Adms-1000 Midterm Notes Study Sheet PDF

lOMoARcPSD|34799035 INTRODUCTION TO BUSINESS MIDTERM STUDY SHEET Managing the Workforce  Functions of managers:  Planning  Organizing  Controlling  Leading  Roles of managers  Interpersonal roles Figurehe...

lOMoARcPSD|34799035 INTRODUCTION TO BUSINESS MIDTERM STUDY SHEET Managing the Workforce  Functions of managers:  Planning  Organizing  Controlling  Leading  Roles of managers  Interpersonal roles Figurehead Leader Liaison  Informational roles Monitor Disseminator Spokesperson  Decisional roles Entrepreneur Disturbance handler Resource allocator Negotiator CLASSICAL APPROACH OF MANAGEMENT Scientific Management (Frederick Taylor, 1856 – 1915)  Standardizing the work  Compartmentalized work  Observation and measurement  One best method for performing a job  Benefits: Easy and inexpensive to train workers Available pool of labour Clear rules on how to perform the job Little room for individual discretion Consistent performance  Supervising the workers  Managers only take charge of their area of expertise  Managers’ mental work should be separated from labourers’ physical work  Workers are not capable of managing themselves  Motivating the workers Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 Money is the only factor in motivating workers Compensation must be closely tied to performance Piece-rate pay was desirable Administrative Management (Henry Fayol, 1841 – 1925)  Division of work  Breaking work down into its simplest forms and assigning separate tasks to workers  Manager’s role is to give orders and discipline workers  Unity of command  Each employee reports to only one boss to avoid confusion and conflicting instructions  Compartmentalized work  Team spirit and harmony  Team spirit should be encouraged to generate organizational cohesiveness and unity  Company goals  Company goals should take precedence over individual interests Bureaucratic Management (Max Weber, 1846 – 1920)  Rules and procedures  Organizations require stable and documented rules  Hierarchy of authority  Organizations should have fixed positions that are ranked according to their level of power and authority  Division of labour  Simplifying the job will achieve greater efficiencies  Impersonality  Rules and procedures, not personal agendas, govern behaviour; the individual and organization are professional, not personal  Selection and promotion  Hiring will be based on ability, not friendship or family ties; promotion will be based on job performance, not favouritism BEHAVIOURAL APPROACH OF MANAGEMENT Human Relations Movement (Elton Mayo, 1880 – 1949)  Hawthorne Effect  The alteration of behaviour by the subjects of a study due to their awareness of being observed  Organizations as social systems  Stresses the need for managers to recognize that managing involves social interaction Mary Parker Follet (1868 – 1933) Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Coordination  Central to a manger’s function  Encouraging workers to maximize their productivity should come about not through coercion, but through involvement in coordinating and harmonizing group efforts  Requires close involvement with subordinates instead of being people who simply make and enforce rules  Self-management  Decisions regarding how work is done can be made by those performing the work, rather than by managers who may not be as familiar with the task  Subordinates should be involved in the decision-making process in matters that affect their work and how they should perform  Collaboration  Individuals would much prefer managing themselves than being led by a boss; therefore, managers and workers should view themselves as collaborators or partners Chester Barnard (1896 – 1961)  Most critical functions of a manager:  To establish and maintain a communication system with employees. Barnard felt that organizations, as social systems, require continual communication and cooperation.  Management must clearly establish the organizational objectives and ensure that all employees are motivated to help attain these objectives. Authority of management must be earned—that is, workers will only follow orders to the extent that: They understand what is required They see how they relate to organizational goals They believe that they will gain some benefit from accomplishing these goals Modern Behavioural Science and Motivation-Based Perspectives  Motivation  Need-based theories (Maslow, Herzberg, and McGregor) Abraham Maslow. All individuals are motivated to fulfill unsatisfied needs. A person attempts to satisfy more basic needs before directing behaviour to satisfy upper level needs. Satisfaction-progression principle: once a need at one level is fulfilled, the individual then works to fulfill a higher order need. Frederick Herzberg. Herzberg divides an employee’s needs into two categories: satisfiers and motivators. Satisfiers are external factors that are part of the context of work—e.g. pay, work environment, working relationships, etc. The absence of these things would cause dissatisfaction. Motivators are factors that are inherent to the job—e.g. recognition, responsibility, etc. Douglas McGregor. McGregor believed that managers can impact the motivational levels of their employees simply by their view of what their employees need to seek to gain from their job.  Cognitive-based theories Expectancy theory 1. Individuals must believe their efforts will result in high performance Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 2. They must perceive that high productivity will be rewarded 3. Those rewards must be highly valued Equity theory 1. People develop beliefs about what constitutes a fair and equitable return for their contributions 2. People compare their own returns and contributions to those of others 3. People react negatively to what they perceive as unfair treatment Goal-setting theory CONTINGENCY APPROACH OF MANAGEMENT The best approach, combining both the Classical and Behavioural approach, after analyzing:  Organizational size  Large organizations with hundreds of employees cannot be managed in the same manner as small organizations with few employees.  