Intro To Management Exam I: Rutgers - Hubbard

Businesses Exist To

Serve needs of society
Productive use of resources, create value for customers, employees, and shareholders

6 Major Theories of Management

Scientific
Administrative
Behavioral
Management Science
Organizational Environment
Leadership and Innovation

Scientific Management Theory Contributors

Adam Smith
Fredrick Taylor
Gilbreaths

Adam Smith

1700's - Job Specialization and Division of Labor

Fredrick Taylor

late 1800's - 4 Principles to increase efficiency

4 Principles to Increase Efficiency

1. Study the Work, experiment with improvements
2. Codify the best methods for doing the work
3. Hire/Align worker skills with the jobs to be done
4. Provide fair pay and incentives

Gilbreaths: 3 Steps

1. Analyze all tasks, break into components
2. Find better ways to perform each component
3. Reorganize each component so overall more efficient

Administrative Management Theory Contributors

Max Weber
Henri Fayol

Max Weber

5 Principles of Bureaucracy to ensure efficiency & effectiveness
Describes a formal system of organization and administration

Henri Fayol

14 Principles of Efficiency
More comprehensive and balanced view of the organization

Behavioral Management Theory Contributors

Mary Parker Follet
Elton Mayo
Douglas McGregor

Mary Parker Follet

Emphasized the Human side of management
"Authority should go with knowledge" - employee job self determination
Identified the importance of cross-functioning (collaboration across the org)

Elton Mayo

Hawthorne Studies
Management involvement with workers more important than physical work conditions
Birth of Human Relations movement

Douglas McGregor

Theory X, Theory Y

Management Science Theory

Quantitative Management
Operations Management
Total Quality Management
Management Information Systems

Quantitative Management

Uses data and math based models, simulations, and techniques to aid decisions

Operations Management

Specialized techniques for optimizing productions systems

Total Quality Management (TQM)

Integrates process management, measures/evaluation, and proven improvement methedologies to improve effectivnes and efficiency

Management Informations Systems (MIS)

Provide easy access to external and internal data to enhance decision making

Organizational Environment Theory

Open Systems View (1960s) - Katz, Kahn, Thompson
Contingency Theory (1960s) - Burns, Stalker, Lawrence, Lorsch

Contingency Theory (1960s) - Burns, Stalker, Lawrence, Lorsch

No one best way to organize:
Stable environment => Mechanistic Structure
Rapidly changing environment => Organic Structure

Open Systems View (1960s) - Katz, Kahn, Thompson

Resources come from the external environment, are converted internally, and then sent back as goods and services to the external environment

Leadership & Innovation

Leadership vs Management (2000 - Goleman, Kotter)
Importance of Innovation (2000 - Foster, Christensen, Amabile)

Leadership vs Management (2000 - Goleman, Kotter)

Emotional Intelligence
Leader as influencer/persuader

Importance of Innovation (2000 - Foster, Christensen, Amabile)

Impact of Disruptive Technologies
Innovation key to growth/survival
Employee Engagement

Confidence in business leaders

Declined greatly over time

Job Satisfaction

Declining over time
Youngest workers are least satisfied
They expect more from management

Conference Board Recommends

Better Management ==> More engaged workforce ==> More satisfied employees ==> More productive employees

Management Theory Evolution

Not necessarily one best way, but nearly always a better way

Purpose of management

Right work, done well

Enterprise Level Management

requires implementing Processes and Practices that identify and deliver superior performance in innovative and socially responsible organizations:

Enterprise Level Management Key Points

Identify and communicate the "Right Work"
Design, implement, and monitor flows of work so the "Right Work" is performed effectively and efficiently ("Done Well")
Pursue innovation to create new opportunities and to continuously improve
Adopt values and practices that enable the firm to act responsibly towards all stakeholders

Why do managers get bad ratings

Most managers think they are doing a GOOD JOB!

Most managers never receive any formal training

Sometimes national policies/cultures perpetuate ineptness (e.g., trade barriers, trade union resistance)

Human nature to resist change (uncomfortable)

Need a burning platform -> the motivation to change

Takes a long time to implement, progress can be slow at first

3 Core Elements of Management

Targets, Incentives, Monitoring

Company Business Model

how its strategy will create value for the customer and at the same time generate revenues sufficient to cover costs and realize a profit

Business Model 2 Components

Customer Value Proposition
Profit Formula

Customer Value Proposition

Describes the company's approach to satisfy buyer needs or wants at a price the customer will consider good value

Value "V" should exceed or equal price "P" charged

Profit Formula

describes how effectively the company can deliver on the value proposition at profit

Price "P" should exceed Cost "C"

Viable Business Model

V ≥ P and P > C

Value Price Observations

The greater the value provided (V) and the lower the price (P), the more attractive the value proposition is to customers
The lower the costs (C) for a given customer value proposition (V-P), the greater the ability of the business model to be profitable

Company Strategy

Action plan for outperforming its competitors and achieving superior profitability

