MGMT 2 Exam Textbook
What kind of questions are asked during after-action review
"What was the intent?" "What actually happened?" "What did we learn?" Encourages people to take responsibility for their efforts and accomplishments
5 steps in the decision-making process
1) Identify & define problem 2) Generate & evaluate alternative solutions 3) Decide on preferred course of action 4) Implement decision 5) Evaluate results
4 steps of the central process
1) Set performance objectives and standards 2) Measure actual performance 3) Compare actual performance with objectives and standards 4) Take corrective action as needed
Satisficing decisions
1st alternative that appears satisfactory
Long-range plans
3 or more years
San José Copper and Gold Mine collapse in Chile
32 miners & their shift leader, Luis Urzúa, "Most difficult moment was when the air cleared and we saw the rock" Urzúa Trapped 2,300 feet below the surface for 69 days After the rescue shaft was completed, Urzúa was the last out
Strategic intent
A clear sense of where you are going in the future
Why aren't decision-making processes complete until results are evaluated
A decision isn't much good if it doesn't achieve the desired outcomes or causes undesired side effects
Analytical competency
Ability to evaluate & analyze info to find meaningful patterns, make decisions, & solve real problems
Information competency
Ability to locate, retrieve, organize, & display info of potential value to decision making & problem solving
Technological competency
Ability to understand new technologies and use them to their best advantage
Intuitive thinkers
Abstract & unstructured situations Idealistic, prone to intellectual and theoretical positions Logical Impersonal Avoid details
Good Planning Makes Us and Our Organizations...
Action oriented Priority oriented Advantage oriented Change oriented Control oriented
Strategy
Action plan for allocating resources to accomplish long-term goals
An individual with flexibility
Adjusts career and life plans to fit new and developing opportunities
Sample Web-Based Business Models
Advertising model Brokerage model Community model Freemium model Infomediary model Merchant model Referral model Subscription model
What program was pioneered by the US army & now used in many other settings
After-action review
Cooperation strategies focus on
Alliances & partnerships
Nonmonetary budgets
Allocate resources such as labor, equipment, and space
Fixed budget
Allocates a fixed amount of resources for a specific purpose
Organizing
Allocating and arranging resources to accomplish tasks
Flexible budget
Allows resources to vary in proportion with various levels of activity
Ajax Case Step 2
Alternatives considered—close plant on schedule, delay closing & try again to sell it to another firm, offer to sell plant to employees & local interests, close plant & offer employees transfers to other Ajax locations, close plant, offer transfers, help employees find new jobs around Murphysboro
Sensation feelers
Analysis and human relations Realistic Open communicators Sensitive to feelings
1st to market with an innovative product linking design, technology, and customer appeal
Apple & its iPad
Example of backward vertical integration
Apple Compute Firm bought chip manufacturers to give it more privacy and sophistication in developing microprocessors
Who are tactics in sports teams decided by
Assistant coaches, in consultation with the head coach
Example of feedforward controls
At fast-food restaurants preliminary control of ingredients plays an important role in quality programs Suppliers of hamburger buns produce them to exact specifications
Bureaucratic control
Authority, policies, procedures, job descriptions, budgets, and day-to-day supervision ensure people behave in ways consistent with organizational interests
Good management of goal setting helps to
Avoid problems, keep goals clear, make them challenging but attainable, allow participation, set and discuss goals frequently, and allow room for failure
Why was poor contingency planning in the news when debates raged over how BP managed the disastrous Deepwater Horizon oil spill in the Gulf of Mexico
BP failed to contain the spill quickly & to anticipate & have contingency plans in place to handle such a crisis
Feedforward/preliminary controls,
Before work begins Forward-thinking and proactive approach We should all try to follow
Analytical competency examples
Being able to digest & sort through info, even large amounts of data, & use it to make good decisions that solve problems
Competitive advantage
Being able to outperform rivals
Complacency trap
Being passively carried along by the flow of events
Relative comparisons
Benchmark actual performance against other people, work teams, or organizations
Planning helps us to deal with such tendencies by challenging the status quo and reminding us not to always accept things as they are. One way to do this is through
Benchmarking
1 reason we underestimate our creativity is too much focus on
Big-C creativity
Management by exception
Boss looking at department performance compared to previous performance to determine why the department fell short in some areas so they can prescribe corrective action Giving attention to high-priority situations that show the greatest need for action
Brokerage model
Bring buyers and sellers together for online business transactions and takes a percentage from the sales (e.g., eBay, Priceline)
Multidomestic strategy example
Bristol Myers, Procter & Gamble, and Unilever all vary their products to match consumer preferences in different countries and cultures
