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MGMT 309: EXAM 2
Chapter 7 |
Basic Elements of Planning and Decision Making
|
Decision Making |
-Is the cornerstone of planning
-Is the catalyst that drives the planning process
-Underlies every aspect of setting goals and formulating plans
|
Planning |
-All organizations plan, but not in the same fashion
-All planning occurs within an environmental context
-All goals require plans to guide in their achievement
-All goals are tied higher goals and plans
|
Purpose of Goals |
1. Provide guidance and a unified direction for people in the organization
2. Strong effect on the quality of other aspects of planning
3. Serve as a source of motivation for employees
4. Provide a mechanism for evaluation and control of the organization
|
Kinds of Goals |
By Level, Area, and Time Frame
|
Level |
1. Mission Statement - statement of an organization's fundamental purpose
2. Strategic Goals - goals set by and for top management of the organization that address broad, general issues
3. Tactical goals - set by and for middle managers; their focus is on how to operationalize actions to strategic goals
4. Operational goals - set by and for lower-level managers to address issues associated with tactical goals |
Area |
Different functional areas of the organization |
Time Frame |
long-term, intermediate, and short-term time frames and explicit time frames
|
Responsibilities of Setting Goals |
1. Who sets goals
-All managers are responsible for goal setting as it corresponds to the respective level in the organization.
2. Managing Multiple Goals
-Optimizing allows managers to balance and reconcile inconsistent or conflicting goals. Managers can pursue one goal and exclude all others or to seek a mid-range goal. |
Kinds of Organizational Plans |
Strategic
Tactical
Operational
|
Strategic Plans |
A general plan set by and for top management that outlines resource allocation, priorities, and action steps to achieve strategic goals |
Tactical Plans |
A plan aimed at achieving the tactical goals set by and for middle management |
Operational Plans |
short term focus plans that are set by and for lower level managers
|
Time Dimension of Planning |
Planning must provide sufficient time to fulfill the managerial commitments involved
|
Time Frames for Planning |
1. Long-range Plans - strategic, 5+ years
2. Intermediate Plans - usually cover 1-5 years and parallel tactical plans
3. Short-range Plans - (operational) Short-range action and contingency plans of 1 year or less |
Responsibilities for Planning |
1. Planning Staff.
2. Planning Task Force
3. Board of Directors
4. Chief Executive Officer
5. Executive Committee
6. Line Management
|
Planning Staff |
Gather information, coordinate planning activities, and take a broader view than individual managers
|
Planning Task Force |
created when an organization wants a special circumstance addressed |
Board of Directors |
- Establishes corporate mission and strategy.
- May engage in strategic planning
|
Chief Executive Officer |
May serve as president or board chair; has a major role in planning and implementing the strategy |
Executive committee |
- Composed of top executives
- Meets regularly with the CEO to review strategic plans |
Line Management |
- Have formal authority and responsibility for management of the organization
- Help to formulate strategy by providing information
- Are responsible for executing the plans of top management
|
Contingency Planning |
- The determination of alternative course of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate
-These plans help managers to cope with uncertainty and change |
Crisis Management |
- The set of procedures the organization uses in the event of a disaster or other unexpected calamity; difficult to anticipate |
Barriers to Goal Setting and Planning |
-As part of managing the goal-setting and planning process, managers must understand the barriers that can disrupt them
-Managers must also know how to overcome them
continued next page
|
Barriers to Goal Setting and Planning, cont'd |
1. Major barriers:
-inappropriate goals, improper reward system, dynamic and complex environment, reluctance to establish goals, resistance to change.