Strategy is about doing

what rival firms don't do, or can't do

No advantage if firms have same strategy

Strategy

Position the company in the marketplace
Attract customers
Compete against rivals
Achieve performance targets
Capitalize on opportunities to grow the business
Respond to changing economic and market conditions

Competitive Advantage

provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm

Strategy is sustainable if

persists despite the best efforts of competitors to match or surpass advantage

Strategic Vision

management's aspirations goals for the company's future and the course and direction charted to achieve them

Components of a Mission Statement

Identifies company's products or services
Specifies the buyer needs that the firm seeks to satisfy and/or the customer groups or markets that it serves
A clear sense of company identity

Strategic Vision

Future Oriented
Aspirational
Relatively High Level

Mission

Present Oriented
Focused on purpose, not goal
More focused and specific

Values

are the beliefs, traits, and behavioral norms that company employees are expected to display in conducting the company's business and pursuing its strategic vision and mission

Objectives

Performance targets

Two Types of Objectives

Financial Objectives
Strategic Objectives

Financial Objectives

Growth in revenue or net income ect...

Strategic Objectives

Growth in market standing
"Winning X percent of Market Share"

Stretch Objectives

High enough to stretch an organization to perform at its full potential and deliver best possible results

Short and long term objectvies

Short Term Objectives

One year or less

Long term objectives

3 or more years

SMART

SPECIFIC
MEASURABLE
ACTIONABLE
REALISTIC
TIME BOUND

Specific

Describe with some precision

Measurable

Allows for monitoring and improvement

Actionable

within the firm's ability to control

Realistic

feasible, some likelihood of success

Time Bound

Has a deadline

Managers modify strategy

Changing market conditions
Advancing technology
Fresh moves of competitors
Shifting buyer needs
Emerging market opportunities
New ideas for improving the strategy

Deliberate Strategy

proactive strategy elements that are planned

Emergent Strategy

Reactive strategy elements that emerge as changing conditions warrant

Realized Strategy

Combination of proactive and reactive elements

Strategy Test

Fit Test
Competitive Advantage Test
Performance Test

Macro-Environment

Context in which a company's industry is situated

Relevant components over which firm has no direct control

PESTEL Analysis

Political Factors
Economic Conditions
Sociocultural Forces
Technological Factors
Environmental Forces
Legal / Regulatory Factors

Industry and Competitive Environment Tools

Five Forces
Driving Forces
Key Success Factors
Industry Outlook for Profitability

5 Competitive Forces

Rivals (competitors)
Potential new entrants
Producers of substitute products
Bargaining power of suppliers
Bargaining power of customers (buyers)

Driving Forces

Underlying causes of change in industry and competitive conditions

Key Success Factors (KSF's)

strategy elements, product attributes, operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in an industry

Resource

productive input or competitive asset owned or controlled by the firm

Capability

capacity of a firm to perform some internal activity competently

Marketing Research and R&D

Tangible Resources

Land
Real estate
CAsh
Patents

Intangible Resources

Intellectual Capital
Brands
Relationships
Company Culture

Capabilities

Mostly knowledge based
Intellectual capital
Organizational Processes

VRIN Test

Sustainable and competitive advantage

VRIN

Valuable
Rare
Inimitable
Non substitutable

Valuable

does the resource capability help the firm compete

RAre

is it something rivals lack

Inimitable

is it difficult or costly to intimidate

Nonsubstitutable

is there a low risk of substitutes

Value Chain Analysis

Identifies primary activites and related support activities that create customer value

Primary Activites

creates value for customers

Support Activities

facilitate and enhance the performance of the primary activites

SWOT Combines

External and Internal Analysis

SWOT

Strengths
Weaknesses
Opportunties
Threats

2 Types of Threats

Normal course of business threats
Sudden-Death (Survival) Threats

Low-Cost Provider

Achieve lower overall costs than rivals on products that attract a broad spectrum of buyers

Broad Differentiations

Differentiating the firm's product offering from rivals with attributes that appeal to a broad spectrum of buyers

Focused Low-Cost

Concentrating on a narrow price-sensitive buyers segment and on costs to offer a lower-priced product

Focused Differentiation

Narrow buyer segment by meeting specific tastes and requirements of niche members

Best Cost Provider

More value for money by offering upscale product attributes at a lower cost than rivals

Lost-Cost Provider Strategy

Becomes industry's lowest-cost provider
Have meanigfully lower costs than rivals (Not Necessarily Lowest Cost)

Two Options For Low-Cost Provider Strategy

Use the lower-cost position to underprice competitors and attract price-sensitive customers in enough numbers to increase profits

Maintain the current price, but use the lower-cost advantage to earn a higher profit margin on each unit sold

Low-Cost Providers Works Best

Vigorous price competition among rival sellers

Identical products are available from many sellers

There are few ways to differentiate industry products

Buyers use the product in the same ways

Buyers incur low switching costs

Industry sales mostly to a few, large volume buyers

New entrants/others use low prices to attract buyers

Broad Differentiation Strategy

Worth Paying More
For a better product
Status Symbol