MGT 3210 Exam 3

RATIONAL DECISION MAKING MODEL

Identify, establish, weigh decision, generate alternatives, evaluate, choose best alternative, implement the decision, evaluate the decision

THE ORGANIZATIONAL STRUCTURE OF A BUSINESS SHOULD BE DESIGNED TO

OPTIMIZE THE PURSUIT OF THE BUSINESS'S STRATEGY.

PESTEL Analysis

Political Economic Social Technological Environmental Legal Helps you collect information on and analyze each dimension to identify threats and opportunities (external)

What are the components of a business's value chain?

Primary Activities Support Activities

CUSTOMERS DRIVE

Strategy

WHAT IS THE DEFINITION OF "MANAGEMENT?"

THE ART OF GETTING THINGS DONE THROUGH THE EFFORTS OF OTHER PEOPLE.

Industry Analysis

Tells you about the organization's competitive environment and key factors that influence performance

What is a "Value Chain" in a business?

The value chain of a business consists of all the steps that involve bringing a product or service from conception to distribution/sale to customers, and everything in between—such as procuring raw materials, manufacturing functions, and marketing activities.

WHAT DO "MANAGERS" ACTUALLY DO?

WHAT DO "MANAGERS" ACTUALLY DO?:

SWOT analysis

a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats (internal)

The presence of one or more competitors

can reduce the prices of goods and services as the companies attempt to gain a larger market share.

COLD STATE"/SYSTEM 2 RATIONAL DECISION MAKING

cognitive processing of information that is independent of emotional involvement critical thinking systematic decision making process decision quality control = more effective decisions -we want to use this when making new decisions

The Value Chain Porter 1985

components of a business's "value chain?" point towards the customer

value proposition

the value a business promises to deliver to its customer after the customer's purchase. A business's value proposition is what makes that business's product/service attractive to that business's target ideal customer.

STRATEGY defines

A TARGETED CUSTOMER BASE THE INDUSTRIES AND MARKETS IN WHICH THE BUSINESS WILL COMPETE THE WAYS IN WHICH THE BUSINESS WILL DIFFERENTIATE ITSELF FROM COMPETITORS.

What is a business's "value proposition" to its "customers?"

A business's value proposition tells a customer the number one reason why a product or service is best suited for that particular customer.

What are a business's "competitors?"

Any a company in the same industry, or a company in a similar industry that offers a similar product or service.

Seven Functional Areas in Business and its stakeholders

1.GOVERNANCE (Board of Directors)-auditors-shareholders2.EXECUTIVE (CEO/COO)-financial community-community-special interest groups-the media-government regulators-trade associations3.PRODUCT/SERVICE DEVELOPMENT ("R&D")-customers4.MARKETING/SALES ("Customer Acquisition and Retention")-customers-competitors5.PRODUCTION/OPERATIONS-suppliers6.FINANCE/ACCOUNTING-suppliers7.ADMINISTRATION ("Support Functions")-employees

What is a "business?"

An organization that produces goods or services for sale to customers in exchange for money.

the value a business promises to deliver to its customer after the customer's purchase. A business's value proposition is what makes that business's product/service attractive to that business's target ideal customer.

1.Specific: What are the specific benefits that the product/service delivers to the customer? 2.Pain-focused: What is the target customer's need that the product/services fulfills? 3.Exclusive: How superior are the benefits of the product/service to the customer, compared to anything offered by competitors?

10 Questions about YOUR business that YOU MUST KNOW!

1.What is a "business?"2.Who are its "customers," and what does it offer to them?3.What is the the business's "value proposition" to its customers?4.What are the "functional areas" of the business?5.What is a "value chain" in a business?6.What are a business's "competitors?"7.What is an "industry?"8.What is a "value system?"9.What are the responsibilities of a business?10. Who are the "stakeholders" of a business?

HOT STATE"/SYSTEM 1 IRRATIONAL DECISION MAKING

= less effective decisions

Levels of ORGANIZATIONAL DESIGN

1. BUSINESS/CORPORATION as a WHOLE 2. LINES OF BUSINESS 3. FUNCTIONAL AREAS within each LINE OF BUSINESS-Governance/Board of Directors-Executive Team-R&D-Production/Ops Mgt-Mktg/Sales/Distribution-Finance/Acctg-Admin 4. DEPARTMENTS within FUNCTIONAL AREAS 5. TEAMS within DEPARTMENTS

managers type of decisions

1. MAKE DECISIONS (MOST IMPORTANT!) 2. PLAN 3.ORGANIZE 4.LEAD 5. CONTROL

Management Summary

1. The customer drives the strategy 2. The strategy drives the decision making in 3 organizational dimensions = Performance (Financial, Environmental, and social)

Competition requires a business to

1. become more efficient in order to reduce costs relative to competitors, and 2. create new products more appealing to customers than those of competitors. For example, fast-food vendors McDonald's and Burger King are competitors, as are soda/snack makers Coca-Cola and Pepsi, and discount chains Wal-Mart and Target.