Intuitive feelers
Broad and global issues Insightful Tend to avoid details Comfortable with intangibles Flexibility and human relationships
Vertical integration
Business acquires its suppliers (backward vertical integration) or its distributors (forward vertical integration)
Liquidation
Business closes down and sells its assets to pay creditors
B2B business strategies
Business-to-business. Link businesses with members of their supply chains
B2C business strategies
Business-to-consumer Use Web and apps to link businesses directly with customers
Strategic control
CEO and other top managers must stay in close with the strategy, know whether it is successful, and recognize when the strategy needs to be changed or discarded
Engineering comparisons
Carefully measure routine to establish the times expected
3 different conditions or problem environments in which managers make decisions
Certainty, risk, uncertainty
Decision
Choice among possible alternatives
Typical business strategy decisions include
Choices about product and service mix, facilities locations, and new technologies
What are 2 companies that filed for Chapter 11 bankruptcy and were successful
Chrysler and General Motors
Vision
Clarifies purpose of the organization & what it hopes to be in the future
How to write a good performance objective
Clarify target Make it measurable Define timetable Avoid the impossible Add challenge Don't overcomplicate
2 ways that alternatives get explored & decisions are made in step 3
Classical and behavioral models
Mission
Clear and ideally sense of purpose of why you exist
Policy
Communicates broad guidelines for making decisions & taking action in specific circumstances
Step 2 in planning
Compare where you are at present with the objectives Establishes a baseline for performance
Cost-benefit analysis
Compares what an alternative will cost with its expected benefits Benefits should exceed costs Alternative should be timely, acceptable to many stakeholders, and ethical The better the pool of alternatives/analysis, the more likely you'll get a good decision
Planning focuses attention on priorities and helps us to avoid the
Complacency trap
What are the different growth strategies
Concentration Diversification
Restructuring & divestiture strategies focus on
Consolidation
Escalating commitment
Continuation of a course of action even when it's not working
Outsourcing alliances
Contracting to purchase specialized services from another organization
Step 3 of control process
Control compares results with objectives & standards
Step 2 of control process
Control measures actual performance
Step 4 in control process
Control takes corrective action as needed
3 levels of strategies
Corporate Business Functional
Retrenchment strategy
Correct performance difficulties by making radical changes to an organization's current ways of operating
Short-range plans
Cover a year or less
Why are creative decisions more likely when the person has a lot of expertise
Creativity extends in new directions for something we are already good at or know something about
One of the most challenging of all decision situations
Crisis
C2C business strategies
Customer-to-customer Use Web and apps to link customers to one another, with the host site collecting a fee for setting up the opportunity
Multidomestic strategy
Customize products and advertising to fit local cultures and needs
Research shows that downsizing is most successful when
Cutbacks are done selectively and focused on key performance objectives
Downsizing
Cuts the size of operations and reduces the workforce
Zero-based budget
Deals with budgeting problem by approaching each budget period as if it were brand new No guarantee for renewing any past funding Helps to eliminate waste by making sure scarce resources are not spent on unproductive, outdated, or low-priority activities
Ajax Case
December 31, Ajax decided to close Murphysboro plant Every employee was fired and given severance pay equal to 1 week's pay per year of service
Examples of certain enviornments
Decision to take out a fixed-rate loan Can make decision knowing future interest costs and repayment timetables
How did the miners survive
Decisions Urzúa made as shift leader—organizing the miners into work shifts, keeping them busy, studying mine diagrams, making escape plans, raising morale—all contributed to the successful rescue Chile's President Sebastian Pinera said, "He was a shift boss who made us proud"
Step 1 in planning
Define objectives and identify the specific results you want to achieve
5 steps of implementing the planning process
Define your objectives. Determine where you stand vis-à-vis objectives Develop premises regarding future conditions Make a plan Implement the plan and evaluate results
Step 1 related to Ajax Case
Defines problem as how to minimize impact of plant closing on the employees, their families, & the community
3 common mistakes in identifying & defining the problem
Defining problem too broadly or narrowly Focusing on symptoms instead of causes Dealing with the wrong problem
B2B business strategy example
Dell Computer sets up special Web site services that allow major corporate customers to manage their accounts online
Procedure/rule
Describes exactly what actions to take in specific situations Often found in employee handbooks/manuals as SOPs (standard operating procedures)
BCG Matrix
Developed by the Boston Consulting Group Strategic management framework analyzes business and product strategies based on market growth rate and market share
Operational/tactical plans
Developed to implement strategic plans Shorter-term Step-by-step
