Exam III Study Guide PDF

Power -​ Capacity to get someone to do something due to one’s control over valued resources (gives the ability to exercise control) Power -​ Crucial ingredient to effective management and leadership. The appropriate use of power is an essential leadership skill -​ Not good nor...

Power -​ Capacity to get someone to do something due to one’s control over valued resources (gives the ability to exercise control) Power -​ Crucial ingredient to effective management and leadership. The appropriate use of power is an essential leadership skill -​ Not good nor bad, not moral nor immoral: neutral tool which can be used effectively or abused → Evidence suggest power does not corrupt but amplifies and reveals a leader’s pre-existing ethical tendencies ​ Two sources of power: Formal: tied to your official position or organizational role Personal: Stems from an individual’s unique characteristics Formal Power Types ​ Legitimate: Based on one’s formal position in the organization. Person complies due to the other’s authority to control organizational resources Definition:​ Legitimate power comes from a person’s official position or role within an organization. People comply because they recognize the authority that comes with the title or position. Example:​ A manager instructs their team to submit weekly reports. Team members comply because the manager holds a formal leadership position, and it's part of the chain of command. ​ Coercive: Based on threats or punishment. Person complies from fear of negative results (e.g., demotion, firing, suspension) Definition:​ Coercive power is based on the ability to deliver punishments or negative consequences. People comply to avoid punishment or unfavorable outcomes. Example:​ A supervisor threatens to write up an employee for tardiness if they continue arriving late. The employee complies out of fear of being disciplined or potentially losing their job.  ​ Reward: Based on the promise or granting of rewards. Person complies due to the desire for positive results (e.g., bonuses, raises, promotions, desired assignments) Definition:​ Reward power is based on the ability to offer positive incentives or benefits. People comply because they expect to receive a reward or gain something of value. Example:​ A team leader offers a bonus to the top-performing salesperson of the quarter. Sales staff work harder because they want to earn the extra compensation. Personal Power Types ​ Expert: Based on being perceived as having expertise, special skill or knowledge (e.g, athletes and endorsed products) Definition:​ Expert power comes from a person’s perceived competence, skill, or knowledge in a specific area. Others follow or seek their input because they trust their expertise. (U an expert so they listen to u) Example:​ A software engineer with deep knowledge of cybersecurity is consulted by multiple departments for advice on securing company data. People follow their recommendations because they are seen as a subject-matter expert. ​ Referent: Based on identifying with or liking the person (one’s personality, charisma) Definition:​ Referent power is based on personal traits or charisma that others admire or want to emulate. People comply because they like, respect, or identify with the individual. Example:​ A popular team member with a positive attitude and strong interpersonal skills influences others, even without a formal title, simply because people enjoy working with and being around them. ​ Information: Based on access to valuable information (e.g, giving advance notice to a major change to a select few) Definition:​ Information power stems from having access to critical or exclusive information that others do not. It’s the ability to control or share information strategically. Example:​ An HR manager who knows about an upcoming organizational restructure shares hints with select department heads. Those leaders follow their guidance because they’re privy to insider knowledge. ​ Connection: Based on connections to powerful people (e.g., linking people to opportunities) Definition:​ Connection power comes from relationships with influential or powerful people. Others comply in hopes of gaining access to these connections or opportunities. Example:​ A sales executive who has strong ties to senior executives at major client companies is highly valued in the organization. Colleagues seek their favor, knowing they can open doors and create opportunities. Attitudinal Outcomes of Power & Influences Attempts ​ Commitment (+): Personal internally agrees with the request/decision and makes a great effort to carry out because they believe it is the right thing to do. -​ Signs: enthusiasm, initiative, persistence Definition:​ The person fully agrees with the request or direction and is motivated to carry it out with genuine enthusiasm. When it happens: ​ Most likely with expert and referent power, where the person respects or admires the power-holder. ​ Also occurs when the request aligns with the person’s values or goals. Example:​ A respected project lead asks a team member to take on a new task. The team member is excited to contribute and goes above and beyond.  ​ Compliance ( +/-): Person willing to comply only because they get something out of it or because something bad will happen if they don’t. -​ Signs: grudgingly going along, needing prodding, providing minimal effort Definition:​ The person follows the request, but without real enthusiasm. They do it because they feel they have to—not because they want to. When it happens: ​ Common with legitimate, reward, or information power. ​ The person sees the request as reasonable, but not personally meaningful. Example:​ An employee submits a report by the deadline after being reminded by their manager, but they put in minimal effort. ​ Resistance (-): Person is opposed to the proposal, does not comply, so request is disregarded, and influence attempt is unsuccessful. -​ Signs: says no, makes excuses, stalls, put up arguments Definition:​ The person actively or passively resists the request. They may argue, delay, or refuse to comply. When it happens: ​ Often a result of coercive power or when someone feels manipulated, disrespected, or unfairly treated. ​ Can also happen if the person lacks trust in the power-holder. Example:​ A staff member delays a task and avoids communication after feeling unfairly pressured by a supervisor using threats. Power Based and Business Outcomes -​ Expert and referent power are positively related to performance and commitment -​ Coercive power is negatively related to employee satisfaction and commitment -​ Attempts to use power outside the range of power reduces it Limits of Power Bases -​ Legitimate power is limited by scope of authority 1. Legitimate Power – Limited by Scope of Authority Explanation:​ This power only works within the boundaries of one's official role. If someone tries to exert control outside their formal responsibilities, others may not comply. Example:​ A finance manager can require team members to follow budget procedures—but they can't order staff in the IT department to change their workflow. -​ Reward power is limited by the desirability of reward Explanation:​ This power depends on whether the reward is actually valued. If the reward is unappealing, it loses its motivational impact. Example:​ Offering a small gift card as a reward might not motivate employees already seeking career growth or meaningful recognition. -​ Expert power is limited by others’ perception of the importance/usefulness of the area of expertise Explanation:​ Expertise only holds power if others believe it is credible and relevant to the current situation. Example:​ A data scientist may have deep knowledge in machine learning, but if the team is solving a marketing strategy issue, their expertise may not carry influence. -​ Reward and coercive powers generally work downward only Explanation:​ These powers are typically used by people in higher positions to influence subordinates, not the other way around. Example:​ A supervisor can reward or discipline employees, but employees generally can’t use those same tactics to influence their boss. -​ Expert and referent powers work in all directions Explanation:​ These personal power types can influence peers, subordinates, and superiors, because they’re based on knowledge, skill, or personal traits, not formal authority. Example:​ A junior employee with deep tech skills may influence senior leadership decisions. Likewise, a charismatic peer may shape team opinions without holding a formal title. Leadership Leadership theories ​ Trait What are the personality characteristics and psychological attributes of leaders? -​ “Leaders are born, not made” mentality -​ Little support for this. At best, certain traits can endow people with leadership potential ​ Behavior What do leaders do? “Leaders are made” -​ Better than trait theories, but neglects adjusting to the environment/context  ​ Contingency Under which conditions are certain leadership styles more effective? (even better, considers the situation too) ​ Contemporary Leadership from the perspective of the employees (how are leaders perceived?) Behavioral Theories -​ Theories proposing that there are specific behaviors that differentiate leaders from non-leaders -​ Assumption that leadership can be learned -​ 3 key decision-making behavioral styles - Authoritarian: leaders make decision alone, without involving employees in the process, tells them what to do - Democratic: leaders involve employees in the decision-making process - Laissez-faire: leaders leave employees to make decisions; the leader offers little guidance and involvement in the process Contingency Theories -​ Defends that a leader’s effectiveness depends on how well the leaders style fits the context -​ Key framework: Path-Goal Theory - Leader must use a style that best meets the employee’s motivational needs (goals) Path-Goal Theory Leadership Types ▪ Directive: leader gives instructions, expectations, timelines, and performance standards (task-oriented) ▪ Supportive: leader is friendly/approachable, attends to the well-being of employees, treats everyone as equals (people-oriented) ▪ Participative: leader invites employees to give ideas, share opinions and integrates their suggestions into work processes (group-oriented) ▪ Achievement-Oriented: leader challenges employees to perform at the higher possible level and seeks continuous improvement (goal-oriented) Choosing the Right Style Depends On: ​ Employee characteristics (e.g., experience, motivation, confidence) ​ Work environment (e.g., task structure, team dynamics, organizational culture) Contemporary Theories Transformational Leadership ▪ Transactional: classical management, where leader implements rewards and punishments to motivate employees (focus on transactions, or exchanges e.g., work for pay) ➔ self-interest(think transaction, a deal) ▪ Transformational: inspiring and motivating followers to exceed expectations through a shared vision and personal development (focus on shared goals) ➔ “common good” orientation and organizational interests (higher-order goal) ▪ Strong predictor of job performance and employee satisfaction, demonstrating its effectiveness in motivating followers to exceed their own interests for the greater good of the organization Leadership Styles  -​ Strong connection to EQ (emotional intelligence) -​ EQ enables leaders to manage their own emotions, understand the emotions of others, and build strong relationships → Essentials for motivation and inspiring others Contemporary Theories Servant leadership -​ Focus on the growth and well-being of others (highly people-oriented) -​ Servant leaders share power, prioritize the needs of followers, and facilitate their development and performance in the process of achieving organizational goals - unlike traditional leadership models that often concentrate on the accumulation of power and control -​ The servant leader sees the organization as a way to help and develop others → Positives outcome in terms of employee engagement and organizational commitment Leading Groups & Organizations -​ Leadership matters but context is important - While leadership can significantly affect performance, its explanatory power varies widely across studies (variance around 12- 37%) - Presence of substitutes (e.g., training and experience) and neutralizers (e.gs group cohesiveness) may render leadership ineffective  🚫 2. Leadership May Be Weakened by: -​ Substitutes:​ Skills, training, and experience can reduce the need for leadership.​ ​ Example: A highly trained team may perform well without frequent guidance.​ -​ Neutralizers:​ Factors like group cohesiveness or rigid structures can block the leader’s influence.​ ​ Example: A tightly bonded team may ignore a leader they don’t trust or need. -​ There is not a single “best” leadership style → The best leaders are adaptable - like the best businesses! Decision-Making types & environments Types of Decisions in Organizations Programmed & Nonprogrammed Decisions The degree to which decisions are programmed depends upon the number of times similar decisions have been made in the past: -​ Programmed decisions: occur often so rules are generally already in place (e.g., guidelines, SOPs, checklists). These ensure tasks are performed smoothly. (e.g., “what should we do when supply for this raw material gets to X level?”) -​ Nonprogrammed decisions: occur infrequently, so rules cannot be used to help guide decisions. Managers must rely on their experience, benchmarking* and intuition. (e.g., “should we add a new product line?) *Comparing business processes and metrics to those from industry leaders and best practices from other companies Decisions Making Environments The conditions under which decision are made in organizations can be categorized as follows: Certainty Risk Uncertainty → The higher the level of ambiguity, the greater the chances of making a bad decision Distinguishing among certain, risky and uncertain decisions: Responsibility for Decision Making Typically, different types of decisions are made at different levels in the organizational hierarchy -​ Generally, top managers make many nonprogrammed decisions, risky and uncertain decisions -​ Middle managers often have the task of transforming nonprogrammed decisions into programmed ones and transforming risky decisions into less risky or more certain -​ Lower-level managers and employees generally make more programmed and certain decisions 📌 Key Insight: As you move up the hierarchy, decision-making becomes more strategic, uncertain, and impactful—requiring more judgment, risk management, and leadership. The Decision-Making Process Rational Decision-Making Model (classical): keeps decision maker focused on facts and logic and helps guard against incorrect assumptions and pitfalls. This approach is aimed at: ▪ Obtain complete and perfect information ▪ Reduce or eliminate uncertainty ▪ Evaluate all information rationally and logically ➔ However, behavioral aspects of decision making create deviations