Business Management Exam 2 (Chapters 6-10)

team approach disadvantages

-Dual loyalties and conflict -Time and resources spent on meetings -Unplanned decentralization

functional approach disadvantages

-Poor communication across functional departments -Slow response to external changes; lagging innovation -Decisions concentrated at top of hierarchy, creating delay

virtual network approach advantages

-can draw on expertise worldwide -highly flexible and responsive -reduced overhead costs

characteristics of classical model

-clear cut problem and goals -condition of certainty -full information about alternatives and their outcomes -rational choice by individual for maximizing outcomes

factors that contribute to the failure of strategy execution

-employee resistance -manager behavior doesn't support new direction -inadequate budget or resources -other barriers

characteristics of political model

-pluralistic; conflicting goals -condition of uncertainty or ambiguity -inconsistent viewpoints; ambiguous information -bargaining and discussion among coalition members

elements of competitive advantage

-target customers -achieve synergy -create value -exploit core competence

Tools for putting strategy into action

-visible leadership -clear roles and accountability -human resources -candid communication

organizational planning process

1. Develop the Plan 2. Translate the Plan 3. Plan Operations 4. performance management 5. Monitor and Learn

global corporate strategies

1. Globalization Strategy 2. Glocalization 3. Export Strategy 4. Multi domestic Strategy

levels of goals and plans

1. Mission Statement (at top) 2. Strategic Goals/Plans 3. Tactical Goals/Plans 4. Operational Goals/Plans (at bottom)

outsourcing

A decision by a corporation to turn over much of the responsibility for production to independent suppliers. •farming out certain activities, such as manufacturing or credit processing

decision making models

Classical, Administrative, Political

divisional approach disadvantages

Duplication of resources across divisions, less technical depth and specialization, poor coordination across divisions.

decision making step 6

Evaluation and feedback: gather information to determine how well the decision was implemented and whether it achieved its goals

Divisional Approach Advantages

Fast response; flexibility in an unstable environment Fosters concern for customer needs Excellent coordination across functional departments

matrix approach disadvantages

Frustration and confusion from dual chain of command High conflict between two sides of the matrix Many meetings, more discussion than action

jugglers

High-energy people who enjoy handling every detail of their own business

key performance indicators

KPIs tool used to assess what is important to an organization and how well the organization is progressing toward achieving its strategic goal

virtual network approach disadvantages

Lack of control; weak boundaries Greater demands on managers Weaker employee loyalty

management by means

MBM new systemic approach that focuses attention on the methods and processes used to achieve goals

management by objectives

MBO •system whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance

matrix approach advantages

More efficient use of resources than single hierarchy Flexibility, adaptability to changing environment Interdisciplinary cooperation, expertise available to all divisions

Porter's 5 forces

Potential new entrants, buyer power, supplier power, threat of substitutes, rivalry and competition.

team approach advantages

Reduced barriers among departments, increased compromise Shorter response time, quicker decisions Better morale, enthusiasm from employee involvement

strategic business units

SBUs •business division of the organization that has a unique business mission, product line, competitors, and markets relative to other SBUs in the corporation

pivot

To change the strategic direction of a business.

characteristics of administrative model

Vague problem and goals, condition of uncertainty, limited information about alternatives and their outcomes, satisficing choice for resolving problem using intuition

less supervision/larger spans of control:

Work is stable and routine Subordinates perform similar work Subordinates are in one location Highly trained/require little direction Rules and procedures are defined Few planning or nonsupervisory activities Manager's preference

Strategic Management Process

a six-step process that encompasses strategic planning, implementation, and evaluation includes SWOT analysis

Maslow's Hierarchy of Needs

a theory of psychology explaining human motivation based on the pursuit of different levels of needs. The theory states that humans are motivated to fulfill their needs in a hierarchical order (level 1) Physiological Needs, (level 2) Safety and Security, (level 3) Relationships, Love and Affection (level 4) Self Esteem, (level 5) Self Actualization

minority

a word that should no longer be utilized to describe groups of people

difference between social entrepreneurship and entrepreneurship

aim, community need, passion for profit etc.

