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1-22-2019 The Cognitive RevolutionKey PointsHumans can cooperate in large number and flexibly across tasks What is the mechanism that allows us to do this? Two layers of reality The best leaders are masters of both objective and subjective reality 1-24-2019 Governing bodies are not for-profit, exist for a certain population What is organization? Managers operate within an organization. A group of people working together toward a specific purpose, Three Types: For profitNon profit VT Department of state US GovernmentMutual benefit They exist to provide mutual aid to members to advance mutual interests European Commission Democratic party UAWManagement is defined as: The pursuit of organization goals efficiently and effectively by Integrating the work through people Planning, organizing, leading and controlling resources Managing Efficiently and Effectively To be efficient means to use resources- people, money, raw materials, and the like- and wisely and cost effectivelyTo be effective means to achieve results, to make the right decisions and to successfully carry them out so that they achieve the organization's goals. The rewards of studying management You will understand how to: Deal with organization from the outside, Relate to your supervisors Interact with co-workers Manage yourself in the workplace The rewards of practicing management Experience a sense of accomplishment Stretch your abilities and magnifying your rangeBuild a catalog of successful products and servicesMentoring & helping others. The Management ProcessPlan Set the goals and formulate how to achieve them OrganizeYou arrange tasks, people, and other resources to accomplish the work. LeadYou motivate, direct, and otherwise influence people to work hard to achieve the organization’s goals. Control You monitor performance, compare it with goals, and take corrective action as needed Challenges to being an Exceptional Manager 1. Managing for competitive advantage2. Managing for information technology3. Managing for diversity. 4. Managing for globalization5. Managing for ethical standards6. Managing for sustainability 7. Managing for happiness and meaningfulness Managing for Competitive Advantage The ability of an organization to product goods and services more effectively than competitors Having a competitive advantage means: Being responsive to customers Innovation- finding ways to deliver better goods or servicesQuality- making improvements in quality so that consumers choose your product Efficiency- avoiding overstaffing and overuse of raw materials Managing for Information Technology Consumer’s online spend in 2019 ($3.5 trillion) will be double 2015 Internet used to facilitate every aspect of running a business An abundance of new tools: Email, text, social media Cloud computing, big data and Al Telecommuting and videoconferencing Managing for Diversity The future won’t resemble the past. Very long term trend toward an ever interconnected world. Consider: U.S. Non-Hispanic white population will decrease from 62% to 43% by 2060.By 2030, 1 in 5 U.S. residents will be > 65 years old. In the coming years there will be a different mix of women, immigrants, and older people in the general population, as well as in the workforce. Managing for Ethical Standards Ethical behavior is not just a nicety.In 2008, Bernie Madoff confessed to a $50 billion Ponzi scheme, and sentenced to 150 years in prison. Former Tyco International CEO Dennis Kozlowski served prison time for grand larceny, securities fraud, and tax evasion. WorldCom head Bernard Ebbers is serving 25 years for fraud. Wells Fargo CEO John Stumpf steps down after fake accounts scandal. Managing for Sustainability Sustainability Economic Development that meets the needs of the present without compromising the ability of future generations. Our changing climate has brought the issue of being “green” to increased prominence. PepsiCo to Walmart to UPS- recognize a responsibility to address the causes of climate change. Managing for Happiness and Meaningfulness Happiness is getting “what you want”. Meaningfulness is a valued sense of self and purpose in your community. Research shows that a sense of meaningfulness in your life is associated with better health, work and life satisfaction, and performance. Four Levels of Management Team Leaders Responsible for facilitating team activities toward achieving key resultsFirst-Line Managers Make short term operating decisions, directing the daily tasks of non managerial personnel Middle Managers Implement the policies and plans of the top managers above them and supervise and coordinate the activities of the first-line managers below them/ Titles like plant, district or regional manager. Top Managers Make long term decisions about the overall direction of the organization and establish the objectives, policies, and strategies for it Functional Versus General Managers Functional Manager Responsible for just one organizational activity I.e. director of finance, vice president of production General Manager Responsible for several organizational activities examples include: EVP for Production, HR and Finance Managers for Three Types of Organizations For-Profit Organizations Making…. Nonprofit Organizations Offering services to some clients, not to make a profit (i.e. hospitals, colleges, social-welfare agencies) Mutual-Benefit Organizations Aiding members in order to advance their interests (i.e. political parties, farm cooperatives, labor unions, trade associations, clubs) The Skills Exceptional Managers Need Technical Skills The job-specific knowledge needed to perform well in a specialized fieldConceptual Skills The ability to think analytically, to visualize an organization as a whole and understand how the parts work together Human Skills The ability to work well in cooperation with other people to get things done; the ability to motivate, to inspire trust, to communicate with others The Most Valued Traits in Managers The ability to motivate and engage others Work experience outside High energy levels to meet demands of global travel and a 24/7 world Roles Managers Must Play Successfully The Manager's roles: Mintzberg’s useful findings 1. A manager relies more on _____ than on ____ communication. 