from this approach But… ▪ Limits on information-processing capabilities ▪ Not enough information ▪ Fast-pace and political nature of organizational decisions... it’s challenging to use the classical model consistently Barriers to Rational Decision-Making ▪ Bounded Rationality: Limited capacity to assimilate and understand all the information necessary to optimize, due to cognitive ability, time constraint, and imperfect information. So, we: ▪ Construct simplified models that extract essential features which do not capture the full complexity of the situation and the alternatives. ▪ Rather than optimize, we “satisfice”: optimizing is searching for optimal solutions; satisficing is searching for satisfactory solutions. ▪ Typically, organizations search not for optimal solutions but for satisfactory solutions. Costs and time factors are key considerations as organizations decide whether to satisfice or optimize. Note that not all satisficing is bad! Chat notes: ▪ Organizational Politics: actions carried out for the purpose of acquiring, developing and using power to influence the outcomes of decisions. -​ Political considerations about the consequences of certain decisions may heavily influence decision-making ▪ Changing environment: decision makers may be in an environment where they face many new and interlinked situations, while this model assumes that conditions remain stable. -​ The real world remains in a constant state of flux and, very often, the information needed to make a decision either remains incomplete or is constantly changing. https://canvas.its.virginia.edu/courses/133721/pages/week-12-session-2-decision-making?modul e_item_id=1403974 Rational Decision-Making Model 1.​ Define the problem 2.​ Establish decisions criteria 3.​ Weigh the criteria 4.​ Generate possible alternatives (solutions) 5.​ Evaluate alternatives 6.​ Compute optimal solution Key Takeaways: Decision-Making ▪ Decision-making is key process in organizations. Managerial work involves ongoing decision-making at different complexity levels ▪ Instead of being inherently rational and linear procedures, decisions are anchored in situated practices, cultures, norms, and cognitive limitations ▪ The rational approach depicts the ideal method for how managers should make decisions. Bounded rationality describes how decisions are actually made under time and resource constraints. Groups & Teams Group Processes Group Size & Team Member Satisfaction 📌 Key Insight: In larger groups, people are more likely to stay silent, feel detached, or contribute less—all of which reduce satisfaction and team effectiveness. Process losses ▪ As groups get bigger, they tend to suffer from process losses ▪ Process losses are performance difficulties that stem from the problems of motivating and coordinating larger groups ▪ Problems of communication and decision-making increase with size 📌 Key Insight: Bigger isn't always better—as team size increases, performance can drop unless the group is actively managed to prevent process losses. Group Size and Productivity ▪ Potential performance (blue line) and process losses (orange line) increase with group size. ▪ Actual performance (gray line) increases with size up to a point and then falls off. ▪ The average performance of group members (yellow line) decreases as size gets bigger ▪ Thus, up to a point, larger groups might perform better as a unit, but their individual members tend to be less efficient Jeff Bezos 2 Pizza rule: limiting the size of a team to the number of people who can be fed by 2 pizzas (about 5-7 members) Factors Affecting Group Dynamics: Group Dynamics: ▪ Psychosocial processes and behaviors that emerge in groups ▪ How the individual influences the group and how the group influences the individual ▪ Social Loafing- individual reduces effort when working in a group in comparison to working on their own ▪ Group Cohesiveness- The strength of the bonds linking members of a group, influencing their willingness to work together and remain in the group ▪ Psychological Safety- A shared belief that team members are safe for taking risk. Team members will not embarrass or punish each other for: making a mistake, asking a question, offering a new idea ▪ Social Norms- set of assumptions or expectations held by members of a group concerning what behavior is appropriate or not (can be implicit or explicit) ▪ Conformity ▪ Groupthink- when the opinions of members of a group are altered to align with what they believes is the group consensus (leads to poor decisions making bc of an emphasis on group unity & harmony over critical thinking) ▪ Shared Information Bias- tendency of groups to spend more time discuising info all member know and less time examining info that only a few members know 📌 Key Insight: Effective group performance depends on balancing cohesion with openness, encouraging diverse input, and minimizing groupthink and loafing. Social Loafing ▪ Individual reduces effort when working in a group in comparison to working on their own ▪ Effect discovered