2. Overcoming barriers:
-understanding the purposes of goals and planning, communication and participation, consistency, revision and updating, effective reward system |
Management by Objectives (MBO) |
-A technique for integrating formal goal setting and planning by giving subordinates a voice and clarifying what they are expected to accomplish
-Formal goal setting gives subordinates a say in the process |
Chapter 8 |
Managing Strategy and Strategic Planning
|
Strategy |
A comprehensive plan for accomplishing an organization's goals |
Strategic Management |
Involves formulating and implementing strategies to take advantage of business opportunities and meet competitive challenges
|
Effective Strategies |
Promote superior alignment between an organization, its environment, and its goals |
Components of Strategy |
1. Distinctive Competence
2. Scope
3. Resource Deployment |
Distinctive Competence |
Something an organization does exceptionally well |
Scope |
Range of Markets in which an organization will compete |
Resource Deployment |
How an organization will distribute its resources across the areas in which it competes |
Types of Strategic Alernatives |
-Business-Level Strategy
-Corporate-Level Strategy |
Business Level-Strategy |
The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market
|
Corporate-Level Strategy |
The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets |
Strategy Formulation and Implementation |
1. Strategy Formulation
2. Strategy Implementation
3. Deliberate Strategy
4. Emergent Strategy
|
strategy Formulation |
The set of processes involved in creating or determining the organization's strategies; it focuses on the content of the strategies |
Strategy Implementation |
The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved
|
Deliberate Strategy |
A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation |
Emergent Strategy |
A pattern of action that develops over time in the absence of goals or missions, or despite goals and missions |
SWOT Analysis and Strategy |
SWOT - Strength, Weaknesses, Opportunities, Threats |
Evaluating Organizational Strengths |
1. Organizational Strengths - Are skills and abilities enabling an organization to conceive of and implement strategies.
2. Common Organizational strengths - are organizational capabilities possessed by numerous competing firms.
3. Distinctive competencies - are useful for competitive advantage and superior performance.
4. Imitation of distinctive competencies - practice of duplicating another organization's distinctive competence and thereby implementing a valuable strategy |
Evaluating Organizational Strengths, cont'd |
5. Sustained Competitive advantage - Occurs when a distinctive competence cannot be easily duplicated. It is what remains after all attempts at strategic imitations cease.
6. Strategic imitation of a distinctive competence is difficult when:
-it is based on unique historical circumstances
-it is difficult for competitors to understand its nature or character
|
Evaluating Organizational Weaknesses |
1. Organizational weaknesses - skills and capabilities that do not enable an organization to choose and implement strategies that support its mission
2. Weaknesses can be overcome by - investments to obtain strengths needed. Modification of the organization's mission so it can be accomplished with the current workforce.
3. Competitive Disadvantage - occurs when an organization fails to implement strategies being implemented by competitors |
Evaluating an Organization's Opportunities and Threats |
1. Organizational opportunities - areas in the organization's environment that may generate high performance.
2. Organizational Threats - areas in the organization's environment that make it difficult for the organization to achieve high performance. |
Porter's Generic Strategies |
1. Differentiation Strategy - an organization seeks to distinguish itself from competitors through the quality of its products or services.
2. Overall cost leadership strategy - an organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms
|
Porter's Generic Strategies, cont'd |
3. Focus Strategy - an organization concentrates on a specific regional market, product line, or group of buyers
|
Implementing Porter's Generic Strategies |
1. Differentiation - Marketing and sales emphasize high-quality, high-value image of the organization's products or services.
2. Overall Cost Leadership - Marketing and sales focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner |
Implementing Porter's Generic Strategies, cont'd |
3. Focus - Either differentiation or cost leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group buyers |
Miles and Snow's Strategy Types |
1. Prospector
2. Defender
3. Analyzer
4. Reactor |
Prospector |
-Encourages creativity to seek out new market opportunities and to take risks.
-Developes the flexibility to meet changing market conditions by decentralizing its organizational structure |
Defender |
-Focuses on defending its current markets by lowering its costs and/or improving the performance of its current products
|
Analyzer |
-Incorporates elements of both the prospector and the defender strategies to maintain business and to be somewhat innovative
|
Reactor |
-A firm has no consistent approach to strategy |
Implementing Business-Level Strategies |
Product Life Cycle:
1. Introduction Stage - Focus on getting product out the door without sacrificing quality
2. Growth Stage - Focus on ensuring quality and delivery, and begin to differentiate products
3. Mature Stage - Focus on low costs and new products. Essential stage if company is going to survive in the long-run
4. Decline Stage - straightforward (didn't have notes) |
Formulating Corporate-Level Strategies |
1. Strategic Business Units
2. Diversification
|
Strategic Business Units |
Each business or group of businesses within an organization is engaged in serving the same markets, customers, or products
|
Diversification |
The number of businesses an organization is engaged in and the extent to which these businesses are related to one another |
Corporate-Level Strategies |
1. Single-Product Strategy
2. Related Diversification |
Single-Product Strategy |
An organization manufactures one product or service and sells it in a single geographic market |
Related Diversification |
-A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
-Basis of relatedness (similar technology, common distribution and marketing skills, common brand name and reputation) |
Advantages of Related Diversification |
Look up in notes, not gonna type it up
|
Unrelated Diversification Organization |
-Operates multiple businesses that are not logically associated with one another
-Advantages: stable performance over time due to business cycle differences among the multiple businesses. Allocation of resources to areas with the highest return potentials to maximize corporate performance
-Disadvantages: poor performance due to the complexity of managing a diversity of businesses.
