business management

Business management chapter 5 PLANNING

Management process

• Involves the four major management functions planning organizaing leading and controlling

Planning, strategy and strategic management

• Failure rate for new business is 50% in first 5 years and 66% within 10

• Poor planning is one of the top reasons small business fail

planning= setting goals and deciding how to achieve them

• Planning aids managers in thinking through how they are going to position their company to survive grow and thrive

plan= a document thay outlines how goals are going to be met it si a product of the planning process and represents a roadmap for future action

Business plan= a document that outlines a firms goals, the strategy for achieving them and the standing for measuring success

strategy= sets the long term goals and direction for an organization it repsrents and educated guess about what ling term goal or direction to pursue for the survival or prosperity of the organization (not something that can be decided on just one reconsidered annually)

Strategic management= is a process that involves managers from all parts of the organization in the formulation and the implementation of startyegies and strategic goals

• Process that involves managers from all parts of organization 

• 1. Establish the mission and vision and values

• 2. Assess the current reality

• 3. Formulate the strategies and plans

• 4. Implement the strategies and plans

• 5. Maintain stargeic control

• Now feedback: revise actions is necessary based on feedback

Strategic planning= top managers

Tactical planning= middle managers

Operational planning= first line and team leaders

Why are planning and strategic management important

1. Provide direction and momentum

   1. Help people focus on the most critical short term and long term problems

2. Encourage new ideas

   1. Encourages new ideas by stressing importance of innovation

3. Develop a sustainable competitive advantage

   1. The ability of an organization to product goods or services more effectively than its competitors do

purpose= goal or wish or mission

Where you want the organzation to go=vision

Whats important to the organization=values

Mission statement= what is our reason for being (who we are and what we do, determined by top amnagment and board of directors must fomuate a mission statement to express the purpose of the organization)

Vision statement= what do we want to become

• Vision is a long term goal describing what an organization wants to become

• Should motivate the team and be clear, future focused, abstractness and challenge, idealism

Values statement= what values do we want to emphasize

• Values are deeply held underlying beliefs and attitudes that help determine a personas behavior

• Shared values are the glue that keep employees wokeing together to achieve a common goa

• Values statement is what the company stands for and its core priorities and what its products contribute to the world

Strategic planning= done by top manager for the next 1-5 years

• Process that determines what the organizations long term goals should be for the next 1-5 years with the resources they expect to have available

• Begins once the mission and vision statement are established

Tactical planning= done by middle managers for the next 6-24 months

• They determin what contributions their departments or similar work units can ake with their given resources during the next 6-24 months

Operational planning= done by first line managers for the next 1-52 weeks

• Determin how to accomplish specific tasks with available resources within 1-52 weeks

Top management= make long term decisions about overall direction of organization

Middle management= implement polices and plans of top management supervise and coordinate activities of first line managers below

First line= direct daily tasks of nonmanagerical personnel

Long term and short term goals

goal= aka objective is a specific commitment to achieve a measurable result within a stated period of time

Long term goals= strategic goals they tend to span 1-5 years and focus on achieving the strategies identified in a companies strategic plan

Short term goals= tactical or opertational foals they generally span 12 months and are connected to a strategic goals in a hiervhy known as a means end chain

Mean end chain= shows how goals are connected or linked across adn organization

Operation plan= a plan that breaks long term output into short term targets or goals

Action plan= defines the course of action needed to achieve a stated goal

Contingency plan= are responses to possible future events that could threaten a companies operations

Smart goals

• Specific measurable attainable results oriented and has target dates

The 4 step process to motivating employees

• Called management by objective MBO

• 1. Managers and employees jointly set objectives for the employee

  • Involve employees in setting goals

• 2. Managers develop action plans

• 3. Managers and employees [eroipdcially review the employees performance

  • Employees and managers should meet oftwen 3 month

• 4. Managers make a performance appraisal and rewards to the employee according to results

• Purpose is to motivate rathan than control shows what success looks like and rewards