2. A manager works long hours at an _______ pace. 3. A manager's work is characterized by _______, brevity, and variety. The Mintzberg Study A manager relies more on verbal than on written communication Three Types of Managerial Roles Interpersonal Roles Interact with people inside and outside their work units Figurehead, leader, liaison Informational Roles Receive and communicate information Monitor, disseminator, spokesperson Decisional Roles Use information to make decisions to solve problems or take advantage of opportunities Entrepreneur, disturbance handler, resource allocator, negotiator Sample Test Question CEO Gary Kelly sets the direction and strategy for Southwest Airlines. What type of managerial role is he performing? Interpersonal InformationalDecisional Conclusive The Link Between Entrepreneurship and Management Entrepreneurship Process of taking risks to create a new enterprise Entrepreneur vs. Intrapreneur An entrepreneur is someone who sees a new opportunity for a product or service and launches an organization to try to realize it An intrapreneur is someone who works inside an existing organization who sees an opportunity for a product or service and mobilies the organization’s resources to try to realize it How Do Entrepreneurs and Managers Differ? Being an entrepreneur is what it takes to start a business; they are high-energy, and tend to have high self-confidence and a high tolerance to risk. Being a manager is what it takes to grow or maintain a business. Entrepreneurs and managers both: Have a high need for achievement Have a high tolerance for ambiguity Believe they are in personal control of their destiny Sample Test Question Jamira thought there was an opportunity and opened a new BBQ restaurant on campus. She is a(n): Manager Intrapreneur Entrepreneur Omnipreneur Major Questions You Should Be Able to Answer1.1 What are the rewards of being an exceptional manager? 1.2 What would I actually do - that is, what would be my four principal functions- as a manager? Planning, organizing, leading, and controlling 1.3 Challenges can make one feel alive. What are seven challenged I can look forward to as a manager? 1.4 What are the levels and areas of management I need to know to move up, down, and sideways? Top managers, middle managers, first-line managers, and team leaders1.5 To be a terrific manager, what skills should i cultivate? 1.6 To be an exceptional manager, what roles must i play successfully? 1.7Do i have what it takes to be an entrepreneur? Take risks to create a new enterprise Chapter 1 Review “Setting goals” → planning A group of people who work together to provide aid to members and advance one another's interest are working at a: Mutual-benefit organization According to the textbook, which of the following is NOT one of the three categories of skills managers must possess: Answer→ intercultural Human, Technical, & Conceptual skills are the skills managers must possess Pat and Jesse implement the policies and plans of managers above them and supervise and coordinate the activities of managers below them. They are: Answer→ Middle Managers 1-29-2019 **20%(12 of 60) of Exam questions were on Ch. 1 CLI and Solstice B2B → business to businessB2C→ business to customers Sales and Operations: Good to Great 1. Level 5 Leadership 2. First Who…. Then What 3. Confront the Brutal Facts 4. The Hedgehog Concept 5. A Culture of Discipline 6. Technology Accelerators 7. The Flywheel and the Doom Loop Level 5 Leadership “You can accomplish anything in life, provided that you do not mind who gets credit.” -Harry S Truman Confront the Brutal Facts “One of the biggest mistakes people generally make, and I’m guilty of it too, is wishful thinking. You want something to be true, even if it isn’t true. Always take the position that you are to some degree wrong, and the goal is to be less wrong over time. Solicit critical feedback, particularly from friends.”- Elon Musk“We [use Bridgewater’s ‘idea meritocracy algorithm’] because it eliminates what I believe to be one of the greatest tragedies of mankind, and that is people arrogantly, naively holding opinions in their minds that are wrong—and acting on them—and not putting them out there to stress test them, and that is a tragedy.”- Ray Dalio (founder of Bridgewater, the most valuable hedge fund in history)The Flywheel What is the flywheel?Task Environment 11 groups that present you with daily tasks to handle: Customers Competitors Suppliers Distributors Strategic allies Employee organizations Local communities Financial institutions Government regulators Special-interest groups Mass media Special Interest Groups Groups whose members try to influence specific issues Quiz 1 Review New developments in methods for transforming resources into goods or services are called ____ forces. Technological Which of the following are types of owners a business can have? Stockholder Partnership Sole proprietors Obligations of a Corporation (in order) Being a good global corporate citizen Being ethical in its practice Obeying the law Making a profit Ethical Standards do not vary among countries or cultures False Level of Personal Moral Development with its description Preconventional Obey managers to avoid consequences Conventional Generally adhere to the expectations of others Postconventional Follow internal values and standards Which of the following are required by the Sarbanes-Oxley Act of 2002?A company’s CEO and CFO certify the accuracy of the company’s financial reports Top management abstain from taking personal loans or lines of credit from the company An organization put procedures and guidelines in place for