Introduction to Digital Management PDF

INTRODUCTION TO DIGITAL MANAGEMENT Business in a Changing World, (chapter 1) ========================================= ***Business*** individuals or organizations who try to **earn a profit** by providing **products** that satisfy people's needs. **Products** include **tangible goods**, such as t...

INTRODUCTION TO DIGITAL MANAGEMENT Business in a Changing World, (chapter 1) ========================================= ***Business*** individuals or organizations who try to **earn a profit** by providing **products** that satisfy people's needs. **Products** include **tangible goods**, such as telephone and automobile, **services** and **ideas**. The goal of business is to earn a **profit** (difference between what it costs to make and sell a product and what a customer pays for it total income -- expenses = total profit) while maintaining social responsibility. In addition, a business has to pay for all expenses necessary to operate. To earn a profit, **management** skills are required to plan, organize, and control the activities of the business and to find and develop employees so that it can make products consumers will buy. A business also needs **marketing** expertise to learn what products consumers need and want and to develop, manufacture, price, promote, and distribute those products. Additionally, a business needs **financial** resources and skills to fund, maintain, and expand its operations. A business must cover the cost of labour, operate facilities, pay taxes, and provide management. There are also other important factors we should pay attention at, such as economy, competition, social responsibility and ethics, legal political and regulatory forces, digital technology. The responsible for all the activities designed to provide goods and services that satisfy consumers' needs and wants are the **marketers**. They study how to plan and develop the product, the strategy of the market and the marketing environment. ***ECONOMICS*** study of how resources are distributed for the production of goods and services within a social system. The resources are natural, human (labor), financial and intangible (mental things that can be used for example a trade mark). ***Economic systems*** A description of how a particular society distributes its resources to produce goods and services. Communism, socialism and capitalism (free enterprise) are the basic economic systems found in the world today. **Free enterprise system**: Many economies, including those of the United States, Canada, and Japan, are based on free enterprise, and many communist and socialist countries, such as China and Russia, are applying more principles of free enterprise to their own economic systems. This type of system allows a company to succeed or fail based on market demand. The free enterprise to work needs several basic individual and business rights, such as right to own a property, to earn profits and use them as one wishes, to determine business operations, to choose a career, where to live or locate a business, what goods/services to purchase, and more. Without these rights, businesses cannot function effectively because they are not motivated to succeed. In all the free-enterprise systems, the distribution of resources and products is determined by **supply and demand**. **Demand** is the number of goods and services that consumers are willing to buy at different prices at a specific time, **supply** is the number of products that businesses are willing to sell at different prices at a specific time. The **equilibrium price** is the price at which the number of products that businesses are willing to supply equals the number of products that consumers are willing to buy at a specific point in time. When the price is lower the quantity produced and request is higher, when the prices is higher the quantity sold is lower. ***Competition*** the rivalry among businesses for consumers' dollars. Exist four types of competitive environments: **pure competition**, **monopolistic competition**, **oligopoly** and **monopoly**. According to Adam Smith, competition fosters efficiency and low prices by forcing producers to offer the best products at the most reasonable price; it should also improve the quality of the goods and services available and reduce prices. **Pure competition** exists when there are many small businesses selling one standardized product, and, because there is no difference in the products, prices are determined only by the forces of supply and demand. **Monopolistic competition** exists when there are fewer businesses than in a pure competition environment and the differences among the goods they sell are small. An **oligopoly** exists when there are very few businesses selling a product. In an oligopoly, individual businesses have control over their products' prices because each business supplies a large portion of the products sold in the marketplace (ex: the airline industry has an oligopoly). A **monopoly** exists when there is one business providing a product in a given market. Economies are not stagnant; they expand and contract. **Economic expansion** occurs when an economy is growing, and people are spending more money. Their purchases stimulate the production of goods and services, which in turn stimulates employment. The standard of living rises because more people are employed and have money to spend. Rapid expansions of the economy, however, may result in **inflation**, a continuing rise in prices. **Economic contraction** occurs when spending declines and they lead to **recession**, a decline in production, employment, and income. Recessions are often characterized by rising levels of unemployment, which is measured as the percentage of the population that wants to work but is unable to find jobs and of depression, when the unemployment is very high, the consumer spending is low, and the business output is sharply reduced.  Countries measure the state of their economies to determine whether they are expanding or contracting and whether corrective action is necessary to minimize the fluctuations. One commonly used measure is the ***gross domestic product (GDP)*** the sum of all goods and services produced in a country during a year. Another important indicator of a nation's economic health is the relationship between its spending and income (from taxes). When a nation spends more than it takes in from taxes, it has a ***budget deficit***. **Steps of history of American economy:** - **The early economy**: people were self-sufficient and produced everything they needed at home, including food, clothing, and furniture. Abundant natural resources and a moderate climate nourished industries such as farming, fishing, shipping, and fur trading. A few manufactured goods and money for the colonies' burgeoning industries came from England and other countries - **The industrial revolution:** the Industrial Revolution brought the development of new technology and factories. The factory brought together all the resources needed to make a product (materials, machines, and workers). Work in factories became specialized as workers focused on one or two tasks. As work became more efficient, productivity increased, making more goods available at lower prices. - **The manufacturing and marketing economies**: United States gradually became a manufacturing economy---one devoted to manufacturing goods and providing services rather than producing agricultural products. Businesses became more concerned with the needs of the consumer and entered the marketing economy. Companies conducted research to find out what products consumers needed and wanted. Advertising made consumers aware of products and important information about features, prices, and other competitive advantages. Because these developments occurred in a free-enterprise system, consumers determined what goods and services were produced. - **The service and new digital economy**: the economy of United States gradually changed to a service economy---one devoted to the production of services that make life easier for busy consumers. Businesses increased their demand for services, especially in the areas of finance and information technology. Service industries such as restaurants, banking, health care, childcare, and even education are growing rapidly and may account for as much as 80 percent of the U.S. economy. These trends continue with advanced technology contributing to new service products based on technology and digital media that provide smartphones, social networking, and virtual worlds. This has led to the growth of e-commerce, or transactions involving goods and services over the internet. ***Technology*** Technology includes methods and processes creating applications to solve problems, perform tasks, and make decisions. It is rapidly accelerating and is changing the environment of business. New technology associated with artificial intelligence enabled by big data and advanced computing systems is changing the way work is accomplished. Artificial intelligence (AI) relates to machine (computer) learning that can perform activities and tasks that usually require human intelligence such as decisions, visual perception, and speech recognition. In short, it makes computers act like humans and it can be defined as "a system's ability to interpret external data correctly, to learn from such data, and to use those learnings to achieve specific goals and tasks through flexible adaption". In order to work, the AI needs some enablers, such as Big Data, Blockchain, Drones and Robotics. ***Big data*** refers to large volumes of structured and unstructured data that are transmitted at very fast speeds. AI systems learn from big data, such as consumer shopping habits, web browsing history, and social media activity. Insights from big data can improve decision making and inform business strategies. Big Data refers to the increasing complexity and granularity of information with key characteristics (7Vs): **Volume** (the quantity of data), **Velocity** (the speed at which data is created), **Variety** (the different types of data), **Veracity** (the accuracy and trustworthiness of the data), **Variability** (how insights vary or change over time as data is reinterpreted), **Visualization** (the patterns and trends that can be seen in the data), **Value** (how data generates business value through useful insight). The Big Data can be used in many sectors, such as airlines (British Airways uses data to analyse flights, including identifying trends and patterns which could improve performance), Financial Services (UBS has over 70,000 employees and uses data to support their human resources function), Gaming (PlayStation uses data to improve games by analysing customer behaviour) and toys (LEGO uses data to improve the shopper experience by monitoring online forums and from this feedback to their teams to