The makers of Coke and Pepsi follow a ____ strategy
Differentiation
Porter believes that competitive strategies can be built around
Differentiation, cost leadership, and focus
When do nonprogrammed decisions work well
Difficult & dynamic circumstances
Restructuring approaches
Downsizing Diverstiture
What way does the hierarchy flow
Downwards
Output standards examples
Earnings per share for a business and standing ovations for a symphony
How do participation and involvement help build commitments to plans
Easier to get commitment when people responsible for implementation have opportunity to participate Better plans, deeper understanding, strengthened commitment to fully implementing the plans, increase creativity & info available
C2B business strategy example
Elance Links customers needing a special project completed—say a Web animation or a document translation task—with businesses and independent contractors who are willing to bid on and complete the project
Goal of Chapter 11 bankruptcy is to
Emerge from bankruptcy as a stronger and profitable business
Common human resource policies address such matters as
Employee hiring, termination, performance appraisals, pay increases, promotions, discipline, and civility
T. J. Rodgers, founder and former CEO of Cypress Semiconductor, supports a planning system where
Employees work with clear and quantified work goals that they assist in setting Believes system helps people identify problems before they interfere with performance
What should be done at each step along the way in the decision-making process
Ethics double-check
Good first step in checking the ethics of a decision
Evaluate using 4 criteria described in the work of ethicist Gerald Cavanagh and his associates
Goals that are set unrealistically high can have negative consequences that include
Excessive stress for goal seeker, poor performance results, possible unethical or illegal behavior
Step 3 Ajax Case
Executives decide to close the plant, offer employees transfers to company plants in another state, and help displaced employees find new jobs in and around Murphysboro
Uncertain environment
Exists when facts are few & info is so poor that managers have a difficult time assigning probabilities Most difficult decision condition & very common Decisions depend on intuition, judgment, informed guessing, and hunches
Related diversification
Expanding into similar or complementary new business areas
Growth strategies focus on
Expansion
Diversification
Expansion occurs by entering new business areas
Historical comparisons
Experience establishes a baseline to evaluate current performance
Example of feedback controls
Experiences as a student Most course evaluation systems ask, "Was this a good learning experience?" only when the class is almost over
Unrelated diversification example
Exxon once owned Izod
Lack-of-participation error
Failure to include the right people in the decision-making process
True or False: While strategy provides the targets, mission and strategic intent provide the plan for reaching them
False While mission and strategic intent provide the targets, strategy provides the plan for reaching them
3 types of managerial controls
Feedforward, concurrent, feedback
6 rules for crisis management
Figure out what is going on Remember that speed matters— Remember that slow counts, too Respect the danger of the unfamiliar Value the skeptic Be ready to "fight fire with fire"
Types of budgets
Financial Operating Nonmonetary Flexible 0-baed Fixed
What do functional plans include
Financial plans Facilities plans Marketing plans Human resource plans Production plans
In large, complex organizations, such as PepsiCo, IBM, and General Electric, decisions on corporate strategy identify how the
Firm intends to compete across multiple industries, businesses, and markets
Why does diversification involve risk
Firm may be moving outside its existing areas of competency
Intuitive thinking
Flexible & spontaneous Creative Imaginative solutions Many aspects of a problem at once, jump quickly from one issue to another
Planning can help sharpen ____ and increase ____
Focus Flexibility
Learning goals
Focus on acquiring knowledge and skills necessary for performance
Personal development objectives
Focus on expanding job knowledge or skills
Improvement objectives
Focus on improving performance in a specific way
Concurrent/steering controls
Focus on what happens during the work process Take place while people are doing their jobs
Porter's 2 forms of the focus strategy
Focused differentiation Focused cost leadership
Business strategy
Focuses on the strategic intent for a single business unit or product line
Examples of input standards
For a college professor might be having an orderly course syllabus, showing up at all class sessions, and returning exams and assignments in a timely fashion
What did Michael Porter say is the 5 forces model analyzes industry attractiveness
Force 1:Competitors Force 2:New entrants Force 3:Suppliers Force 4:Customers Force 5:Substitutes
Transnational strategy example
Ford strives to be a global brand, not just an American one Draws on design, manufacturing, and distribution expertise from around the world and modifies products within regions to meet local tastes
Periodicals such as Bloomberg Business, Fortune, and The Economist regularly report ____ of industry conditions, interest rates, unemployment trends, and national economies, among other issues
Forecasts
Step 3 in planning
Formulate premises about future conditions
Henry Schacht, former CEO of Cummins Engine Company, once discussed control in terms of what he called