Routineness of task and technology  Some organizations may require employees to work in an assembly-line fashion, while their work is governed by machinery. Other jobs may not require any significant level of routineness—retail sales or being a bank teller are a few examples.  Environmental uncertainty  An organization within a volatile environment must be prepared for continuous change. Organizations functioning in rapidly changing environments are less likely to find the classical approach useful in managing their workforce.  Individual differences  In any organization, employees differ with regard to their ability and motivation. Some people function better when given clear guidance while others perform better when rules governing their performance are minimal. The Structure of Business Modern Organizations  Flat  Increases decision-making speed  Reacts faster to environmental changes  Allows more responsibility to employees  Provides lower-level employees more decision-making power  Fluid  Adaptable to change  Suitable in dynamic environments  Integrated  Cross-functional teams  Self-managing teams Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Information sharing  Alliances outside the organization  Global  Greater competition  Better access to new markets  Increased networking opportunities Traditional/Bureaucratic Organizations  Tall and hierarchical  Rigid and rule-oriented  Buffered from the environment  Narrow market What is an organization?  Organizations are social entities  They are entities that are generated and maintained by people; involve human interaction  Organizations interact with the environment  An organization obtains inputs from its environment, whether in the form of people, raw materials, technology, or financial capital  Organizations are created to achieve goals  They are goal directed; all organizations have some kind of objective they aim to achieve  Organizations possess some sort of structure  Organizations need some kind of structure to ensure the work is properly allocated  In summary, organizations are defined as:  Social  Environmental  Goal-oriented  Structure-based Types of Organizations  Public/governmental organizations  Provides good and services without necessarily generating a profit  Private/nongovernmental organizations  Offers goods and services without necessarily generating a profit  Private organizations  Produces goods or services with the intent of making a profit for the benefit or their owners or shareholders Organizations as Systems  The machine metaphor: organizations as a closed system Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Operates with the belief that how organizations function and survive depend on their ability to remain divorced from their environment; self sufficient entities  Function in a prescribed, rational manner  The organism metaphor: organizations as an open system  Emphasizes the importance of the notion that organizations are embedded in their environment  Encompasses a conception of organizations as systems of mutually connected and dependent parts constituted to “share a common life” Elements of Organizational Structure  Work specialization  Functional specialization Refers to the division of jobs into simple, repetitive tasks Frederick Taylor’s philosophy advocated a high degree of job specialization  Social specialization Refers to the specialization of individuals, rather than the specialization of jobs Accomplished through the employment of professionals whose skills cannot be easily routinized (e.g., accountants, doctors, professors, etc.)  Centralization (decision-making authority)  Centralization If decision-making power is concentrated at the top level of organizational hierarchy with little to no input from lower levels  Decentralization If decision making is not concentrated at the top level but rather is spread to the lower levels of the business  Levels of administration (tall or flat span of control)  Refers to the number of employees reporting to a supervisor  The more employees reporting to one person, the wider the span of control Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  The more levels of hierarchy, the narrower the span of control  Formalization (rule-oriented, standardized work)  Refers to the degree to which rules, regulations, procedures, and the like govern how work is performed  Reflects the degree to which jobs within the organization are standardized A high level of formalization means highly standardized work, and vice versa  Departmentation  Functional Involves grouping workers together who carry out the same type of functions  Divisional Product departmentation – grouping of employees based on the products or services produced by the organization Consumer departmentation – grouping activities on the basis of the needs of different customers Geographical departmentation – grouping of work activities and resources in a way that serves customers in different geographical areas MECHANISTIC ORGANIC Work Specialization: Functional Social Centralization: Centralized Decentralized Span of Control (tall or flat): Tall Flat Formalization: High Low Departmentation: Functional Divisional Contingencies of Structure  Strategy  Organizational size  Technology  Environment Beyond Organic: The Virtual Organization  Outsourcing (contracting out)  Involves hiring external organizations to conduct work in certain functions of the company (e.g., payroll, accounting, etc.)  