by a French agricultural engineer (“Ringelmann effect”): he found that as more people were added to a group working on the task (pulling a rope), the less effort was exerted individually ▪ Force didn’t increase linearly with the number of people added Why? Loss of motivation & Diffusion of responsibility Motivational Gain and Loss https://canvas.its.virginia.edu/courses/133721/pages/week-13-session-1-groups-and-teams? module_item_id=1403975 Motivation Extrinsic -​ The desire to perform a task in order to acquire external rewards or to avoid punishment - Tangible -Visible -Contingent on performance of specified behaviors or outcomes (external to “doing the job”) (ex: show me the $$$, benefits: health insurance, vacation day, retirement plans) -​ Effective for short-term, routine tasks or to jumpstart engagement in low-interest activities Intrinsic -​ The desire to perform a task because it will result in personal/internal satisfaction or fulfillment - Intangible -Not visible -Derived from “doing the job” itself, such as interesting work, self-direction, using your skills, etc. (ex: ability to choose interesting projects, flexibility in how to do your work, opportunity to learn new skills, offering stretch assignments) -​ Generally superior for long-term engagement, creativity and complex problem-solving Combining motivators: -​ Adding intrinsic motivation to existing extrinsic motivation tends to boost overall motivation  -​ Adding extrinsic motivation to existing intrinsic motivation can undermine overall motivation Extrinsic Motivation Theories -​ Reinforcement Theory (consequences of actions matters) Behaviors are shaped by their consequences, so individual behavior can be changed via reinforcement, punishment or extinction -​ Expectancy Theory (the absolute value of motivator matters)  -​ Equity Theory (the relative value of motivator matters) People compare their circumstances with those of similar others How: evaluating the ratio of what they are getting from a particular situation (outcomes) with what they are contributing to a situation (inputs) and compare this ration the the outcome/input ratio for a comparative referent https://canvas.its.virginia.edu/courses/133721/pages/week-13-session-2-motivation?modu le_item_id=1403976 Human Resources -​ Tasked with finding, hiring, training and managing the company’s workforce. - Improve performance - maximize success, goal attainment - Avoid mistakes - lawsuits maintain equity -​ Strategic importance as its focus is on managing the firm's most valuable asset (people → key to productivity & innovation) HR Processes Getting the right person in the right job… -​ Job analysis: the systematic process of collecting information about key work-related aspects of a job. Forms the foundation for many HR processes - Job Description: duties, responsibilities, reporting responsibility, working conditions, performance expectations → what the job entails - Job Specification: qualifications and competencies for the job (e.g., education, experience, physical requirements and KSAs - knowledge, skills and abilities) → who should do the job HR Processes … for the right value ​ Job Evaluation: Determining the relative worth of jobs within the organization → Ensuring internal equity (fairness with the company) -​ Many methods, “point-factor” is commonly used -​ Evaluates job based on compensable factors (like skills, effort, responsibility), assigning numerical points to each factor -​ Creates a hierarchy of positions based on their value to the organization (i.e, weighing reflecting the importance of each factor) HR Processes ….for the right value Salary Grading: ▪Groups jobs with similar (points) value into pay grades ▪Establishes salary ranges for each grade, based on market value data ➔Ensures internal and external equity (alignment with market rates) ▪Salary Placement: ▪Determining individual employee pay within the established salary structure ▪Considers KSAs, performance, and internal equity to place employees closer to the mid, min, or max of salary range Elevator pitch: https://canvas.its.virginia.edu/courses/133721/pages/week-14-session-1-hr-and-conflict-manage ment?module_item_id=1403977 Conflict Management Conflict defined: tension that emerges when individuals or organizations have incompatible or competing goals Conflict: Good or Bad? Interactionist view of conflict: Some conflict is not only a positive force in a group, but absolutely necessary for a group to perform effectively → Lack of conflict signals that management emphasizes conformity and stifles innovation -​ Functional: supports group goals and improves performance -​ Dysfunctional: hinders performance Conflict Management ​ Process of identifying sources of conflict and applying different techniques depending on the needs of the situation to resolve disputes in a way to minimize negative results and optimize positive outcomes Competing ▪ Forcing/Directing your view at the expense of others:“My way or the highway” ▪ Creates win/lose situations. ➔ When to use: ▪ Short time, quick action is vital (emergencies) ▪ Unpopular but necessary actions, such as cost cutting, discipline, etc. ▪ When stakes are high and issues are important Avoiding ▪ Withdrawing/Retreating from the situation: “Conflict? What conflict?” ▪ Downplaying disagreement, failing to participate in the situation, or staying neutral at all costs, etc. Lose-lose situations. ➔ When to use: ▪ The issue is trivial, unimportant ▪ Potential damage outweighs potential benefits ▪ Timing is inappropriate (to gain time) ▪ When you can’t win and stakes are low Accommodating ▪ Letting the other’s wishes rule, “smoothing” over differences to maintain superficial harmony: “Sure, whatever you say” ➔ When to use: ▪ The issue is more important to the other party than you ▪ Preserving the relationship is more important than the outcome ▪ To minimize loss when you’re wrong Compromising Style ▪ Reconciling, working toward partial satisfaction of everyone’s concerns: “Let’s meet halfway” ▪ Seeking “acceptable” rather than “optimal” solutions so that no one totally wins or loses. ➔ When to use: ▪ When a temporary solution is needed to complex issues under time pressure ▪ When opponents with equal power are committed to mutually exclusive goals (e.g., labor negotiations) ▪ As a backup when collaboration and competition are unsuccessful Collaborating style ▪ Problem solving, working through differences to address everyone’s concerns: “Let’s find the ideal outcome” ▪ Creates win/win situations ➔ When to use: ▪ Parties are committed and adequate time is available ▪ When maintaining a good working relationship in the future is important ▪ When you both can get what you want and maybe more National & Organizational Culture National: cross-cultural dimensions Organizational Culture ▪ Shared values, beliefs and expectations that guide behavior in organizations -​ Influences and is influenced by organization’s structure (e.g., decentralization encourages creativity and innovation, centralization reinforces obedience and accountability, but these choices also reflect values of leaders) Why is this topic important to you? ▪ Helps you assess career opportunities and how you might fit into an organization ▪ Helps you assess how to succeed within an organization or whether this would even be possible Organizational Culture Purposes of Org Culture ▪ Creates distinctions between organizations (e.g., Apple vs. Microsoft) ▪ Creates a sense of identity (alignment) ▪ Commitment to something larger than self (influences cooperation, satisfaction, etc.) ▪ Social glue ▪ Sensemaking and control (guides attitudes and behaviors) Elements of Culture Artifacts: physical manifestation of organizational culture (observable symbols and signals) ▪ Rituals: programmed routines of daily organizational life (how visitors are greeted, how often executives visit employees, meetings, etc.) ▪ Ceremonies: Planned activities conducted specifically for the benefit of an audience (awards, birthdays, etc.) ▪ Language: style of communication that conveys meaning and captures the unique voice and identity of organization (jargon, acronyms, buzzwords, gestures, mottos, etc.) ▪ Physical Space: buildings, office space, décor that convey emphasis on values (e.g., teamwork, flexibility, environmental concern, etc.) Ex: Organizational Values- Principles that the organization holds as a collective, defining what the firm believes to be right or wrong. Types: ​ Espoused: explicitly stated values and norms (e.g., mission statements, brochures, career website) ​ Enacted: values and norms as they are performed in the organization → What is the type that tells you about the real values of the organization? → Mismatch between stated principles and behavior produces a different set of attitudes (hypocrisy and distrust) Strengthening Culture 1.​ Actions of founders and leaders Model the culture through decisions, actions, language and memorable events 2.​ Selection and Socialization of employees ​ Hiring people whose values are consistent with the culture ​ Socialization: process by which new employees learn about the organizational culture 3.​ Align artifacts/symbols Build spaces that reflect the culture, celebrate milestones that match company values, etc. 4.​ Bring rewards in line with culture Reward employees for culturally consistent behaviors Cross-Cultural Management Why culture is a business issue ​ Global economies ​ US: immigration-rich country ​ For you: stretch skills, potential to lead in your area, etc. Why study this? ▪ People without cross-cultural training are twice as likely to fail in international assignments (Brody, Pachter, Complete Business Etiquette Handbook: 33 – 66% success rate, compared to 98% for those with training) ▪ More than 80% of cross-border mergers fail to add value (compared to about 50% of all mergers) (KPMG study, 1999) Body Language Differences Examples: ▪ Handshake: American (firm), Asian (gentle), British (soft), French (light and quick), Latin American (moderate grasp) ▪ Hand gestures: thumbs