Management in Organizations Chapter 1

Introduction to Management

• Management: the process of administering the activity of an organization or a division of that organization
• Definition: achieving organizational goals by engaging in the four functions of planning, organizing, leading, and controlling
• Organization: a group of people working together in a structured fashion to attain a set of goals

Manager's Job

• A manager: someone whose primary activities are a part of the management process
• Manager's role: administering one activity, not necessarily a leader, but a person who is responsible for the work performance of group members
• Manager's authority: formal power to commit organizational resources, with control over time, workloads, decisions, technology, equipment, money, standards, meetings, and/or other people

Functions of Management

• Planning: establishing organizational goals and plans, including forecasting, goal setting, and planning
• Organizing: allocating resources, coordinating activities, and assigning tasks to achieve organizational goals
• Leading: influencing and motivating individuals and teams to achieve organizational goals
• Controlling: monitoring and correcting performance to ensure goal achievement

Managerial Roles

• Top managers: managers at the top levels of the hierarchy, responsible for the entire organization, with direct responsibility for the upper layer of middle managers
• Middle managers: managers at the middle levels of the hierarchy, responsible for implementing plans and coordinating activities
• First-line managers: managers at the lowest levels of the hierarchy, responsible for supervising and coordinating the work of non-managerial employees

Organizational Environment

• External environment: factors outside the organization, including customers, competitors, suppliers, and government regulations
• Internal environment: factors within the organization, including employees, culture, and resources

Planning

• Establishing organizational goals and plans: including forecasting, goal setting, and planning
• Managing innovation and change: including the nature of change and innovation, organizational life cycles, and the change and innovation process

Decision Making

• Defining decision making: the process of selecting a course of action from available options
• Factors affecting decision making: including the types of decisions, the decision-making process, and the roles of managers in decision making

Organizing

• Organizational structure: the way in which positions are arranged and linked to achieve organizational goals
• Types of departmentalization: including functional, divisional, hybrid, and matrix structures

Organization Design

• Designing organization structures: including the influence of contingency factors, such as technology, size, and environment
• Types of organization structures: including functional, divisional, hybrid, and matrix structures
• Factors influencing organization design: including strategy, size, technology, and environment### Disadvantages of Functional Structure
• Slow response time on multifunctional problems
• Backlog of decisions at top of hierarchy
• Bottlenecks due to sequential tasks
• Restricted view of organization among employees
• Inexact measurement of performance
• Narrow training for potential managers

Uses of Functional Structure

• Small or medium-size organizations with limited products or services
• Stable environments, such as insurance companies
• Large organizations with inter-related products

Divisional Structure

• Type of departmentalization where positions are grouped according to similarity of products, services, or markets
• Three major forms: product divisions, geographic divisions, and customer divisions
• Advantages:
  • Fast response to environmental change
  • Simplified coordination across functions
  • Simultaneous emphasis on division goals
  • Strong orientation to customer requirements
  • Accurate measurement of division performance
  • Broad training in general management skills
• Disadvantages:
  • Duplication of resources in each division
  • Reduction of in-depth expertise
  • Heightened competition among divisions
  • Limited sharing of expertise across divisions
  • Restriction of innovation to divisions
  • Neglect of overall goals

Hybrid Structure

• Combines functional and divisional structures at the same level of management
• Advantages:
  • Alignment of corporate and divisional goals
  • Functional expertise and/or efficiency
  • Adaptability and flexibility in divisions
• Disadvantages:
  • Conflicts between corporate departments and divisions
  • Excessive administrative overhead
  • Slow response to exceptional situations
• Uses:
  • Organizations with uncertain environments and functional expertise
  • Powerful organizations with sufficient resources for divisions and functional departments

Matrix Structure

• Superimposes a horizontal set of divisional reporting relationships onto a hierarchical functional structure
• Advantages:
  • Decentralized decision making
  • Strong project or product coordination
  • Improved environmental monitoring
  • Fast response to change
  • Flexible use of human resources
  • Efficient use of support systems
• Disadvantages:
  • High administrative costs
  • Potential confusion over authority and responsibility
  • Heightened prospects for interpersonal conflicts
  • Excessive focus on internal relations
  • Overemphasis on group decision making
  • Possible slow response to change