audit committees Companies are expected to benefit the interests of society in addition to the interests of the organization, a concept known as _____ social responsibility (CSR). Corporate The ___ of an organization consists of all those who can claim it as their legal property. Owners The forces that arise form relationship between people in a community are known as ___ forces. Sociocultural The passage of the US Patient Protection and Affordable Care Act during the Obama administration and its impact on employers is an example of which force?Political-legal What are the three levels of personal moral development proposed by Laurence Kohlberg?Following others’ expectations Acting according to internal values Obeying the rules The Sarbanes-Oxley Reform Act was established to monitor ___ of public institutions Financial records Which of the following statements regarding ethical climates is TRUE?An ethical climate significantly affects the frequency of ethical behavior. Garrison Company is in the process of evaluating its operating procedures, code of conduct, and other factors to determine their effect on society. The company is conducting a(n)Social audit Changes in the way politics shape laws and laws shape the opportunities for and threats to organizations are called ____ forces. Political-legal A(n) ___ reflects workers beliefs about whether or not their organization endorses moral behavior.Ethical climate Kendrick believes that it is important to understand why his employees take certain actions because this allows him to motivate them to get the job done. Which managerial viewpoint does Kendrick possess?Behavioral Which of the following would be considered characteristics of Theory Y workers? Imaginative and creative Accepting of responsibility Capable of self-direction A supervisor who considers employees to be irresponsible and wanting to be led rather than wanting to lead would be characteristics of Theory ____ manager. X Management science is sometimes known as Operations research Chapter 3 QuizAt any given organization, employees, owners and the Board of Directors are examples of: Internal stakeholders 1-31-2019 The Triple Bottom Line: People, Planet, Profit Triple bottom line Represents people, planet, and profit (the 3 Ps) Measures an organization’s social, environmental, and financial performance Success can be measured through social audit A systematic assessment of a company’s performance in implementing socially responsible programs Internal Stakeholders Consists of employees, owners, and the board of directors Employees Individuals employed for wages or salary at an organization, especially at the non-executive levelOwners Consists of all those who can claim the organization as their legal property Board of Directors Members elected by the stockholders to see that the company is being run according to their interests External Stakeholders People or groups in the organization’s external environment that are affected by it Inner Ring: the task environmentConsists of 11 groups that present an organization with daily tasks to handle Outer Ring: the general environment Refers to the macro-environment such as economic, technological, and sociocultural The Task Environment Customers Those who pay to use an organization’s goods or services. Competitors People or organizations that compete for customers or for service Supplier Provides raw materials, services, equipment, labor, or energy to other organizations Distributor A person or organization that helps another organization sell tis good and services to customer Strategic Allies The relationship of two organizations who join forces to achieve advantages neither can perform as well alone Employee organizations Labor unions and professional associations Local communities May institute clawbacks (rescinding tax breaks when firms don’t deliver promised jobs), and may engage in crowdfunding (raising money for a project by obtaining many small amounts of money from many people)Financial institutions Banks, savings and loans, and credit unions Government regulators Regulatory agencies that establish ground rules under which organizations may operate Special Interest Groups Groups whose members try to influence specific issues Mass Media The power of print, radio, TV, and the Internet on an organization's news, both good and bad The General Environment Economic Force Consists of the general economic conditions and trends: unemployment,inflation, interest rates, economic growth Technological Force New developments in methods for transforming resources into goods and services Sociocultural Force Influences and trends originating in a country’s, a society's, or a culture’s human relationships and values that may affect an organization Demographic Forces Influences on an organization arising from changes in the characteristics of a population, such as age, gender, or ethnic origin political-Legal Forces Changes in the way politics shape laws and laws shape the opportunities for and threats to an organization International Forces Changes in the economic, political, legal, and technological global system that may affect an organization Defining Ethics and Values Ethics Standards of right or wrong that influence behavior; may vary among countries and cultures Values Relatively permanent and deeply help underlying beliefs and attitudes that help determine a person's’ behavior Five Moral Underpinnings across Cultures harm/care fairness/reciprocity ingroup/loyalty authority/respect purity/sanctity Conflicting Values Organizations may have two value systems that conflict: 1. The Value System stressing financial performance versus 2. The Value System stressing cohesion and solidarity in employee relationships Ethical Dilemma Situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but that is unethical or even illegal. Four Approaches to Deciding Ethical Dilemmas The Utilitarian Approach Guided by what will result in the greatest good for