PORTER's FIVE FORCES of COMPETITION

1. threat of new entrants 2. threat of substitute products 3. bargaining power of buyers 4. bargaining power of suppliers 5. rivalry among competitors

"STRATEGY" IS YOUR BUSINESS'S CONCISE STATEMENT OF HOW IT WILL:

1.Achieve its goals (quantified): economic, social, and environmental 2.Meet the current and future needs of its customers 3.Create and maintain competitive advantage in its target markets.

What does a business provide to its "customers?"

A product or service desired or needed by a customer, for which the customer is willing to pay money.

Value system

A series of individual company "value chains" linked together sequentially to serve a defined set of customers. A "VALUE SYSTEM" CONSISTS OF SEVERAL INDIVIDUAL BUSINESS "VALUE CHAINS" ARRANGED SEQUENTIALLY TO SERVE A DEFINED SET OF CUSTOMERS

BEFORE ADDRESSING ALL ORGANIZATIONAL DESIGN ELEMENTS

ALL MUST BE ALIGNED AROUND THE STRATEGY and the CHOSEN ORGANIZATIONAL STRUCTURE. ELEMENTS (e.g., HIRING AND PERSONNEL DEVELOPMENT PRACTICES, COMMUNICATIONS, DECISION-MAKING HIERARCHY, CONTROL SYSTEMS)

WHAT IS THE DEFINITION OF A "MANAGER?"

AN INDIVIDUAL IN AN ORGANIZATION WHO GETS DEFINED ACTIVITIES COMPLETED WITH AND THROUGH OTHER PEOPLE.

Organizing

a management function that includes designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives § Organizational design § Culture § Social networks

What is an "industry?"

all the businesses that make one kind of product or provide one kind of service Any general business activity or commercial enterprise that is clearly different from others: e.g., the "tourist industry" or the "entertainment industry." A single industry is usually named after its principal product; i.e., "auto industry"or "pharmaceutical industry"

Primary Stakeholders

any group on which an organization relies for its long-term survival Shareholders or Owners Customers Employees Suppliers Government Regulators Financial Community

Secondary Stakeholders

any group that can influence or be influenced by a company and can affect public perceptions about the company's socially responsible behavior Community Media Special Interest Groups Auditors Trade Associations Competitors

Internal Analysis

assesses relevant areas involving the product/service offering and the firm itself SWOT

Primary Activities

consist of five components, and all are essential for adding value to the business's products/services and creating a competitive advantage: 1.Inbound logistics: Functions like receiving, warehousing, and managing inventory. 2.Operations: Procedures for converting raw materials into finished product. 3.Outbound logistics: Activities to distribute a final product to a customer. 4.Marketing and sales: Activities that enhance visibility and target appropriate customers—such as advertising, promotion, and pricing. 5.Service: Programs to maintain products and enhance consumer experience—customer service, maintenance, repair, refund, and exchange.

Support Activities

consist of four components, and are responsible for enabling the Primary Activities to be as efficient as possible. Support activities are generally denoted as overhead costs on a company's income statement: 1.Procurement: How a company obtains raw materials. 2.Technological development: Used at a firm's research and development (R&D) stage—designing and developing manufacturing techniques; and automating processes. 3.Human resources (HR) management: Hiring and retaining employees who enable the business to implement its strategy; and help design, produce, market, and sell the product. 4.Infrastructure: Company management, and administrative functions and systems - planning, accounting, finance, quality control, public relations, legal.

Leading

creating a vision for the organization and guiding, training, coaching, and motivating others to work effectively to achieve the organization's goals and objectives § Leadership § Decision making § Communications § Groups/teams § Motivation

Opportunities

external situations that present possibilities for exceeding existing goals

External Analysis

focuses on factors such as characteristics of the firm's customers, market segments, positioning strategies, and competitors PESTEL Industry analysis

Strengths

internal capabilities that may help a company reach its objectives

Weaknesses

internal limitations that may interfere with a company's ability to achieve its objectives

Pharmaceutical "Value System"

memorize graphic

Controlling

monitoring performance, comparing it with goals, and taking corrective action as needed § Systems/processes § Strategic human resources

Threats

negative trends in the external environment

Businesses can be

publicly owned (ownership shares traded on a stock exchange), privately- owned, "tax exempt" (usually - and inaccurately - described as "non-profit"), or state-owned.

Triple Bottom Line

recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth

Business's Competition Can Come From Five Different Directions

see graphic

Every business requires

some form of investment and enough customers to whom its products/services can be sold on a consistent basis in order to make a profit (aka "surplus") over and above its operating and capital costs.

PLANNINGALL ASPECTS OF ORGANIZING, LEADING AND CONTROLLING A BUSINESS FLOW FROM ITS DEFINED

strategy

STRATEGY DRIVES

the Business's Goals, Objectives, Control, and Performance Management Systems. Continuous process: 1. Strategy- choose the customer 2. organizational design - Design the organization to service the customer 3. Mission/Vision/Values- Focus Employees on Serving the Customer 4. Goals and Objectives- How Well is the Customer Served? How Profitably? 5. Control- Metrics/Measurement Methods Used to Track the Business's Performance Against its Quantified Objectives

Planning

the process of anticipating future events and determining strategies to achieve organizational objectives in the future § Vision and mission § Strategizing § Goals and Objectives

The purpose of value-chain analysis

to increase production efficiency so that a business can deliver maximum value to the target customer for the least possible cost..