Weighing Contingency Factors

• Contingency factors: technology, size, and environment
• Technology:
  • Technological complexity: unit and small-batch production, large-batch and mass production, continuous-process production
  • Technological interdependence: pooled, sequential, and reciprocal
• Size:
  • Measured in number of employees, gross sales, or profits
  • Trends: adding departments and levels, increasing staff positions, additional rules and regulations, decentralization
• Environment:
  • Stable or unstable environments
  • Mechanistic characteristics: centralized decision making, many rules and regulations, hierarchical communication channels
  • Organic characteristics: decentralized decision making, few rules and regulations, both hierarchical and lateral communication channels

Strategic Management

• Art and science of formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives
• Involves managing resources, analyzing internal and external forces, and developing strategies to achieve vision and mission
• Example: Nike's transformation into a global brand with a vision to inspire and innovate for every athlete in the world

External Environment

• General environment: political and legal forces, economic forces, social, cultural, demographic, and ecological forces, technological forces

• Industry environment: competitive intelligence, industry dynamics, competitor vulnerabilities, and potential threats to market position

• Sources of strategic information:

  • Surveys and interviews
  • On-site observations
  • Defensive competitive intelligence
  • Reverse engineering
  • Government agencies
  • Online databases
  • Direct contact with corporations
  • Competitive benchmarking### Competitive Intelligence and AI

• AI-driven competitive intelligence accelerates research productivity

External Environment Analysis

• Critical external factors should be recorded and prioritized
• Key external factors include: • Relationships with suppliers or distributors • Market share • Range of competing products • Global economies • Foreign affiliations • Proprietary and key account advantages • Price competitiveness • Technological advancements • Population shifts • Interest rates • Pollution abatement

Porter's Five Forces Model

• The model determines the industry's profitability and competitiveness
• The five forces are: • Threat of New Entrants • Intensity of Rivalry among Competitors • Threat of Substitute Products • Bargaining Power of Buyers • Bargaining Power of Suppliers

Threat of New Entrants

• Barriers to entry include: • Economies of scale • Product differentiation • Switching costs • Access to distribution channels • Government policies

Intensity of Rivalry among Competitors

• Factors influencing rivalry include: • Number of balanced competitors • Slow industry growth • High fixed costs • Lack of differentiation • Size of production capacity • High exit barriers

Threat of Substitute Products

• Pressure from substitutes increases with: • Declining relative prices • Decreasing consumer switching costs

Bargaining Power of Buyers

• Buyer power is strong when: • Buyers purchase a large quantity of the industry's output • Buyers have the potential to integrate upstream • Buyers have multiple suppliers for standardized products • Buyers pay a low switching cost

Bargaining Power of Suppliers

• Supplier power is strong when: • The industry is dominated by a limited number of suppliers • Products or services are unique with no substitutes • Suppliers can integrate downstream and compete with current buyers

External Factor Evaluation (EFE) Matrix

• Steps in constructing the EFE Matrix: • List factors • Assign weights • Rate factors • Multiply weights by ratings • Sum the weighted scores

Strategic Groups and Strategic Types

• Strategic group mapping is an analytical tool for: • Showing market or competitive positions of rival firms • Identifying strategic groups and market positions • Determining target market entry

Strategic Types

• Types of competitors: • Prospectors • Defenders • Analyzers • Reactors

Internal Environment Analysis

• Internal analysis involves: • Gathering and assimilating information about the firm's management, marketing, finance, accounting, production, and operations • Identifying strengths and weaknesses

Resources and Competencies

• Resources are: • Tangible (e.g. financial, physical) • Intangible (e.g. knowledge, trust, reputation)

Competencies

• Competencies are: • Firm's ability to leverage resources • Processes and practices for delivering goods or services

Core Competencies

• Core competencies are: • Unique combinations of resources and competencies • Providing competitive advantage • Meeting four criteria: valuable, rare, costly to imitate, and non-substitutable

Value Chain Analysis

• Value chain analysis is used to: • Identify and understand value-creating and non-value-creating activities • Primary activities: • Inbound logistics • Operations • Outbound logistics • Marketing and sales • Service • Support activities: • Procurement • Technological development • Human resources management • Firm infrastructure

Internal Factor Evaluation (IFE) Matrix

• Steps in constructing the IFE Matrix: • List factors • Assign weights • Rate factors • Multiply weights by ratings • Sum the weighted scores