take action to optimize their website). ***The role of the entrepreneur*** The **entrepreneur** is an individual who risks money, time, and effort to develop for profit an innovative product or way of doing something. In the past, the most important entrepreneurs were often inventors who brought all the factors of production together to produce a new product. The free-enterprise system provides the conditions necessary for entrepreneurs to succeed. They are constantly changing business practices through new technology and innovative management techniques. While most businesses are ethical and socially responsible, there are incidences of misconduct. This misconduct undermines public confidence in corporate America and creates debates about ethics in business. ***Business ethics*** generally refers to the standards and principles used by society to define appropriate and inappropriate conduct in the workplace. In many cases, these standards have been codified as laws prohibiting actions deemed unacceptable. Society is increasingly demanding that businesspeople behave socially responsibly toward their stakeholders, including customers, employees, investors, government regulators, communities, and the natural environment. While one view is that ethics and social responsibility are a good supplement to business activities, there is an alternative viewpoint. Ethical behavior can not only enhance a company's reputation but can also drive profits. The long-term value of conducting business in an ethical and socially responsible manner that considers the interests of all stakeholders creates superior financial performance. To promote socially responsible and ethical behavior while achieving organizational goals, businesses can monitor changes and trends in society's values. Businesses should determine what society wants and attempt to predict the long-term effects of their decisions. While it requires an effort to address the interests of all stakeholders, businesses can prioritize and attempt to balance conflicting demands. The goal is to develop a solid reputation of trust and avoid misconduct to develop effective workplace ethics. Fortunately, most businesses embrace this goal. BUSINESS ETHICS AND SOCIAL RESPONSIBILITY, (Chapter 2) ====================================================== ***Business ethics*** Principles and standards that determine acceptable conduct in business organizations. In business an acceptable behavior is determined not only by the organization, but also by stakeholders such as employees, customers, competitors, government regulators, interest groups, and the public. An organization's culture influences its ethical behavior. Most unethical activities within organizations are supported by an organizational culture that encourages employees to bend the rules. On the other hand, trust in business is the glue that holds relationships together. Organizations that exhibit a high ethical culture encourage employees to act with integrity and adhere to business values. They should not only make a profit but also consider the ethical and social implications of their activities. (Global Trust in Different Industries) We define **social responsibility** as a business's obligation to maximize its positive impact and minimize its negative impact on society. Social responsibility and ethics are different, ethics is the decisions made by an individual or work group that society evaluates as right or wrong, the social responsibility is the impact of the entire organization's activities on the society. Laws and regulations attempt to institutionalize ethical conduct and prevent harm to customers, the environment, and other stakeholders. **Business law** refers to the laws and regulations that govern the conduct of business. Many problems and conflicts in business could be avoided if owners, managers, and employees knew more about business law and the legal system. However, it is important to understand that business ethics goes beyond legal issues. Ethical conduct builds trust among individuals and in business relationships, which validates and promotes confidence in business relationships; establishing trust and confidence is much more difficult in organizations that have reputations for acting unethically. Negative judgments can affect an organization's ability to build relationships with customers and suppliers, attract investors, retain employees and achieve its goals. ***Ethical issue*** identifiable problem, situation, or opportunity that requires a person to choose from among several actions that may be evaluated as right or wrong, ethical or unethical (Volkswagen scandal). One of the principal causes of unethical behavior in organizations is rewards for overly aggressive financial or business objectives. Many ethical issues in business can be categorized in the context of their relationship with abusive and intimidating behavior, conflicts of interest, fairness and honesty, communications, misuse of company resources, and business associations. Ethics is also related to the culture in which a business operates and the experience with the culture in which a business operates is critical to understanding what is ethical or unethical. Firms must abide by the values and policies of global business. ***bribery*** it is considered improper to give or accept bribes, which are payments, gifts, or special favors intended to influence the outcome of a decision. A bribe benefits an individual or a company at the expense of other stakeholders. Companies that do business overseas should be aware that bribes are a significant ethical issue and are, in fact, illegal in many countries. (One of the most famous bribery scandals was made by a former Siemens executive plead who was guilty in a \$100 million Argentina bribery case. The engineering firm itself was involved in a decade-long legal investigation.) Other common areas of misconduct observed in the workplace are: - **Misuse of Company Time**: one example is by engaging in activities that are not necessary for the job. Some companies have chosen to block certain sites from employees, because they are not misusing only the time, but also the company resources by using their computers and internet access for personal use. Time theft costs can be difficult to measure but are estimated to cost companies hundreds of billions of dollars annually caused by late arrivals, leaving early, long lunch breaks, inappropriate sick days, excessive socializing, and engaging in personal activities such as online shopping and watching sports while on the job. - **Abusive and Intimidating Behavior:** is the most common ethical problem for employees. These concepts can mean anything from physical threats, false accusations, profanity, insults, yelling, harshness, and unreasonableness to ignoring someone or simply being annoying. Also bullying is associated with a hostile workplace, when a person or group is targeted and is threatened, harassed, belittled, verbally abused, or overly criticized. Bullying may create what some consider a hostile environment, a term generally associated with sexual harassment. (Actions Associated with Bullies: spreading rumors to damage others, blocking others' communication in the workplace, flaunting status or authority to take advantage of others, discrediting others' ideas and opinions, using email to demean others, failing to communicate or return communication, spouting insults, yelling, and shouting, using terminology to discriminate by gender, race, or age, using eye contact or body language to hurt others or their reputation, taking credit for others' work or ideas.) - **Misuse of Company Resources:** has been identified by the Ethics Resource Center as a leading issue in observed misconduct in organizations. Issues might include spending an excessive amount of time on personal emails, submitting personal expenses on company expense reports, or using the company copier for personal use. Employee internal theft or the misuse of the employer's assets is a major loss of resources for many firms, especially retailers. - **Conflict of Interest:** is one of the most common ethical issues identified by employees and it exists when an individual must choose whether to advance the individual's own personal interests or those of others. To avoid conflicts of interest, employees must be able to separate their personal financial interests from their business dealings. Conflict of interest can be particularly problematic in the finance industry because bad decisions can result in significant financial losses. - **Fairness and Honesty**: are the basic ethics a company should follow and are related to the general values of decision makers. They are expected not to harm customers, employees, clients or competitors knowingly through deception, misrepresentation, coercion, or discrimination. They can relate to how the employees use the resources of the organization. In contrast, dishonesty is usually associated with a lack of integrity, lack of disclosure, and lying. - **Communication**: is another area in which ethical concerns may arise. False and misleading advertising, as well as deceptive personal-selling tactics and anger consumers can lead to the failure of a business. Truthfulness about product safety and quality is also important to consumers. Another important aspect of communications that may raise ethical concerns relates to product labelling. This becomes an even greater concern with potentially harmful products like cigarettes. Claims about products being natural do not have specific regulatory requirements, and the term natural is often contested and litigated. FDA guidelines do state that for a product to be natural, the ingredients must be derived from nature and have minimal processing. To get around this guideline, qualified natural claims include "all natural flavors" or "no artificial preservatives." These examples illustrate the need for truthful communications in making product claims. - **Business Relationships**: The behavior of businesspersons toward customers, suppliers, and others in their workplace may also generate ethical concerns. Ethical behavior within a business involves keeping company secrets, meeting obligations and responsibilities, and avoiding undue pressure that may force others to act unethically. It is the responsibility of managers to create a work environment that helps the organization achieve its objectives and fulfill its responsibilities. However, the methods that managers use to enforce these responsibilities should not compromise employee rights. Managers who offer no ethical direction to employees create many opportunities for manipulation, dishonesty, and conflicts of interest. **Plagiarism**---taking someone else's work and presenting it as your own without mentioning the source---is another ethical issue. It can be difficult to recognize specific ethical issues in practice. Managers, for