a mission statement should be short and specific but:

also include all your goals and aspects you want to achieve with your business

chain of command

an unbroken line of authority that links all employees in an organization and shows who reports to whom

Strategy defines what to do:

and organizing defines how to do it

Entrepreneurs: high importance on:

being free to acheive

satisficing

choosing the first solution that satisfies minimal decision criteria

glocalization strategy

combines global coordination to attain efficiency with local flexibility to meet needs in different countries

quasirationality

combining intuitive and analytical thought

3 levels of strategy in organizations

corporate, business level, and functional

first step in strategic management is to:

define an explicit strategy

technical complexity

degree to which machinery is used in production without people

goal

desired future circumstance or condition that the organization attempts to realize

4 types of decision styles

directive, analytical, conceptual, behavioral

differentiation strategy

distinguish products and services

mechanistic organization

efficiency is the goal in a stable environment

functional approach advantages

efficient use of resources, economies of scale in-depth skill specialization and development of top manager direction and control.

sustainers

enjoy chance to balance work and personal life

behavioral style

exhibit a deep concern regarding effect of decision on others

vertical integration

expansion into businesses that supply to the business or are distributors

optimizer

get personal satisfaction from being business owners

uncertainty

goals are known, but information about alternatives and future events is incomplete

ambiguity

goals to be achieved or problems to be solved are unclear, alternatives are difficult to define, and information about outcomes is unavailable

normative

how a decision maker should make a decision

5 types of small business owners

idealists, optimizers, hard workers, jugglers, sustainers

organic organization

innovation is the goal in a rapidly changing environment

Porter

made five forces that impact competitiveness in industry

successful entrepreneurs have:

many different motivations and measure rewards in different ways

merger

occurs when two or more organizations combine to become one

co-working facility

open office environment shared by multiple freelance entrepreneurs as well as corporate telecommuting employees or others who don't have a regular office

devil's advocate

person assigned the role of challenging the assumptions and assertions made by the group

top leader

person who oversees both the product and functional chains of command and is responsible for the entire matrix

sources of start-up capital for entrepreneurs

personal savings home equity credit cards personal bank loans family loans business bank loans angel capital

portfolio strategy

pertains to the mix of SBUs and product lines to provide synergy and competitive advantage

goal + plan=

planning

Essential Stages of Crisis Planning

prevention and preparation

premortem

purposefully imagining a decision has been implemented and has failed miserably, and then identifying reasons for the failure so that problematic issues can be addressed in advance

reengineering

radical redesign of business processes to achieve dramatic improvements

crowdfunding

raising capital from small amounts from many investors, usually through social media and the Internet

idealist

rewarded by chance to work on something new and creative

strategic management

set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

Woodwards categories

small batch production mass production continuous process production

characteristics of effective goals

specific and measurable defined time period cover key result areas challenging but realistic linked to rewards

loss aversion

stronger response to a potential loss than to an expected gain

team-based structure

the entire organization is made up of horizontal teams that coordinate their work and work directly with customers to accomplish the organization's goals

virtual network structure

the firm subcontracts most of its major functions to separate companies and coordinates their activities from a small organization at headquarters

span of management

the number of employees reporting to a supervisor §Ex. Dean Jensen had a huge span of control/management

delegation

the process that managers use to transfer authority and responsibility down the hierarchy

strategy execution

the use of managerial and organizational tools to direct resources toward accomplishing strategic results

organization chart

the visual representation of an organization's structure

hard workers

thrive on the challenge of building a larger, more profitable business

Common structural problem:

too many levels with a span that is too narrow

administrative model

use of a rational decision-making process within the limits of human and environmental factors

locus of control

whether a person places the primary responsibility within the self or on outside forces

a mission statement accomplishes these things:

§Provides basis for development of all subsequent goals and plans §Often focuses on the market and customers, and identifies desired fields of endeavor §Can describe company characteristics such as corporate values, product quality, location of facilities, and attitude toward employees

political model

• Useful for nonprogrammed decisions when conditions are uncertain, information is limited, and there is manager conflict about goals to pursue or action to take −Resembles the real environment

embeddedness

• deep understanding and acceptance of organizational direction and purpose throughout the organization −Alignment requires all aspects of the organization to focus on strategic goals

related diversification

• expansion into new business related to existing business activities

responsibility

• the duty to perform the task or activity as assigned

minority owned businesses

•As the minority population of the United States has grown, so has the number of minority-owned businesses (people who don't normally own businesses) −More than 11 million minority-owned businesses −Employ more than 6.3 million people and generate nearly $2 trillion in revenue annually Woman who built nail salon in mall

managing goal conflict

•Build a coalition −-More diverse your group is, the better •Modify goals by time or location •Address conflicts with debate and dialogue •Break down barriers and promote cross-silo cooperation •Manager departures

characteristics of a business plan

•Clear, compelling vision •Clear, realistic financial projections •Profile of potential customers and target market •Details about the industry and competitors •Evidence of an effective management team •Critical risks •Sources and uses of start-up funds and operating funds •Summary

decision making step 3

•Development of alternatives: develop possible alternative solutions that will respond to the needs of the situation and correct the underlying causes

decision making step 2

•Diagnosis and analysis: analyze underlying causal factors −5 Whys: a question-asking method used to explore the root cause underlying a particular problem

strategy execution is the:

•Final step in the strategic management process −Most important but most difficult part

immigrants owned businesses

•Immigrants were almost twice as likely as native-born Americans to start new businesses −May not be able to do this in other countries due to race, gender, class etc. −Many immigrants take an entrepreneurial path because they appreciate the economic stability and opportunity •Types of businesses launched by immigrant entrepreneurs are increasingly sophisticated Traditional minority-owned retail stores and restaurants are being complemented by firms in financial services, software, insurance, and online businesses

decision making step 5

•Implementation of chosen alternative: the use of managerial, administrative, and persuasive abilities to ensure that the chosen alternative is carried out

performance management

•Managers use operational goals to direct employees and resources

woman-owned businesses

•More than 12 million firms were majority women-owned in 2018, a 58 percent increase from 2007 •The suggestion that women tend to be more cautious than men about borrowing money, which limits growth opportunities, particularly in high-tech fields questioned −Sociologist argues that women have less access to capital because they "have to work harder to convince others that they have what it takes to be successful" •As the cost of launching technology-related businesses falls, more women are taking a gamble in this competitive market

decision making step 1

•Recognition of decision requirement: identify problem or opportunity −Problem: organizational accomplishment is less than established goals −Opportunity: managers see potential accomplishments that exceed current goals

why do managers make bad decisions?

•Seeing what you want to see •Perpetuating the status quo •Being influenced by emotions •Being overconfident

decision making step 4

•Selection of desired alternative: best alternative is one in which the solution best fits the firm's overall goals and values and achieves the desired results using the fewest resources Risk propensity:

decision

•a choice made from available alternatives

mission statement definition

•a formal and broadly stated definition of purpose that distinguishes the organization from others of a similar type

cost leadership strategy

•aggressively seek efficient facilities, cost reductions, and cost controls

corporation

•artificial entity created by the state and existing apart from its owners −Separate legal entity liable for its actions −Limits owners' liability −Must pay taxes on its income −Provides continuity −Expensive and complex paperwork −Can raise funds through the sale of stock to investors

SWOT analysis

•audit of internal and external factors −Internal Strengths and Weaknesses −External Opportunities and Threats -info is acquired from reports, surveys, discussions, and meetings

classical model

•based on rational economic assumptions and manager beliefs about what ideal decision making should be

