Test #2 Principles of Management

Symptoms

More salient, high-level, relevant to various stakeholders

Underlying Problems

Less visible, lower level

Ethics

Moral principles & standards that guide the behavior of an individual/group

“moral character”

Moral

“Proper behavior of a person in society”

Premise

Employee, organization & community thrive over the long term when managers apply ethical standards that direct them to act with integrity.

Managers often

Think they are immune to conflicts of interest

Hire people who are like them

Take more credit than they deserve

Blame others when that deserve some blame themselves

Ethical decisions are

guided by underlying values

Ethical Issue

Situation, problem, opportunity in which one must choose among several actions that must be evaluate as morally right or wrong.

Business Ethics

Moral principles & standards that guide behavior in the business world.

Moral Philosophy

Principles, rules & values people use in deciding what is right or wrong

5 Major Ethical Systems Guiding Decisions

Universalism
Egoism

Utilitarianism

Relativism

Virtue Ethics

Universalism

States that all people should uphold certain values that society needs to function

Kyosei

Living & working together for the common good, allowing cooperation & mutual prosperity to coexist with healthy & fair competition.

Human dignity

Concerns the value of each person as an end, not a means, to the fulfillment of others’ purposes.

Egoism

Holds that individual self-interest is the actual motive of all conscious action.

Utilitarianism

States that the greatest good for the greatest number should be the overriding concern of decision makers. 

Relativism

Bases ethical behavior on the opinions & behaviors of relevant other people.

Virtue Ethics

States that what is moral comes from what a mature person with “good” moral character would deem right.

Kohlberg’s Stages of Moral Development

Preconventional

Conventional

Principled

Preconventional Stage

Make decisions based on immediate self-interest

Conventional Stage

Make decisions that conform to expectations of groups and institutions like family, peers, and society.

In-their-face marketing

Aggressive & highly direct promotional strategies designed to capture immediate attention from consumers.

Examples of In-their-face marketing

Bragging

Giving the impression of being untouchable

Using vulgarity to get attention 

Being controversial for the sake of being controversial

Sarbanes-Oxley (SOX) 2002 Act

An act that established strict accounting & reporting rules to make senior managers more accountable and to improve and maintain investor confidence.

Ethical Climate

The processes by which decisions are evaluated and made on the basis of right & wrong.

Ethics Programs

Compliance-based ethics

Integrity-based ethics

Compliance-based ethics programs

Prevent, detect, punish legal violations; surveillance & control

Integrity-based ethics programs

Instill in people a personal responsibility for ethical behavior; self-governance

Ethical Leadership

Leaders are moral persons & moral managers, who influence others to behave ethically.

Ethics Codes

Address employee conduct, community & environment, shareholders, customers, suppliers & contractors, political activity, and technology.

The MBA Oath

The oath signals that graduating MBA students are committed to applying ethics and integrity in all future managerial and leadership endeavors.

Moral Awareness

Realizing the issue has ethical implications

Moral judgment

Knowing what actions are morally defensible

Moral Character

The strength & persistence to act in accordance with your ethics despite the challenges.

Stewardship

Contributing to the long-term welfare of others

CSR

The obligation toward society assumed by a business
Reflects the social imperatives & consequences of business practices

Bottom Line for CSR

Economic, Social, and Environment performance

A Linear Economy

Take input resources

Make products, sell to customers

Customers dispose used products

A circular economy

Company makes and maintains ownerships of product

Customers use products via leasing

Customers return used products

Planning Process

Conscious, systematic process of making decisions about goals and activities that an individual, group, work unit, or organization will purse in the future.

Shareholder Perspective

Milton Friedman

A neoclassical school of thought emerged in 1930s

Advocates for free markets, minimal government intervention

“The social responsibility of business is to increase profits” while conforming to society’s laws and ethical customs.

Stakeholder Perspective

Adam Smith

1959 book, “A Theory of Moral Sentiments”

Sympathy is the basis of a civilized society.

Reconciliation

Profit maximization & CSR are converging
Social responsibility related to better financial performance

Life Cycle Analysis (LCA)

A process of analyzing all inputs & outputs, thought the entire “cradle-to-grave” life of a product, to determine total environmental impact.

6 steps of Planning Process

Analyze the Situation

Generate Alternative Goals and Plans

Evaluate goals and plans

Select Goals & Plans

Implement the Goals & Plans

Monitor & Control Performance

Top-level Managers

Strategic Planning: Making decisions about long-term goals & strategies

Strategic Goals: Major targets relating to long-term survival, value, growth

Strategy: A set of actions designed to achieve the organization’s goals.