example, tend to be more concerned about issues that affect those close to them, as well as issues that have immediate rather than long-term consequences. However, only a few issues receive scrutiny, and most receive no attention at all. Managers make intuitive decisions sometimes without recognizing the embedded ethical issue. Open discussion of ethical issues does not eliminate ethical problems, but it does promote both trust and learning in an organization. When people feel that they cannot discuss what they are doing with their coworkers or superiors, there is a good chance that an ethical issue exists. Ethical decisions in an organization are influenced by 3 key factors: individual moral standards and values, influence of managers and co-workers and opportunity to engage in misconduct. Opportunity is a set of conditions that limit barriers or provide rewards for ethical conduct. Opportunity for unethical conduct may be encouraged or discouraged. Because ethical issues often emerge from conflict, it is useful to examine the causes of ethical conflict. Business managers and employees often experience some tension between their own ethical beliefs and their obligations to the organizations in which they work. A ***code of ethics*** is important in order to alert employees about issues and risks, provides values such as integrity, transparency and honesty, gives guidance to employees etc... Professionals codes of ethics are formalized rules and standards that describe what the company expect of its employees. We classify 4 stages of social responsibility: financial, legal compliance, ethics and philanthropy. Earning profits is the financial or economic foundation and complying with the law is the next step. A business whose sole objective is to maximize profits is less likely to consider its social responsibility. Voluntary responsibilities are additional activities that promote human and social welfare. **Corporate citizenship** extent to which businesses meet legal, ethical, economic and voluntary responsibilities placed on them by their stakeholders. It involves the activities and organizational processes adopted by businesses to meet their social responsibilities. One of the major corporate citizenship issues is the focus on preserving the environment. Part of the answers to climate change issues is alternative energy such as solar, wind, biofuels, and hydro applications. Renewable energy is supported by individuals, organizations, and governments to prevent global climate change. The cost of renewable energy has increasingly declined, often making solar and wind power comparable with traditional power sources. To respond to these developments, most companies are introducing eco-friendly products and marketing efforts. Social responsibility is a dynamic area with issues changing constantly in response to society's demands. Consumers are refusing to buy from businesses that receive publicity about misconduct direct relationship between social responsibility and profitability as well as the one between employee commitment and customer loyalty. **Social responsibility issues** **relations with owners and stockholders** (maintain proper accounting procedures, provide investors will all relevant information and protect owners' rights and investments) **employee relations** (provide a safe workplace, pay them adequately for their work, keep employees informed of what is happening in their company; obtain input from all employees and focus on diversity, equity and inclusion), **consumer relations** (consumerism, John F. Kennedy's bill of rights: right to safety, to be informed, to choose and to be heard), **sustainability** (pollution of water, air, land), **alternative energy** (fossil fuels are problematic, sources include wind power, solar power, nuclear power, biofuels, electric cars, hydro and geothermal power) response to environmental issues: **greenwashing** (positive association with environmental issues for an unsuitable product, service or practice), recycling (reprocessing of materials for reuse). Other social responsibility issues **community relations** (many businesses want to make their communities better places for everyone to live and work and the most common way is thorough donations to local and charitable organizations), **unemployment** (carries ethical implications, leads to a growing gap between rich and poor, factory closures are ethical issues, employers have been accused of unreasonable hiring standards that applicants cannot meet). **Whistleblowing** occurs when an employee exposes an employer's wrongdoing to outsiders (media or government regulatory agencies). More companies are establishing programs to encourage employees to report illegal or unethical practices internally, so they can remedy problems before resulting in legal action. Whistleblowers are often treated negatively in organizations. The current trend is to move away from legally based ethical initiatives in organizations to cultural- or integrity-based initiatives that make ethics a part of core organizational values. Organizations recognize that effective business ethics programs are good for business performance. Organizational ethics initiatives have been supportive of many organizational objectives, such as profitability, hiring, employee satisfaction and customer lotyalty **CONTROLLA QUESTE PARTI** Right of the consumers: right to safety, to be informed, to choose, to be heard (created by.. in 1962) Companies have to pay attention to the environment and try to avoid the pollution of water, air, land... they could use alternative energy sources and the recycling of materials and also the greenwashing (try to describe in an approach ethical and green the product, but actually the approach is damaging the environment). Community relation: many businesses want to make their communities better places... Unemployment carries ethical implications. Protesters say it leads to growing gap between rich and poor and also factory closures contribute to the unemployment. Employers have been accused of having unreasonable standards that applicants cannot meet (there are some businesses which are working to reduce unemployment). BUSINESS IN A BORDERLESS WORLD, (Chapter 3) =========================================== **International business** buying, selling and trading of goods and services across national boundaries. The internet and the ease with which mobile applications can be developed provide many companies with easier entry to access global markets than opening brick-and-mortar stores. Nations and businesses engage in international trade to obtain raw materials and goods that are otherwise unavailable. Which goods and services a nation sells depends on what resources it has available and its ability to compete in global markets. Some nations have a **monopoly** on the production of a particular resource or product. Such a monopoly exists when a country is the **most efficient producer of a unique item** **ABSOLUTE ADVANTAGE.** When a country is specialized in products that it can supply more **efficiently or at a lower cost** **COMPARATIVE ADVANTAGE.** Transferring manufacturing and other tasks to countries where **labor and supplies are less expensive** **OUTSOURCING.** Many companies have decided to outsource manufacturing to factories in Asia due to lower costs of labor. To obtain needed goods and services, nations trade by exporting and importing. **Exporting** sale of goods and services to foreign markets (US more than \$2.1 trillion annually) **Importing** purchase of goods and services from foreign sources (US more than \$2.8 trillion annually) **Balance of trade** 0.7 trillion (difference between exports and imports) **Trade deficit** negative balance of trade, the nation imports more than exports. **Balance of payments** difference between flow of money in and out the country. **Economic development** things we find in industrialized nations -- economically advanced countries are not the same that we can find in least-developed countries: **LDCs** (countries in Africa, Asia and South America). LDCs are characterized by low per-capita income, so consumers are less likely to purchase nonessential products. A country's level of development is determined in part by its **infrastructure** physical facilities that support its economic activities. A company that decides to enter the international marketplace must contend with potentially complex relationships among the different domestic laws, international laws and the laws of the host country. The United States has several laws and regulations that govern the activities of U.S. firms engaged in international trade and has a variety of commerce and navigation treaties with other countries that allows business to be transacted between U.S. companies and citizens of specified countries. The laws of other countries differ from those of the United States. Tariffs and other trade restrictions are part of a country's legal structure but may be established or removed for political reasons. **Import tariff** tax levied by a nation on goods imported into the country. A **fixed tariff** is a specific amount of money levied on each unit of a product brought into the country, while an **ad valorem** tariff is based on the value of the item. Sometimes, countries levy tariffs for political reasons, such as when they impose sanctions against other countries to protest their actions. Exchange controls restrict the amount of currency that can be bought or sold. Some countries control their foreign trade by forcing businesspeople to buy and sell foreign products through a central bank. When foreign currency is in short supply, as it is in many LDCs, the government uses foreign currency to purchase necessities and capital goods and produces other products locally, thus limiting its need for foreign imports. A **quota** limits the number of units of a particular product that can be imported into a country. It may be established by voluntary agreement or by government decree and are designed to protect the industries and jobs of the country. An embargo prohibits trade in a particular product. Embargoes are generally directed at specific goods or countries and may be established for political, economic, health or religious reasons. The US currently maintains a trade embargo with Cuba. One common reason for setting quotas or tariffs is to prohibit **dumping**, which occurs when a country or business sells products at less than what it costs to produce them. A company may dump its products for several reasons, for example, it permits quick entry into a market. **Political considerations** are seldom down and often change rapidly. Nations that have been subject to economic sanctions for political reasons in recent years include Cuba, Iran, Syria, North Korea. Political considerations affect international business daily as government enact