like having a mutual fund split between many investments
|
Implementing Corporate-Level Strategies: Becoming a Diversified Firm |
1. Internal development of new products (developing products or services within the boundaries of traditional business operations)
2. Replacement of suppliers and customers: backward and vertical integration |
Backward vertical Integration |
beginning a business that furnishes resources previously handled by a supplier |
Forward Vertical Integration |
beginning a business that conducts activities previously handled by customers |
Becoming a Diversified Firm, cont'd |
3. Merger - purchase of one firm by another firm of approximately the same size
4. Acquisition - purchase of a firm by a considerably larger firm
|
Purposes of mergers and acquisitions |
1. To diversify through vertical integration
2. To acquire complementary products or services linked by a common technology and common customers
3. To create or exploit synergies that reduce the combined organizations' costs of doing business to increase revenue |
Major Tools for Managing Diversification |
1. Organization Structure (chapter 12)
2. Portfolio management technique - Methods used by diversified firms to make decisions about what businesses to engage in and how to manage these businesses to maximize corporate performance
3. Two important portfolio management techniques: The BCG matrix, The GE Business Screen |
BCG Matrix |
1. Evaluates a portfolio of businesses on the growth rate of their respective markets and each business's relative share of its market
2. Classifies the types of businesses in a diversified firm's portfolio as: (next page)
|
BCG Matrix cont'd |
businesses classified as:
1. "Dogs" have small market shares and no growth prospects
2. "Cash Cows" have large shares of mature markets
3. "Question marks" have small market shares in quickly growing markets |
GE Business Screen |
1. A method of evaluating businesses in a diversified portfolio along two dimensions, each of which contain multiple factors: industry attractiveness, competitive position (strength) of each firm in portfolio
2. In general the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business. |
Developing International and Global Strategies |
1. Global Efficiencies
2. Multimarket flexibility
3. Worldwide Learning |
Global Efficiencies |
1. Location efficiencies - seeking lower input cost locations
2. Economies of scale - larger facilities results in lower costs
3. Economies of scope - like economies of scale but with more than 1 product (diversification)
|
Multimarket Flexibility |
international businesses may respond to a change in one country by implementing a change in another country
|
Worldwide Learning |
The diverse operating environments of multinational corporations (MNCs) contribute to organizational learning that can be transferred to other operating environments |
Strategic Alternatives for International Businesses |
1. Home Replication
2. Multi-Domestic Strategy
3. Global Strategy
4. Transnational Strategy |
Home Replication |
Utilizing a core competency or a firm-specific advantaged developed at home as a main competitive weapon in foreign markets |
Multi-Domestic Strategy |
Managing a corporation as a collection of independent operating subsidaries frees a firm to customize its products, its marketing campaigns, and operating techniques to meet local customer needs
|
Global Strategy |
Viewing the world as a single marketplace and having as a primary goal the creation of standardized goods and services that will address the needs of customers worldwide |
Transnational Strategy |
Attempting to combine the benefits of scale efficiencies pursued by a global corporation, with the benefits and advantages of local responsiveness of a multi-domestic corporation |
Chapter 9 |
Managing Decision Making and Problem Solving |
Decision Making |
The act of choosing one alternative from among a set of alternatives
|
Decision-Making Process |
-The process of recognizing and defining the nature of a decision situation, identifying alternatives, choosing the "best" alternative, and putting it into practice
-An effective decision optimizes some set of factors such as profits, sales, employee welfare, and market share |
Types of Decisions |
1. Programmed Decision
2. Nonprogrammed Decision |
Programmed Decision |
a fairly structured decision or one that recurs with some frequency or both
|
Nonprogrammed Decision |
is relatively unstructured and occurs much less often than a programmed decision
|
Decision-Making Conditions |
1. Decision Making Under Certainty
2. Decision Making Under Risk
3. Decision Making Under Uncertainty
|
Decision Making Under Certainty |