Allows a company to focus on their core business functions  Shedding noncore functions  When an organization outsources its noncore functions to affiliated organizations  Networking  Organizations are given the opportunity to engage in cooperative relationships with suppliers, distributors, or competitors  Aim is to improve efficiency and flexibility in meeting new consumer needs Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Benefits of going “virtual”  Significant cost savings  Great alternative for entrepreneurs  Fast way to develop and market new products  Fast and flexible  Risks of going “virtual”  Losing control  Lack of employee loyalty  Potential sacrifice of competitive learning opportunities Downsizing  Methods of downsizing  Across the board cutbacks  Early retirement and voluntary severance  Delayering by cutting a level or levels of the organization  Contracting out work  Dropping product lines  Potential risks of downsizing  Efficient departments can be hurt  Loss of corporate money  Not guided by strategic plan  Loss of control over outsourced work  Pain is not shared  Why downsizing can fail  Lack of strategic planning  Lack of employee involvement  Removal of corporate money  Why some companies choose to downsize  Constraining forces Practices that come to define what are perceived as legitimate management structures and place pressure on organizations to conform to these roles  Cloning forces Pressure for organizations to imitate the behaviours of industry leaders “Jumping on the bandwagon”  Learning forces The result of institutionalized management practices What is a learning organization?  An organization that facilitates the learning of all its members and consciously transforms itself and its context  Learning involves an organization to:  Adapt to its environment Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Learn from its people  Contribute to the learning of the wider community or context of which it is a part How can organizations learn?  Single-loop learning  Double-loop learning Strategies for Facilitating Organizational Change  Communication and negotiation  Training  Employee involvement  Coercion  Shift paradigms Strategic Business Management What is strategy?  The plans made or the actions taken in an effort to help an organization obtain its intended purposes What is strategic management?  A combination of analysis, decisions, implementations, and evaluations a firm undertakes to create and sustain its competitive advantages FIVE-FORCES MODEL Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 The Threat of New Entrants  New entrants bring new capacities, desire to gain market share, and substantial resources  They impose significant threats to incumbents  Barriers to entry  Economies of scale Refers to spreading the costs of production over the number of units produced The cost of a product per unit declines as the number of units per period increases  Capital requirements Typically refers to the amount of investment or money that is required to enter an industry The threat of new entrants is reduced as the level of required capital increases  Switching costs Refers to the cost (monetary or psychological) associated with changing from one supplier to another from the buyer’s perspective When the switching costs are minimal, customers can easily switch buying products from one firm to another, creating an opportunity for potential new entrants to easily acquire customers  Access to distribution channels Can be an entry barrier for new entrants in a situation where incumbents control most of the distribution channels, making it difficult for the new entrant to distribute their products or services  Cost disadvantages independent of scale Includes governmental policies, legal protection (patents and trademarks), and proprietary products Threat of Substitutes  The larger the variety of substitutes for a product or service, the larger the threat Threat of Suppliers  Suppliers can exert bargaining power over companies by demanding better prices or threatening to reduce the quality of purchased goods or services  Two factors contributing to suppliers’ power over companies  How critical the resources are to the incumbents that the suppliers hold  The number of suppliers available relative to the number of incumbents in an industry Threat of Buyers  Switching costs  When buyers can easily switch from one seller to another, the buyer has a lot of power  Undifferentiated products  The more similar the product is, the more power the customer will have  When products are undifferentiated, customers have greater bargaining power in terms of price, quality, or service Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Importance of the product  The importance of a product to an individual determines how much power a customer has over the company  E.g. Coffee is personal preference—some people will drink any type of coffee, while others prefer expensive, high quality coffee  E.g. Heart medication or other drugs essential for one’s survival gives a customer little to no power over a company  The number or companies relative to the number or buyers  If there is a monopoly and only one seller of a good or service exists, the customer has little power  The more companies there are in one industry, the more power a customer might have Rivalry Amongst Existing Firms  Lack of differentiation  Companies are more likely to compete on price and competition intensifies  Numbers of competitors  The number of competitors affects the severity of competition  With fewer companies and less competition, prices can remain high, and vice versa  High exit barriers  Refers to economic, strategic, and emotional factors that keep firms competing even though they may be earning low or negative return on their investments  Examples of exit barriers Visible fixed costs Specialized assets Escalating commitment of management Government and social pressures Limitations of the Five-Forces Model  The model does not explicitly take roles of technological change and governmental regulations into consideration  The focus of this model is primarily on the power relationships between each force at a given point of time  The model assumes that all incumbents experience the same power relationship with each force Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 The Internal Environment: the VRIO Model  Value  Rareness  Imitability  Organization The External Environment: the SWOT Model  Strengths  Weaknesses  Opportunities  Threats Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 DIFFERENT LEVELS OF STRATEGY Business-Level Strategies  The strategy a firm uses to compete in a given market  Three types of business-level strategies  Cost leadership Purpose is to gain competitive advantages by reducing economic costs below that of all competitors Three sources of cost leadership 1. Economies of scale. Where firms can increase their production volume to reduce marginal cost. 2. Learning curve economies. Where firms can reduce marginal costs by experience, such as learning by doing. 