tariffs, embargoes, or other types of trade restrictions in response to political events. Business engaged in international trade must consider the relative instability of countries such as Iraq, Ukraine and Venezuela. Political unrest in countries such as Pakistan, Somalia and the Democratic Republic of the Congo may create a hostile or even dangerous environment for foreign businesses. A sudden change in power can result in a regime that is hostile to foreign investment. Political concerns may lead a group of nations to form a **cartel**, a group of firms or nations that agree to act as a monopoly and not compete, to generate a competitive advantage in world markets. **Social and cultural barriers** differences in spoken and written language, differences in body language and personal space, family roles differ in different societies, perceptions of time differ in other nations, national and religious holidays and customs must be respected, most nations use the metric system. **Technological barriers** lack of technological infrastructure can create opportunities for business, technological advances create global marketing opportunities, changing technologies create new challenges and competition. **GATT (General Agreement on Tariffs and Trade)** was signed by 23 nations in 1947. It provided a forum for tariff negotiations and a place where international trade problems could be discussed and resolved. **WTO (World Trade Organization)** was created in 1995 by Uruguay Round. It's an international organization dealing with rules of trade between nations and it's based in Geneva, Switzerland. **NAFTA (United States -- Mexico -- Canada Agreement)** went into effect January 1, 1994, and it virtually eliminated all tariffs on goods produced and traded among Canada, Mexico and United States. It was replaced by **USMCA (United States, Mexico, Canada Agreement)** with major changes on auto manufacturing and new policies on labor and environmental standards, intellectual property protections and some digital trade provisions. The **EU (European Union)** was established in 1958 to promote trade among members. It's one of the largest single markets today and it's working toward standardization to facilitate free trade among members. Many countries in the EU link their exchange rates to the euro. It has enacted some of the world's strictest law concerning antitrust issues. The United Kingdom exited the EU in 2020. There remain many questions about the impact of the exit on trade relationships with other countries. APEC (Asia-Pacific Economic Cooperation) was established in 1989, and it promotes open trade and economic and technical cooperation among member nations. It differs from other international trade alliances regarding the business and private sectors. APEC companies are increasingly competitive and sophisticated, and it increased industrialization. The **World bank** was established by industrialized nations in 1946, and it loans money to underdeveloped and developing countries. **IMF (International Monetary Fund)** was established in 1947, and it promotes trade among member-nations by eliminating trade barriers and fostering financial cooperation. Many companies first get involved in international trade when they import goods from other countries for resale in their own businesses. A business may get involved in exporting when it's called upon to supply a foreign company with a particular product. Exporting can take place through **countertrade agreements**, which involve bartering products for other products instead of for currency. Many companies choose to deal with an intermediary called export agent, who seldom produces products themselves. The **trading companies** buy goods in one country and sell them to buyers in another country. They handle all activities required to move products from one country to another. **Licensing** is a trade arrangement in which a company called licensor allows another company called licensee to use its company name, product etc. in exchange for a fee or royalty. **Franchising** is a form of licensing in which a company called franchiser agrees to provide a franchisee the name, logo and other elements associated with the franchiser's businesses, in exchange for a financial commitment and agreement to conduct business in accordance with the franchiser's standard of operations. **Contract manufacturing** occurs when a firm hires a foreign company to produce a specified volume of the firm's product to specification and the final product carries the domestic firm's name. **Outsourcing** is defined as the transfer of manufacturing or other tasks where labor and supplies are less expensive. Although outsourcing has become politically controversial in recent years amid concerns over jobs lost to overseas workers, foreign companies transfer tasks and jobs to U.S. companies---sometimes called insourcing---far more often than U.S. companies outsource tasks and jobs abroad. **Offshoring** is the relocation of a business process by a company, or a subsidiary, to another country. **Joint venture** is a partnership established for a specific project or for a limited time for finding a local partner to share costs and operations of the business **Strategic alliance** is a partnership formed to create competitive advantage on a worldwide basis. Companies doing business internationally have traditionally used a **multinational strategy**, involving customizing products, promotion, and distribution according to cultural, technological, regional and national differences. More and more companies are moving from this customization strategy to a **global strategy** which involves standardizing products for the whole world, as if it were a single entity. Managers who can meet the challenges of creating and implementing effective and sensitive business strategies for the global marketplace can help lead their companies to success. OPTIONS FOR ORGANIZING BUSINESS (CHAPTER 4) =========================================== Primary forms of business ownership: sole proprietorship (1 owner), partnership (2 or + owner), corporation (any number of stakeholders), S corporation (up to 100 stakeholders), limited liability company (unlimited number of stakeholders). - **Sole proprietorship**: business owned and operated by one individual. It's the most common form of business organization in the US, it comprises nearly three-quarters of all US businesses. Typically, it employs fewer than 50 people. Advantages ease and cost of formation, secrecy, distribution and use of profits, flexibility and control of the business, government regulation, taxation, and closing the business. Disadvantages unlimited liability, limited sources of funds, limited skills, lack of continuity, lack of qualified employees, taxation. - **Partnership**: business organization defined by the Uniform Partnership Act as an association of two or more people who carry on a co-owner of a business for profit. It's the least used form of business and is typically larger than sole proprietorship but smaller than corporations. There are 2 basic types of partnership general partnership, that involves complete sharing in the management of a business, and limited partnership, which has at least one general partner, who assumes unlimited liability and at least one limited partner whose liability is limited to their investment in the business. A master limited partnership is a limited partnership traded on securities exchanges. Articles of partnership legal documents that set forth the basic agreement between partners. It's required by most states and makes good sense for partners to draw them up. Advantages ease of organization, availability of capital and credit, combined knowledge and skills, decision making, regulatory controls. Disadvantages unlimited liability, responsibilities and conflicts, life of the partnership, distribution of profits, limited sources of funds. Partnerships are quasi-taxable organizations. They do not pay taxes when submitting the partnership tax returns to the Internet Revenue Service. The tax return simply provides information about the profitability of the organization and the distribution of profits among the partners. Partners must report their share of profits on their individual tax returns and pay taxes at the income tax rate for individuals. - **Corporation**: legal entity, created by the state, whose assets and liabilities are separate from its owners. A corporation has many of the rights, duties and powers of a person; it can own and transfer property, it can enter into contracts, it can be sued and be sued in court. Corporations are typically owned by many individuals and organizations who own shares of the business, called stock. Stockholders can buy, sell, give or receive as gifts, or inherit their shares as stock. As owners, the stockholders are entitled to all profits that are left after all the corporation's other obligations have been paid. These profits may be distributed in the form of cash payments called dividends *Creating a corporation* the individuals creating the corporation are known as incorporators. Each state has a specific procedure called 'chartering the corporation' for incorporating a business. Articles of incorporation are legal documents. State issues a corporate charter to the company and the owners are established by law and elect a board of directors. Types of corporations: *Private corporation* owned by just one or a few people closely involved in managing the business, no stock is sold to public, not required to disclose financial information publicly, may become public via IPO (initial public offering). *Public corporation* a corporate whose stock anyone may buy, sell or trade. It may be taken private when all the firm's stock is purchased and can no longer be sold publicly. There are 2 types of public corporations: quasi-public corporations (owned and operated by the federal state or local government) and nonprofit corporations (focus on providing a service rather than earning a profit but are not owned by a government entity). Elements of a corporation *Board of directors*: elected by stakeholders, sets long-range objectives of the corporation, ensures objectives are met on the schedule and hires corporate officers. Directors can be employees of the company (inside directors) or people unaffiliated with the company (outside director). *Stock ownership*: preferred stock, do not have say in running the company but have a claim to profits before other stakeholders and common stock, do not get preferential treatment regarding dividends but have voting rights, may vote by proxy and have preemptive rights. *Advantages* of corporations: limited liability, ease of transfer of ownership, perpetual life, external sources of funds, expansion potential. *Disadvantages*: double taxation, forming a corporation, disclosure of information, employee-owner separation. Other types