Friendly facts- reinforce what you are doing are nice because they help in terms of psychic reward
In business, tactical plans often take the form of
Functional plans
Example of a company where strategic management is complicated because it operates multiple businesses selling many different products and services
General Electric (GE)
Creativity
Generation of a novel idea or unique approach to solving performance problems or exploiting performance opportunities
Globalization strategy example
Gillette sells and advertises razors around the world You get the same product in Italy as in America
Framing error example
Glass 1/2 empty vs 1/2 full dilemma
Supplier alliances
Guarantee a smooth and timely flow of quality supplies among alliance partners
Functional strategy
Guides activities to implement higher-level business and corporate strategies Within a specific functional area
Leading
Guiding efforts of human resources to ensure high levels of task accomplishment
How does Michael Porter describe a strategic leader
Has to be the guardian of trade-offs Create a sense of urgency Must make sure that everyone understands the strategy Must be a teacher
Value of the control equation depends on
Having goals that clearly identify desired performance and measurements that clearly define actual performance
Who came up with the term satisficing decisions
Herbert Simon
Why do well-intentioned people sometimes make bad decisions
Heuristics Framing error Confirmation error Escalating commitment
Good planning facilitates coordination by linking people and subsystems in a
Hierarchy of objectives
Stars in the BCG Matrix
High market shares in high-growth markets Produce large profits through substantial penetration of expanding markets Preferred strategy is growth Offer future potential to do the same or even better
Cash cows
High market shares in low-growth markets Produce large profits and a strong cash flow, albeit with little upside potential Preferred strategy is stability or modest growth Matrix advises firms to "milk" these businesses to generate cash for investing in other more promising areas
Strategic question at the business strategy level is
How are we going to compete for customers within this industry and in this market?
Strategic question for functional strategies
How can we best use resources within the function to support the business strategy?
Step 5 Ajax case
How effective was Ajax's decision? Well, we don't know for sure After Ajax ran the ads, the plant's industrial relations manager said: "I've been very pleased with the results." However, we need more info for a true evaluation
Certain environment
Ideal decision situation where factual info exists on alternative courses of action & their consequences
Contingency planning
Identifies alternative courses of action that can be implemented to meet the needs of changing circumstances
Careful attention to ethical analysis helps
Identify any underlying moral problems moving from one step to anothe
Managers as problem avoiders
Ignore info that signals a performance threat or opportunity Inactive in gathering info & prefer not to make decisions or deal with problems
Sensation thinkers
Impersonal Realistic Hard facts, clear goals, certainty, & controllable situations
Step 5 in planning
Implement plan and evaluate results
When a team leader and team member work together in an MBO approach, it is helpful to consider these 2 types of objectives
Improvement Personal development
Strategic question at the corporate strategy level
In what industries and markets should we compete?
Participatory planning
Includes in process people whose ideas and inputs can benefit the plans and whose support is needed for implementation Unlocks the advantages of group decision making
The levels of risk and uncertainty in problem environments tend to ____ the higher one moves in management ranks
Increase
Growth strategies
Increase the size and scope of current operations
Functional plans
Indicate how different parts of the enterprise contribute to the overall strategy
Market control
Influence of competition on the behavior of organizations and their members
Clan control
Influences behavior through social norms and peer expectations Power of collective identity
Risk environments
Info & facts are incomplete Future is hard to predict Alternative courses of action & consequences can be analyzed only as probabilities
Strategic intent of Khan Academy
Inspire the world to learn
Strategic leadership
Inspiring people to successfully implement organizational strategies
According to Porter, an unattractive industry will have
Intense competitive rivalries, substantial threats in the form of possible new entrants and substitute products, and powerful suppliers and buyers who dominate bargaining with the firm
Global strategies focus on
International business opportunities
SWOT analysis
Involves a detailed exam of organizational strengths and weaknesses & environmental opportunities and threats
Technological competency examples
Involves moving skills —social media, smart devices, and more—into work-related applications
How can managers react to crises the wrong way
Isolate themselves Denies them access to crucial info when they need it most
Sustainable competitive advantage
It's difficult for competitors to imitate
Stretch goals
Jack Welch, former CEO of GE, believed in these Performance targets that we have to work extra hard and really stretch to reach
Uncertain environment example
Japanese built a nuclear power plant at Fukushima were decision makers just taking a calculated risk, or were they acting in the face of absolute uncertainty?
