MGT111 midterm 2

Max Weber and Organizational Theory

+ Fayol 1. Job descriptions 2. Written rules, decision guidelines, and detailed records 3. Consistent procedures, regulations, and policies 4. Staffing and promotion based on qualification "workers simply do as they are told"

Cooperative(Co-Op)

A business owned and controlled by the people who use it—producers, consumers, or workers who pool their resources for mutual gain. Members democratically control the business

Sole Proprietorship (SP)

A business owned, and usually managed, by one person. (most common)

What Does It Take to Be an Entrepreneur?

Self-directed Self-nurturing Action-oriented Highly energetic Tolerant of uncertainty

Operational planning

Setting work standards and schedules necessary to implement the company's tactical objectives.

Enterprise zones*

Specific geographic areas to which governments try to attract private business investment by offering lower taxes and other government support

Informal organization

the system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organization

Six Ds of decision making

1. Define the situation 2. Describe and collect needed information 3. Develop alternatives 4. Decide which alternative is best 5. Do what is indicated 6. Determine whether the decision was a good one and follow up

Disadvantages of Departmentalization

1. Departments may not communicate well. 2. Employees may identify with their department's goals rather than the organization's. 3. The company's response to external changes may be slow. 4. People may not be trained to take different managerial responsibilities, instead they become specialists. 5. Department members may engage in groupthink and may need outside input.

Advantages of Departmentalization

1. Employees develop skills and progress within a department as they master skills. 2. The company can achieve economies of scale. 3. Employees can coordinate work within the function and top management can easily direct activities.

5 steps of control process

1. Establish clear standards 2. Monitor and record performance 3. Compare results against standards 4. Communicate results 5. If needed, take corrective action

Conventional (C) Corporation

A corporation that enables many people to share in ownership.

Business plan**

A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s).

Corporation (corp)

A legal entity with authority to act and have liability separate from its owners.

Partnership (P)

A legal form of business with two or more owners.

General PartnerSHIP

A partnership in which all owners share in operating the business and in assuming liability for the business's debts

Limited liability partnership (LLP)

A partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision.

Master limited partnership (MLP)

A partnership that stock are traded like a corporation but is taxed like a partnership avoiding income tax

Limited PartnerSHIP

A partnership with one or more general partners and one or more limited partners

Leveraged buyout (LBO)

An attempt by employees, management, or a group of private investors to buy out the stockholders in a company. $50mil-$34bil

Line organization

An organization that has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with all people reporting to only one supervisor.

Bureaucracy

An organization with many layers of managers who set rules and regulations and oversee all decisions.

General Partner

An owner (partner) who has unlimited liability and is active in managing the firm.

Limited Partner

An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment

Who Can Incorporate

Anyone - truckers, plumbers, athletes and small business owners can incorporate. Since stock is not usually issued to outsiders when individuals incorporate, the advantages and disadvantages are different than large corporation Major advantages are limited liability and possible tax benefits

Ways to departmentalize

By product By function By customer group By geographic location By process

Incubators

Centers that offer new businesses low-cost offices with basic business services.

Human relations skills

Communication and motivation; they enable managers to work through and with people.

Economies of scale

Companies can reduce their production costs by purchasing raw materials in bulk.

Reasons for growth of home-based businesses

Computer technology is leveled Corporate downsizing has led many to venture on their own Social attitudes have changed New tax laws have loosened restrictions on deducting expenses for home offices.

Strategic planning

Determining the major goals and what strategy and resources are needed

Tactical planning

Developing detailed, short-term statements about what is to be done, who is to do it, and how it is to be done.

Why do many small businesses avoid doing business globally? *

Difficulty in finding financing Not knowing how to get started Not understanding cultural differences Too much bureaucratic paperwork.

Sole Proprietorship Advantages*

Ease of starting and ending the business Being your own boss Pride of ownership Leaving a legacy Retention of company profits No special taxes

Staff personnel

Employees who advise and assist line personnel in meeting their goals.

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing a business that remains small commonly family owned

Franchising

Franchise agreement —An arrangement where someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory. any type of business

Top management

Highest level, consisting of the president and other key company executives who develop strategic plans.

Disadvantages of Corporations

Initial cost Extensive paperwork Double taxation Two tax returns Size Difficulty of termination Possible conflict with stockholders and board of directors.

Home-Based Franchises Disadvantages

Isolation Long hours

Limited Liability Companies

LLC's are similar to an S corporation but without the special eligibility requirements.

Crowdfunding

Large group of individuals provide donations in support of a company

Disadvantages of Franchises

Large start-up costs Shared profit Management regulation Coattail effects Restrictions on selling Fraudulent franchisors

Advantages of Corporations

Limited liability Ability to raise more money for investment Size Perpetual life Ease of ownership change Ease of attracting talented employees Separation of ownership from management

Advantages of LLCs

Limited liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating flexibility

PMI

Listing all the pluses, minuses, and implications for a solution in separate columns

Managing a Small Business

Manage Employees Keep Records Look for Help - SCORE

Advantages of Franchises

Management and marketing assistance Personal ownership Nationally recognized name Financial advice and assistance Lower failure rate

Take a firm private

Management or a group of stockholders take control by obtaining all the firm's stock.