the greatest number of people Often associated with financial performance The Individual Approach Guided by what will result in the individuals best long-term interest, which ultimately is in everyone’s self-interest Assumes that people will act ethically in the short run to avoid harm in the long run Flaw is one person’s short term gain may not be good for everyone in the long term The Moral-Rights Approach Guided by respect for the fundamental rights of human beings: the right to life, liberty, privacy, health, safety, and due process For example, the U.S. Constitution's Bill of Rights The Justice Approach Guided by respect for impartial standards of fairness and equity Policies administered impartially and fairly regardless of gender, age, sexual orientation, and the like The Sarbanes-Oxley Reform Act White-collar crime Illegal trading, Ponzi schemes, and other white-collar crimes dominated the headlines in the early 21st century Sarbanes-Oxley Act of 2002 Established requirements for proper financial record keeping for public companies Penalties of as much as 25 years in prison for noncompliance Sometimes called SarbOC or SOX How do People Learn Ethics Kohlberg’s three levels of persona moral development Level 1Preconventional: follow rules to avoid unpleasant consequences Level 2 Conventional: follows expectations of others (most managers are at this level) Level 3Postconventional: guided by internal values, they lead by example How Organizations Can Promote Ethics 1. Create a strong ethical climate 2. Screen prospective employees 3. Institute ethics codes and training programs 4. Protect whistleblowers who report organizational misconduct Your Social Responsibilities as a Manager Social Responsibility Manager’s duty to take actions that will benefit the interests of society as well as of the organization Corporate Social Responsibility Notion that corporations are expected to go above and beyond following the law and making a profit Carroll's’ Global Corporate Social Responsibility Types of Social Responsibility Sustainability Economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs Natural Capital The value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on Philanthropy Making charitable donations to benefit humankind 136 billionaires have joined Bill and Melinda Gates in the Giving Pledge, a commitment to dedicate a majority of their wealth to philanthropy How does Being Good Pay Off? 1. Positive effects on customers 2. Positive effects on employees’ work attitudes and intentions to quit 3. Positive effect on employees’ behavior and work performance 4. Positive effect on sales growth, company efficiency, company revenue, stock price, and profits Corporate Governance How can I trust a company is doing the right thing? Definition of Corporate Governance The systems of governing a company so that the interests of corporate owners and other stakeholders are protected More attention paid to strengthening corporate governance so that directors are clearly separated in their authority from the CEO Chapter 3 Review Hamsters “R” Us has an excellent system of oversight that ensures the interests of corporate owners and other stakeholders are protected. Based on this information, we can be sure that Hamsters “R” Us has strong: Corporate governanceWhen managing Candy4everyone, Paula frequently runs into ethical dilemmas. In deciding these dilemmas, she prefers to be guided by respect or impartial standards of equity regardless of the gender, age, sexual orientation, etc. for the people involved. Which approach does Paula prefer? Justice Approach Which of the following statements about the Individual Approach to deciding ethical dilemmas is correct? Assumes that people will act ethically in the short run to avoid harm in the long runCustomers, allies, and unions are examples of: External Stakeholders 2-5-2019 Chapter 4 Global Management Major Questions You Should Be Able to Answer 4.1 What three important developments of globalization will probably affect me? 4.2 Why learn about international management, and what characterizes the successful international manager? 4.3 Why do companies expand internationally, and how do they do it? 4.4 What are barriers to free trade, what major organizations and trading blocs promote trade, and how important are the BRICS countries? 4.5 What are the potential areas of cultural differences? Competition and Globalization: Who will be No. 1 Tomorrow? Globalization The trend of the world economy toward becoming a more interdependent system The Rise of the “Global Village” The “global village” The “shrinking” of time and space as air travel and the electronic media have made it much easier for the people of the globe to communicate with one another. 25 years ago, cell phones, pagers, fax, and voicemail links barely existed. By 3015, there were nearly 7 billion mobile-cellular subscriptions. As of june 2018, of the 7.5 billion people in the world, 55% are Internet users. Examples of the “Global Village”You can outsource tasks around the world instantly Upwork You can learn any language online iTalki Fluent ForeverSo easy to live abroad! Internships Language study Teach english Volunteer The Rise of Electronic Commerce E-commerce E-commerce is the buying and selling of products and services through computer networks. U.S. retail ecommerce sales were estimated at $341.17 billion for 2015, up 14.7% over the previous year. Asian countries account for nearly half of the world’s mobile online shopping, worth more than $230 billion annually (in U.S. dollars). One Big World Market: The Global Economy 85726228600Mega Firms and mergers are on the rise Industries are becoming bigger and cross-global, especially automobiles, telecommunications, and healthcare Mini Firms are operating worldwide The internet allows almost anyone to be globalSmall companies can get started more easily Small companies can maneuver faster QuestionJelene sells her art through her own