Personal development objective example
Learn the latest version of our firm's customer relationship management software
Types of goals by scholars Gary Latham and Gerard Seijts
Learning Outcome
Even though improving performance through learning is one of the great opportunities offered by the control process, the potential benefits are realized only when
Learning is translated into corrective actions
All budgets play important roles in organizations by
Linking planned activities with the resources needed to accomplish them
Most extreme form of retrenchment is
Liquidation
Types of retrenchment
Liquidation Restructuring
Plan
List of actions to accomplish the objectives
Although to-do lists can help, they aren't much good unless
Lists contain high-priority things
According to Porter, an attractive industry will have
Little existing competition, few threats from new entrants or substitutes, and low bargaining power among suppliers and buyers
Information competency examples
Locating credible & valuable information
Management researcher Elliot Jaques found that very few people have the capacity to think ____
Long term
Scenario planning
Long-term version of contingency planning Identifies several alternative future scenarios
Strategic plans
Longer-term Set broad & comprehensive directions for an organization Take a vision & set out ways to turn it into reality
Question marks
Low market shares in high-growth markets Don't generate much profit at the moment Upside potential is there because of the growing markets Make for difficult strategic decision making Target only the most promising question marks for growth, while retrenching those that are less promising
Dogs
Low market shares in low-growth markets Produce little if any profit Low potential for future improvement Preferred strategy is retrenchment by divestiture
Example of focused cost leadership strategy
Low-fare airlines offer heavily discounted fares and no frills service for customers who want to travel point to point for the lowest prices
Step 4 in planning
Make a plan
Classical decision model
Making decisions under complete info
Behavioral decision model
Making decisions with the limited info & bounded rationality
Restructuring
Making major changes to cut costs and buy time to try new strategies to improve future success
Step 4 Ajax Case
Management ran an ad in newspapers Announced to potential employers an "Ajax skill bank" composed of "qualified, dedicated, and well-motivated employees with a variety of skills and experiences" Ad urged interested employers to contact Ajax for further info
Hierarchy of objectives
Means-ends chain where lower-level objectives (the means) lead to higher-level objectives (the ends)
Output standards
Measure actual outcomes or work results
Input standards
Measure work efforts Helpful in situations where outputs are difficult or expensive to measure
Best practices
Methods that lead to superior performance
Order from top to bottom of hierarchy of objectives
Mission & purpose Top management objective Senior management objective Middle management objective Team leader objective
To successfully put strategies into action, the entire organization and all its resources and systems must be
Mobilized
Controlling
Monitoring task accomplishments and taking necessary corrective action
Advantages of group decisions
More info available More alternatives considered Increased understanding Greater commitment
Findings of Elliot Jacques
Most of us work comfortably with only 3-month time spans Only 1 person in several million can handle a 20-year time frame
Management consultant Stephen R. Covey says
Most successful executives "zero in on what they do that adds value to an organization"
To Porter's list of what makes a strategic leader we must add
Must be the champion of control
Control equation
Need for Action=Desired Performance−Actual Performance
Example of focused differentiation strategy
NetJets offers air travel by fractional ownership of private jets to wealthy customers
When to think of Little-C creativity
Next time you solve relationship problems at home, build something for the kids, or even find ways to pack too many things into too small a suitcase
Internal/self-control
Occurs as people exercise self-discipline in fulfilling job expectations
Freemium model
Offers a free service and encourages users to buy extras (e.g., Skype, Zynga)
Focused differentiation strategy
Offers a unique product to customers in a special market segment
C2C strategy example
Online marketplaces such as eBay and Etsy, where customers sell, buy, and trade with one another
Confirmation error
Only looking at the info that confirms decision the decision you've already made
How do decision makers behave in certain environments
Only needs to study the alternatives and choose the best solution
Strategic alliances
Organizations join together in partnership to pursue an area of mutual interest
Scholars Gary Latham and Gerard Seijts point out that undesirable effects of goal setting are likely when
Outcome goals are emphasized at the expense of the learning goals on which they depend
Forms of cooperation
Outsourcing alliances Supplier alliances Distribution alliances Co-opetition
P2P business strategies
