Intro to Management Exam 1 - Hamilton, Rutgers

Business Model

Customer Value Proposition and Profit Formula

Profit Formula

How effectively the company can deliver on the value proposition as a profit

Customer Value Proposition

Company's approach to satisfying buyer needs to wants at a price the customer will consider a good value

Value-Price-Cost

Value > Price

Price > Cost

Why a business model is important

Attract customers

Beat competition

Survive due to lack of profitability

Strategy

Action plan for outperforming competitors and achieving profitability (needs to be distinct)

Why is strategy important?

Improve financial performance

Strengthen its competitive position

Gain competitive advantage

Sustainable competitive advantage

Provides buyers with superior value compared to rival seller and persists despite efforts of competitors to match or surpass

Implementing a company's strategy

1. Develop strategic vision

2. Set objectives to measure performance

3. Craft a strategy

4. Execute the strategy

Strategic Vision

Goals for the company's future and the course and direction to achieve them

Mission Statement

Describes company's business and purpose (who we are, what we do, why we are here)

Strategic Vision vs. Mission

Strategic - future oriented, aspirational, high level

Mission - present oriented, focus on purpose not goal, more specific

Values

The beliefs, traits, and behavioral norms that employees are expected to display

Objectives

Organization's performance targets (financial and strategic)

Financial Objectives

financial performance targets

Strategic Objectives

targets that indicate a company is increasing its market standing

Effective Objectives

- "stretch objectives": set high enough to stretch an organization to perform at its full potential and deliver best possible results

- Consists of both short term and long term objectives

- Created at all levels

- SMART goals

SMART

Specific

Measurable

Actionable

Realistic

Timely

Deliberate Strategy

Proactive strategy elements that are planned

Emergent Strategy

Reactive strategy elements that emerge as changing conditions warrant

Realized Strategy

Proactive and reactive elements

Winning strategy must pass

Fit test

Competitive advantage test

Performance test

Macro Environment

PESTEL Analysis: goal is to identify factors that are important enough to have a bearing on the company's strategic decisions

- Political

- Economic

- Sociocultural

- Technological

- Environmental

- Legal

Industry and Competitive Environment

- Five forces analysis: diagnose the principal competitive pressures in an industry and assess the potential for profitability

- Driving forces

- Key success factors

- Industry outlook and profitability

Driving Forces

Cause of change in industry and competitive and competitive conditions

1. Identify the driving forces

2. Assess whether the drivers of change are acting to make the industry more/less attractive

3. Determine what strategy changes are needed for the impact driving forces

Key Success Factors (KSFs)

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

VRIN Test (for competitive advantage)

Valuable

Rare

Inimitable

Non-substitutable

Value Chain Analysis

The primary activities that create customer value

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats

Competitive Strategies

Low Cost Provider

Broad Differentiation

Focused Low Cost

Focused Differentiation

Best Cost Provider

Economies of Scale

increase size of business operation in order to reduce unit costs

Best Cost Strategies

Mix of "low cost provider" and "differentiator strategies"

- aimed at value conscious buyers who shy away from cheap low end products and expensive high end products

- gives customers more value for money

Corporate Governance

the relationship among shareholders, management, and the board of directors in determining the direction and performance of the corp. (reward and compensation agreements)

Control

any process that directs the activities towards the achievement of goals

Standard

Expected performance for a given goal (target/benchmark)

Bureaucratic Control

1. setting performance standards

2. measuring performance

3. comparing against standards

4. taking action to correct a problem

Feedforward Control

collecting performance info before a task or project is done

Concurrent

collecting info while a task is being done (GPS tracking on UPS)

Feedback

collecting information after a project is done

Bureaucratic Control Disadvantage

1. ridged behavior

2. tactical behavior

3. resistance

Clan Controls

the reliance on organizational culture and empowerment to regulate employee behavior

- managers create culture of integrity

- strong understanding of values

- employees are motivated to act in accordance

Enterprise Risk Management (ERP)

Bridges corporate governance as well as control to help firms achieve its strategic objectives

Downside of Bureaucratic Controls

- Will not be effective w/o consideration of how employees and other parties will react to it

1. Rigid bureaucratic behavior

2. Tactical behavior

3. Resistance

Rigid Bureaucratic Behavior

- people often act in ways that will help them look good on the control system's measures

- Can result in inflexible behavior geared toward doing only what the system requires

(ex: United Airlines)

Tactical Behavior

- controls will be ineffective if employees try to beat the system

- manipulating info or reporting false performance data

Resistance

People resist control systems

- can decrease autonomy

- can change expertise and power structures

Effective Control Systems

1. establish valid performance standards

2. provide adequate information to employees

3. ensure acceptability to employees

4. maintain open communication between managers and employees

5. use multiple approaches

Market Controls - Transfer pricing

price charged by one business unit to another within the same organization

Leadership

The process of influencing and organized group toward achieving its goals

Organizational Design

process by which managers create a specific type of org. structure and culture so that a co. can operate in the most efficient and effective way in implementing its strategy.

