MNGT301 Test 2

The planning/Control Cycle

Planning Steps 1. Make the plan 2. Carry out the plan Control Steps: 3. Control the direction by comparing the results with the plan 4. Control the direction by taking corrective actions in two ways -correcting deviations in the plan being carried out (return to step 2) or -by improving future plans (go to step 1 to start over)

Establishing Corporate Level Strategy

Three Overall Types of Corporate Strategy 1. Growth Strategy: expansion (revenue, market share, employee's, or customers, if non-profit then clients served) -often takes form of innovation strategy: growing market share or profits by innovating improvements in products/services 2. Stability Strategy: grand strategy that involves little/no significant change (hot sauce) 3. Defensive Strategy: or a retrenchment strategy is a grand strategy that involves reduction of the organizations efforts Formulation of Corporate Strategy 1. Boston Consulting Group (BCG) -used evaluate strategic business units on the basis of their business growth rates (Y access: top is high, bottom's low) and their share of the market (x axis: left is high, right is low) -Star: high growth, high market share- definite keeper -Question Mark: right of Star: risky new ventures-some will become stars/dog --Cash cow: bottom left: slow growth but high market share, income finances stars and question marks -Dogs: bottom right: low growth low market share, should be gotten rid of 2. Diversification Strategy -process of moving into new lines of business -generally companies diversify to grow revenue/reduce risk -related diversification: new business purchased relating to existing business portfolio -Unrelated diversification: company acquires another company in a completely unrelated business. This strategy reduces risk because one business or industry can be offset by profits from other co. -vertical integration