website and her Etsy store. She received questions from many different countries. Jelene is engaged in E-commerce Global trading Counter-trading Embargo International Management Multinational Corporation Business firm with operations in several countries Multinational Organization Non Profit organization with operations in several countries Learning to Be a Success AbroadA survey conducted by DDB Worldwide in more than 100 countries found that respondents repeatedly mentioned “arrogant”, “loud”, and “uninterested in the world” when asked by their perceptions of Americans. Developing a global mindset: Be patient, be quiet, listen, don’t use slang, don’t talk about wealth Be global in your focus, but study up on local customs Learn what is appropriate behavior (gestures, eye contact, etc.) Learn rituals of respect (shaking hands, dressing appropriately, etc.)Become at least minimally skilled in the language Why Learn About International Management You may deal with foreign customers or partners. You may deal with foreign employees or suppliers. You may work for a foreign firm in the United States. You may work for an American firm outside the United States, or for a foreign one. The Successful International Manager Ethnocentric managers Believe that their native country, culture, language, and behavior are superior to all others Related to parochialism, a narrow view in which people see things solely through their own perspective Polycentric managers Take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them aloneGeocentric managers Accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective. Questions David has studied SPanish for several years and has visited ARgentina a few times, but he still doesn’t really understand the consumer mindset in Buenos Aires. He prefers to leave local managerial decisions to the local team themselves, rather than imposing his way of doing things. David is an example of a(n): Polycentric Manager Why Companies Expand Internationally 1. Availability of supplies 2. New markets 3. Lower Labor costs Example: maquiladoras in Mexico) 4. Access to financial capital 5. Avoidance of tariffs and import quotas Five Ways of Expanding Internationally How Companies Expand Internationally Global outsourcing Also called offshoringUsing suppliers outside the United States to provide labor, goods, or services Importing A company buys good outside the country and resells them domestically Exporting A company produces goods domestically and sells them outside the country Countertrading Bartering goods for goods Top 10 Exporting Countries, 1999 and 2015 828675114300How Companies Expand Internationally Licensing A company allows a foreign company to pay it a fee to make or distribute the firm’s product or service Franchising A company allows a foreign company to pay it a fee and a share of the profit in return for using the company’s brand name and a package of materials and services Joint ventures Formed with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country Also known as a “strategic alliance” Wholly-owned subsidiary Foreign subsidiary that is totally owned and controlled by an organization “Greenfield venture”A foreign subsidiary that the owning organization has built from scratch 323850485775The World of Free Trade Barriers to International Trade Tariffs Customs duty, or tax, levied mainly in imports Import quotas Limits on the numbres of a product that can be imported Embargoes Complete bans on trade between one country and another Sanctions A trade prohibition on certain types of products or services for a specific reason (e.g. nuclear proliferation) Playing by the Rules? 4 of the top 5 solar cell producers are based in China, where the government has subsidized the development of this technology, to the detriment of American and European solar industries. Organizations Promoting International Trade World Trade Organization (WTO) Designed to monitor and enforce trade agreements agreements based on the General AGreement on Tariffs and Trade (GATT), an international accord first signed by 23 nations in 1947 Currently consists of 164 countries Headquartered in Geneva, Switzerland The World Bank It was founded after WWII to help European countries rebuild Today the purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunications It has 188 member nations, with most contributions coming from Britain, the US, Japan, and Germany Headquartered in Washington, D.C. International Monetary Fund (IMF) Designed to assist in smoothing the flow of money between nations Founded in 1945 and now affiliated with the United Nations Operates as a last-report lender that makes short-terms loans to countries suffering from unfavorable balance of payments (example: Greece) Headquartered in Washington, D.CMajor Trading BlocsA trading bloc is a group of nations within a geographic region that have agreed to remove trade barriers to one another. NAFTA (North American Free Trade Agreement) Allows for freer flow of goods, services, and capital among the US, Canada, and Mexico EU (European Union) 28 “borderless” trading partners in Europe; or 27 with “Brexit” (Britain’s exit) APEC (Asia-Pacific Economic Cooperation) group of 21 Pacific Rim countries in Southeast Asia ASEAN (Association of Southeast Asian Nations) Trading bloc of 10 countries in Southeast Asia Mercosur Largest trading block in Latin America CAFTA (Central American Free Trade Agreement) Central America The Trans-Pacific Partnership Most Favored Nation Trading Status Most favored nation trading status Describes a condition in which a country grants other countries favorable trading treatment such as the reduction of import duties Exchange Rates The rate at which the currency of one area or country can be exchanged for the currency of another’s For example: Let’s pretend $1 trades equal to 1 British pound An item that costs 3 pounds can be bought for $3. If the exchange rate changes so that $1 buy 1.50pounds then an item