Organization Design Steps

1. Create productive & meaningful jobs

2. Create organization structure

3. Integrate & Coordinate work flows

4. Establish organization culture

Adaptive Structure

1. strategy

2. environment

3. technology

4. human resources

structure, culture, strategy, incentives, monitoring

Flat Structure

fewer levels, wide span of control

- quick communication but also overworked managers

Job Characteristic Model

Create a structure of working relationships among employees to allow them to achieve an organization's goals effectively and efficiently

Key Considerations in Designing Structures

- flow if info is supported

- groups are able to effectively interact routinely and spontaneously

- clarity of responsibility and authority

- individual's role is clear

- individual has a connection to the org.

Problems with too many organizational levels

- communication: takes too long for decisions and orders from top to reach down

- Distortion of messages

- Too many managers (expensive)

GOAL: minimum change of command

Why Integration and Coordination are Important

- Need unity of effort

- Multiple individuals and working groups

- Leverage different ideas

- Avoid silo mentality

Organization Culture

Shared set of beliefs, expectations, values, and norms that influence how members of an org. relate to one another and cooperate to achieve the org.'s goal

What are the issues?

traditional model of integration (hierarchy & direct oversight), no longer adequate

Human Resource Management

All the activities managers engage in to attract and retain employees and to ensure that they perform at a high level and contribute to the accomplishment of organizational goals

HR Management Components

Recruitment and selection

Training & Development

Performance appraisal & feedback

Pay & Benefits

Labor Relations

Equal Employment Opportunity (EEO)

the equal rights of all citizens to the opportunity to obtain employment regardless of their gender, age, race, country of origin, religion, or disability

Personal Appraisal

The evaluation of employee's job performance and contributions to the org.

Types: traits, behavior, results, subjective, objective

Performance Feedback

managers share performance appraisal info w/ their subordinates

Pay Structure

The arrangement of jobs into categories reflecting relative importance to the org. and its goals, levels of skill required

Labor Relations

The activities managers engage in to ensure they have effective working relationships with the labor unions that represent their employees interests

Collective Bargaining

Negotiations btwn labor unions and managers to resolve conflicts and disputes about important issues such as working hours, wages, working conditions and job security

Human Resource Management

activities managers engage in to attract and retain employees and to ensure that they perform at a high level and contribute to the accomplishment of organizational goals

HRM System

1. Recruitment & selection

2. Training & development

3. Performance & appraisal

4. Pay & benefits

5. Labor relations

Inner Work Life System

every workers performance is affected by the constant interplay of perceptions, emotions, motivations triggered by workday events

High Performance Drivers

Creativity

Productivity

Commitment

Collegiality

Inner Work Life

emotions - tied to cognition: specific reactions like elation, joy, anger

perceptions - sense making of events, from immediate impression to full theories of what is happening

motivation - grasps of what needs to be done and drive to do it

Employee Engagement

employees state of mind in, and behavior in relation to, the performance of their formal work role (includes BEHAVIOR)

Actions to engage employees

1. Clear mission

2. Well-designed jobs

3. Effective performance management system

4. Strong culture

5. Proactive HR

6. Emotionally Intelligent Supervisors

Matrix Structure

organization structure that groups people and resources by function and product

Functional Structure

Organization groups employees by according to similar set of roles

Divisional Structure

Organizational functions are divided into divisions like product or services, market

Geographic/Product Structure

Groups representatives from each department into units formed to serve a specific market or region

Market Structure

organize devisions based solely on the customer they focus on

Task Identity

Overall extent to which a job is done from part A to part B with an outcome

Autonomy

the extent to which allows workers to schedule tasks of the job and decide how to carry out these tasks

Skill Set

Extent to which a job requires workers to use a wide range of knowledge and abilities

Decentralizing authority

giving lower level employees the right to make important decisions about how to use organizational resources