CH 7

Two kinds of Decision Making: Rational and Non-rational -Decision: choice made from among available alternatives -decision making: process of identifying and choosing alternative courses of action Rational Decision Making: Managers should Make Logical and Optimal Decisions RATIONAL MODEL -classical model, explains how managers should make decisions -Rational model is Prescriptive, how managers ought to make decisions and doesn't describe how they actually do. -Assumptions of Rational Model -complete information, no uncertainty, -logical, unemotional analysis -best decision for the organization -Four stages 1. Identify the problem or opportunity -how to make an improvement by making a diagnosis: analyzing the underlying causes 2. Think up alternative solutions -employer's greatest competitive resource: "creative thinking is a way of looking at problems from a fresh perspective with nontraditional solutions and it's the most important business strategy" 3. Evaluate alternatives and select a solution -evaluating alt. is facilitated by big data and AI 4. Implement and evaluate the solution chosen -for implementation to be successful: plan carefully and be sensitive to those affected -Evaluation: if actions isn't working you can give it more time, change it slightly, try another alternative, or start over. Non-rational Decision Making: -managers find it difficult to make optimal decisions -assume decision making is nearly always uncertain and risky, making it difficult for managers to make optimal decisions -non-rational models are descriptive rather than prescriptive -Two non-rational models are: 1. Satisficing: Bounded rationality, Hubris, and the Satificing Model "Satisfactory is Good Enough" -managers seek alternatives until they find one that is satisfactory, not optimal -Hubris:impediment to rational decision making defined as an extreme and inflated sense of pride, certainty, and confidence -Bounded Rationality: ability of decision makers to be rational is limited by numerous constraints like -complexity -time and money constraints -different cognitive capacity, values, habits, and unconscious reflexes -Imperfect Information -Information Overload -Different Priorities -Conflicting Goals 2. Intuition Model: "it just feels right" -intuition: making a choice without the conscious thought or logical inference. -Holistic hunch: intuition stems from expertise: a person's explicit and tacit knowledge about a person, a situation, or a decision opportunity -Automated Experience: intuition based on feelings-the involuntary emotional response to those same matters -those who are in high self-esteem and risk propensity are more prone to use intuition -Intuition benefits: speed up decision making with tight deadlines and helps managers when resources are limited. However, it's difficult to convince others that hunch makes sense What's Causing Ethical Lapses 1. Public's Less forgiving 2. regulations are more stringent 3. Companies are expanding into developing countries where ethical risks may be higher and law less protective 4. Digital communication increase exposure to risk from both hackers and whistle-blowers, 5. the 24/7 news cycle and the proliferation of media in the 21st century publicizes and amplifies negative info in real time -Ethics Officer: companies response Ethical Decision Tree -is the proposed action legal -does the proposed action maximize shareholder value -is the proposed action ethical -if no, would it be ethical not to take the proposed action 4 competencies that contribute to evidence-based decision making 1. information technology application (effectively using and learning new applications) -computational thinking (using numbers to distill abstract concepts and conducting data-based reasoning), 2. computational thinking (using #'s to distill abstract concepts and conducting data-based reasoning) 3. Critical Thinking and problem solving (analyzing situations, making decisions, and solving problems), and 4. decision making (collecting, processing, and analyzing information in order to identify and choose from alternative solutions that lead to optimal outcomes. -Evidence Based management: translation of principles based on best evidence into organizational practice, bringing rationality to the decision-making process Seven Implementation Principles 1. Treat your organization as an unfinished prototype 2. No brag, just facts 3. See yourself and your organization as outsiders do 4. Evidence-based management is not just for senior executives 5. Like everything else, you still need to sell it 6. If all else fails, slow the spread of bad practice 7. The best diagnostic question: what happens when people fail? What makes it hard to be evidence based: 1. Too much evidence 2. Not enough good evidence 3. The evidence doesn't quite apply 4. people are trying to mislead you 5. you're trying to mislead yourself 6. The side effects outweigh the cure -data analytics: purest application of evidence-based management which is the process of analyzing raw data sets in order to make conclusions about the information they contain -big data: stores of data so vast that conventional database management systems cannot handle them, so very sophisticated analysis software and supercomputers are required -includes information on corporate databases, web-browsing data trails, social network communications, sensor data, and surveillance data USES: meeting customer needs, Improving human resource management practices, enhancing production efficiency, advancing health and medicine, aiding public policy, using big data up and down the hierarchy -autonomous devices: machines analyze data and make autonomous decisions with limited or no human contribution: collect data from situations to make calculations, define probabilities, and make reason-based decisions according to programmed goals AI: autonomous devises rely on it and it's the ability of a computer system to perform tasks that normally require human intelligence -Types of AI: -automated business processes: most common type of AI and is primarily achieved through robotic process automation (RPA), they're code on a server. act like a human inputing and extracting information -Data Analysis: detect patterns in vast volumes of data and interpret their meaning. Predictive analytics extends to machine learning which enables systems or algorithms to automatically improve themselves based on data patters, experiences, and observations -engaging customers and employees AI Drawbacks: Implementation(need experts), data issues (different sections), Cost(6,00- to 300,000 for custom software), weaponizing or replacement 4 General Decision Making Styles: two dimensions: value orientation and tolerance for ambiguity -Value Orientation: focuses on task and tech. concerns or people and social patters -Tolerance for ambiguity: extent to which a person has high need for structure or control in life (a lot of structure means low tolerance) 1. Analytical: high tolerance for ambiguity and task and technical concern orientation. Careful decision makers who like lots of information and alternative choices. Take longer and overanalyze a situation. 2. Conceptual: high tolerance for ambiguity but people focused. take broad perspectives to problem solving and like to consider many options and future possibilities. they adopt a long-term perspective and rely on intuition and discussion with others to acquire information. Willing to take risks and good at finding creative solutions to problems. Enjoy abstract challenges. Disney 3. Directive Style: action-oriented decision makers who focus on fact: efficient, logical, practical, and systematic in their approach. don't shy away from making difficult decisions (faster near-term) 4. Behavioral: people oriented decision makers -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 info. Doesn't take himself too seriously. hard time saying no. 10 Common Decision Making Biases: Rules of Thumb, or Heuristics 1. Availability: using only info readily available from memory to make judgements 2. representative bias: tendency to generalize from a small sample or a single event 3. confirmation bias: seeking information to support your point of view 4. The Sunk-Cost Bias: money already spent seems to justify continuing 5. anchoring and adjustment Bias: being influenced by an initial figure 6. Overconfidence Bias: Blind to our own bias: bias in which people's subjective confidence in their decision making is greater than their objective accuracy 7. Hindsight Bias: I-knew-it-all-along-effect 8. Framing Bias: shaping the way a problem's presented 9. Escalation of commitment Bias: feeling overly invested in a decision because you hate to admit you're wrong 10. Categorical thinking bias: sorting info into buckets: tendency of decision makers to classify people or info based on observed or inferred characteristics (facebook liberals)