Middle-Level Managers

Tactical Planning: Translating broad strategic goals & plans into specific goals & plans that are relevant to a distinct portion of the organization, such as functional area like marketing.

Frontline managers & Team Leaders

Operational Planning: Identifying the specific procedures & processes required at lower levels of the organization.

Strategic Management Process

Involves managers from all parts of the organization in the the formulation & implementation of strategic goals & strategies.

Integrates strategic planning & management into a single process.

Mission

An organization’s basic purpose & scope of operations

Strategic Vision

The long-term direction & strategic intent of a company

Provides a perspective on where the organization is headed & what it can become.

Strategic goals

Evolve from the organization’s mission & vision.

Underlying Management Approach

Open system approach

Organizational Environments

External environment (macro & competitive)

Internal Environment

Element of Macro-environment

Laws & regulations, Economy, Technology, Demographics, Social values

PESTEL: Political, Economic, Social, Technological, Environmental, Legal

Elements of Competitive Environment

Porter’s 5 forces: Rivalry, Substitute, New Entrant, Supplier, Customer

Industry Actrative

Low Rivalry

Low threat from new entrant 

Low threat from substitute

Low supplier’s bargaining power

Low customer’s bargaining power

Ultimate Goal of Strategy

To gain and sustain competitive advantage

Source of Competitive Advantage

Resources

Internal Analysis

Analyze internal resources

Resources

Inputs to a system that can enhance performance

Core Competencies

Resources that are valuable, rare, inimitable, and organized.

Benchmarking

The process of assessing how well one company’s basic functions and skills compare with those of another company or set of companies.

Corporate Strategy

Identifies the set of businesses, markets, or industries in which an organization competes and the distribution of resources among those entities.

The diversified businesses of an organization comprise its business portfolio.

Four Basic Corporate Strategies

Concentration, Vertical integration, Horizontal Related diversification, Horizontal Unrelated diversification

Concentration

Focus on a single business in a single industry

Vertical Integration

Move up and down the industry value chain

Horizontal Related Diversification

Enter a related industry

Horizontal Unrelated Diversification

Enter an unrelated industry.

BCG Matrix

A popular technique for analyzing how a corporation manages its portfolio.

Stars

High Market Growth, Strong Relative Competitive Position

Question Marks

High Market Growth, Weak Relative Competitive Position

Cash Cows

Low Market Growth, Strong Relative Competitive Position

Dogs

Low Market Growth, Weak Relative Competitive Position

Business Strategy

Major actions by which an organization builds & strengths its competitive position

The most effective business strategy is the one that competitors are unwilling or unable to imitate

Two business strategies

Low cost strategy

Differentiation strategy

Advantages of Industry Leadership

First-mover advantage

Little or no competition

Greater efficiency 

Higher profit margins

Sustainability advantages

Reputation for innovation

Establishment of entry barriers

Occupation of best market niches

Opportunities to learn

Disadvantages of Industry Leadership

Greater risks

Cost of technology development

Cost of market development

Cost of customer education

Infrastructure costs

Cost of learning and eliminating defects

Possible cannibalization of existing products

Functional managers

develop strategies with input & approval from executives responsible for business strategy.

Implementation involves four related steps

Define strategic tasks

Assess organization capabilities

Develop an implementation agenda

Create an implementation plan

Strategic Control System

Supports managers in evaluating progress & take corrective action

Framing Effects

A decision bias influenced by the way in which a problem or decision alternative is phrased or presented

Two Modes of Thinking

System 1: Thinking is fast, automatic, and emotional

System 2: Thinking is more thoughtful, slower, and more logical

Groups can help

More information improves decisions

Different perspectives enhance problem solving

Group discussions spur thinking

Understanding may be greater

Commitment may be greater

Group can hurt

One person may dominate discussions & undermine the process

Groups mad lead to satisficing

Groups may lead to groupthink

Goal displacement often occurs

Groupthink

Occur when a highly cohesive group with a directive leader is under time pressure

Devil’s advocate

Constructively critiquing ideas

Dialectic

A structured debate between two conflicting courses of action

Brainstorming

Asking members to generate as many ideas as they can

Design thinking

A human-centered approach to innovation that integrates customer needs, the potentials of technology, and the requirements of business success.