that cost 3 pounds can be bought for $2 (the dollar is “stronger”) The BRICS Countries The five major emerging economies Brazil, Russia, India, China, and South Africa Coined by a financial analyst as promising markets for finance capital in the 21st century Represent 40% of the world’s population Represent about 20% of the world’s economic activity Understanding Cultural Differences CultureShared set of beliefs, values, knowledge, and patterns of behavior common to a group of people Ex. → the culture of tipping in restaurants varies from country to country Low-context Culture Shared meanings primarily derived from written and spoken words Includes US, Great Britain, Scandinava, Germany High-Context Culture Rely heavily on situational cues for meaning when communicating with others Includes China, Korea, Japan, Mexico, many Arab countries Cultural Dimensions: The GLOBE project 1114300Other Cultural Variations 1. LanguageMore than 3,000 languages spoken in the world 2. Interpersonal Space Americans like 3-4 feet of space; range is 1 foot in Latin America and Asian cultures 3. CommunicationDo you treat business as a “task” (U.S.) or as a “relationship” (China)?4. Time orientation Doing one thing at a time (monochronic) or more than one thing at a time (polychronic) 5. Religion How does religion influence work-related values?6. Law and political stability Be aware of the Foreign Corrupt Practices Act, instability, expropriation, corruption, or labor abuses U.S. Managers on Foreign Assignments Expatriates Americans living or working in a foreign country Between 2.2 million and 6.8 million Americans living or working outside American borders 10%-20% of all U.S. managers sent abroad returned early because of job dissatisfaction or adjustment difficulties One study showed a turnover rate double that of managers who did not go abroad 2-7-2019 Planning - Chapter 5 The Likelihood of Success of Any Endeavor Strategy X Execution X The Wind Quality of the Plan X Quality of the Team X Luck (or General Environment Forces) Strategy: Setting Long-Term Direction Strategy/Strategic Plan (long term)A large-scale action plan that sets the long term goals and direction for an organization Represents an “educated guess” about what must be done in the long term for the survival or the prosperity of the organization or its principal parts Strategic plans generally reconsidered every year due to ever-changing business conditions Strategic Management 5-Step Process 1. Establish the mission, vision, and values2. Access the current reality 3. Formulate the grand strategy and the strategic, tactical, and operational plans 4. Implement the strategy 5. Maintain strategic control Fundamentals of Planning 371475247650Mission, Vision, and Value Statements Mission Statement Expresses the purpose of the organization What is our reason for being? Why are we here? Vision Statement What the company stands for, it’s core priorities, the values its employees embody, and what its products contribute to the world What values do we want to emphasize? Value Statement It is a clear sense of the future and the actions needed to get there. What do we want to become? Where do we want to go? Example: Hilton Hotels Mission Statement: “To be the preeminent global hospitality company- the first choice of guest, members, and owners alike.” Values Statement: “To fill the earth with the light and warmth of hospitality.” VIsion Statement: acronym based on family/brand nameHospitality: We’re passionate about delivering exceptional guest experiences Integrity: We do the right thing, all the time. Leadership: We’re leaders in our industry and in our communities Teamwork: We’re team players in everything we do. Ownership: We’re the owners of our actions and decisions Now: We operate with a sense of urgency and discipline.Strategy and Tactics - What’s the difference? Strategy defines your long-term goals and how you’re planning to achieve them. In other words, your strategy gives you the path you need toward achieving your organization’s mission. Tactics are much more concrete and are often oriented toward smaller steps and shorter time frames along the way. They involve best practices, specific plans, resources, etc. They’re also called “initiatives.” (6 to 24 months) PlanningBusiness Plan: A document that outlines a proposed firm’s goals, the strategy for achieving them, and the standards for measuring success. Business Model: Outlines the need the firm will fill, the operations of the business, it’s component and functions, as well as the expected revenues and expenses SMART Goals Specific Urban mobility plan 9 square city blocks, close off inside to through traffic Speed limit kept to 6 mph Curbside parking replaced with underground parking Measureable Improvements in air quality Increase in amount of “markets, outdoor games, and events”? Increase in business activity within superblock? Attainable “Barcelona has some unique advantages”. Much of Barcelona built before cars and built on a simple grid design Results-Oriented City northwest of Barcelona achieved pedestrian space increase of 45% to 74% In comparison city, noise levels dropped from 66.5 dBA to 61bBA 42% of reduction in nitrogen oxide emissions 38% reduction in particle pollution Target dates None mentioned! But Barcelona urban planners almost definitely set project completion dates! VRIO:Value, Rarity, Imitability, Organization VRIO is a framework for analyzing a resource or capability to determine its competitive strategic potential by answering four questions about its: Value Is the resource or capability valuable? Rarity Is the resource or capability currently controlled by only a few organizations or no other organizations? Imitability Is the resource or capability costly for other firms to imitate? Organization Is the firm organized to exploit the resource or capability? Why Plan? Program Direction and Momentum Why are direction and momentum important? Unless a plan is in