager's ability but are not too time consuming or out of reach are called stretch goals. T/F
True
The aging of the population of a country is an example of a demographic force that affects organizations in the country. T/F
True
The free-trade doctrine predicts that if each country agrees to specialize in the production of the goods and services that it can produce most efficiently, this will make the best use of global capital resources and will result in lower prices. T/F
True
The global environment is a set of forces and conditions in the world outside an organization's boundary that affect how it operates and shape its behavior. T/F
True
The materials management function controls the movement of physical materials from the procurement of inputs through production and to distribution and delivery to the customer. T/F
True
The process of comparing one company's performance on specific dimensions with the performance of other high-performing organizations is called benchmarking. T/F
True