Small-Business Failure

Managerial incompetence Inadequate financial planning Choosing the wrong type of business

Matrix-Style Organizations Advantages

Managers have flexibility in assigning people to projects Interorganizational cooperation and teamwork is encouraged Creative solutions to product development problems are produced Organizational resources are used efficiently

Types of Expansion (2)

Merger—Two firms forming one company Acquisition—One company's purchase of the property and obligations of another company

Advantages of Partnerships

More financial resources Shared management and pooled/complementary skills and knowledge Longer survival No special taxes.

Importance of Small Businesses

More personal customer service and the ability to respond quickly to opportunities, lots of new jobs

Service Corps of Retired Executives (SCORE)

More than 11,000 volunteers from industry, trade associations, and education who counsel small business at no cost

Disadvantages of LLCs

No stock Ownership is nontransferable Fewer incentives Taxes Paperwork

Four Major Reasons to be an Entrepreneur*

Opportunity Profit Independence Challenge

Contingency planning

Preparing alternative courses of action that may be used if the primary plans fail

Home-Based Franchises Advantages

Relief from commuting stress Extra family time Low overhead expenses

9 sections of a business plan *

Section 1—Executive Summary Section 2—Company Background Section 3—Management Team Section 4—Financial Plan Section 5—Capital Required Section 6—Marketing Plan Section 7—Location Analysis Section 8—Manufacturing Plan Section 9—Appendix

Technical skills

The ability to perform tasks in a specific discipline or department.

Conceptual skills

The ability to picture the organization as a whole and the relationship among its various parts.

Span of control

The optimum number of subordinates a manager supervises or should supervise

Mission statement

The organization's self-concept Its philosophy Its long-term survival needs Its customer needs Its social responsibility The nature of its product or service.

Management

The process of accomplishing the goals by Planning Organizing Leading Controlling

Supervisory management

Those directly responsible for supervising workers and evaluating their daily performance.

Small Business Administration (SBA)

U.S. government agency that advises and assists small businesses

Fayol's Principles of Organization

Unity of command Hierarchy of authority Division of labor Subordination of individual interests to the general interest/equity Authority/Order Degree of centralization Clear communication channels

Disadvantages of Partnerships

Unlimited liability Division of profits Disagreements among partners Difficulty of termination

Sole Proprietorship disadvantages*

Unlimited liability Limited financial resources Management difficulties Overwhelming time commitment Few fringe benefits Limited growth Limited life span.

formal organization

a group designed for a special purpose and structured for maximum efficiency

SWOT analysis

a planning tool used to analyze an organization's Strengths, Weaknesses, Opportunities, and Threats

Virtual corporation

a temporary networked organization made up of replaceable firms that join and leave as needed

Self-Employment Assistance (SEA)

allows participants to collect unemployment checks while they build their businesses

Inverted organization

an organization that has contact people at the top and the chief executive officer at the bottom

Leadership styles (3)

autocratic, democratic, free-rein

Entrepreneurial Teams

composed of individuals with different talents and abilities to start a company

Intrapreneurs

creative people who work as entrepreneurs within corporations use company's existing resources to launch new products

External customers

dealers and end users who buy products for their own personal use

Line personnel

employees who are part of the chain of command that is responsible for achieving organizational goals

Flat organization structure

fewer levels of management

Small Business Development Centers (SBDC)

funded jointly by the federal government and individual states.

S corporation

gov creation that looks like a corp but taxed like SP and P Have shareholders, directors, and employees, plus the benefit of limited liability Profits are taxed only as the personal income of the shareholders If an S corporation loses its S status, it may not operate under it again for at least 5 years.

Cross-Functional Self-Managed Teams

groups of employees from different departments who work together on a long-term basis

Centralized authority

important decisions are made by higher-level managers

Decentralized authority

important decisions are made by middle-level and supervisory-level managers

Small business

independently owned and operated, is not dominant in its field, meets certain standards of size

Internal customers

individuals and units within the firm that receive services from other individuals or units

Angel investors

individuals who invest in start-up companies with high growth potential

Venture capitalists

invest in new businesses in exchange for partial ownership Shark tank

Tall organization structure

lots of different levels of management

Middle management

managers who are responsible for tactical planning and controlling.

Challenges of home-based businesses

new customers Time management Balancing work and family Government ordinances may restrict your business Homeowner's insurance may not cover business-related claims.

Small Business Investment Company (SBIC)

private investment companies licensed by the SBA lend money to small businesses.

Organization chart

shows relationships among people and divides the organization's work; who reports to whom

Matrix organization

specialists from different parts of the organization are brought together to work on specific project

horizontal merger

the combination of two or more firms competing in the same market with the same good or service Soft drink and artificial sweetener

Conglomerate merger

the joining of firms in completely unrelated industries Soft drink and chip company

Core competencies

what a company is the best in the world at

verticle merger

when firms involved in different steps of manufacturing or marketing join together Soft drink and a mineral water

Matrix-Style Organizations Disadvantages

•It's costly and complex. •Employees may be confused where their loyalty belongs. •Good interpersonal skills and cooperative employees are a must. •It may only be a temporary solution to a long-term problem.

Managers Today

•Tend to be collaborative •Emphasize teams and team building •Guide, train, support, motivate, and coach employees •Need to be skilled communicators and team players •Need to be globally prepared