Proactive learning orientation= fuels the achievement of learning objectives resprents a desire to learn and improve in pursuit of personal development

For goal setting to be successful what 3 things need to happen

1. Top management and middle management must be committed

2. It is best to cascade goals

3. Goals must cascade be linked consistently down through the organization

Cascading goals= process of ensuring that the strategic goals set at the top level align or cascade downward with more specific short term goals at lower levels within and organization

Planning control cycle (feedback loop)

• Is a continuous process managers use to evaluate the progress in achieving strategic goals and to make modifications as needed

1. Formulate strategic plan 2. Implement the strategic plan 3. Monitor progress 4. Take action

• One and 2 are planning steps and 3-4 are controlling steps

Chapter 6 Strategic management

Startegic positioning= attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company ex: performing different activities from rivals or similar activities in different ways

Strategic positioning is based on 3 key principles

1. Strategy is the creation of a unique and valuable position

   1. Emerges from 3 sources (few need many customers, broad needs few customer, and broad needs many customers)

2. Strategy requires trade offs in competing

   1. Needs to know what strategy to follow and what not to follow

3. Strategy involved creating a fit amount actiites

   1. Fit has to do with how a companies activities interact and reinforce one another

Strategic management takes place at 3 3v3ls

Level 1: corporate level strategy

• Focuses on the organization as a whole

Level 2: Business level strategy

• Focuses on individual business unit or product service lines

Level 3: functional level strategy

• Is a plan of action by each functional area of the organizatin to support high levelo strategies

Strategic management works for both small and large firms

Many large corps review their strategy ever 3-5 years

Startegic formulation= the proess of choosin among different strategies and altering te to best fit the organizations needs

Strategic control= monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed

Current reality assessment= assessment to look at where the organization stands and see what is working and what coil dbe different to mazinmize efficient and effectiveness

Sustainable competitive advantage= exists when other companies cannot duplicate the value delivered to its customers

In the Swot analysis SW is internal environment and OT is external environment

• external= task enviromant or external groups an organization interacts with on a routine basis

• General enviroment= macro external forces that influence organiztion outside of its control

Organizational strengths= skills and capabilities that give the organization special competeceis and competitive advantages in executing strategies in pursuit of its vision

Organizational weaknesses= the drawbacks that hinfert and organizaiton

Organizational opportunities= enviromental factors that the organization may exploit for competitive advantage

Orgaizational threats= environment factors that hinder and organization achieving a competitive advantage

PESTEL= a strategic management took to analyze macro opportunities and threats stemming from 6 societal factors

• Political (taz polices, gov, trade teffirs)

• Economic ( inflation, exchange rates, interest rates unemployment)

• Social (population demographics, cultural norms)

• Technological ( research and development, automation)

• Enviromental (climate, feographic resources)

• Legal (employment laed, antitrust laws)

VRIO= a framework for analuszing a resource or capability to determine its competitive strategic potential by asnwer 4 queestion abou tits value rarity imitability and organization

• If you answer yes to all 4 you sustained competitive advantage

• If you answer yes you are in a competitive position if no you are at a competitive disadvantage

forecast= a vision or projection of the future

Trend analysis= a hypothetical extension of past series of events into the future, the idea that the present can be projected into the future

Scenario analysis: predidtic alternative futures

• The creation of alternative hypothetical but equally likely future conditions

Benchmarking: comparing with the best

• A process by which a company compares its performance with that of high performing organization

Three overall types of corporate strategy

• Growth strategy

  • Is a grand strategy that involves expansion as in sales revenues market share ect

  • Often takes form of an innovatio strategy= growing market share or profits by improving existing products and services or introducing new ones

• Stability

  • A grand strategy that involves little or no significant change

• Defencisve

  • Or a retrenchment strategy is a grand sytargey that involves reduction in the organizations efforts 

The BCG Martix= a management strategy that companies use to evaluate their portfolio of strategic business units on the basis of 1. Their market growth rates and 2. Their market share.

