MGMT Exam #2
What are Porter's generic strategies?
1.) Differentiation strategy: Seeks to distinguish itself from competitors through the quality (broadly defined) of its products or services. -Firms that successfully implement a differentiation strategy can charge more than competitors because customers are willing to pay more to obtain the extra value they perceive. -EX: Rolex pursues a differentiation strategy. Rolex watches are handmade of precious metals like gold or platinum and stainless steel, and they are subjected to strenuous tests of quality and reliability. The firm's reputation enables it to charge thousands of dollars for its watches. -Ex: Coca-Cola and Pepsi compete in the market for bottled water on the basis of differentiation. Coke touts its Dasani brand on the basis of its fresh taste, whereas Pepsi promotes its Aquafina brand on the basis of its purity. -Other firms that use differentiation strategies are Lexus, Godiva, Nikon, Mont Blanc, and Ralph Lauren. 2.) Overall cost leadership strategy: Tries to gain a competitive advantage by reducing its costs below the costs of competing firms. -By keeping costs low, the organization can sell its products at low prices and still make a profit. -EX: Timex uses an overall cost leadership strategy. For decades, this firm has specialized in manufacturing relatively simple, low-cost watches for the mass market. The price of Timex watches, starting around $39.95, is low because of the company's efficient high-volume manufacturing capacity. -EX: Poland Springs and Crystal Geyser bottled waters are also promoted on the basis of their low cost. -Other firms that implement overall cost leadership strategies are Hyundai, BIC, Old Navy, and Hershey. 3.) Focus strategy: Concentrates on a specific regional market, product line, or group of buyers. -This strategy may have either a differentiation focus, whereby the firm differentiates its products in the focus market, or an overall cost leadership focus, whereby the firm manufactures and sells its products at low cost in the focus market. -EX: In the watch industry, Tag Heuer follows a focus differentiation strategy by selling only rugged waterproof watches to active consumers. -EX: Hasselblad makes expensive cameras targeted at professional photographers, as opposed to recreational or casual photographers. -EX: Fisher-Price uses focus differentiation to sell electronic calculators with large, brightly colored buttons to the parents of preschoolers; stockbroker Edward Jones focuses on small-town markets. -EX: General Mills focuses one part of its new-product development on consumers who eat meals while driving—their watchword is "Can we make it 'one-handed'?" so that drivers can safely eat or drink it. -EX: Two investors realized that most Las Vegas casinos were targeting either high-end big spenders or the young hip market. So, they bought the venerable old Tropicana casino, renovated it, and began marketing it to so-called "Middle America"—middle-aged or older gamblers who aren't into big-dollar wagering. Their occupancy rates have soared, as have their profits.
What is automation & what is its impact on manufacturing?
Automation: Is the process of designing work so that it can be completely or almost completely performed by machines. -Because automated machines operate quickly and make few errors, they increase the amount of work that can be done. Thus automation helps to improve products and services and fosters innovation. -Automation is the most recent step in the development of machines and machine-controlling devices. -Automation relies on feedback, information, sensors, and a control mechanism. Feedback is the flow of information from the machine back to the sensor. Sensors are the parts of the system that gather information and compare it to preset standards. The control mechanism is the device that sends instructions to the automatic machine. -The shortage of skilled workers and the development of high-speed computers combined to bring about a tremendous interest in automation. During the 1990s, automation became a major element in the manufacture of computers and computer components, such as electronic chips and circuits. It is this computerized, or programmable, automation that presents the greatest opportunities and challenges for management today. Impact of automation: -The impact of automation on people in the workplace is complex. In the short term, people whose jobs are automated may find themselves without a job. In the long term, however, more jobs are created than are lost. Nevertheless, not all companies are able to help displaced workers find new jobs, so the human costs are sometimes high. -EX: In the coal industry, for instance, automation has been used primarily in mining. The output per miner has risen dramatically from the 1950s on. The demand for coal, however, has decreased, and productivity gains resulting from automation have lessened the need for miners. Consequently, many workers have lost their jobs, and the industry has not been able to absorb them. -EX: In contrast, in the electronics industry, the rising demand for products has led to increasing employment opportunities despite the use of automation.
what is backward vertical integration?