Departmentalization

•basis for grouping positions into departments and departments into the total organization

plan

•blueprint for goal achievement specifying the necessary resource allocations, schedules, tasks, and other actions

debt financing

•borrowing money that must be repaid at a later date to start a business −Family and friends −Personal credit cards −Bank loans −Finance companies −Wealthy individuals −Potential customers −Small Business Administration (SBA)

matrix approach

•combines both functional and divisional approaches simultaneously, in the same part of the organization •Improves coordination and information •Dual lines of authority make the matrix unique

focus strategy

•concentration on a specific region or buyer −Either differentiation or cost leadership approach

cross-functional teams

•consist of employees from various functional departments who are responsible to meet as a team and resolve mutual problems

centralization

•decision authority is located near the top of the organization

decentralization

•decision authority is pushed downward to lower organization levels

risk

•decision has clear-cut goals and good information is available, but future outcomes associated with each alternative are subject to chance of loss or failure

contingency planning

•define company responses to be taken in the case of emergencies, setbacks, or unexpected conditions −Ex. Plan of action for fire, tornado, etc.

strategic plans

•define the action steps by which the company intends to attain strategic goals (also called long range planning) −Blueprint that defines organizational activities and resource allocations −Tend to be long term

tactical plans

•define what major departments and organizational subunits will do to implement the organization's strategic plan −Tend to be short term and more applicable to middle management

divisional structure

•departments are grouped together based on similar organizational outputs •Geographic or customer-based divisions −Focuses company activities on local market conditions −Competitive advantage: selling a product adapted to a given country

planning

•determining the organization's goals and defining the means for achieving them

operational plans

•developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical plans −Goals stated in quantitative terms −Schedules are an important component

decision styles

•distinctions among people with respect to how they evaluate problems, generate alternatives, and make choices.

business plan

•document specifying business details prepared by an entrepreneur prior to opening a new business

two-boss employees

•employees who report to two supervisors simultaneously and must resolve conflicting demands from the matrix bosses

unrelated diversification

•expansion into new lines of business that are not related

franchising

•firm (franchise) collects upfront and ongoing fees in exchange for letting other firms (franchisees) offer products and services under its brand name and using its processes (ex. McDonalds) −Franchise provides management help −Provides established name and national advertising −Disadvantages include a lack of control; franchisors who dictate the prices; requirement of purchasing expensive equipment; and new product offerings Start-up costs may be high and are typically followed with monthly payments

social entrepreneurship

•focuses primarily on creating social value by providing solutions to social problems, with a secondary purpose of generating profit and returns −Combines the creativity, business smarts, passion, and work of the traditional entrepreneur with a mission to change the world for the better •Benefit corporation allowed in many states

scenario building

•forecasting technique that looks at current trends and discontinuities and visualizes future possibilities −Ex. Active shooter training

relational coordination

•frequent horizontal coordination and communication carried out through ongoing relationships of shared goals, shared knowledge, and mutual respect − Employees coordinate directly with each other across units --Walmart and bobcat reevaluated their structure between employees

equity financing

•funds that are invested in exchange for ownership in the company

permanent teams

•groups of employees who are organized in a way similar to a formal department

multidomestic strategy

•handling of competition in each country remains independent of industry competition in other countries −Especially important for service companies

descriptive

•how managers actually make decisions in complex situations

strategy formulation

•includes the planning and decision making that lead to the establishment of the firm's goals and the development of a specific strategic plan

coalition

•informal alliance among managers who support specific goal −Without a coalition, powerful groups can derail the decision-making process

programmed decisions

•involve situations that have occurred often enough to enable decision rules to be developed and applied in the future

joint venture

•involves a strategic alliance or program by two or more organizations

collaboration

•joint effort between people from two or more departments to produce outcomes that meet a common goal or shared purpose and that are typically greater than what could be achieved working alone

workflow technology

•knowledge, tools, techniques, and activities used to transform organizational inputs into outputs

Nonprogrammed decisons

•made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization (employee slashes tires)

line authority

•managers have formal authority to direct and control immediate subordinates −Line departments perform tasks that reflect the organization's primary goal and mission

staff authority

•narrow authority that includes the right to advise, recommend, and counsel in the staff specialists' area of expertise −Staff departments support line departments

strategic goals

•official goals; broad statements describing where the organization wants to be in the future

standing plans

•ongoing plans that provide guidance for tasks or situations that occur repeatedly within the organization −Include organizational policies, rules, and procedures −Standard operating procedures −How to handle grievances, social media, etc.