of ownership: - **LLCs (limited liability companies)** provides limited liability and taxation like a partnership but places fewer restrictions on members - **Co-ops (cooperatives)** organizations composed of individuals or small businesses that band together to reap the benefits of belonging to a larger organization **Mergers** combination of two companies to form a new company. It can be a horizontal merger, when firms make and sell similar products to the same customer's merge, a vertical merger, when companies operate at different but related levels of an industry merge, or a conglomerate merger, when 2 firms in unrelated industries merge. **Acquisitions** purchase of one company by another, usually by buying its stock. **Leveraged buyout** a group of investors borrows money from banks and other institutions to acquire a company (or a division of one), using the assets of the purchased company to guarantee repayment of the loan. Small business, entrepreneurship and franchising (chapter 5) ============================================================ **Entrepreneurship** is the process of creating and managing a business to achieve desired objectives. An **entrepreneur** is a person who risks money, time and effort to develop for profit an innovative product or way of doing something. The entrepreneurship movement is accelerating, and many new, smaller businesses are emerging. Many entrepreneurs with five or fewer employees are considered **microentrepreneurs**. Another growing trend among small businesses is **social entrepreneurship**. Social entrepreneurs are individuals who use entrepreneurship to address social problems. **Small business** any independently owned and operated business that is not dominant in its competitive area. A small business does not employ more than 500 people. **Small Business Administration** (SBA) is an independent agency of the federal government that offers managerial and financial assistance to small businesses. **Importance of small businesses to U.S. economy**: small firms represent 99.9% of all employer firms and create 1.6 million net new jobs each year. Small businesses employ 67.6% of real estate, rental and leasing workers. Small firms with fewer than 100 employees have the largest share of small business employment; small firms employ nearly half of all private-sector employees, and they employ more than 80% of construction workers. **Industries that attract small business** **Retailing**: retailers acquire goods from producers or wholesalers and sell them to consumers nonstore retailing or direct selling. **Wholesaling**: wholesalers provide both goods and services to producers and retailers. They can assist their customers with almost every business function and, if eliminated, their functions must be passed on to another intermediary. **Services**: include businesses that do not actually produce tangible goods and account for 80% of US jobs. **Manufacturing**: can provide unique opportunities for small businesses and can customize products to meet specific consumer needs. **Technology**: high technology is a broad term used to describe businesses that depend heavily on advanced scientific and engineering knowledge. **Sharing economy**: an economic model involving the sharing of underutilized resources. Under this model, entrepreneurs earn income by renting out an underutilized resource such as lodging or vehicles (uber) gig economy. **Successful traits** of young entrepreneurs intuitive, productive, resourceful, charismatic, innovative, risk-taker, persistent, friendly. **Advantages of small-business ownership** independence, costs, flexibility, focus, and reputation. **Disadvantages of small-business ownership** high stress level, high failure rate undercapitalization, managerial inexperience or incompetence, inability to cope with growth. **Challenges in starting a new business** underfunded (not providing adequate startup capital), not understanding your competitive niche, lack of effective utilization of websites and social media, lack of a marketing and business plan, if operating a retail store poor site selection, pricing mistakes -- too high or too low, underestimating the time commitment for success, not finding complementary partners to bring in additional experience, not hiring the right employees and not training them properly, and not understanding legal and ethical responsibilities. **Starting a small business:** **Business Plan** statement of rationale for the business, step-by-step explanation of how to achieve goals. The business plan should include an explanation of the business, an analysis of the competition, estimates of income and expenses, and other information. It should also establish a strategy for acquiring sufficient funds to keep the business going. After developing a business plan, the entrepreneur has to decide on an appropriate legal form of business ownership, whether it is best to operate as a sole proprietorship, partnership, or corporation. **Financial resources** owner puts up a significant percentage of capital needed. **Equity financing**: use of personal assets rather than borrowing funds, venture capitalists (persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock), debt financing (loans obtained from banks or the Small Business Administration, collateral, mortgage, line of credit, trade credit, bartering). **Approaches to starting a small business** starting from scratch vs buying an existing business: advantage of a built-in network of customers, suppliers and distributors; disadvantage of inheriting any problems the business already has. *Franchising* franchise is the license to sell another's products or to use another's name in business, franchiser is the company that sells a franchise, and franchisee is the purchaser of a franchise. **Technological and economic trends**: internet, increase in service exports. Economic turbulence provides both opportunities and threats. **Making big businesses act "small"** the success and competitiveness of small businesses have led large corporations to reevaluate their business formats. Many larger firms are emulating smaller firms to improve their bottom line, are downsizing or right-sizing and intrapreneurs, individuals in large firms who take responsibility for the development of innovations within the organization, take responsibility for the development of innovations of any kind within the larger organization. The Nature of Management (chapter 6) ==================================== **Management** process designed to achieve an organization's objectives by using its resources effectively and efficiently in a changing environment. Effectively means having the intended result, while efficiently means accomplishing objective with a minimum of resources. **Managers** individuals in organizations who make decisions about use of resources. They use planning, organizing, staffing, directing and controlling to reach organizational objectives. **Staffing** hiring people to carry out the work of the organization **Downsizing**: elimination of a significant number of employees from an organization. **Acquiring suppliers** is another important part of managing resources and ensuring that products are made available to customers, maximizing efficiencies and providing creative solutions. **Financial resources** needed to pay for essential activities. **Functions of management**: - Planning activities to achieve the organization's objectives - Organizing resources and activities to achieve the organization's objectives - Directing employees' activities toward achievement of objectives - Controlling the organization's activities to keep it on course **Planning** process of determining the organization's objectives and deciding how to accomplish them, but it must first determine what it wants to achieve: - **Mission** declaration of an organization's fundamental purpose and basic philosophy. It seeks to answer the question: "What business are we in?". A well-developed mission statement, no matter what the industry or size of business, will answer five basic questions: Who are we? Who are our customers? What is our operating philosophy? What are our core competencies and competitive advantages? What are our responsibilities with respect to being a good steward of environmental, financial, and human resources? - **Goals** expressed in general terms and do not contain specific, quantifiable metrics of where the firm is now or where it is going. Goals are aspirational in nature and should be consistent and comprehensive to achieve an outcome. It is not an action, but more intangible. - **Objectives** the ends or results desired by an organization and they derive from the organization's mission and goals. Common objectives relate to profit, competitive advantage, and growth. The principal difference between goals and objectives is that objectives are generally stated in such a way that they are measurable. - **Plans** There are three general types of plans for meeting objectives: strategic, tactical, and operational. A firm's highest managers develop its **strategic plans**, which establish the long-range objectives and overall strategy or course of action by which the firm fulfills its mission. They include plans to add products, purchase companies, sell unprofitable segments of the business, issue stock, and move into international markets. **Tactical plans** are short range and designed to implement the activities and objectives specified in the strategic plan. These plans, which usually cover a period of one year or less, help keep the organization on the course established in the strategic plan. **Operational plans** are very short term and specify what actions specific individuals, work groups, or departments need to accomplish to achieve the tactical plan and, ultimately, the strategic plan. They apply to details in executing activities in one month, week, or even day. - **Crisis management** it deals with potential disasters such as product tampering, oil spills, fire, earthquake, computer viruses, global pandemics etc. Many businesses do not have updated contingency plans to handle the types of crises that their companies might encounter. **Organizing** structuring of resources and activities to accomplish objectives in an efficient and effective manner. It helps to create synergy, establishes lines of authority, improves communication, helps to avoid duplication of resources and it can also improve competitiveness by speeding up decision making. **Directing** motivating and leading employees to achieve organizational objectives. For directing we mean telling the employees what to do and when to do it by using deadlines, determining and administering rewards and recognition, motivating employees by providing incentives and asking workers to contribute ideas. **Controlling** process of evaluating and correcting activities to keep the organization on