Backward Vertical Integration: Firms can also become diversified by replacing their former suppliers and customers. -A company that stops buying supplies (either manufactured goods or raw materials) from other companies and begins to provide its own supplies has diversified through backward vertical integration. -EX: Campbell Soup once bought soup cans from several different manufacturers but later began manufacturing its own cans. In fact, Campbell is currently one of the largest can-manufacturing companies in the world, although almost all the cans it makes are used in its own soup operations.
What are the various production layouts?
Layout: The choice of physical configuration, or the layout, of facilities is closely related to other operations decisions. The three entirely different layout alternatives help demonstrate the importance of the layout decision. 1.) product layout: is appropriate when large quantities of a single product are needed. It makes sense to custom-design a straight-line flow of work for a product when a specific task is performed at each workstation as each unit flows past. Most assembly lines use this format. For example, Dell's personal computer factories use a product layout. Process layouts are used in operations settings that create or process a variety of products. Auto repair shops and healthcare clinics are good examples. Each car and each person is a separate "product." The needs of each incoming job are diagnosed as it enters the operations system, and the job is routed through the unique sequence of workstations needed to create the desired finished product. 2.) Process layout: each type of conversion task is centralized in a single workstation or department. All welding is done in one designated shop location, and any car that requires welding is moved to that area. This setup is in contrast to the product layout, in which several different workstations may perform welding operations if the conversion task sequence so dictates. Similarly, in a hospital, all X-rays are done in one location, all surgeries in another, and all physical therapy in yet another. Patients are moved from location to location to get the services they need. 3.) Fixed-position layout: is used when the organization is creating a few very large and complex products. Aircraft manufacturers like Boeing and shipbuilders like Newport News use this method. An assembly line capable of moving one of Boeing's new 787 aircraft would require an enormous plant, so instead the airplane itself remains stationary, and people and machines move around it as it is assembled. 4.) Cellular layout: is a relatively new approach to facilities design. Cellular layouts are used when families of products can follow similar flow paths. A clothing manufacturer, for example, might create a cell, or designated area, dedicated to making a family of pockets, such as pockets for shirts, coats, blouses, and slacks. Although each kind of pocket is unique, the same basic equipment and methods are used to make all of them. Hence, all pockets might be made in the same area and then delivered directly to different product layout assembly areas where the shirts, coats, blouses, and slacks are actually being assembled. :
What is Synergy?
Synergy: The interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects. -Synergy exists among a set of businesses when the businesses' economic value together is greater than their economic value separately. -EX: McDonald's is using synergy as it diversifies into other restaurant and food businesses. For example, its McCafe premium coffee stands in some McDonald's restaurants allow the firm to create new revenue opportunities while using the firm's existing strengths in food-product purchasing and distribution. -EX: Similarly, Starbucks is experimenting with an evening menu featuring wine and cheese in a select number of stores. Synergy can reduce the combined organizations' costs of doing business; it can increase revenues; and it may open the way to entirely new businesses for the organization to enter. -EX: Procter & Gamble made a decision to launch a nationwide chain of car washes under the widely recognized brand name of Mr. Clean, one of its leading brands of cleaning products. To jump-start the Mr. Clean Car Wash venture, the firm acquired the assets of Atlanta-based Carnett's Car Wash and its 14 locations.
What are the Strategies Based on the Product Life Cycle?
The product life cycle: A model that shows how sales volume changes over the life of products. Understanding the four stages in the product life cycle helps managers recognize that strategies need to evolve over time. -The cycle has 4 stages: 1.) Introduction stage Demand may be very high, sometimes outpacing the firm's ability to supply the product. -At this stage, managers need to focus their efforts on "getting product out the door" without sacrificing quality. -Managing growth by hiring new employees and managing inventories and cash flow are also concerns during this stage. 2.) Growth stage More firms begin producing the product, and sales continue to grow. -Important management issues include ensuring quality and delivery and beginning to differentiate an organization's product from competitors' products. -Entry into the industry during the growth stage may threaten an organization's competitive advantage; thus, strategies to slow the entry of competitors are important. 3.) Maturity stage Overall demand growth for a product begins to slow down, and the number of new firms producing the product begins to decline. -The number of established firms producing the product may also begin to decline. -This period of maturity is essential if an organization is going to survive in the long run. -Product differentiation concerns are still important during this stage, but keeping costs low and beginning the search for new products or services are also important strategic considerations. 4.) Decline stage Demand for the product or technology decreases, the number of organizations producing the product drops, and total sales drop. -Demand often declines because all those who were interested in purchasing a particular product have already done so. -Organizations that fail to anticipate the decline stage in earlier stages of the life cycle may go out of business. Those that differentiate their product, keep their costs low, or develop new products or services may do well during this stage.