The decision maker knows with reasonable certainty what the alternatives are and what conditions are associated with each alternative |
Decision Making Under Risk |
The availability of each alternative and its potential payoffs and costs are all associated with risks
|
Decision Making Under Uncertainty |
The decision maker does not know all the alternatives, risks associated with each, or the consequences each alternative is likely to have |
Factors that Prevent Rationality |
1. Lack of Consensus
2. Unclear Means-end Relations
3. Noisy Environment
|
Lack of Consensus |
there must be a general agreement of the definition of problems, decisions and decision-making goals at the beginning
|
Unclear Means-end Relations |
It is impossible to generate an exhaustive list of alternatives then select the most promising |
Noisy Environment |
The link between outcome and actions is hard to predict |
Behavioral Aspects that affect Decision Making |
1. Bounded Rationality
2. Satisficing
3. Coalition
4. Intuition
5. Escalation of Commitment
6. Risk Prospensity
7. Ethics and Decision Making |
Bounded Rationality |
Decision makers are limited by their values and unconscious reflexes, skills, and habits
|
Satisficing |
the tendency to search for alternatives only until one is found that meets some minimum standard of sufficiency to resolve the problem
|
Coalition |
A positive or negative political force in decision making which consists of an informal alliance of individuals or groups formed to achieve a goal |
Intuition |
An innate belief about something without conscious consideration |
Escalation of Commitment |
Staying with a decision even when it appears to be wrong |
Risk Prospensity |
extent to which decision maker is willing to gamble when making a decision
|
Ethics and Decision Making |
-Individual ethics combine with the organization's ethics to create managerial ethics.
-Components of managerial ethics: Relationship of the firm to employees, Employees to the firm, the firm to other economic agents |
Forms of Group Decision Making |
1. Interacting groups or teams
2. Delphi Groups
3. Nominal Groups
4. Brainstorming
|
Interacting groups or teams |
the most common form of decision-making groups which consists of an existing group or newly formed team interacting and then making a decision
|
Delphi Groups |
sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator |
Nominal Groups |
a structure technique designed to generate creative and innovative ideas through the individual contributions of alternatives that are winnowed down through a series of rank-ordering of the alternatives to reach a decision |
Brainstorming |
Criticism is not allowed; free wheeling is welcome quantity is encouraged combination and improvement are sought |
Disadvantages of Group and Team Decision Making |
-Groupthink: the group's desire for consensus and cohesiveness overwhelms its desire to reach the best possible decision
-Compliance: people conform to others' expectations or behaviors in the hope of acquiring rewards or avoiding punishment |
Chapter 21 |
Managing Operations, Quality, and Productivity |
Operations Management |
The set of managerial activities used by an organization to transform resource inputs into products, services, or both |
Importance of Excellence in Operations |
-Is necessary for competitiveness and overall organization performance
-Creates value and utility through production of products and services
|
Types of Operations |
1. Manufacturing Organization
2. Service Organization |
Manufacturing Organization |
a form of business that combines and transforms resource inputs into tangible outcomes that are then sold to others |
Service Organization |
An organization that transforms resources into an intangible output and creates time and place utility for its customers |
Role of Operations in Organizational Strategy |
-Operations management has a direct impact on competitiveness, quality, productivity, and effectiveness
-Operations management and organizational strategy have reciprocal effects on each other.
-Strategic goals cannot be met if there are deficiencies and insufficiencies in operations resources |
Designing Operations Systems |
1. Determining Product-Service Mix
2. Capacity Decisions
3. Facilities Decisions
4. Types of Layouts (product, process, fixed position, cellular) |
Determining Product-Service Mix |
Involves deciding how many and what kinds of products to offer in the marketplace |
Capacity Decision |
Can be high-risk decisions due to uncertainty about future product demand and incurred costs of additional, possibly excess, capacity |
Facilities Decision |
-Facilities are the physical locations where products or services are created, stored, and distributed.