Peer-to-peer connections Web and apps link persons needing services with those willing to provide them
Related diversification example
PepsiCo purchasing Tropicana Business related to its expertise in the beverages industry
What happens to firms that get into too much unrelated diversification
Performance declines
When actual is more than desired, a ____ exists
Performance opportunity
Most obvious problem-solving situation
Performance threat
When actual is less than desired, a ____ exists
Performance threat/deficiency
Budget
Plan that commits resources to activities, programs, or project Allocates scarce resources among multiple, competing uses
1st function of management
Planning
Why should forecasts be used with caution
Planning aids, not substitutes
Benchmarking
Planning technique that makes use of external comparisons to better evaluate current performance
What are the 4 management functions
Planning, organizing, leading, controlling
Operating budgets
Plot anticipated sales or revenues against expenses
Difference between policy & procedures
Policy sets broad guidelines Procedures define specific actions to be taken
Success with differentiation strategy example
Polo Ralph Lauren Polo redefined how American style and quality is perceived. Polo has always been about selling quality products by creating worlds and inviting our customers to be part of our dream Polo aggressively markets this perception
When an organization's core competencies are unique and costly for others to imitate—say, for example, Amazon's "1-Click" order technology and efficient logistics—they become
Potential sources of competitive advantage
Goal of feedforward controls
Prevent problems before they occur
In what ways do managers approach problems
Problem avoiders Problem seekers
A sexual harassment policy should be backed up with ____ that spell out how to file a sexual harassment complaint, & the steps through which any complaint will be handled
Procedures
Strategy formulation
Process of crafting strategy to fit mission and strategic intent, objectives, and environmental conditions Establishes strategic plan to deliver future competitive advantage
Strategic management
Process of formulating & implementing strategies to accomplish long-term goals & sustain competitive advantage
Problem solving
Process of identifying a discrepancy between an actual and a desired situation and then taking action to resolve it
Forecasting
Process of predicting what will happen in the future
Strategy implementation
Process of putting strategies into action Activates entire organization to put strategies to work
Planning
Process of setting goals & objectives & determining how to best accomplish them
Key Operating Objectives of Organizations
Profits Cost efficiency Market share Product quality Talented workforce Innovation Social responsibility Sustainability
Types of decisions
Programmed & nonprogrammer
Financial budgets
Project cash flows & expenditures
Chapter 11 bankruptcy
Protects firm from creditors while management reorganizes to restore solvency When a firm is in desperate financial condition and unable to pay its bills
Mission of Khan Academy
Provide a free world-class education for anyone anywhere
Community model
Provide a meeting point sold by subscription or supported by advertising (e.g., eHarmony, Facebook)
Infomediary model
Provides a free service while collecting information on users and selling it to other businesses (e.g., Epinions, Yelp)
Advertising model
Provides free information or services and then generates revenues from paid advertising to viewers (e.g., Yahoo!, Google)
Referral model
Provides free listings and gets referral fees from online merchants after directing customers to them (e.g., Shopzilla, PriceGrabber)
How to moderate the risk of diversification
Pursue related diversification
What do periodicals rely on
Qualitative forecasting- uses expert opinions to predict future Quantitative forecasting- uses mathematical models & analysis of data & surveys
Why is the classical decision model too good to be true
Rare to face problems in environments of complete certainty Limits to human info-processing capabilities Cognitive limitations makes it is difficult for us to be fully informed and make perfectly rational decisions
Systematic thinking
Rational, step-by-step, analytical Break complex problems into smaller components Make a plan before taking action
Confirmation error example
Rationalize with statements such as "No one will ever find out" or "The boss will protect me"
Managers as problem seekers
Really good ones Looking for problems to solve or opportunities to explore Proactive info gatherers, forward thinking Anticipate threats & opportunities & are eager to take action to gain the advantage in dealing with them
Little-C creativity
Regular people come up with unique ways to deal with daily events and situations
One of the most common budgeting problems
Resource allocations are rolled over from one time period to the next without any real performance review
Less extreme and more common form of retrenchment
Restructuring
Steps in the strategic management process