Operations Improvement
When you see these two questions: The answer is operations improvement!! 1.) Toyota installed a flexible manufacturing assembly line in its plant outside Columbus, Ohio... 2.) Almost 20,000 UPS employees are now equipped with ring scanners....
What are the Rational Perspectives on Decision Making?
1.) Classical Model: A prescriptive approach that tells managers how they should make decisions. It rests on the assumptions that managers are logical and rational and that they make decisions that are in the best interests of the organization. -The Process: 1.) Decision makers have complete information about the decision situation and possible alternatives. 2.) They can effectively eliminate uncertainty to achieve a decision condition of certainty. 3.) They evaluate all aspects of the decision situation logically and rationally. -End up with a decision that best serves the interests of the organization. **As we will see later, these conditions rarely, if ever, actually exist. 2.) Evidence Based Management (EBM): The need to use rationality and evidence when making decisions. A commitment to finding and using the best theory and data available at the time to make decisions - "Management decisions," they argue, "[should] be based on the best evidence, managers [should] systematically learn from experience, and organizational practices [should] reflect sound principles of thought and analysis." -The "Five Principles of Evidence-Based Management" make it clear that EBM means more than just sifting through data and crunching numbers. Here's what they recommend: 1.) Face the hard facts and build a culture in which people are encouraged to tell the truth, even if it's unpleasant. 2.) Be committed to "fact-based" decision making—which means being committed to getting the best evidence and using it to guide actions. 3.) Treat your organization as an unfinished prototype— encourage experimentation and learning by doing. 4.) Look for the risks and drawbacks in what people recommend (even the best medicine has side effects). 5.) Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical "benchmarking" of what winners do. This perspective is particularly persuasive when EBM is used to question the outcomes of decisions based on "untested but strongly held beliefs" or on "uncritical benchmarking." For instance, consider the popular policy of paying high performers significantly more than low performers. EBM research shows that pay-for-performance policies get good results when employees work solo or independently. But it's another matter altogether when it comes to collaborative teams—the kind of team that makes so many organizational decisions today.
What are the types of Group & Team Decision making?
1.) Interacting groups and teams: are the most common form of decision-making group. The format is simple—either an existing or a newly designated group or team is asked to make a decision. -Existing groups or teams might be functional departments, regular work teams, or standing committees. -Newly designated groups or teams can be ad hoc committees, task forces, or newly constituted work teams. -The group or team members talk among themselves, argue, agree, argue some more, form internal coalitions, and so forth. Finally, after some period of deliberation, the group or team makes its decision. - An advantage of this method is that the interaction among people often sparks new ideas and promotes understanding. -A major disadvantage, though, is that political processes can play too big a role. 2.) Delphi group: is sometimes used to develop a consensus of expert opinion. Developed by the Rand Corporation, the Delphi procedure solicits input from a panel of experts who contribute individually. Their opinions are combined and, in effect, averaged. -Assume, for example, that the problem is to establish an expected date for a major technological breakthrough in converting coal into usable energy: 1.) The first step in using the Delphi procedure is to obtain the cooperation of a panel of experts. For this situation, experts might include various research scientists, university researchers, and executives in a relevant energy industry. At first, the experts are asked to anonymously predict a time frame for the expected breakthrough. 2.) The persons coordinating the Delphi group collect the responses, average them, and ask the experts for another prediction. In this round, the experts who provided unusual or extreme predictions may be asked to justify them. These explanations may then be relayed to the other experts. 3.) When the predictions stabilize, the average prediction is taken to represent the decision of the group of experts. -The time, expense, and logistics of the Delphi technique rule out its use for routine, everyday decisions, but it has been successfully used for forecasting technological breakthroughs at Boeing, market potential for new products at General Motors, research and development patterns at Eli Lilly, and future economic conditions by the U.S. government. -Moreover, the Delphi method originally relied on paper-and-pencil responses obtained and shared through the mail; modern communication technologies such as e-mail and the Internet have enabled Delphi users to get answers much more quickly than in the past. 3.) Nominal Groups: Unlike the Delphi method, in which group members do not see one another, nominal group members are brought together in a face-to-face setting. -The members represent a group in name only, however; they do not talk to one another freely like the members of interacting groups. -Nominal groups are used most often to generate creative and innovative alternatives or ideas. 1.) To begin, the manager assembles a group of knowledgeable experts and outlines the problem to them. 2.) The group members are then asked to individually write down as many alternatives as they can think of. 3.) The members then take turns stating their ideas, which are recorded on a flip chart or board at the front of the room. Discussion is limited to simple clarification. 4.) After all alternatives have been listed, more open discussion takes place. 5.) Group members then vote, usually by rank-ordering the various alternatives & The highest-ranking alternative represents the decision of the group. Of course, the manager in charge may retain the authority to accept or reject the group decision.
