Principles of Management - Chapters 7, 8, and 11

Decision Making

Responding to opportunities and threats by analyzing options and making determinations about organizational goals

Opportunities

Respond to ways to improve organizational performance to benefit stakeholders

Threats

Events inside or outside the organization are adversely affecting organizational performance

Programmed Decision

Routine, virtually automatic decision making that follows established rules or guidelines. Sam situation repeats itself to help create rules

Non-programmed Decision

Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats. No rules because managers lack the information they would need to develop a routine response

Classical Model of Decision Making

A prescriptive approach to decision making. Assumption that the decision maker can identify and evaluate all possible alternatives.

Optimum Decision

The most appropriate decision in light of what managers believe to be the most desirable consequences for their organization.

Administrative Model

explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions

Bounded Rationality

Cognitive limitations that constrain one's ability to interpret, process, and act on information.

Incomplete Information

Because of risk and uncertainty, ambiguity, and time constraints

Risk

The degree of probability that the possible outcomes of a particular course of action will occur.

Uncertainty

the probabilities of alternative outcomes cannot be determined and future outcomes are unknown

Ambiguous Information

information that can be interpreted in multiple and often conflicting ways

Time Constraints and Information Costs

No time nor money to search for all possible alternatives and evaluate potential consequences

Satisficing

Searching for and choosing an acceptable, or satisfactory, response not necessarily the best decision

Decision Making Steps

Step 1: Recognize the Need

Step 2: Gather Information

Step 3: Generate Alternatives

Step 4: Assess Alternatives

Step 5: Choose among Alternatives

Step 6: Implement the Chosen Path

Step 7: Learn from Feedback

Step 1: Recognize the Need

Managers must first realize that a decision must be made

Clearly define problem

Step 2: Gather Information

Find info from internet, employees, and past experiences

Step 3: Generate Alternatives

Develop feasible alternatives

True brainstorming

Step 4: Assess Alternatives

Specify criteria, then evaluate

Pros and Cons of each alternative

Step 5: Choose among Alternatives

Rank various alternatives then select an option based off of evidence available

Step 6: Implement the Chosen Path

Carry out the alternative

Step 7: Learn from Feedback

1. Compare what actually happens to what was expected

2. Find out why expectations weren't met

3. Create guidelines to help future decision-making

Pros of Decision-Making

More Minds

Confidence

Less Bias

More Alternatives

Cons of Decision-Making

Slower Process

Social Loafing

Groupthink

Disagreement

Groupthink

A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision

Planning

Identifying and selecting goals and courses of action for an organization

Strategy

Decisions about what actions and resources are needed to achieve goals

Nature of Planning Process

1. Establish and discover where an organization is at the present time

2. Determine desired future state

3. Decide how to move it forward to reach that future state

Why is Planning Important

1. Sets sense of direction and purpose

2. Managers must participate goal setting

3. Coordinate managers and functions

4. Control Managers

Unity

One guiding plan is put into operation

Continuity

Ongoing process

Accuracy

Attempt to collect and utilize all info

Flexibility

Alter based on situational changes

Corporate Level Plan

Top management decides organization's mission, overall strategy, and structure

Corporate Level Strategy

indicates in which industries and national markets an organization intends to compete

3 questions to determine mission and goals

1. Who are our customers?

2. What customer needs are being satisfied?

3. How are we satisfying customer needs?

Strategic Leadership

Top managers must convey a compelling vision of what they want the organization to achieve

SMART Goals

Specific

Measurable

Attainable

Results-Oriented

Timely

Business Level Plan

Long-term divisional goals that will allow the division to meet corporate goals

Business Level Strategy

Specific methods used to compete effectively against its rivals in an industry

Functional Level Plan

Goals that the managers of each function will pursue to help their division attain its business level goals

Functional Strategy

A plan of action to improve performance of its task-specific activities to add value to an organization's goods and services

Time Horizons of Plans

Period of time over which plans are intended to apply or endure

Standing Plan

Programmed decision making, written guides to action, Standard Operation Procedure

Single-Use Plans

Non-programmed decision making in unusual or one-of-a-kind situations

Scenario Planning (Contingency Planning)

Multiple scenarios of future conditions

Analysis of how to respond effectively to each

SWOT Analysis

A planning exercise is which managers identify internal Strengths and Weaknesses, and external Opportunities and Threats

The 5 Forces

Level of rivalry within the industry

Potential for entry into an industry

Power of large suppliers

Power of large customers

Threat of substitute products

Porter's Theory of Business Level Strategy

Reduces rivalry

Prevents new competitors from entering the industry

Reduces the power of suppliers or buyers

Lowers the threat of substitutes, raising prices, and profits

Low-cost Strategy

Lowering total costs below the rivals

Allows discounted prices

Target many market segments

Discourages new competition

Differentiation

Distinguishing products via design, quality, or after-sales service

Increase cost of R&D and marketing

Charge premium price to recoup costs

Target many segments

Focused Low-cost

One market segment at lowest cost

Focused Differentiation

One market segment differentiated

Concentration on a Single Industry

Reinvesting profits to strengthen its competitive position in its current industry

New products and locations

Vertical Integration

Expanding a company's operations

Diversification

Expanding a company's business operations into a new industry

Synergy

Value created by two divisions cooperating is greater than independent operations

Related Diversification

Entering a new business or industry in an existing division or business

Unrelated Diversification

Entering a new, unrelated industry

Planning and Implementing Strategy Steps

1. Determine responsibility

2. Draft detailed action plans

3. Establish a timetable for implementation

4. Allocate appropriate resources

5. Evaluate what went right and wrong

6. Take corrective action as needed

7. Conduct a review of the overall process

Organizational Control

managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals

Control Systems

Formal target-setting, monitoring, evaluation, and feedback systems that provide managers with information about how well the organization's strategy and structure are working.

Technology

Facilitates the flow of accurate and timely information

Three Types of Control

Input Stage (Suppliers)

Conversion Stage (Manufacturing)

Output Stage (Retailer / Customer)

Input Stage - Feedforward Control

Control that allows managers to anticipate problems before they arise

Conversion Stage - Concurrent Control

Control that gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise

Output Stage - Feedback Control

Control that gives managers information about customers' reactions to goods and services so corrective action can be taken if necessary

4 Steps in Organizational Control

1. establish standards

2. measure performance

3. compare performance to standards

4. take corrective action as needed

Types of Control

Output Control - financials

Behavior Control - management supervision

Clan Control - values and norms