course. It consists of 5 activities: measuring performances, comparing present performance with standards or objectives, identifying deviations from standards, investigating causes of deviations and taking corrective action when necessary. Levels of management: - **High level management** high level managers include the president and other top executives of a business, such as chief executive officer (CEO), chief financial offer (CFO) and chief operations officer (COO), who have overall responsibility for the organization. They spend most of their time planning and generally have many years of experience. Compensation committees work with directors and CEOs to keep pay in line with performance. Workforce diversity is good for workers and is bottom line. - **Middle management** middle managers are responsible for tactical and operational planning that implements the general guidelines established by high-level management. The responsibility is more narrowly focused and involves the specific operations of the organizations. - **Front-line management** front-line managers are those who supervise both workers and the daily operations of an organization. They spend most of their time directing and controlling and directing workers' daily performance. Areas of management: - **Financial manager**: focuses on obtaining the money needed for the successful operation of the organization and using that money in accordance with organizational goals. - **Production and operations manager**: develops and administers the activities involved in transforming resources into goods, services and ideas ready for the marketplace. - **Human resources manager**: handles the staffing function and deals with employees in a formalized manner. - **Marketing manager**: responsible for planning, pricing, and promoting products and making them available to customers through distribution. - **Information technology (IT) manager**: responsible for implementing, maintaining, and controlling technology applications in business, such as computer networks. - **Administrative manager**: manages an entire business or a major segment of a business, does not specialize in a particular function. Skills needed by managers: - **Technical expertise** specialized knowledge and training - **Conceptual skills** thinking in abstract terms and seeing how parts come together - **Analytical skills** identifying relevant issues - **Human relations skills** ability to deal with people **Leadership** ability to influence employees to work towards organizational goals. Leadership styles: autocratic (make all decisions by himself), democratic (involving the employees in the decisions), free-rein (let their employees work without much interference), authentic (passionate about the goals and mission of the company, display corporate values in the workplace, and form long-term relationships with stakeholders). Requirements for successful leadership: - **Communicate** objectives and expectations - Gain the respect and **trust** of stakeholders - Develop **shared values** - Acquire and share **knowledge** - **Empower employees** to make decisions - Be a role model for **appropriate behavior** - Provide rewards and take **corrective action** to achieve goals **Employee empowerment** occurs when employees are provided with the ability to take on responsibilities and make decisions about their jobs, with participative decision making and leadership in teams **Decision making** - **Recognizing and defining the decision situation**: situations may be positive or negative; the ones calling for small-case decisions occur without warning, while the large-scale decisions generally occur after some warning signs. Once a situation is recognized, management must define it. - **Developing options**: a list of possible courses of actions should include both standard and creative plans. Brainstorming, a technique in which group members spontaneously suggest ideas to solve a problem, is an effective way to encourage creativity and explore a variety of options. - **Analyzing options**: management must look at the practicality and appropriateness of each option; does the proposed option adequately address the situation? - **Selecting the best option**: often a subjective procedure. The best option always relates to analyzing risks and trade-offs. - **Implementing the decision**: can be simple or very complex and prepare for unexpected consequences. - **Monitoring the consequences**: did the decision accomplish the desired result? Management is not an exact process. Managers spend more than 75% of their time working with others (meetings, etc.) and establishing and updating an agenda of goals and implementation plans. Managers also spend a lot of time networking and confronting complex and difficult challenges of the business world. Organization, teamwork and communication (chapter 7) ==================================================== **Organizational culture** a firm's shared values, beliefs, traditions, principles, rules and role models for behavior. Formal culture: mission statement, codes of ethics, memos, manuals and ceremonies Informal culture: dress codes and work habits, extracurricular activities and stories, discussions with co-workers. **Structure** arrangement of positions within an organization. Structure is developed when managers assign work tasks to specific individuals or groups and to coordinate activities to reach the firm's objectives. Organizational chart visual display of the organization's structure. **Specialization** division of labor into small, specific tasks and the assignment of the employees to do a single task. Reasons to specialize: efficiency, workers do not waste time shifting from one job to another, training is easier. Overspecialization can have negative effects such as boredom and dissatisfaction. **Departmentization** the grouping of jobs into working units usually called departments, units or divisions. Common ways to departmentalize: by function, by product, by geographic region, by customer.   Assigning responsibility: - **Delegation of authority** not only giving tasks to employees but empowering them to do whatever is necessary to carry out those tasks. As a business grows, so do the number and complexity of decisions that must be made. Delegation also gives a **responsibility** to employees to carry out assigned tasks satisfactorily and holds them accountable for the proper execution of their assigned work. The principle of **accountability** means that employees who accept an assignment and the authority to carry it out are responsible to a superior for the outcome. - **Degree of centralization** extent of which authority is delegated throughout an organization. Centralized organizations: authority is concentrated at the top; little decision making delegated to lower levels. Decentralized organizations: decision-making authorities delegated as far down the chain of command as possible. - **Span of management** the number of subordinates who report to a particular manager. A wide span of management or control exists when a manager directly supervises a very large number of employees. A narrow span of management or control exists when a manager directly supervises only a few subordinates. - **Organizational structure** the levels of management in an organization. A company with many levels is considered tall (span of management is narrow), while a company with few levels is considered flat (span of management is wide). Forms of organizational structure: - **Line structure** simplest organizational structure, direct lines of authority extend from top management to employees at the lowest levels and is most common in small business. - **Line-and-staff structure** traditional line relationship between superiors and subordinates, in which specialized managers assist line managers. May experience problems with overstaffing and ambiguous lines of communication. - **Multidivisional structure** organizes departments into larger groups called divisions and permits delegation of decision-making authority. It inevitably creates work duplication, and the firm tends to restructure, so to change the basic structure of the organization. - **Matrix structure** sets up teams from different departments, creating 2 or more intersecting lines of authority. It provides flexibility, enhanced cooperation and creativity, but generally it is expensive and complex. **All teams are groups, but not all groups are teams**. A group is made up of 2 or more individuals who communicate with one another, share a common identity and have a common goal. A team is a small group whose members have complementary skills; have a common purpose, goals and approach; and hold themselves accountable. **Committees** permanent, formal group that performs a specific task **Task forces** temporary group of employees responsible for bringing about a particular change. The membership is based on expertise rather than position. **Teams** examples of teams are **project teams**, groups similar to task forces that normally run their operation and have total control of a specific work project, **product-development teams**, that are a specific type of project teams formed to devise, design and implement a new product, **quality-assurance teams**, small groups of workers brought together from throughout the organization to solve specific quality, productivity or service problems and **self-directed teams (SDT)**, a group pf employees responsible for an entire work process or segment that delivers a product to an internal or external customer. Communication in organizations can be formal or informal. **Formal** channels of communication are intentionally defined and designed by the organization, while **informal** organization consists of friendship and other non-work social relationships. The grapevine is the most significant type of communication, it's a channel separated from management's formal and official communication channels. **Technological** **advances** and the increased use of electronic communication in the workplace have made monitoring its use necessary for most companies. Failure in monitoring employees' use of technology can be costly. **AI** is significantly impacting workplace monitoring, benchmarking and understanding how employees feel about their jobs (more than 40% of employers globally have implemented AI process). Without **effective communication**, the activities and overall productivity of projects, groups, teams, and individuals will be diminished. One of the major issues of effective communication is obtaining feedback; the employees should be encouraged to provide feedback, even if it's negative. The managers should always encourage feedback and listen to them. Interruptions can be a serious threat to effective communication, various activities can interrupt the message. Also, developing strong and effective communication channels and