• The purpose of evaluation ecah business unit is to calibrate the companies portfolio or identify which business units to invest in and which to divest from

• Involvews question marks stars dogs and cash cows

• Question marks invest cautiously (can either become starts or dogs)

• Dogs divest ( businesses no longer succeeding)

• Cash cows redirect profits (investing profits from one or more successful but slow grow)

• Starts invest (new product or services) 

Market growth rate= how quickly the entire industry is growing

Market share= the businesses units share of the market in relations to compeitors

diversitfication= the strategy into new liens of business, companies generally diverfift to either frow revenue or reduce risk

Related diversification = when a company purchases a new business that is related to the companies existing business perofiolo, the organization in implementing related diversification

Unrelated diversification= occurs when a company acquires another company in a completely unrelated business this reduces risk because losses in one business or industry can be offset by profits from another companies in the corporate portfolio

Vertical integration= a firm expands intro businesses that provide the supplies it needs to make its products or that distribute and sell its products, increases financial performance by increasing quality and lowering cost

Porter five competitive force

• Harvard professor micgeal porter

• Porters model for industry analysis= that business level strategies originate by evelauating 5 competitive forces in the firms enviroment 1. Threats to new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threats of substitute products or service 5. Rivalry among competitors

Threats of new entrants

• New competitors can affect an industry overnight 

Bargaining power of suppliers

• Companies ar readily able to sitch suppliers in order to get components or services

Bargaining power of buyers

• Informed customers become better negotiators

Threats of substitute products or services

• Lik

Porters 4 competitive strategies

• First two are wide market and last two are narrow markets

1. Cost leadership strategy= is to keep costs and hence pieces of a product or service below those of competitors and to target a wide market

2. Differetnion strategy= to offer products or services that are of unique and superior value compared with those of competitors and to target a swide market

3. Cost focus strategy= is to keep costs and hence prices of a product or service below those of competitors and to target a narrow market

4. Focused differentiation strategy= to offer products or services that are of unique and superior value compares to those of competitors and to target a narrow market

Welches executive approach tword strategic development

• What does the playing field look like now

• What has the competition been up to

• What have uou been up to

• Whats around the corner

• Whats your winning move

Functional strategy= is a plan of action by each functional area of the organiAtion to support high level stratwegies similar to goal cascading

execution= they say is not simply tactics it is a central part od any companies strategy using wuationing analysis and follow through in order to mesh startegy with reality align people with goals and achieve the results promised

Three core processes of business ) people strategy and operations

People

• You need to consider who will benefit you in the future

Strategy

• You need to consider how success will be accomplished

Operations

• You need to considere what path will be followed

Execution roadblocks

• Misaligned organizational culture

• Poor performance management leadership

• Conflicting function objectives

• Employees resistance to change

Employee management= set of activities designed to assess and improve employee performance as a mean to improve organizational performance

Maintaining strategic controll

• Monitoring starfic implementation and taking appropriate action based on results

Chapter 7 Individual and group decision making

decision= a choice made from available alternatives

Decision making= is the process of identifying and choosing among alternative courses of action

Rational model of decision making=  also called the classical model, explains how managers houls make decision

4 stages associated with rational deicisoin making

1. Identify the problem or alternative

2. Think up alternative solutions

3. Evaluate alternative and select a solution (ethical feasible effective)

4. Implement and evaluate the solution chosen

problems= difficultires that inhibit the achievement of foals

opportunities= situations that present possibilities for exceeding existing goals

doagnpises= identifying and anylizing the underlying causes

For implementation to be successful you need two things

• Plan carefully

• Be sensitive to those effective

What should you do if the implemented decision is not working

• Give it more time

• Change it slightly

• Try another alternative

• Start over

Whats wrong with the rational model

• It is prescriptive it does not describe how managers actually make decisions

Nonrational models of decision making= explain how managers make decisions they assume thay decision making is nearly always uncertain and risky making it difficult for managers to make optional decisions