-Layout is the physical configuration of facilities, the arrangement of equipment within facilities or both |
Types of Layouts: Product Layout |
Facilities arranged around the product; used when large quantities of a single product are needed |
Types of Layouts: Process Layout |
facilities arranged around the process; used in facilities that create or process a variety of products |
Types of Layouts: Fixed Position Layout |
facilities arranged around a single work area; used for the manufacturing of large and complex products such as airplanes
|
Types of Layouts: Cellular Layout |
a configuration of facilities used when families of products can follow similar paths |
Manufacturing Technology |
technology used in making products
1. Technology
2. Automation
3. Robot
4. Robotics
|
Technology |
the set of processes and systems used by organizations to convert resources into products or services |
Automation |
The process of designing work so that it can be completely or almost completely performed by machines |
Robot |
any artificial device that can perform functions ordinarily thought to be appropriate for human beings
|
Robotics |
Coming soon |
Service Technology |
Services are rapidly moving toward automated systems and procedures (e.g., ATMs) |
Operations Systems in Supply Chain Mangagement |
1. Supply Chain Management
2. Operations Management as Control
3. Purchasing Management (Procurement)
4. Inventory Management |
Supply Chain Management |
The process of managing operations control, resource and inventory acquisition and purchasing, and thus improving overall efficiency and effectiveness
|
Operations Management as Control |
Coordinating operations management with other functions helps insure the system focuses on critical elements crucial to goal attainment |
Purchasing Management (Procurement) |
Controlling the buying of the materials and resources is at the heart of effective supply chain management |
Inventory Management |
1. Inventory control (materials control) - managing the organization's raw materials, work-in-process, finished goods, and products-in-transit
2. Just-in-Time (JIT) method - an inventory system that has necessary materials arriving as soon as they are needed (JIT) so that the production process is not interrupted.
|
Managing Total Quality |
1. The Meaning of Quality
2. The Importance of Quality
3. TQM Tools and Techniques |
The Meaning of Quality |
-The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
-Quality is both a relative and absolute concept.
-Quality is relevant to both products and services |
The Importance of Quality |
1. Competition - Quality has become one of the most important competitive points in business today
2. Productivity - Quality enhancement programs decrease defects, reduce rework, and eliminate the need for inspectors as employees assume responsibility for quality
3. Costs - Improved quality reduces costs from customer returns, warranty, lawsuits for faulty products, and lost sales to future customers |
TQM Tools and Techniques |
1. Benchmarking
2. Outsourcing
3. Reducing cycle time
4. Statistical quality control (SQC)
|
Benchmarking |
the process of learning how and what other firms do in an exceptionally high-quality manner |
Outsourcing |
Subcontracting operations/services to those who can do them cheaper and/or better |
Reducing cycle time |
The time needed by the organization to accomplish activities such as developing, making, and distributing products or services |
Statistical quality control (SQC) |
A set of specific statistical techniques that can be used to monitor quality
1. Acceptance sampling - customer accepts products based on sample quality after production
2. In-process sampling - run a sample during production |
Managing Productivity |
1. Productivity
2. Levels of Productivity (Aggregate, Industry, Company, Unit, and Individual productivity)
3. Improving Productivity |
Productivity |
An economic measure of efficiency that summarizes the value of outputs relative to the value of the resources used to produce them
|
Aggregate Productivity |
the total level of productivity for a country |
Industry Productivity |
the total productivity of all firms in an industry |
Company Productivity |
the level of productivity of a single company
|
Unit Productivity |
the productivity level of a unit or department |
Individual productivity |
hodor |
Improving Productivity |
1. Improving Operations
2. Increasing Employee Involvement
|
Improving Operations |
-Spending more resources on research and development helps identify new products, new uses for existing products, and new methods for making products
-Reworking transformation processes and facilities can boost productivity |
Increasing Employee Involvement |
-Increased employee participation can increase both quality and productivity
-Cross-training of employees allows firms to function with fewer workers
-Rewards are essential to success in improving productivity |