Formulating Business-Level Strategies: 3 important classification schemes
1.) Porters Generic Strategies 2.) Miles & Snow Typology 3.) Strategies based on product life cycle
What are the 2 types of decision making?
1.) Programmed decision: One that is relatively structured or recurs with some frequency (or both). -EX: Starbucks uses programmed decisions to purchase new supplies of coffee beans, cups, and napkins, and Starbucks employees are trained in exact procedures for brewing coffee. -EX: Likewise, the Bryan Ford dealer made a decision that he will sponsor a youth soccer team each year. Thus, when the soccer club president calls, the dealer already knows what he will do. -Many decisions about basic operating systems and procedures and standard organizational transactions are of this variety and can therefore be programmed. 2.) Nonprogrammed decisions: Relatively unstructured and occur much less often. -EX: Disney's decision to buy Pixar was a nonprogrammed decision. Managers faced with such decisions must treat each one as unique, investing enormous amounts of time, energy, and resources into exploring the situation from all perspectives. -Intuition and experience are major factors in nonprogrammed decisions. -Most of the decisions made by top managers involving strategy (including mergers, acquisitions, and takeovers) and organization design are nonprogrammed. So are decisions about new facilities, new products, labor contracts, and legal issues.
What are Miles and Snow typology of Strategies?
1.) Prospector Strategy: A Highly innovative firm that is constantly seeking out new markets and new opportunities and is oriented toward growth and risk taking. -EX: Over the years, 3M has prided itself on being one of the most innovative major corporations in the world. Employees at 3M are constantly encouraged to develop new products and ideas in a creative and entrepreneurial way. This focus on innovation has led 3M to develop a wide range of new products and markets, including invisible tape and anti-stain fabric treatments. -EX: Amazon.com also follows a prospector strategy as it constantly seeks new market opportunities for selling different kinds of products through its websites and by offering a growing array of delivery options. -EX: Similarly, Apple is also using a prospector strategy and helped create markets for MP3 players (with its iPod), smartphones (the iPhone), and tablets (the iPad). 2.) Defender Strategy: Concentrates on protecting its current markets, maintaining stable growth, and serving current customers, generally by lowering its costs and improving the performance of its existing products. -EX: With the maturity of the market for writing instruments, BIC has used this approach—it has adopted a less aggressive, less entrepreneurial style of management and has chosen to defend its substantial market share in the industry. It has done this by emphasizing efficient manufacturing and customer satisfaction. -EX: Although eBay is expanding into foreign markets, the online auctioneer is still pursuing what amounts to a defender strategy, in that it is keeping its focus primarily on the auction business. Thus, while it is prospecting for new markets, it is defending its core business focus. 3.) Analyzer Strategy: Tries to maintain its current businesses and to be somewhat innovative in new businesses, combines elements of prospectors and defenders. -Most large companies use this approach because they want to both protect their base of operations and create new market opportunities. -EX: DuPont is currently using an analyzer strategy; the firm is relying heavily on its existing chemical and fiber operations to fuel its earnings for the foreseeable future. At the same time, though, DuPont is moving systematically into new business areas such as biotech agriculture and pharmaceuticals. -EX: Yahoo! is also using this strategy by keeping its primary focus on its role as an Internet portal while simultaneously seeking to extend that portal into more and more applications. 4.) Reactor Strategy: Has no consistent strategic approach; it drifts with environmental events, reacting to but failing to anticipate or influence those events. -Not surprisingly, these firms usually do not perform as well as organizations that implement other strategies. -EX: Although most organizations would deny using reactor strategies, a firm called International Harvester Company (IH) was clearly a reactor. At a time when IH's market for trucks, construction equipment, and agricultural equipment was booming, the company failed to keep pace with its competitors. By the time a recession cut demand for its products, it was too late for IH to respond, and the company lost millions of dollars. The firm was forced to sell off virtually all of its businesses, except its truck-manufacturing business. IH, now renamed Navistar, moved from being a dominant firm in trucking, agriculture, and construction to a smaller truck and bus manufacturer because it failed to anticipate changes in its environment. -EX: Kmart, Eddie Bauer, and Chrysler have all shown signs of being reactors in recent years. The lack of a consistent strategy is also the primary reason that RadioShack collapsed.