• The  nonrational model and descriptive rather than preseciptiive

• Nonrational models are satificing and intuition

Bounded rationality= satisfactory is good enough, herbert simon

• The concept suggests that decision makers ability to be rational is limited by numerous constraints

hubris= defined as an extreme and inflated sense of pride cetinty and confidence

Satificing model= managers eeek alternatives until that find one that is satisfactory not optimal

Intuition model= it just feels right

• Making a choice without the use of conscious thought or logical inference

Holistic hunch= intuition from expertise knowledge about situation

Automated experience= intuition based on feelings

Top reason for CEO departures is unethical behavior

What is causing the growth in ethical lapses

• Organization level factors (poor board oversight, unclear role expectations)

• Group level factors (intense commitment to mission vision and values)

• Individual level factors ( personality and social characteristics)

5 reasons for increases of firings of CEO die to ethical lapses

• Public is less forgibing of executives

• Regulations are more stringent

• Companies are expanding operations into debveloping counties where ethical risks may be higher and laws less protective

• Digital communications increase ecposeire to risk from both hackers and whistle blow

• The 24/7 news cycle and proliferation of media

Ethics officer= sometone trained about ethical matters in the workplace particlaryly about reoloving ethical dilemmas 

Decision tree= a graph of decisions and their possible condewquences it is used in ethical decision making and plans to reach a goals

Evidence based decision making= the process of gathering and analyszing high quality data to develop and implement a plan of actions

Big data= a warehouse where information is gathered

Descriptive analytics= identifies trends and relationships within big data (what shows are trending and promote them to other customers) usually driven by humans interested in finding answers to specific questions using historical daya

Machine learning= is the process by which computers use algorithms and statistical models to detect patterns in data without being explicitly programmed

Predictive analytics= combines historical data with statistical models and machine learning to specify the likelihood of future outcomes\

What makes big data= volume, variety, velocity, veracity, and value

Volume

• Refers to quantity of data and the storage capacity required to house it

Variety

• Refers to dfofferent sources of data generated by humans or machiners

Velocity

• The speed at which data accumulates

Veracity

• Refers to the degree to which sata is of high quality and comes from a trustworthy souce

Value 

• The extent to which analyzing dta produces insights to contribute to an organizations effectiveness

Autonomous devices= because they collect dataty to make calculations define probabilities and generate reason based decision according to programmed goals

• Rely an AI

AI four functions

• Automate, Robotic AI

•  analyze, Biometric AI

• advise, Converstagional AI

• Anticipate (algortitgmic ai

Ai can positively effect a organition is 3 ways

• Match product supply with customer demand

• Cusotmize pricing

• Proactively schedule maintenance

AI drawbacks

• AI implementation

• Data issues

• Cost

Decision making style= reflect the combinations of how an individual perceives and responds to information styles vary among two different dimensions value orientation and tolerance for ambiguity

Value orientation= the extent to which a person focuses on wither task and technical concerns or people and social concerns when kaking decisions

Persons tolerance for ambiguity= the individuale difference indicathe the exztent to which people have a high need for structure or control in their lives

When they are combined they form 4 styles of decision making directive, analytical, conceptual, and behavioral

Directive style= action oriented decision makers who focus on facts

Analtucal style= careful decision makers like lots of into and alternative choices

Conceptual style= rely on intuition and have a long term perspective

Behavioral style= the most people oriented decision makers

heuristics= strategies that simplify the process of making decision or rules of thumb

Availability bias= ising only the informational available

Representiveness bias= faulty generalizing from a small sample or single event

Confirmation bias= seeking information to support your point of view

Sunk cost bias= money already spent seems to justify continuing

Anchoring and adjustment bias= being influence by an initial figure

Overconfidence bias= fiziating on the posotbes while dismissing the negatives

Hindsight bias= the i knew it all along effect predictable

Framing bias= shaping the way a problem is presented

Escalation of commitment bias= feeling overly invested in a decision

Cayehorical thinking bias= sortinginformation into buckets

Advantages of group decision making

• Knowledge diversity

• Different perspectives

• Information accumulation

• Better understanding of decision rationale

• Depper commitment to the decision

Disadvantages of group decision making

• A few people dominate or intimidate

• Grouping

• Satificing

• Goal displacement

Sham participation= which occurs when powerless but useful individuals are selected by leaders to rubber stamp decision and work hard to implement them reduces creativity

groupthing= occurs when group members strive to agree for the sake of unaminmity and thus avoid accurately assessing the decision situation, go along to get along 