Review of current mission, objectives, and strategies to set a baseline for further action Organizational strengths and weaknesses and environmental opportunities and threats are analyzed Strategies are crafted at corporate, business, and functional levels Strategies are put into action
Co-opetition
Revolution mind-set that business competitors can be cooperating partners
Unrelated diversification
Seeking growth in entirely new business areas
Cost leadership strategy
Seeks competitive advantage by operating with lower costs than competitors
Differentiation strategy
Seeks competitive advantage through uniqueness
Concentration
Seeks expansion within an existing business area, one in which the firm has experience and presumably expertise
Divestiture
Selling parts of the organization to refocus on core competencies, cut costs, and improve operating efficiency
Subscription model
Sells access to high-value content through a subscription Web site (e.g., Netflix, Wall Street Journal Interactive)
Merchant model
Sells products directly to customers through e-tailing (e.g., Amazon, Apple iTunes Store)
4 master cognitive styles
Sensation thinkers Intuitive thinkers Intuitive feelers Sensation feelers
Outcome goals
Set actual performance targets
How to avoid escalation trap
Set advance limits on your involvement to a particular course of action (stick with these limits) Make your own decisions (don't follow the lead of others because they are also prone to escalation) Carefully determine why you are continuing a course of action (insufficient reasons to continue, don't) Remind yourself of costs of a course of action (consider saving these costs as a reason to discontinue)
Step 1 of control process
Set performance objectives and standards
Example of concurrent controls
Shift leaders at fast-food restaurants Constantly observe what is taking place Trained to correct things on the spot
2 types of plans relating to time
Short-range Long-range plans
Even most top managers would likely agree that long-range planning is becoming
Shorter and shorter
Part of what makes strategy so challenging today is that the world's fast-changing environment is
Shrinking the period of time competitive advantage can be maintained
Heuristics
Simplifying strategies when making decisions with limited info, time, and energy
Performance opportunity
Situation that offers the possibility of a better future if the right steps are taken now
Performance threat
Situation were something is wrong or like to be wrong
Disadvantages of group decisions
Social pressures to conform Domination by a few Time delays
Nonprogrammed decisions
Solve new or unusual problems full of ambiguities & info deficiencies Craft novel solutions to meet the unique demands of unstructured problems
Goal of concurrent controls
Solve problems as they occur
Programmed decisions
Solve routine & repetitive problems Apply preplanned solutions based on past experience
Framing error
Solving a problem only in the context perceived, whether positive or negative
Crowdsourcing
Special type of social media strategy Uses Web to engage existing & potential customers to make suggestions and express opinions on products and their designs
Objectives
Specific results that 1 wishes to achieve
Best objectives are
Specific, have a timeline Agreement on a measurable end product
Hierarchy of great goals
Specific, measurable, attainable, relevant, timely
Tactical plans example
Sports team involving special teams or plays designed to meet a particular threat or opportunity
Strategic plan example
Sports teams use strategy set by head coach & assistants Goal: win the game Call for tactics
When do you se cost-benefit analysis
Step 2
When planning for the organization as a whole or a major component, the focus is on ____ plans
Strategic
2 types of plan relating to focus
Strategic Operational
E-business strategy
Strategic use of the Web and mobile apps to gain competitive advantage
External control
Structure situations so things happen as planned
When do programmed decisions work well
Structured problems that are familiar & have clear-cut info needs
After-action review
Structured review of lessons learned and results accomplished through a completed project, task force assignment, or special operation
Significance of Salman Khan & Khan Academy
Success helped to spur the development of MOOCs—massive open online courses—as disrupters of the traditional university model of instructors delivering pay-per-credit courses in person and on campus
Do effective managers and leaders use individual or group decision making
Switch back and forth to use the best methods for any given situation
2 types of managerial thinking
Systematic & intuitive
Feedback/postaction controls
Take place after a job or project is done
Transnational strategy
Tap business resources and customer markets worldwide Operates without a strong national identity, hoping instead to blend seamlessly with the global economy
What are the 3 personal creativity drivers
Task expertise Task motivation Creativity skills
Managing by objectives (MBO)
Team leader and member jointly set performance objectives with a timeline and review results
Managers as problem solvers
They make decisions and try to solve problems, but only when required Reactive, gathering info & responding to problems when they occur, but not before Deal well with performance threats, but likely to miss many performance opportunities