place, managers may well focus on just whatever is in front of them, just “putting out fires.” Managers might be so preoccupied with day-to-day pressures that their organizations can lose momentum. Examples: How did Amazon impact Borders bookstores? How has uber impacted taxicabs? How have blogs and internet news impacted the newspaper business? How have microbreweries impacted Anheuser-Busch? Why Plan? Developing a Sustainable Competitive Advantage Competitive advantage The ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them Sustainable Competitive Advantage Occurs when an organization is able to get and stay ahead in four areas: In being responsive to customers In innovating In quality In effectiveness Three types of Planning for Three Levels of Management The Operating Plan and Action Plan Operating plan A plan that breaks long-term output into short-term targets or goals Turns strategic plans into actionable short-term goals and action plans Action Plan Defines the course of action (the tactics) needed to achieve a stated goal Contains a projected date for completing the desired activities for each tactic Example: Means-End Chain Strategic goal: Increase revenue from new customers by 10% over the next 12 months Operational Goal: Introduce (roll out) two new product offerings over the next 12 months Action Plan: Product development team to propose two new products by March 31Products to be produced and pilot-tested in selected markets by May 1Products to be modified as needed and a marketing plan prepared to support their introduction (rollout) by May 31Sales force to be trained to sell products and execution of marketing plan: begun by June 30Sales managers to meet with sales force to discuss progress and receive comments on marketing plan: ongoingStanding Plans and Single-Use Plans 923925171450Cascading Goals Making lower-level goals align with Top Goals For MBO goal setting to be successful, the following three things have to happen:Top management must be committed to the goals Goals must be applied organization wide Goals must “cascase” - be linked consistently down through the organization The Planning/Control Cycle Strategic Management Why Planning and strategic management are important: Provides direction and momentum Encourages new ideas Develops a sustainable competitive advantage Long-Term and Short-Term Goals Goals A specific commitment to achieve a measurable result within a stated period of time Long-term goals Generally referred to as strategic goals Tend to spain 1 to 5 years and focus on achieving the strategies identified in a company's strategic plan Short-Term Goals Sometimes referred to as tactical or operational goals, or just plain goals Generally span 12 months and connected to strategic goals in hierarchy knows as a means-end chain Planning - three definitions 1. Planning is defined as setting goals and deciding how to achieve them 2. Planning is coping with uncertainty by formulating future courses of action to achieve specified results 3. A plan is a document that outlines how goals are going to be met. Review Danny is participating with other managers in a discussion about what his organization goals should be for the next decade. He is participating in: Strategic planning Melissa wants her employee, Ralpha, to turn in his monthly sales report by the 5th of every month. Which requirement of SMART goals is this?Time oriented Apply has fired employees who have leaked news about unannounced products. Which step of the planning and controlling process is this? Take the corrective action 2-12-2019 Strategic Management Ch. 6 Major Questions You Should Be Able to Answer 6.1 What is strategic positioning, and what are the three principles that underlie it? 6.2 What’s the five step recipe for the strategic management process? 6.3 What are the characteristics of good mission, vision, and values statements? 6.4 What tools can help me describe where the organization stands from a competitive point of view? 6.5 How can four techniques- Porter’s four competitive strategies, diversification strategy, blue ocean strategy, and the BCG matrix - help me formulate strategy? 6.6 How does effective execution help managers during the strategic management process? What is an Effective Strategy? Strategic Positioning 1. Developed by famous strategist Michael Porter 2. Attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company 3. “Performing different activities from rivals, or performing similar activities in different ways.” From a 1997 Fortune Magazine Story on Apple: “Apple Computer, Silicon Valley’s paragon of dysfunctional management and fumbled techno-dreams, is back on crisis mode, scrambling lugubriously in slow motion to deal with imploding sales, a floundering technology strategy, and a hemorrhaging brand name.” “Deciding what not to do is as important as deciding what to do. It’s true for companies and it’s true for products.” Strategic Positioning and its Principles 1. Strategy is the creation of a unique and valuable position Few needs, many customers Broad needs, few customersBroad needs, many customers 2. Strategy requires trade-offs in competing In the apple example, what were some of the trade-offs? How about in the Wells Fargo example? 