planning/plan/business plan/business model definitions

planning: defined as setting goals and deciding how to achieve them or coping with uncertainty by formulating future courses of action to achieve specified results Plan: document that outlines how goals are going to be met. (blueprint for action that describes what you need to do to realize your goals) business plan: is a type of plan, and is a document that outlines a firm's goals, the strategy for achieving them, and the standards for measuring success. Business model: basic idea behind your business is described in the business plan which is the "business model": outlines the need the firm will fill, the operations of the business, its components and functions, as well as the expected revenues and expenses. It will also describe the industry you're entering, how your product will be different, how you'll market to customers, how you're qualified to run the business, and how you'll finance your business.

Strategic Implementation: Creating, Executing, and Controlling Functional-Level Strategies

strategic implementation entails the execution of strategic plans, to make it happen managers need to create functional-level strategies, which outline the activities that must occur to achieve higher-order corporate and business-level strategies. We explain this process by first focusing on how managers execute strategy through the three core internal processes and then review obstacles to execution. functional strategy: plan of action by each functional area of the organization to support higher-level strategies. In other words, higher-level corporate and business level strategies flow down to the functional strategy- similar to goal cascading Corporate Strategy flows to in-store division business strategy and online division business strategy which then flow to operations functional strategy, marketing functional strategy, and info technology functional strategy Execution: not simply tactics: it's the central part of any company's strategy. It consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised The 3 Core Processes of Business: People, Strategy, and Operations: a companies overall ability -a company's overall ability to execute is a function of effectively executing according to three processes: people, strategy, and operations -people is the most important because you need to consider who will benefit you in the future -strategy: you need to consider how success will be accomplished -Operations: you need to consider which path will be followed Maintaining Strategic Control -Engage people: actively engage people in clarifying what your group hopes to accomplish and how you'll accomplish it -Keep it Simple: keep planning simple unless there's a good reason to make it more comples -Stay focused: on important things -Keep moving: toward vision of future, adjusting plans as you learn what works

Establishing a Business-level Strategy

Business-level strategy begins with an assessment of 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/services, 5. Rivalry among competitors Companies are then advised to select from one of four competitive strategies that Porter came up with 1. Cost=Leadership Strategy: keeping costs and prices low for a wide market -puts pressure on R&D managers -IKEA, walmart, home depot 2. Differentiation Strategy: Offering Unique and Superior Value for a Wide Market -more $ spend on R&D, marketing, and customer service -Ritz-Carlton hotel, Lexus 3. Cost-Focus Strategy: Keeping Costs and Prices Low for a Narrow market -often executed with low-end products sold in discount stores -low-cost beer or cigarettes, regional gas stations (Terrible Herbst, Rotten Robbie, Red Box) 4. Focused-Differentiation Strategy: offering unique and superior value for a narrow market -viking cruises Practical Approach by Jack Welsch: An Executive's Approach Toward Strategy Development -contracts above academic approach by Porter -CEO of GE, but believed strategy should be used to create a big "a-ha" for business - a smart, realistic, relatively fast way to gain sustainable competitive advantage 1. What Does the Playing Field Look Like Now? -includes veterans in the industry and potential new players -use SWOT analysis to see competitors strengths and weaknesses 2. What has Competition been up to? -managers need to know what each competitor has done in the past year to change the playing field 3. What have you been up to? -has there been an acquisition, new product, or new technology, any lost comp. advantage 4. What's around the corner? -managers need to decide what they fear most in the year ahead -make sure top talent is being cared for with competitive pay and parks as well as an inspiring organizational culture 5. What's your winning move? -what does the team want to do moving forward