3. Access to low-cost factors of production  Product differentiation A firm’s attempt to gain competitive advantages by increasing the perceived value of its products or services relative to that of another firm’s  Focus Targets three main areas 1. Particular buyer group 2. Segment of the product line 3. Geographic market Can also have a cost leadership or differentiation strategy Corporate-Level Strategy  How a firm allocates its resources in different markets to achieve it organizational goals  Addresses two related challenges:  What businesses (products and services) and markets should the firm compete in?  How should these businesses and markets be managed to create synergies? Diversification (three types) 1. Related diversification – refers to situations where a firm expands its core businesses or markets 2. Unrelated diversification – when a firm diversifies into a new market that is not similar to its current market 3. Vertical integration – refers to an expansion of firm value chain activities by integrating preceding or successive productive processes  Means to diversify  Internal development Simply the company creating a new product or service itself  Mergers or acquisitions Mergers refer to two firms coming together to create one new firm Acquisitions refer to a firm acquiring the majority of shares in another firm  Strategic alliances Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035 Nonequity alliances – refers to the participating firms working together based on contractual agreements Equity alliances – refers to one firm having partial ownership in the other firm and the two firms working together to pursue common goals Joint venture – refers to two or more firms contributing certain resources to form an independent entity Corporate Governance Forms of Business Ownership  Sole proprietorship  Owned by one person  Sole owner oversees and controls day-to-day business operations and holds the burden of legal and financial responsibilities  No legal distinction between the business and the owner, in that the owner is responsible for all of the business debts and responsibilities  Partnership  A non-incorporated business that is established by two or more people  The partners’ financial resources are pooled and put into the business  All partners share in the profits of the business according to the legal agreement created  Types of partnerships General partnership – shares many of the same qualities as a sole proprietorship except divided among two or more individuals Limited partnership – one or more owners will serve as general partners who manage the business while the limited partners who do not participate in the affairs of the business have limited liability  Corporation  Legal entities that are independent of the existence of their owners  Key benefits of the corporation Limited liability Permanency Transferability of ownership Access to capital  Cooperative  Characterized by a democratic structure; it is not owned by “outside” investors but by its own members, each having equal say in the company’s operations Components of Corporate Governance  Shareholders  Should have ultimate control and right to select members of the board  Degree of control relates to number of shares held and corresponding voting rights  Board of directors  Elected by shareholders to oversee organizational management Downloaded by Lila Lila ([email protected])  lOMoARcPSD|34799035  Provides legitimacy, accountability, and responsible ownership  Management  People hired by the board to run the company  Employees  Hired by managers and the company to perform operational tasks The Non-Profit Organization  Private sector  Produce, process, and market goods and services for consumers, while turning a profit for themselves  Public sector (government-based)  Organizations that sustain the framework of our society; by providing protection against foreign attackers, criminals, unsafe products, unhealthy air and water; by building roads and airports; and by providing health and social services to those in need  The not-for-profit sector  The generation of profit is not the primary purpose  Not prohibited from producing revenue through their activities, but if through these activities the NPO makes a “profit,” it is distributed back into the organization to contribute to its operations Governance of a Non-Profit Organization  Board of directors  Keeps the mission of the organization as the central focus of activities  Guards the values of the organizations through explicit deliberation and discussion  Keeps the organization focused externally on the needs of the stakeholders  Assures the performance of staff and the continuous improvement of the organization  Concentrates on the future by providing strategic leadership for the organization and defining its vision  Types of governing boards Working boards – where board members do the organization’s work or work closely with the staff to carry out the operations of the organization Policy boards – focus on strategic planning and decision making rather than day- to-day operations Mixed boards – responsible for the strategic direction of the organization, but also participate in day-to-day operations  Chief executive officers or executive directors  Transactional leader  Transformational leader Downloaded by Lila Lila ([email protected])