MNGT-3100 Exam 2 Liesl Wesson (Ch. 6, 7, 8, 20)

steps in rational decision making model

1. Define the problem

2. Identify the decision criteria

3. Allocate weights to the criteria

4. Develop the alternatives

5. Evaluate the alternatives

6. Select the best alternative

life cycle of business

introduction, growth, maturity, decline

purposes of goals

1. provide guidance and a unified direction for people in the organization

2. strong affect 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

mission statement

a statement of an organization's fundamental purpose

How to remember flow of decision levels

STO; Strategic leads to tactical leads to Operational

strategic goals

goals set by and for top management of the organization that address broad, general issues

tactical goals

set by and for middle managers; their focus is on how to operationalize actions to strategic goals

operational goals

set by and for lower-level mangers to address issues associated with tactical goals

optimizing

allows managers to balance and reconcile inconsistent or conflicting goals

criteria for effective goals

1. specific and measurable

2. cover key result areas

3. challenging but realistic

4. defined time period

5. linked to rewards

planning staff

gather information, coordinate planning activities, and take a broader view than individual managers

planning task force

created when the organization wants a special circumstance addressed

board of directors

1. establishes corporate mission and strategy

2. 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

1. is composed of top executives

2. meets regularly with the CEO to review strategic plans

line management

direct management of staff

contingency planning

1. the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate

2. these plans help managers to cope with uncertainty and change.

crisis management

caused by the lack of a contingency plan organization's methods for dealing with emergencies

Business level strategy examples

-overall cost leadership

-differentiation

-focus

-porters archetypes

-growth, maturity, decline

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

strategy

is 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

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

business-level strategy

1. the set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market

2. how do we compete?

corporate-level strategy

1. the set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets

2. what business are we in?

strategy formulation

the set of processes involved in creating or determining the organization's strategies; it focuses on the content of 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

strengths, weaknesses, opportunities, threats

What are organizational strengths in SWOT analysis?

Organizational strengths are skills and abilities enabling an organization to conceive of and implement strategies.

What are common organizational strengths?

Common organizational strengths are organizational capabilities possessed by numerous competing firms.

What happens when a distinctive competence is imitated?

Imitation of distinctive competencies removes the competitive advantage of the competency.

What is sustained competitive advantage in SWOT analysis?

Sustained competitive advantage occurs when a distinctive competence cannot be easily duplicated and remains after all attempts at strategic imitations cease.

When is strategic imitation of a distinctive competence difficult?

Strategic imitation of a distinctive competence is difficult when it is based on unique historical circumstances, difficult for competitors to understand its nature or character, or based on a complex phenomenon like organizational culture.

organizational weaknesses

skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.

weaknesses can be overcome by:

1. investments to obtain the strengths needed.

2. modification of the organization's mission so it can be accomplished with the current workforce

competitive disadvantage

occurs when an organization fails to implement strategies being implemented by competitors

organizational opportunities

are areas in the organization's environment that may generate high performance

organizational threats

are areas in the organization's environment that make it difficult for the organization to achieve high performance

differentiation strategy

1. an organization seeks to distinguish itself from competitors through the quality of its products or services

2. marketing and sales emphasize high-quality, high-value image of the organization's products or services

overall cost leadership strategy

1. an organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms

focus strategy

1. an organization concentrates on a specific regional market, product line, or group of buyers

2. either differentiation or costs leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group of buyers

introduction stage

focus on getting the product out the door without sacrificing quality (product life cycle stages)

growth stage

focus on ensuring quality and delivery, and begin to differentiate product (product life cycle stages)

mature stage

focus on low costs and new products. essential stage if company is going to survive in the long-run (product life cycle stages)

strategic business units

each business or group of businesses with an organization is engaged in serving the same markets, customers, or products

diversification

the number of businesses an organization is engaged in and the extend to which these businesses are related to one another

single-product strategy

an organization manufactures one product or service and sells it in a single geographic market

related diversification strategy

1. a strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked

2. avoids the disadvantages and risks of a single-product strategy

What is backward vertical integration?