5 Steps to the Strategic Management process

1. Establish the Mission, Vision, and Values Statements 2. Assess the Current Reality: do a current reality or organizational assessment to see where organization stands and what's working or not (SWOT/VRIO analysis, forecasting = trend analysis:time-series forecast or contengency planning/scenario analysis, and benchmarking-comparing with the best) -VRIO: valuable (you have competitive advantage), exploit an opportunity or neutralize a threat R: Rare: you're about equal competitively, gives you temporary competitive advantage (controlled by no other or just a few firms) I: costly to Imitate: you have temporary competitive advantage O: Organized to exploit value? (you have unexploited competitive advantage. -if yes to all four gives you sustained competitive advantage 3. Formulate Corporate, Business, and Functional Strategies -translate the broad mission and vision statements into a corporate strategy, which after the assessment of the current reality, explains how the organization's mission is to be accomplished. -Three common grand strategies are growth, stability, and defensive -Strategy Formulation: process of choosing among different strategies and altering them to best fit the organizations needs. Formulating strategy is time-consuming because it's important and has to be translated into strategic plans, which determine the organization's long-term goals for the next 1-5 years 4. Strategic Implementation: Execute the Strategies or have strategy implementation -check if there's roadblocks 5. Maintaining Strategic Control: The Feedback Loops -strategic control consists of monitoring the execution of strategy and making adjustments, if necessary -to keep plan on track, managers need to control systems to monitor progress and take corrective action early and rapidly

How Smart, Connected Products are Transforming Competition Article

1. How smart connected products change competition and M. Porter's five forces model? 2. What are some of the new strategies pursued by companies the produce smart connected products? Notes:

How an Organization's Mission becomes Translated into Action Plans

1. Mission, Vision, and Values Statements -Mission statement: answers what is our reason for being and is determined by top management and BoD. Identifies the goods and services organization provides -Vision statement: After formulating the mission statement, top managers need to develop a vision statement, which expresses what the organization should become, where it wants to go strategically. What do we want to become. It's future based and the actions needed to get there. It should guide decisions and should describe what's happening to the world you compete in and what you want to do about it. It should have 4 characteristics: Clarity (employees understand the vision statement), Future Focus (the vision statement describes the future, not the current state), Abstractness and challenge (future's described as hypothetical and difficult, but achievable), Idealism (the future is portrayed as being highly desirable). -Values Statement: after formulating a vision statement, then top managers need to develop a values statement/core values statement. "what values do we want to emphasize". relatively permanent and deeply held underlying beliefs and attitudes that help determine a person's behavior. Reflect the qualities that represent an organization's deeply held beliefs, highest priorities, and core guiding principles. Expresses what the coompany stands for, its core priorities, the values its employees embody, and what its products contribute to the world. 2. Three Types of Planning for 3 Levels of Management: Strategic, Tactical, and Operational -Inspiring, clearly stated mission statements and vision statements provide the focal point of the entire planning process. Then three things Happen -Strategic planning by top management: determine what the organizations long-term goals should be the for next 1-5 years with the resources they expect to have available. They communicate general goals and ways to achieve them. Todays strategic plans may have to be done every 2-5 years. -CEO, President, VP, General managers, Division heads -make long-term decisions about overall direction of organization. Mangers need to pay attention to environmental outside the organization, be future oriented, deal with uncertain and highly competitive conditions -creates long-term/strategic goals which eventually are turned into short-term/tactical/operational goals/goals that generally span 12 months are are connected to strategic goals in a hierarchy known as a means-end chain. Tactical Planning by middle Mangers: the strategic priorities and policies are passed down to middle managers who must do tactical planning - determine what contributions their departments or similar work units can make with their given resources during the next 6-12/24 mo. -functional managers, product-line managers, department managers -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 Operational Planning by first-line managers and team leaders: middle managers pass tactical plans down to first-line managers and team leaders to do operational planning - they determine how to accomplish specific tasks with available resources within the next 1-52 weeks -unit managers, first-line supervisors -direct daily tasks of non-managerial personnel; decisions often predictable following well-defined set of routine procedures

Types of Organizational Plans (Operational, Tactical, and Strategic)

1. Operating Plan to Action Plan: Operational plan "breaks long-term output into short-term targets or goals. They turn strategic plans into actionable short-term goals and action plans :(defines the course of action needed to achieve a stated goal). -Whether the goal's long or short term, action plans outline the tactics that will be used to achieve a goal. Each tactic also contains a contained projected date for completing desired activities.