3. Strategy involved creating a “fit” among activities. The Strategic Management Process Establishing the Mission Statement 276225190500Does your organization’s mission statement answer these questions: What are our customers? What are our major products or services In what geographical areas do we compete? What is our basic technology? What is our commitment to economic objectives? What are our belief, values, aspirations, and philosophical priorities? What are our major strengths and competitive advantages? What are our public responsibilities, and what images do we wish to project? What is our attitude toward our employees? Example: The Periodic Table → VT food truck Establishing the Vision Statement Does your organization's vision statement answer these questions: Is it appropriate for the organization and for the times? Does it set standards of excellence and reflect high ideals? Does it clarify purpose and direction? Does it inspire enthusiasm and encourage commitment? Is ti well articulated and easily understood? Does it reflect the uniqueness of the organization, its distinctive competence, what is stands for, what it’s able to achieve? Is it ambitious? An ambitious vision will help attract top talent. Establishing the Values Statement Assessing the Current Reality Look at where the organization stands internally and externally, to determine what’s working and what’s not See what can be changed so as to increase efficiency and effectiveness in achieving the organization’s vision Tools include competitive intelligence, SWOT analysis, forecasting, benchmarking, Porter’s model for industry analysis Competitive Intelligence Means gaining information about one’s competitors activities so that you can anticipate their moves and react appropriately Sources of information include public print and advertising, investor information, informal sources SWOT Analysis Environmental scanning Monitoring of an organization's internal and external environments to detect early signs of opportunities and threats that may influence the firm’s plans SWOT, process for scanning Internal Strengths Internal weaknesses External opportunities External threats Example: SWOT Characteristics of a College Campus 542925114300When analyzing the “W” in the SWOT analysis, the manager might be assessing: High turnover of employees Forecasting: Predicting the Future Forecasting A vision or projection of the future Trend analysis Hypothetical extension of a past series of events into the future Contingency planning Creation of alternative hypothetical but equally likely future conditions Also called scenario planning and scenario analysis Benchmarking: Comparing with the Best A process by which a company its performance with that of high-performing organizations Porter’s Five Competitive Forces Porter contends that business-level strategies originate in 5 primary competitive forces in the firm’s environment: 1. Threat of new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitute products or services 5. Rivalry among competitors Formulate the Grand Strategy Grand Strategy Comes after assessing the current reality Explain how the organization’s mission is to be accomplished Common Grand Strategies Growth Strategy Involves expansion, as in sales revenues, market share, number of employees, or number of customers Stability Involves little or no significant change DefensiveInvolved reduction in the organization’s efforts Retrenchment How Companies Can Implement a Grand Strategy 400050200025Porters 4 Competitive Strategies Cost-leadership Strategy Keep the costs, and hence prices, of a product or service below those of competitors and target a WIDE market Cost-Focus Strategy Keep the costs of a product below those of competitors and to target a NARROW market Differentiation Strategy Offers products that are of unique value compared to those of competitors but to target a wide market Focused-Differentiation Strategy Offers products that are of unique and superior value compared to those of competitors and to target a NARROW market Single-Product Strategy: Focused but Vulnerable Company makes and sells only one product within its market Benefit is that a company can focus on just one product Risk is that you are vulnerable - why? The Diversification Strategy Diversification Operating several businesses in order to spread the risk Products may be related or unrelated Vertical integration Firm expands into businesses that provide the supplies it needs to make it products or that distribute and sell its products The Blue Ocean Strategy A company creates a new, uncontested market space that makes competitors irrelevant, created new consumer value, and decreases costs “Competing in overcrowded industries is no way to sustain high performance,” the authors write. “The real opportunity is to create blue oceans of uncontested market space.” The BCG Matrix Implementing and Controlling Strategy Strategy implementation Putting strategic plans into effect Means dealing with roadblocks within the organization’s structure and culture and seeing if the right people and control systems are available to execute the plans Strategic Control Monitoring the execution of strategy and taking corrective action, if necessaryTo keep on track, you must (1) engage people (2) keep it simple (3) stay focused and (4) keep moving Execution: Getting Things Done Execution Consists of using questioning analysis and follow-through in order to mesh strategy with reality, align people with goals, and achieve results promised Three Core Processes of Business A company’s overall ability to execute is a function of effectively executing according to three processes: 1. People - consider who will benefit you in the future 2. Strategy- consider how success will be accomplished 3. Operators - consider what path will be followed What Questions Should a Strong Strategic Plan Address?1. What is the assessment of the external environment? 2. How well do you understand the existing customers and markets? 3. What is the best way to grow the business profitability, and what are the obstacles to growth? 4. Who is the competitor? 5. Can the business execute the strategy? 6. Are the short term and long term balanced? 7. What are the important milestones for executing the plan? 8. What are the critical issues facing the business? 9. How will the business make money on a sustainable basis? Building a Foundation of Execution Know you people and your business Insist on realism Set clear goals and priorities Follow through on accountability and results Reward the doers. Expand people’s capabilities Know and understand yourself. ................
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