Core competencies (special strengths)
Things the organization does well compared to competitors
Crowdsourcing example
Threadless.com Firm's online visitors submit designs for T-shirts Designs are voted on by other viewers—the "crowd"—and top-rated ones get selected for production and sale to customers
Success with the cost leadership strategy requires
Tight cost and managerial controls, as well as products or services that are easy to create and distribute
Key to success for executives on a tight schedule with little time
Time management
Improvement objective example
To reduce quality rejects in our apparel supply chain by 10%
Corporate
Top level Provides direction and guides resource use for the organization as a whole
Why are many organizations developing formal crisis management programs
Train managers in the rules of crisis decision making Assign people to crisis management teams Develop plans to deal with contingencies
Focused cost leadership strategy
Tries to be the low-cost provider for a special market segment
A really good contingency plan will contain
Trigger points for activating preselected alternatives
True or False: Strategic goals set by top management should cascade down the organization to become goals and objectives for lower levels
True
P2P strategy example
Uber—matching riders with drivers, TaskRabbit—matching small jobs with "taskers" willing to do them, and Airbnb—matching travelers with host residences
Planning fallacy
Underestimating time required to complete a task
Crisis
Unexpected problem that can lead to disaster if not resolved quickly and appropriately
Co-opetition example
United and Lufthansa are international competitors They cooperate in the Star Alliance network that allows customers to book both airlines' flights and share frequent flyer programs
C2B business strategy
Use the Web to link customers with businesses to provide products or services Puts the initiative for the transaction in the hands of the potential customer
4 criteria described by Gerald Cavanagh
Utility—Does the decision satisfy all constituents or stakeholders Rights—Does the decision respect the rights of everyone? Justice—Is the decision consistent with the canons of justice? Caring—Is the decision consistent with responsibilities to care?
Knowledge workers
Value to organizations rests with their intellectual and analytical talents, not physical capabilities
Risk environment examples
Variable-rate loan scenario
Types of diversification
Vertical integration Horizontal integration
Globalization strategy
View the world as 1 large market Advertise and sell standard products for use everywhere
What is the cost leadership strategy also known as
Walmart strategy—do everything you can to keep costs so low that you can offer customers lower prices than competitors and still make a reasonable profit
Cognitive styles
Way individuals deal with info while making decisions
E-business strategies use the
Web & apps for business success
An organization with focus knows
What it does best and what it needs to do
Big-C creativity
When extraordinary things are done by exceptional people
When does divestiture often occur
When organizations have become too diversified
Why are creative decisions more likely when people are highly task motivated
When people work hard to resolve a problem, they accomplish something new and different
B2C business strategy example
Whenever you buy a music download from Apple's iTunes Store, order a book from Amazon or shop at Patagonia for the latest outdoor gear, you are the "C" in a B2C strategy
Distribution alliances
Where firms join together to accomplish product or services sales and distribution
Individuals with focus know
Where they want to go in a career or personal situation, and they keep that focus even when difficulties arise
An organization with flexibility is
Willing and able to change and adapt to shifting circumstances
How does Xerox make good use of best practices benchmarks
Xerox has benchmarked L.L.Bean's warehousing and distribution methods, Ford's plant layouts, and American Express's billing and collections
When was scenario planning developed
Years ago at Royal Dutch/Shell Top managers asked themselves: "What will Shell do after its oil supplies run out?" Shell executive said it helps "condition the organization to think" and better prepare for "future shocks" Shell uses it to tackle climate change, sustainable development, fossil fuel alternatives, human rights, and biodiversity
Classic growth by concentration strategies examples
You don't see Chipotle trying to grow by buying bookstores or gas stations; instead, the company keeps opening more restaurants
Example of divestiture
eBay spent $3.1 billion to buy Skype Expected synergies between Skype and eBay's online auction business never developed, Skype was sold to private investors They sold it to Microsoft, which is still working to integrate Skype into its business model
When to think about Big-C creativity
iPhone—Steve Jobs's creativity, or browse Facebook—Mark Zuckerburg's creativity, or chat on WhatsApp—Brian Acton's and Jan Koum's creativity