communication policies throughout the organization can improve communication effectiveness. Managing operations and supply chain (chapter 8) ================================================ **Operations management** the development and administration of the activities involved in transforming resources into goods and services. Historically, it has been called "production" or "manufacturing"; the change from "production" to "operations" recognizes the increasing importance of organizations that provide services and ideas. The term "operations" represents an interest in viewing the operations function as a whole rather than simply as an analysis of inputs and outputs. **Manufacturing** activities and processes used in making tangible products (also called production) **Production** activities and processes used in making tangible products (also called manufacturing) **Operations** activities used in making both tangible and intangible products At the heart of operations management is the **transformation process**, which converts inputs into products. Input are resources such as labor, money, materials and energy, while products are goods, services, and ideas that result from the conversion of inputs. The transformation may take place through one or more processes. **Operations management** in service businesses: service requires different transformation processes and high customer contact. An ideal service provider is high tech and high touch, while the service product is generally intangible and even perishable. **Service vs tangible product**: service requires more customer contact, while the performance of a service occurs at the point of consumption. **Uniformity of inputs** service providers have less control over the amount of variability resources and the services are more customized to each customer. **Uniformity of product** the human element is inherent in providing services; therefore, each service is performed differently. **Labor required** services are more labor-intensive due to customer contact. **Measurement of productivity** intangibility of the service product makes measurement more difficult. **Planning the product** before making any product, a company first must determine what consumers want through marketing research and then design a product to satisfy that want. The development of the product can be a lengthy and expensive process, most companies work to reduce development time and costs, and some firms develop products jointly. Creating a workable design and a transformation process are important research and development. **Designing the operations processes** *Standardization*: making identical and interchangeable components. Usually, it costs less than a custom-designed product. *Modular design*: building an item in a self-contained unit or module that can be combined or interchanged to create different products. Often, it is produced as integrated units and the failure of one unit usually means entire component must be replaced. *Customization*: making products to meet a customer's particular need or wants. (ex: Dell, customers select a base model computer then customize the graphic card, hard drive, keyboard, battery, display and more). Blockchain: secure, public database that records all transactions and is spread across multiple computers. It is difficult to tamper with and it grows rapidly. **Planning capacity** **Capacity**: maximum load an organizational unit can carry or operate. The unit of measure could be a worker, a machine, a department, a branch, or an entire plant. The capacity can be stated in terms of input or output. Operations managers need to plan for capacity needs: if too low unmet demand and lost customers, if too high higher operating costs. **Planning facilities** **Location**: the choice of the location can be influenced by the proximity to the market, the availability of raw materials, transportation, power and labor, climatic influences and community characteristics, taxes and inducements. **Layout**: Arranging the physical layout of a facility is a complex, highly technical task. Some industrial architects specialize in the design and layout of certain types of businesses. There are three basic layouts: fixed-position layout, which brings all resources required to create the product to a central location and a company using this layout may be called a project organization; process layout, which organize the transformation process into departments that group related processes and these types of organizations are called intermittent organizations; and product layout, that requires the production to be broken down into relatively simple tasks assigned to workers and these companies are usually known as continuous manufacturing organizations. **Technology**: Every industry has a basic, underlying technology that dictates the nature of its transformation process. The operations function makes great use of computers in all phases of the transformation process. Computer-assisted design (CAD), for example, helps engineers design components, products, and processes on the computer instead of on paper. Computer-assisted manufacturing (CAM) goes a step further, employing specialized computer systems to guide and control the transformation processes. Using flexible manufacturing, computers can direct machinery to adapt to different versions of similar operations. When all these technologies---CAD/CAM, flexible manufacturing, robotics, AI, drones, and more---are integrated, the result is computer-integrated manufacturing (CIM), a complete system that designs products, manages machines and materials, and controls the operations function. **Sustainability and manufacturing** sustainability deals with conducting activities in such a way as to provide for the long-term well-being of the natural environment, including all biological entities. Sustainability issues are increasingly important to stakeholders and consumers (pollution of land, air, water, climate change, waste management, deforestation, protection of biodiversity and urban sprawl, genetically modified foods). **Supply chain management** connecting and integrating all parties of the distribution system to satisfy customers. Supply chain management requires marketing managers to work with other managers in operations, logistics, and procurement. Procurement involves the processes to obtain resources to create value through sourcing, purchasing, and recycling materials and information. Logistical concerns involve physical distribution and the selection of transportation modes (inbound, outbound, third-party). AI and blockchain are moving rapidly across supply chain functions. **Procurement** **Purchasing**: the buying of all materials needed by the organization. The aim is to obtain items of the desired quality in the right quantities at the lowest possible cost. The companies may be able to make some component parts more economically and efficiently, it can arrange to lease the item from another company and what the firm does depends on cost, product availability, and supplier reliability. **Managing inventory** **Inventory**: all raw materials, components, products and pieces of equipment a firm uses. Basic types of inventories: finished goods inventory, work-in-process inventory, raw materials inventory. **Inventory control**: process of determining how many supplies and goods are needed and keeping track of quantities on hand, where each item is, and who is responsible for it. Some types are the economic order quantity model (EOQ), just-in-time inventory management (Toyota)(JIT), and material-requirement planning (MRP). **Outsourcing** the contracting of manufacturing or other tasks to independent companies. Globalization requires supply chain managers to improve speed and balance resources. It's linked with competitive advantage, but it may raise negative public opinion. **Routing and scheduling** **Routing:** the sequencing of operations through which the product must pass (the sequence depends on the product specifications). **Scheduling:** the assignment of required tasks to departments or even machines, workers or teams. **Program Evaluation and Review Technique (PERT):** it identifies all the major activities required to complete a project and it arranges them in a sequence or path. It determines the critical path (the path that requires the longest time from start to finish) and it estimates the time required for each event. **Managing quality** quality reflects the degree to which a good or service meets the demands and requirements of customers. Determining the quality can be difficult because it depends on customers' perceptions. Quality is especially difficult to measure for services, because the companies must define important quality characteristics that can be measured. **Quality control** process an organization uses to maintain its established quality standards. **Total quality management (TQM)** philosophy that uniform commitment to quality in all areas of the organization will promote a culture that meets customers' perceptions of quality. **Statistical process control** system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system. **International organization for standardization (ISO)** **ISO 9000**: a series of quality assurance standards designed to ensure the customer's quality standards are met. **ISO 14000**: comprehensive set of environmental standards that encourages a cleaner and safer world. **ISO 19600**: comprehensive set of guidelines for compliance management that addresses risks, legal requirements and stakeholder needs. **Sampling** usually desirable to test only a sample of the products. If the sample passes, the inspector may assume all items in the lot also pass inspection but there will always be a risk of making an incorrect conclusion. Likely to be used with inspection tests are destructive. Managing various partners is important because stakeholders hold the firm responsible. Firms can adopt a **Global Supplier Code of Conduct** and ensure it's communicated. Supply chain and procurement managers must work together to make operational decisions and it must regularly audit suppliers and act where necessary MOTIVATING THE WORKFORCE (chapter 9) ==================================== **Human** **relations** the study of the behavior of individuals and groups in organizational settings. It involves motivating employees to achieve organizational objectives efficiently and effectively. **Motivation** inner drive that directs a person's behavior toward a goal. A goal is the satisfaction of some need. A need is the difference between an actual state and a desired state. Motivation is important both in business and outside of it (coaches motivate athletes before major games to increase their chances they will play their best) **Morale** an employee's attitude toward their job, employer, and colleagues. **High morale** leads to high levels of productivity, high returns to stakeholders and employee loyalty. **Low morale** leads to high rates of absenteeism and high rates of employee turnover. Both intrinsic and extrinsic rewards contribute to motivation. **Intrinsic rewards**: personal satisfaction and enjoyment you feel from attaining a goal. **Extrinsic rewards**: Benefits and/or recognition you receive from someone else. **How to retain good employees**: 1\. Offer ongoing training opportunities. 