What is the Administrative Model?
Administrative Model: Rather than prescribing how decisions should be made, his view of decision making, now called the administrative model, describes how decisions often actually are made. -The model holds that managers: 1.) use incomplete and imperfect information 2.) are constrained by bounded rationality 3.) tend to "satisfice" when making decisions. -Bounded rationality: suggests that decision makers are limited by their values and unconscious reflexes, skills, and habits. They are also limited by less-than-complete information and knowledge. -Bounded rationality partially explains how U.S. auto executives allowed Japanese automakers to get such a strong foothold in the U.S. domestic market. For years, executives at GM, Ford, and Chrysler compared their companies' performance only to one another's and ignored foreign imports. The foreign "threat" was not acknowledged until the domestic auto market had been changed forever. If managers had gathered complete information from the beginning, they might have been better able to thwart foreign competitors. -Essentially, then, the concept of bounded rationality suggests that although people try to be rational decision makers, their rationality has limits. -Satisficing: This concept suggests that rather than conducting an exhaustive search for the best possible alternative, decision makers tend to search only until they identify an alternative that meets some minimum standard of sufficiency. -A manager looking for a site for a new plant, for example, may select the first site she finds that meets basic requirements for transportation, utilities, and price, even though further search might yield a better location. -People satisfice for a variety of reasons: -Managers may simply be unwilling to ignore their own motives (such as reluctance to spend time making a decision) and therefore may not be able to continue searching after a minimally acceptable alternative is identified. -The decision maker may be unable to weigh and evaluate large numbers of alternatives and criteria. Also, subjective and personal considerations often intervene in decision situations. *Because of the inherent imperfection of information, bounded rationality and satisficing, the decisions made by a manager may or may not actually be in the best interests of the organization. A manager may choose a particular location for the new plant because it offers the lowest price and best availability of utilities and transportation. Or she may choose the site because it is located in a community where she wants to live.
What is Escalation of Commitment?
Escalation of Commitment: Another important behavioral process that influences decision making is escalation of commitment to a chosen course of action. -In particular, decision makers sometimes make decisions and then become so committed to the courses of action suggested by those decisions that they stay with them even when the decisions appear to have been wrong. -EX: when people buy stock in a company, they sometimes refuse to sell it even after repeated drops in price. They choose a course of action—buying the stock in anticipation of making a profit—and then stay with it even in the face of increasing losses. Moreover, after the value drops, they rationalize that they can't sell now because they will lose money.
What is Just-in-time inventory?
Just-In-Time Inventory (JIT): One particularly important breakthrough is the just-in-time method. First popularized by the Japanese, the JIT system reduces the organization's investment in storage space for raw materials and in the materials themselves. -Historically, manufacturers built large storage areas and filled them with materials, parts, and supplies that would be needed days, weeks, and even months in the future. -A manager using the JIT approach orders materials and parts more often and in smaller quantities, thereby reducing investment in both storage space and actual inventory. -The ideal arrangement is for materials to arrive just as they are needed—or just in time. Recall our example about the small firm that assembles stereo speakers for Honda and delivers them three times a day, making it unnecessary for Honda to carry large quantities of the speakers in inventory. -EX: Johnson Controls makes automobile seats for Mercedes and ships them by small truckloads to a Mercedes plant 75 miles away. Each shipment is scheduled to arrive two hours before it is needed. -Clearly, the JIT approach requires high levels of coordination and cooperation between the company and its suppliers. If shipments arrive too early, Mercedes has no place to store them. If they arrive too late, the entire assembly line may have to be shut down, resulting in enormous expense. When properly designed and used, the JIT method controls inventory very effectively.
What is labor production productivity index?