BCG matrix

•organizes business along two dimensions—business growth rate and market share

bounded rationality

•people have limits or boundaries on how rational they can be

project manager

•person who is responsible for coordinating the activities of several departments for the completion of a specific project −Project manager is not a member of one of the departments being coordinated

business level strategy

•pertains to each business unit or product line

functional level strategy

•pertains to the major functional departments within the business unit

corporate level strategy

•pertains to the organization as a whole and the combination of business units and product lines that makes up the corporate entity

strategy

•plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals

single-use plans

•plans developed to achieve objectives that are not likely to be repeated in the future −Include programs and projects (only gonna use these a couple times)

crisis planning

•preparing organization, managers, and employees to cope with catastrophic events that could destroy the firm

intuition

•quick apprehension of decision situation based on experience but without conscious thought

stretch goals

•reasonable yet highly ambitious and compelling goals, characterized by both extreme difficulty and extreme novelty, that energize people and inspire excellence −Ex. Mi Mclaren jajaja

operational goals

•results expected from departments, work groups, and individuals −Precise and measurable

certainty

•situation in which all information the decision maker needs is fully available

entrepreneur

•someone who engages in entrepreneurship

tall structure

•span of management that is narrow and has many hierarchical levels

flat structure

•span of management that is wide and has few hierarchical levels (a lot more horizontal and less layers)

diversification

•strategy of moving into new lines of business

task force

•temporary team or committee designed to solve a problem involving several departments

division of labor

•the degree to which organizational tasks are subdivided into separate jobs −Losing popularity because too much specialization leads to employee isolation and boredom

organizing

•the deployment of organizational resources to achieve strategic goals

authority

•the formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizationally desired outcomes

functional structure

•the grouping of activities by common function from the bottom to the top of the organization •Positions are grouped into departments based on similar skills, expertise, work activities, and resource use

coordination

•the managerial task of collaborating across departments

accountability

•the mechanism through which authority and responsibility are aligned

mission

•the organization's reason for existence

decision making

•the process of identifying problems and opportunities and then resolving them

entrepreneurship

•the process of initiating a business venture, organizing the necessary resources, assuming the associated risks, and enjoying the rewards −Can be non-profit or for profit −Johnny B is great example about taking risks

matrix boss

•the product or functional boss who is responsible for one side of the matrix

tactical goals

•the results that major divisions and departments within the organization intend to achieve −Apply to middle management

business incubator

•typically provides shared office space, management support services, and management and legal advice to entrepreneurs −Virtual incubators do not require entrepreneurs to set up on site

sole proprietorship

•unincorporated business owned by an individual for profit −Majority of businesses in the United States −Easy to start −Few legal requirements −Proprietor has total ownership and control −Owner has unlimited liability −Financing can be harder to obtain

partnership

•unincorporated business owned by two or more people −Easy to start −Use a formal partnership agreement §Specifies how partners share responsibility and resources §Specifies how partners contribute expertise −Unlimited liability −Often dissolve within five years

globalization strategy

•use of standardized product design and advertising strategies throughout the world −Based on the assumption that a single global market exists for many consumer and industrial products

strategy map

•visual representations of the key drivers of an organization's success −Show how specific goals and plans in each area are linked

competitive advantage

•what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace

analytical style

− base decisions on all available rational data

anchoring bias

− occurs when we allow initial impressions, statistics, and estimates to act as anchors to our subsequent thoughts and judgements (halo effect)

core competence

− something the organization does especially well in comparison to its competitors

conceptual style

− use a broad amount of information to solve problems creatively

Authority characteristics

−Authority is vested in organizational positions, not people −Authority flows down the vertical hierarchy −Authority is accepted by subordinates