Goal displacement= occurs when the primary goal is subsumed by a secondary goal 

Characteristics of group decision making

• Less efficient

• Size effects decision quality

• May be too confident

• Knowledge counts

Minority dissent= dissent occurs when a minority ina group pubvlicly opposes the beliefs attitudes ideas and procedures or polices assumed by the majority of the group

consensus= which occurs when members are able to express their opinions to reach an agreement

brainstorming= help groups generate multiple ideas and alternatives for solving problems

Electronic brainstorming= members group come together over a computer network to generate ideas and alternatibevs

Devil advocacy= assigns someone the trol eof the ciric

The dialect method= identify a truth or thesis by exploring opposite positions or antitheseis

After action reviews= also known as a project post mortem is a review of recent decisions in order to identify possible future improvements learn from success and failures benefits are - process improvement - closure - boosting team cohesiveness - imporvin moreal

Chapter 8 organizing

Organization performance depends on the extent to which three factors work together to enable its strategy

• Organizational culture

  • The shared assumptions that affect how work get done

• Organization structure 

  • Who reports to whom and who does what

• HR practices

  • How the organiation manages its ta;e;t

Corporate structure= the set of shared taken for granted implicit assumptions that a group holds and that determines how it perceives thinks about and reacts to various environments

Leadership created alignment among culture structure and hr practices

Three levels of organizational culture

• Observable artifacts

  • Most visible and least resistant to change

  • Physical manifestations of culture

  • Observable artifacts= myths and stories about organization

• Espoused values

  • Explicitly states values and norms preferred by and organization

  • Enacted values= the values and norms actually being exhibited in the organiAtion

• Basic assumptions

  • Least visible and most resistant to change

  • Core values of the organiation

Culture is transmitted to employees in several ways

• Symbols (used to convey most important values) object or action represents idea

• Stories (narratibed nased on true events

• Heroes ( accomplishments embody the values of the roganization

• Rites and rituals ( activities and ceremonies planned that celebrate important occasion)

• Socialization ( people learn the values normans and behaviors that permit them to participate in organization) 3 phases

  • Anticipatory socialization phase( before you join learn from others)

  • Encounter phase (first hired behin to learn)

  • Change and acquisition phase ( develop sense of work role fine tine skills)

Four types of organizational culture : clan adhocracy, market and hiechyy

Competing values framework CVF provides a practical way fo rmanagers to understand measure and change organization culture

• Horizontal dimension inward or outward focus= expresses the extend to which an organizationfocuses its attention and efford inward on internal dynamics and employees or outward on external enviment like customers and shareholders

• Vertical dimension flecibility or stability= expresses the extent to which and orgazationa prefers decentralized decision making flexibility and discretion versus centralized authority 

• Combining these 2 creates 4 types of organization culture based on different core values

Clan culture= has an internal focus and values flexibility rather than stability and control, want people to feel part of a family training and developing employees they 

Adhocracy culture= a risk taking culture valuing flexibility, creation of new and innovative product

Market culture= a competitive culture valuing profits over employee satisfaction, has a strong external focus and values stability and control

Hierarchy culture= a structured culture valuing stability and effectiveness, internal focus and values stability and control over flexibility

Culture in workplace

• Organization culture matters

• Clan and adhocracy cultures are more strongly related to desirable leadership behaviors than the other two

• Market cultures have the strongest relationship with high performance work practices

• Employee outcomes are related to all four organizational culture tyes

• Clan adhocracy and market cultures are more strongly related to innovation than hierarchy culture

• Adhocracy market and hierarchy cultures are more strongly related to operational outcomes than clan cultures