Labor Productivity = Outputs/Direct Labor This method has two advantages: 1.) it is not necessary to transform the units of input into some other unit. 2.) this method provides managers with specific insights into how changing different resource inputs affects productivity. -EX: Suppose that an organization can manufacture 100 units of a particular product with 20 hours of direct labor. The organization's labor productivity index is 100/20, or 5 (5 units per labor hour). Now suppose that worker efficiency is increased (through one of the ways to be discussed later in this chapter) so that the same 20 hours of labor results in the manufacture of 120 units of the product. The labor productivity index increases to 120/20, or 6 (6 units per labor hour), and the firm can see the direct results of a specific managerial action.
What is Computer Aided Design (CAD)?
One type of computer-assisted manufacturing is computer-aided design (CAD): The use of computers to design parts and complete products and to simulate performance so that prototypes need not be constructed. -EX: Boeing uses CAD technology to study hydraulic tubing in its commercial aircraft. -EX: Japan's automotive industry uses it to speed up car design. -EX: GE used CAD to change the design of circuit breakers, and Benetton uses CAD to design new styles and products. -EX: Oneida, the table flatware firm, uses CAD to design new flatware patterns; for example, it can design a new spoon in a single day. -CAD is usually combined with computer-aided manufacturing (CAM) to ensure that the design moves smoothly to production. The production computer shares the design computer's information and can have machines with the proper settings ready when production is needed. A CAM system is especially useful when reorders come in because the computer can quickly produce the desired product, prepare labels and copies of orders, and send the product out to where it is wanted.
What is Operations Management?
Operations Management: Is at the core of what organizations do as they add value and create products and services. -But what exactly are operations? And how are they managed?: Operations management is the set of managerial activities used by an organization to transform resource inputs into products and services. -EX: When Dell Computer buys electronic components, assembles them into PCs, and then ships them to customers, it is engaging in operations management. -EX: When a Pizza Hut employee orders food and paper products and then combines dough, cheese, and tomato paste to create a pizza, he or she is engaging in operations management. We use it make the following decisions: 1.) Determining Product-Service mix 2.) Making Capacity Decisions 3.) Making Facilities Decisions -Operations is an important functional concern for organizations because efficient and effective management of operations goes a long way toward ensuring competitiveness and overall organizational performance, as well as quality and productivity. -Inefficient or ineffective operations management, on the other hand, will almost inevitably lead to poorer performance and lower levels of both quality and productivity. -In an economic sense, operations management creates value and utility of one type or another, depending on the nature of the firm's products or services. -If the product is a physical good, such as a Harley-Davidson motorcycle, operations creates value and provides form utility by combining many dissimilar inputs (sheet metal, rubber, paint, internal combustion engines, and human skills) to make something (a motorcycle) that is more valuable than the actual cost of the inputs used to create it. The inputs are converted from their incoming form into a new physical form. This conversion is typical of manufacturing operations and essentially reflects the organization's technology. -In contrast, the operations activities of Delta Airlines create value and provide time and place utility through its services. The airline transports passengers and freight according to agreed-upon departure and arrival places and times. -Other service operations, such as a Coors beer distributorship or a Zara retail store, create value and provide place and possession utility by bringing together the customer and products made by others.
What is optimization?
Optimizing: Involves balancing and reconciling possible conflicts among goals. Because goals may conflict with one another, the manager must look for inconsistencies and decide whether to pursue one goal to the exclusion of another or to find a midrange target between the extremes. -EX: Home Depot first achieved success in the retailing industry by offering do-it-yourselfers high-quality home improvement products at low prices and with good service. The firm then added an additional goal of doubling its revenues from professional contractors. To help achieve this, many Home Depot stores have separate checkout areas and special products for contractors. The challenge, however, has been to keep loyal individual customers while also satisfying professional contractors. -EX: Lowe's, is also optimizing, but among different alternatives—trying to retain its core customer group (primarily male) while also appealing more to women. -EX: Starbucks faces optimization challenges as it tries to maintain its cachet as an upscale purveyor of fine coffees while also opening roadside drive-through stores and adding non-coffee drinks to its menu. -EX: And the airlines almost always seem to face a classic optimizing question—carrying more passengers for lower prices or fewer passengers for higher prices.
What is productivity?