Execution Roadblocks

1. Overcoming Roadblocks in the C-Suite -boring details -organizational culture (get work done fast) Overcoming Roadblocks Down the Hierarchy -resistance by people who feel the plans threaten their influence/livelihood so top managers have to sell plans to middle and supervisory managers

Why planning and strategic management are important

1. Providing Direction and Momentum 2. Encourage New ideas 3. Develop a Sustainable Competitive Advantage

Promoting Consistencies in Goals

1. SMART Goals S: specific rather than vague (use a number) M: Measureable (tell if they're quantifiable) A: Attainable (achievable but challenging) R: Result-Oriented (support organizations vision) T: Target Dates -Verbs to use in R: should start with "To" and follow with action-oriented verb (complete, acquire, increase) -Verbs not to use in R: develop, conduct, implement 2. Management by Objectives: the 4 Step Process for Motivating Employees 1. Managers and employees jointly set objectives for the employee 2. managers develop action plans: can be prepared for both individuals, and work units 3. Managers and employees periodically review the employees performance (reasonably often if informally or once every 3 mo's if formally) 4. Manager makes performance appraisal and rewards the employees accordingly: (at the end of 6 or 12 months by comparing performance with initial objectives, they deal with results, not personality, emotional issues, or excuses. Failure to meet goals can be addressed by redefining the objectives for the next 6-12 mo's or demotion. Good performance should allow employee to receive compliments, raises, bonuses, promotions, or other suitable benefits) -purpose is to manage rather than to control subordinates -managers set 3 types of goals 1. Performance objectives: express the objective as an outcome or end-result "increase small appliances sales by 10%" 2. Behavioral Objectives: express the objective as behaviors needed to achieve an outcome "ensure food is stored in seal-proof containers" or "attend five days of leadership training" 3. Learning Objectives: express the objective in terms of acquiring knowledge of competencies "attend diversity training class or learn" -after step 4 is over it starts new 3. Cascading Goals: Making lower-level goals align with top goals. For goal setting to be successful, the following three things have to happen 1. Top management and middle management must be committed 2. It's best to cascade goals 3. Goals must "cascade" be linked consistently down through the organization. top managers set strategic goals, which go to divisional, then departmental, then individual goals. -process helps employees understand how their work contributes to overall corporate success

Blitzscaling Article

As a company advances through levels of scaling, which management functions change and do not change in the process? According to Reid Hoffman (interviewed in the article "Blitzscaling") what keeps blitzscaling companies like PayPal, Google, and eBay "together" and functioning despite their rapid growth?

Strategic Positioning and Levels of Strategy

Strategic Positioning: attempts to achieve sustainable competitive advantage by preserving what's distinctive about a company. "performing different activities from rivals, or performing similar activities in different ways" -Three Key Principles underlie it: 1. Strategy is the creation of a unique and valued position -Few needs, many customers (crocs) -Broad needs, few customers (baby store) -Broad needs, many customers (airplane service) 2. Strategy Requires trade-offs in competing -can give up some sales, volume, and manufacturing efficiencies 3. Strategy Involved Creating a "Fit" among Activities -how co.'s activities interact and reinforce one another Levels of Strategy: -Level 1: Corporate-Level Strategy: focuses on organization as a whole, executives at senior levels (C-suite) typically conduct this type of strategic positioning =what business are we in -what products and services shall we offer -acquisitions or joint ventures -EX: Corporation -Level 2: Business-Level Strategy: focuses on individual business units or product/service lines. Senior level managers below the C-Suite are responsible for this level. Issues under consideration flow from C-suite and are -how much to spend on marketing, new-product development (teamed up to produce sandwiches at 900 locations) -EX: Electronic Components Unit, Services Unit, Retail Unit -Level 3: Functional-Level Strategy -plan of action by each functional area of the organization to support higher elvel strategies =functional managers lead planning at this level, and the focus is on more tactical issues that support the execution of business-level strategies -marketing managers decide how to market new sandwhiches -store managers need to determine how to best make sandwiches with existing equipment -EX: Finance, HR, Operations, Marketing and Communications

Strategy and strategic management

Strategy -strategic plan that sets long-term goals and direction for an organization. -it's an "educated guess about what long-term goals and direction to pursue Strategic Management -process that involves managers from all parts of the organization in formulation and implementation of strategies and strategic goals -involves top (strategic planning), middle (tactical planning), first-line (operational planning), and team leaders (operational planning)