Principles of Management Exam 2

What is a strategy?

A plan of action to meet a goal

Understand BCG matrix.

- A concept developed by the Boston Consulting Group (BCG) that evaluates strategic business units with respect to two dimensions—business growth rate and market share—and classifies them as cash cows, stars, question marks, or dogs.

Managers may make bad decisions, what are the biases that are always there?

- Being influenced by initial impressions. - Justifying past decisions. - Seeing what you want to see - Perpetuating the status quo - Being influenced by emotions. - Being overconfident

What is certainty, risk, uncertainty, ambiguity?

- Certainty: A situation in which all the information the decision maker needs is fully available. - Risk: Means that a decision has clear-cut goals and good information is available, but the future outcomes associated with each alternative are subject to chance. - Uncertainty: Occurs when managers know which goals they want to achieve, but information about alternatives and future events is incomplete. - Ambiguity: A condition in which the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable.

What is the difference between classical, administrative, and political models of decision making? Which one is the most/least useful?

- Classical Model: A decision-making model based on the assumption that managers should make logical decisions that are economically sensible and in the organization's best economic interest. - Administrative Model: A decision-making model that includes the concepts of bounded rationality and satisfying and describes how managers make decisions in situations that are characterized by uncertainty and ambiguity. - Political Model: takes into consideration that many decisions require debate, discussion, and coalition building.

What are the four major decision styles? Know the difference between them.

- Directive Style: Being influenced by emotions. - Analytical Style: like to consider complex solutions based on as much data as they can gather. - Conceptual Style: also like to consider a broad amount of information. However, they are more socially oriented than those with an analytical style and like to talk to others about the problem and possible alternatives for solving it. - Behavioral Style: often the style adopted by managers who have a deep concern for others as individuals

What does Managing by Objectives mean? What does Managing by Means mean?

- MBO: a method whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance. - MBM: an approach that focuses people on the methods and processes used to attain results, rather than on the results themselves.

What are the types of decisions and problems? Know what is a programmed/nonprogrammed decision.

- Programmed Decision: A decision made in response to a situation that has occurred often enough to enable managers to develop decision rules that can be applied in the future. - Non programmed Decision: A choice made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organization.

What are the levels of goals (plans)? Think of examples of strategic goals (strategic plans), tactical goals (tactical plans), and operational goals (operational plans).

- Strategic Goals: are broad statements describing where the organization wants to be in the future. These goals pertain to the organization as a whole rather than to specific divisions or departments. -Strategic Plans: define the action steps by which the company intends to attain strategic goals. The strategic plan is the blueprint that defines the organizational activities and resource allocations—in the form of cash, personnel, space, and facilities—required for meeting these targets. - Tactical Goals: the results that major divisions and departments within the organization intend to achieve. These goals apply to middle management and describe what major subunits must do for the organization to achieve its overall goals. - Tactical Plans: designed to help execute the major strategic plans and to accomplish a specific part of the company's strategy. In a business or nonprofit organization, tactical plans define what major departments and organizational subunits will do to implement the organization's strategic plan. - Operational Goals: The results expected from departments, work groups, and individuals. They are precise and measurable. - Operational Plans: specify the action steps toward achieving operational goals and support tactical activities.

What is a scenario building? What is crisis planning?

- an approach where managers look at trends and discontinuities and imagine possible alternative futures to build a framework within which unexpected future events can be managed. - preparing organizations to cope with sudden catastrophic events that could destroy the firm.

What is decentralized planning? What is the difference between a stretch goal and a big hairy audacious goal?

- an approach where top executives or planning experts work with managers in major divisions or departments to develop their own goals and plans. - Stretch Goal: reasonably yet highly ambitious and compelling goal that energizes people and inspires excellence. - BHAG: any goal that is so big, inspiring, and outside the prevailing paradigm that it hits people in the gut and shifts their thinking.

What is SWOT analysis? Why do we need it? What does S, W, O, and T stand for?

- an audit or careful examination of strengths, weaknesses, opportunities, and threats that affect organizational performance.

What is a contingency plan? Why do we need it?

- identifies important factors in the environment and defines a range of alternative responses to be taken in case of emergencies, setbacks, or unexpected conditions. It gives companies backup plans in case of emergencies.

What is brainstorming, evidence-based decision making? What is the importance of a devil's advocate? Why should we avoid groupthink? What is escalating commitment?

1. Brainstorming: A technique that uses a face-to-face group to spontaneously suggest a broad range of alternatives for making a decision. 2. Evidence-based decision making: A process founded on a commitment to examining potential biases, seeking and examining evidence with rigor, and making informed and intelligent decisions based on the best available facts and evidence. 3. Importance of Devil's Advocate: who has the role of challenging the assumptions and assertions made by the group. The devil's advocate may force the group to rethink its approach to the problem and avoid reaching premature conclusions. 4. Groupthink: When people slip into groupthink, the desire for harmony outweighs concerns over decision quality. Group members emphasize maintaining unity rather than realistically challenging problems and alternatives. People censor their personal opinions and are reluctant to criticize the opinions of others. 5. Escalating Commitment: Refers to continuing to invest time and money in a decision despite evidence that it is failing.

Understand the six steps in the management decision-making process?

1. Recognition of Decision Requirement2. Diagnosis and Analysis of Causes3. Development of Alternatives4. Selection of Desired Alternative5. Implementation of Chosen Alternative6. Evaluation and Feedback

What are the benefits and limitations of planning?

Benefits: -Goals and plans provide a source of motivation and commitment. - Goals and plans guide resource allocation. - Goals and plans are guides to action. - Goals and plans set a standard of performance. Limitations: - Goals and plans can create too much pressure. - Goals can create a false sense of certainty. - Goals and plans may cause rigidity in a turbulent environment. - Goals and plans can get in the way of intuition and creativity.

What is a mission and what is a mission statement? Why do we care?

Mission: an organization's purpose or reason for existence. Mission Statement: a broadly stated definition of an organization's basic business scope and operations that distinguishes it from similar types of organizations. - We care because mission's and mission statements can enhance employee motivation and organizational performance.

What is the organizational planning process? Know 5 elements in the process.

process that prevents managers from thinking merely in terms of day-to-day activities. 1. Develop the plan. 2. Translate the plan. 3. Plan operations. 4. Performance Management. 5. Monitor and Learn

What is diversification?

the strategy of moving into new lines of business.