Productivity: Is an economic measure of efficiency that summarizes the value of outputs relative to the value of the inputs used to create them. -Productivity can be and often is assessed at different levels of analysis and in different forms. Levels of Productivity: By level of productivity we mean the units of analysis used to calculate or define productivity. -For example, aggregate productivity is the total level of productivity achieved by a country. -Industry productivity is the total productivity achieved by all the firms in a particular industry. -Company productivity, just as the term suggests, is the level of productivity achieved by an individual company. -Unit and individual productivity refer to the productivity achieved by a unit or department within an organization and the level of productivity attained by a single person. The Importance of Productivity: Managers consider it important that their firm maintain high levels of productivity for a variety of reasons. Firm productivity is a primary determinant of an organization's level of profitability and, ultimately, of its ability to survive. -If one organization is more productive than another, it will have more products to sell at lower prices and have more profits to reinvest in other areas. -Productivity also partially determines people's standard of living within a particular country. The more goods and services the businesses within a country can produce, the more goods and services the country's citizens will have. Even goods that are exported result in financial resources flowing back into the home country. Thus the citizens of a highly productive country are likely to have a notably higher standard of living than are the citizens of a country with low productivity. Productivity Trends: The United States has one of the highest levels of productivity in the world. Sparked by gains made in other countries, however, U.S. business has begun to focus more attention on productivity. Indeed, this was a primary factor in the decisions made by U.S. businesses to retrench, retool, and become more competitive in the world marketplace. -U.S. workers are generally maintaining their lead in most industries. -One important factor that has hurt U.S. productivity indices has been the tremendous growth of the service sector in the United States. Although this sector grew, its productivity levels did not. One part of this problem relates to measurement. For example, it is fairly easy to calculate the number of tons of steel produced at a steel mill and divide it by the number of labor hours used; it is more difficult to determine the output of an attorney or a certified public accountant. Still, virtually everyone agrees that improving service-sector productivity is the next major hurdle facing U.S. business. -Some experts believe that productivity in both the United States and abroad will continue to improve at even more impressive rates. Their confidence rests on technology's potential ability to improve operations. Improving Productivity: How does a business or industry improve its productivity? Suggestions made by experts generally fall into two broad categories: 1.) Improving Operations: One way that firms can improve operations is by spending more on research and development. Research and development (R&D) spending helps identify new products, new uses for existing products, and new methods for making products. Each of these contributes to productivity. 2.) Increasing Employee Involvement: The other major thrust in productivity enhancement has been toward employee involvement. We noted earlier that participation can enhance quality. So, too, can it boost productivity. -Examples of this involvement: an individual worker's being given a bigger voice in how she does her job, a formal agreement of cooperation between management and labor, and total involvement throughout the organization. GE eliminated most of the supervisors at its one new circuit breaker plant and put control in the hands of workers.
What are the different types of decision making models?
Rational Perspectives on Decision Making: 1.) Classical Model of decision making 2.) Evidence Based Management (EBM) Behavioral Elements in Decision Making: 1.) Administrative Model 2.) Political forces in Decision Making 3.) Intuition & Escalation of Commitment 4.) Risk Propensity & Decision Making 5.) Ethics & Decision Making Group & Team Decision Making: 1.) Interacting teams & groups 2.) Delphi Groups 3.)Nominal Groups
What is single product strategy?
Single product Strategy: An organization that pursues a single-product strategy manufactures or provides just one product or service; this product is also often sold in a single market. -EX: Red Bull GmbH, an Austrian company, produces and markets only the energy drink that bears its name. While there are a few variations, such as a low-calorie formulation, Red Bull is essentially one product. The firm sells no other energy products and does not retail its own products, instead focusing on astute marketing and promotions to drive sales. -Advantage: By concentrating its efforts so completely on one product and market, a firm is likely to be very successful in manufacturing and marketing the product. -Disadvantage: Because it has staked its survival on a single product, the organization works very hard to make sure that the product is a success. Of course, if the product is not accepted by the market or is replaced by a new one, the firm will suffer. *EX: Wrigley long practiced what amounted to a single-product strategy with its line of chewing gums. But, because younger consumers are buying less gum than earlier generations, Wrigley experienced declining revenues and lower profits. As a result, the Wrigley family eventually sold their business to Mars.
What is Strategic Imitation?
Strategic imitation: The practice of duplicating another firm's distinctive competence and thereby implementing a valuable strategy. Although some distinctive competencies can be imitated, others cannot be. -When a distinctive competence cannot be imitated, strategies that exploit these competencies generate sustained competitive advantage. A sustained competitive advantage is a competitive advantage that exists after all attempts at strategic imitation have ceased. *Tactical imitation: primarily focuses on people and actions. A tactical plan must specify precisely what activities will be undertaken to achieve this goal.