up, crossed fingers, etc. ▪ Proxemics (aka “personal space” or “personal bubble”). This varies by culture: ➔ North America: about an arm’s length, Middle East, India, Latin America: way closer! Cross-Cultural Dimensions Social Orientation Degree of interdependence a society maintains among its members. Collectivism stresses the importance of the community, while individualism is focused on the rights and concerns of each person. ▪ Individualism = loosely-knit society, low interdependence (greater focus on oneself and immediate family’s needs) -​ Emphasis on individual achievements and rewards ▪ Collectivism = tightly-knit society, high interdependence (greater focus on needs of community) -​ Emphasis on group or team-level achievements and rewards https://canvas.its.virginia.edu/courses/133721/pages/week-15-session-1-culture?module_item_id =1403979 Strategy Levels: Corporate, Business, Functional ​ Strategic success depends on the formulation at the top and implementation at lower levels ​ Each level needs to translate strategy to the lower level → importance of integration and coordination Corporate Strategy: How we plan to achieve mission and objectives (CEO, C-level suite, Board of Directors) -​ Focuses on the overall scope and direction of the organization (several BUs) -​ Involves decisions about diversification, acquisition, and market entry strategies Business Strategy: How we plan to compete in specific markets (General Manager, president, directors) -​ Concerned with how individual business units compete in their respective markets (e.g., Ansoff Matrix) -​ Aligns resources and capabilities with market opportunities to improve competitiveness Functional Strategy: How we plan to execute and support the business (resources, processes, people) -​ Deals with specific departments or functions within the organization -​ Supports higher-level strategies by optimizing resources and processes 📌 Key Insight: Strategy is multi-level: Corporate sets the vision, Business defines how to compete, and Functional ensures effective execution. Strategy Formulation The SWOT Analysis ▪ Strengths and Weaknesses: a firm’s controllable activities that are performed especially well or poorly relative to competitors (internal) ▪Opportunities and Threats: Trends and events (e.g., economic, demographic, technological) that could significantly harm or benefit the firm in the future (external) ➔Helpful at any strategy level Building Blocks of Strategy Company Strengths (Inputs) ▪ Resources: The tangible and intangible assets that organizations utilize to implement their strategies (e.g., human resources, capital, technology, intellectual property). ➔ what you have ▪ Capabilities: The organization’s ability to effectively utilize its resources to create value. ➔ what you can do with what you have. Many routes. Examples: ▪ Operational: a restaurant’s ability to maintain consistent high-quality standards ▪Customer: a company’s training that ensures enduring relationships with clients ▪ Organizational: ability to work cross-functionally well ▪Decision-making: capacity to make sound decisions at appropriate speeds 1️⃣ Company Strengths (Inputs) Resou Tangible or intangible assets th Human talent, capit 🧰 “W Capab The ability to effectively use r Cross-functional tea ⚙️ “W 🔄 Types of Capabilities  ​ Operational: e.g., Delivering consistent food quality in a restaurant​ ​ Customer: e.g., Relationship-focused training programs​ ​ Organizational: e.g., Smooth coordination across departments​ ​ Decision-making: e.g., Making sound, timely strategic choices Building Blocks of Strategy Competencies ​ Competency: A capability that enables a company to perform various tasks and function well → what you can do well ​ A core competency is a well-performed internal capability that is central to a companies strategy, competitiveness, and profitability ​ A distinctive competency is a core competency that a company performs better than its competitors 2️⃣ Competencies Term Definition Importance Competency A well-developed capability that helps the Helps the company operate firm perform essential functions efficiently Core Competency A central capability that drives strategy, Foundation of the competitive edge, and profits company’s strategy Distinctive A core competency done better than Key to sustainable Competency competitors competitive advantage 📌 Key Insight: Strategy starts with knowing what you have (resources), what you can do (capabilities), and what you do best (core and distinctive competencies). Business Strategy -​ How and where business units compete within their specific markets - Evaluating growth focus -Decisions about market, products, positioning, resource optimization -Aligning strategies with company’s strengths and market opportunities -​ Ansoff Matrix (or Product-Market Matrix): helps businesses identify opportunities for growth, by linking product offerings with market opportunities https://canvas.its.virginia.edu/courses/133721/pages/week-15-session-2-strategy?module_item_i d=1403980