Traits of Entrepreneurs

−Autonomy −Entrepreneurial sacrifice −High energy −Need to achieve −Locus of control −Self confidence

limitations of planning

−Can create too much pressure −Can create a false sense of certainty −May cause rigidity in a turbulent environment (ex. COVID) −Can get in the way of intuition and creativity

classical model assumptions

−Decision maker operates to accomplish known goals; problems are defined −Decision maker strives for certainty and gathers information; results are calculated −Criteria for evaluation of alternatives are known; selects alternative that maximizes economic return −Decision maker is rational and uses logic; decision maximizes attainment of organizational goals

process of starting an online business

−Find a market niche −Create a professional Web site −Choose a domain name −Know when to pivot (change strategic directions) −Use social media

departmentalization: 5 approaches

−Functional −Divisional −Matrix −Team −Virtual network

administrative model assumptions

−Goals are often vague and conflicting −Managers often unaware of problems or opportunities −Rational procedures are not always used; simplistic view of problems −Managers' searches for alternatives are limited −Most managers settle for satisficing

how important is strategic management?

−It determines which organizations succeed and which ones struggle −Strategic blunders can hurt a company

planning approaches

−Management by objectives (MBO) −Single-use plans −Standing plans

political model assumptions

−Organizations are made up of groups with diverse interests, goals, and values −Information is ambiguous and incomplete −Managers do not have the time, resources, or mental capacity to identify all dimensions and process all information regarding a problem −Decisions are the result of bargaining and discussion among coalition members

3 approaches to understanding corporate level strategy

−Portfolio strategy −Boston Consulting Group (BCG) matrix −Diversification

benefits of planning

−Provide a source of motivation and commitment −Guide resource allocation −Are a guide to action −Set a standard of performance

factors that influence centralization

−Rapid change and uncertainty in the environment are associated with decentralization −Fits the firm's strategy −Crisis requires centralization

4 categories of corporate portfolio

−Star −Cash cow −Bright prospect −Dog

launching a start-up process

−Start with an idea −Write a business plan −Choose a legal structure −Arrange financing

what does it mean to think strategically about the organization and competition?

−Take the long-term view −See the big picture −Positively affect performance and financial success •Today's environment requires everyone to think strategically

organization structure

−The set of formal tasks assigned to individuals and departments −Formal reporting relationships −The design of systems to ensure effective coordination of employees across department

evidence based decision making

−a commitment to make more informed and intelligent decisions based on the best available facts and evidence

electronic brainstorming

−brings people together in an interactive group over a computer network

coalition management

−building an alliance of people who support managers and influence efforts toward achieving goals

escalating commitment

−continuing to invest time and money in a solution even when there is strong evidence that it is not appropriate

postmortem or after action review

−disciplined procedure whereby managers invest time in reviewing the results of decisions on a regular basis and learn from them

continuous process production

−entire workflow is mechanized and runs without stopping

small batch production

−firms produce goods in batches of one or a few products designed to customer specification

venture capital firms

−group that invests money in new or expanding businesses for ownership and potential profits

confirmation bias

−occurs when a manager puts too much value on evidence that is consistent with a favored belief or viewpoint and discounts evidence that contradicts it

synergy

−occurs when organizational parts interact to produce a joint effect that is greater than the sum of its parts acting alone

need to achieve

−people are motivated to excel and pick situations in which success is likely

directive style

−prefer simple, clear-cut solutions to problems

mass production

−standardized production runs of a large volume of identical products

groupthink

−tendency of people in groups to suppress contrary opinions (go with what everyone is saying; appease people)

brainstorming

−uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem

angel financing

−wealthy individual who believes in a start-up provides personal funds and advice to help the business get started

risk propensity

−willingness to undertake risk in exchange for the opportunity of gaining an increased payoff