What is strategy formulation?
Strategy formulation: The set of processes involved in creating or determining the strategies of the organization, whereas strategy implementation is the methods by which strategies are operationalized or executed within the organization. -The primary distinction is along the lines of content versus process: The formulation stage determines what the strategy is, and the implementation stage focuses on how the strategy is achieved.
What is the BCG Matrix? & how do we use it?
The BCG (for Boston Consulting Group) matrix: Provides a framework for evaluating the relative performance of businesses in which a diversified organization operates. It also prescribes the preferred distribution of cash and other resources among these businesses. -The BCG matrix uses two factors to evaluate an organization's set of businesses: 1.) The growth rate of a particular market 2.) The organization's share of that market. -The matrix suggests that fast-growing markets in which an organization has the highest market share are more attractive business opportunities than slow-growing markets in which an organization has a small market share. - Dividing market growth and market share into two categories (low and high) creates the simple matrix. -The matrix classifies the 4 types of businesses in which a diversified organization can engage as: 1.) Dogs = businesses that have a very small share of a market that is not expected to grow. Because these businesses do not hold much economic promise, the BCG matrix suggests that organizations either should not invest in them or should consider selling them as soon as possible. 2.) Cash cows = businesses that have a large share of a market that is not expected to grow substantially. These businesses characteristically generate high profits that the organization should use to support question marks and stars. (Cash cows are "milked" for cash to support businesses in markets that have greater growth potential.) 3.) Question marks = businesses that have only a small share of a quickly growing market. The future performance of these businesses is uncertain. A question mark that can capture increasing amounts of this growing market may be very profitable. On the other hand, a question mark unable to keep up with market growth is likely to have low profits. The BCG matrix suggests that organizations should invest carefully in question marks. If their performance does not live up to expectations, question marks should be reclassified as dogs and divested. 4.) Stars = businesses that have the largest share of a rapidly growing market. Cash generated by cash cows should be invested in stars to ensure their preeminent position. -EX: More recently, Yum Brands has also made significant decisions based on the BCG matrix approach. For several years Yum owned and operated five restaurant chains—KFC, Pizza Hut, Taco Bell, A&W, and Long John Silver's. As the U.S. fast-food market approached saturation, Yum managers started to expand aggressively into foreign markets. The firm's three flagship brands, KFC, Pizza Hut, and Taco Bell, had been successfully launched in many foreign markets several years ago, and now overseas profits account for around 70 percent of Yum's total profits. But A&W and Long John Silver's had few foreign outlets, and managers decided there was little potential for overseas growth. Consequently Yum sold those two businesses in order to more effectively concentrate on the other three. Then the firm bought WingStreet and added it to the Yum portfolio. WingStreet, like the other chains, has had success in foreign markets, and managers project significant growth potential abroad.
What is capacity utilization?
The capacity decision involves choosing the amount of products, services, or both that can be produced by the organization. -Determining whether to build a factory capable of making 5,000 or 8,000 units per day is a capacity decision. -So, too, is deciding whether to build a restaurant with 100 or 150 seats, or a bank with five or 10 teller stations. The capacity decision is truly a high-risk one because of the uncertainties of future product demand and the large monetary stakes involved. -An organization that builds capacity exceeding its needs may commit resources (capital investment, space, and so forth) that will never be recovered. -Alternatively, an organization can build a facility with a smaller capacity than expected demand. Doing so may result in lost market opportunities, but it may also free capital resources for use elsewhere in the organization. A major consideration in determining capacity is demand: -A company operating with fairly constant monthly demand might build a plant capable of producing an amount each month roughly equivalent to its demand. -But if its market is characterized by seasonal fluctuations, building a smaller plant to meet normal demand and then adding extra shifts staffed with temporary workers or paying permanent workers extra to work more hours during peak periods might be the most effective choice. -Likewise, a restaurant that needs 150 seats for Saturday night but never needs more than 100 at any other time during the week would probably be foolish to expand to 150 seats. During the rest of the week, it must still pay to light, heat, cool, and clean the excess capacity. -Many customer service departments have tried to improve their capacity to deal with customers while also lowering costs by using automated voice prompts to direct callers to the right representative.