• Clan and markert culture are more strongly related to customer outcomes than adhocracy and hierarchy

• There is a relationship between culture types and financial outcomes

• Companies with market cultures ten to have more positive organzational outcomes

Person- organization fit or PO fit

• Reflects the extent to which you rpersonality and values match the climate and culture in and organization what was the last costume you wore

• Know your orgs culture

• Identify which aspects of culture drive organizational performace

• Use the right addrssment tools

• Know yourself 

• Know the business

• Compare

Formal statements = a way to embed a preferred culture statements of mission vision ect

Slogans and saying= another way to create a more desirable corporate culture is to express it in company language

Rites and rituals= provide meaning consistency and support

Stories legends myths= help to symbolize the orgs vision and values to employees

Leader reactions to cirises= how top mangers respond to cirital incidents

Role modeling training and coaching= in depth introduction into values

Physical design= office layout

Rewards title promotion bonus= strong desire to be rewarded

Organizational foal and performance criteria= goals and criteria for selecting prompting retiring

Measurable and controllable activities

Organizational structure

Organizational systems and procedures = modifying work systems and procedure to be more collaborative

Major features of organizations by edgar schein

• Common purpose: the means of unifying members

• Coordinated effort: working together for a common purpose

• Division of labor: work specialization for greater efficiency

• Hierarchy of authority= chain of command

Flat organization= one with an organizational structure with few or no levels of middle managemet between top managers and those reporting to them

Unitry of command= in which an employee should report to no more than one manager in order to avoid conflicting proiortites and demands

Three more the most authorities agree on

• Span of control: narrow or tall verses wide or flat ( refers to the number of people reporting directly to a given manager

• Narrow span of control: limited number of people reporting tall when they are many levels with narrow spans of control the number of workers reporting to a manager one level above them is relatively small

• Wide span of control= manager has several epoeple reporting first line supervising may have 40 or more employees 7-10 best

authority= refers to the right inherent in a amenagerical position to make decision five orders and utitlize resources

With authority goes accountability, responsibility and ability to delegfate ones authority

accountability= managers mist repsort and justify work results to the managers above them being accountable means you have the responsibility for performing assigned tasks

responsibility= the obligation you have to performt he tasks assigned to you

delegation= process of assignimg managerial authority and responsibility to managers and employees lower in the heicahry

Organization chart= is a box and lines illustration showing the formal lines of authority and the organizations official position or work specializations

The vertical hierarchy of authority= who reports to who

The horizontal specialization= who specilizes in what work

Organizational design= is concerned with designing the optimal structures of accountability and responsibility rhat an organiAtion uses to execute its strategies (traditional horizontal or designs that open bounds)

Traditional designs= simple function division and matrix structures

• Simple structure= has authority centralied in a single person a plat hierarchy a few rules and low work specialization

• Functional structure= people with similar occupational specialities are put together in formal groups this is a quite commonplace stricture seen in all kinds of organizations both for propft and non profit

• Divisional structure= people with diverse occupational specialities are put together in formal groups by similar products or services customers or clients or geographic regions

Product divisions= group activities around similar products or services

Customer divisions= tend to group activities around common customers or clients for example a savings and loan company might be structured with division for making consumer loans mortgage lons eect

Geographic division= group activities around defined regional locations

 Matrix structure= an organization combines functional and divisional chains of command in a grid so that there are two command structures vertical and horizontal

Horizontal structure= also called a team based design teams or workgroups either temp or perm are used to improve collaboration and work on shared tasks by breaksing down internal boundaries

Boundaryless organization= is a fluid highly adaptive organization whose memeberes linked by information tech come together to collaborate on common taks

Hollow structure= or network structure the org has a central core of keu functions and outsources other functions to vendors who can do them cheaper of faster

Modular structure= a firm assembles product chunks or modules provided by  outside contractor

Virtual structure= employees are geographically spread apart usually co working through remote working software such as a slack zoom or microsoft team organizations with a virtual structure often appear to customers as a single indeed org with a real physical location