owning inputs of the value chain

What is forward vertical integration?

owning activities closer to the customer

merger

purchase of one firm by another firm of approximately the same size

acquisition

purchase of a firm by another firm that is considerably larger

portfolio management techniques

methods used by diversified firms to make decisions about what businesses to engage in and how to manage these businesses to maximize corporate performance (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:

- "dogs" have small market shares and no growth prospects

- "cash cows" have large shares of mature markets

- "question marks" have small market shares in quickly growing markets

- "stars" have large shares of rapidly growing markets

GE business screen

1. a method of evaluating businesses in a diversified portfolio along two dimensions, each of which contains multiple factors:

- industry attractiveness

- competitive position (strength) of each firm in the 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

global efficiencies

1. location efficiencies - seeking lower input cost locations

2. economies of scale - larger facilities result in lower costs

3. economies of scope - broadening product lines

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

home replication

utilizing a core competency or a firm-specific advantage developed at home as a main competitive weapon in foreign markets

- works best when the firm's competences are valuable in many different types of markets

multi-domestic strategy

managing a corporation as a collection of independent operating subsidiaries frees a firm to customize its products, its marketing campaigns, and operating techniques to meet local customer needs

- works best when national demands for customization are high

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

- works best for a commodity-like product or in an industry that demands high efficiency

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

- works best for complex industries and for companies with highly-skilled international managers

programmed decision

is a fairly structured decision or one that recurs with some frequency or both

- example: starting your car in the morning

non-programmed decision

is relatively unstructured and occurs much less often than a programmed decision

- example: choosing a vacation destination

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, the risks associated with each, or the consequences of each alternative

factors that prevent rationality

1. lack of consensus: there must be a general agreement of the definition of problems, decision and decision-making goals at the beginning

2. unclear means-end relations: it is impossible to generate an exhaustive list of alternatives then select the most promising

3. noisy environment: the link between outcome and actions is hard to predict

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

an increased commitment to a previous decision in spite of negative information

risk propensity

the extent to which a decision maker is willing to gamble when making a decision

availability bias

the tendency to judge the likelihood that something will happen by the ease with which you can call examples to mind

outcome bias

judging the decision based on the outcome rather than how exactly the decision was made in the moment

clustering illusion

the tendency to see patterns in random events

ostrich effect

the decision to ignore dangerous or negative information by "burying" one's head in the sand, like an ostrich

ethics and decision making

1. individual ethics (personal beliefs about right and wrong behavior) combine with the organization's ethics to create managerial ethics

2. components of managerial ethics

- relationships of the firm to employees

- employees to the firm

- the firm to other economic agents

interacting groups or teams

are 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

are sometimes used for developing a consensus of expert opinion from a panel of experts who individually contribute through a moderator

nominal groups

are a structured 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

1. criticism is not allowed

2. free-wheeling is welcome

3. quantity is encouraged

4. combination and improvement are sought

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

choice shift

tendency for groups to make decisions that appear more extreme than the decisions group members would have made on their own

Strategic management is determined by

Upper level management; broad and general scope

Tactical management is set by

middle management; how to operationalize strategic goals

Operational plans are set by

lower level management, address issues related with tactical plans

single use plan

a one-time plan specifically designed to meet the needs of a unique situation

standing plan

developed for activities that recur regularly over a period of time

Porters generic strategy

1. Product Differentiation

2. Cost Saving Leadership

3. Focus

Miles and Snow's Strategy Types

1. Prospector

2. Defender

3. Analyzer

4. Reactor

Miles &Snow Prospector strategy

Focus on identifying and exploiting new opportunities quickly. Move to new products as competition moves in. High Involvement strategy best.

Miles & Snow: Defender

Been doing well for a long time and would like to continue it

Not completely risk-avoiding, not incentivized to do anything rash

Miles & Snow Analyzer strategy

Exploits new opportunities early on while maintaining traditional base of products and services. Balanced. High Involvement and classical.