2\. Create a positive organizational culture. 3\. Support free-flowing communication. 4\. Blend compensation, benefits, and recognition. 5\. Encourage referrals and don't overlook internal recruiting. 6\. Coach employees, provide feedback, and offer mentoring programs. 7\. Provide growth opportunities. 8\. Support work/life balance and minimize stress. 9\. Foster trust, respect, and confidence in high-level management. **Classical theory of motivation**: theory suggesting that **money** is the sole motivator for workers. Time and motion studies: - Frederick W. Taylor, Frank and Lillian Gilbreth - Analyzed how workers performed tasks to improve productivity - Led to the application of scientific principles to management. Taylor's ideas still in practice today Financial incentives for productivity. **The Hawthorne Studies** Early 20th century at the Hawthorne Works Plant. Elton Mayo. - Postulated that physical conditions in the workplace stimulate productivity - Productivity increased regardless of physical conditions (the Hawthorne effect) - Findings showed that social and psychological factors could affect productivity and morale. Marked the beginning of concern for human relations in the workplace. **Theories of employee motivation:** - **Maslow's hierarchy** created by the psychologist Abraham Maslow. It's a theory that arranges the five basic needs of people--- physiological, security, social, esteem, and self-actualization---into the order in which people strive to satisfy them. - **Herzberg's Two-Factor Theory**: Hygiene factors: relate to the work setting and not to the content of the work and do not necessarily motivate people to excel, but their absence may dissatisfy workers. Motivational factors: relating to the content of the work itself. Absence may not result in dissatisfaction, but presence is likely to motivate. - **McGregor's Theory X and Y** **Theory X** is a traditional view of management: The average person naturally dislikes work and will avoid it when possible. Most workers must be coerced, controlled, directed, or threatened with punishment to get them to work toward achieving organizational objectives. The average worker prefers to be directed, avoids responsibility, has little ambition, and wants security. **Theory Y**: The expenditure of physical and mental effort in work is as natural as play or rest. People will exercise self-direction and self-control to achieve objectives to which they are committed. People will commit to objectives when they realize that the achievement of those goals will bring them personal reward. The average person will accept and seek responsibility. Imagination, ingenuity, and creativity can help solve organizational problems, but most organizations do not make adequate use of these characteristics in their employees. Organizations today do not make full use of workers' intellectual potential. - **Theory Z** management philosophy that stresses employee participation in all aspects of company decision making. It was first described by William Ouchi, and it incorporates elements of the Japanese approach to management, trust and intimacy. With this theory, managers and workers share responsibilities. It's characterized by a participative management style and long-term, often lifelong employment. - **Equity Theory** how much people are willing to contribute to an organization depends on their assessment of the fairness, or equity, of the rewards they will receive in exchange. Equity is a subjective notion and it may explain why many consumers are upset about CEO compensation. Feelings of inequity may lead to unethical behavior - **Expectancy Theory** motivation depends not only on how much a person wants something, but also on the person's perception of how likely they are to get it. - **Goal-Setting Theory** refers to the impact that setting goals has on performance. Management by objectives (MBO). **Strategies for motivating employees**: - **Behavior modification** involves changing behavior and encouraging appropriate actions by relating the consequences of behavior to the behavior itself. - **Reinforcement theory** behavior that is rewarded will tend to be repeated, behavior that is punished will tend to be eliminated. Two strategies may not be equally effective; generally, rewarding appropriate behavior is more effective. - **Job design** managers can use job design strategies to improve employee motivation. These include job rotation, job enlargement, job enrichment, and flexible scheduling strategies**. Job rotation** allows employees to move from one job to another to relieve the monotony that is often associated with job specialization used for young employees. It's a program in which the employee can try 3 / 4 roles (ex 6 months in the marketing department, 6 months in the supply-chain department etc.). The benefits of job rotation are to being exposed to different business areas, nurturing employees, supporting ongoing learning and improvement, preparing for more senior roles, accelerating professional development, building new hard and soft skills, boosting overall productivity, enhancing recruiting and retention efforts **Job enlargement** adds more tasks to a job instead of treating each task as separate. **Job enrichment** incorporates motivational factors such as opportunity for achievement, recognition, responsibility, and advancement into a job. It gives workers not only more tasks within the job, but more control and authority over the job. Job design permits us to have flexible scheduling strategies. **Flextime** (a program that allows employees to choose their starting and ending times, provided that they are at work during a specified core period), compressed work week, job sharing, allows full-time workers to work part-time for a certain period of time, and to work at home either full or part-time. **Working remotely** is becoming increasingly common. Telecommuting, job sharing, and flextime can be beneficial for employees who cannot work normal work hours. **Importance of motivational strategies** fosters employees' loyalty, boosts productivity, influences pay, promotion, job design, training opportunities and reporting relationships. Employees are motivated by the nature of the relationship they have with supervisors, their jobs and the characteristics of the organization MANAGING HUMAN RESOURCES (chapter 10) ===================================== **Human resources management (HRM)**: - All the activities involved in determining an organization's human resource needs - Acquiring, training, and compensating people to fill those needs - Maximizing the satisfaction of employees - Motivating employees to meet organizational objectives productively. The human resources management determine the number of employees/ skills needed to satisfy organization's plans. Forecast the number of qualified employees that will need to be hired or determine if layoffs are required. Managers analyze the organization's jobs so that they can match the human resources to the available assignments: - **Job analysis** the determination, through observation and study, of pertinent information about a job, including specific tasks and necessary abilities, knowledge, and skills. - **Job description** a formal, written explanation of a specific job, usually including job title, tasks, relationship with other jobs, physical and mental skills required, duties, responsibilities, and working conditions - **Job specification** a description of the qualifications necessary for a specific job, in terms of education, experience, and personal and physical characteristics. **Recruiting** forming a pool of qualified applicants from which management can select employees, from an internal source or an external source (job listing websites, college and university campuses, headhunters). **Selection** process of collecting information about applicants and using that information to make hiring decisions. It includes the application, the interview, testing and reference checking. The most common question asked during the interview are: what are your strengths? what are your weaknesses? why are you interested in working for this company? where do you see yourself in five years? ten years? why do you want to leave your current company? why was there a gap in your employment between \[insert date\] and \[insert date\]? what can you offer us that someone else cannot? what are three things your former manager would like you to improve on? are you willing to relocate? are you willing to travel. The most common resume lies are about education, employment dates, technical skills, previous employment history, fluency in another language, GPA, previous job descriptions, graduation year, promotions and salary. **Legal issues in recruiting and selecting:** - American with disabilities act prevents discriminations against people with disabilities - Age discrimination in employment act outlaws discrimination based on age; focus is on people 40 years and older. - Equal pay act mandates that men and women who do equal work receive the same wage. Wage differences are acceptable if based on seniority, performance, or qualifications. **Developing the workforce:** - **Orientation** familiarizes newly hired employees with fellow workers, company procedures and the physical properties of the company. It includes the tour of the building, the introductions to supervisors and co-workers, the distribution of manuals and policies and socializing the new employee into the ethics and culture of the company. - **Training and development** training can be on-the-job, allowing workers to learn by performing the tasks of the job, or classroom training, which teaches employees with lectures, conferences, videos, case studies, and web-based training. Mentoring involves supporting, training, and guiding an employee's professional development. Mentoring provides employees with more of a one-on-one interaction with somebody in the organization who not only teaches them but also acts as their supporter as they progress in their jobs. Development is training that augments the skills and knowledge of managers and professionals. - **Assessing performance** is one of the most difficult tasks for managers. Is a crucial activity because it gives employees feedback, it provides a basis for determining compensation and it generates information about the quality of the firm's selection, training, and development activities. Performance appraisals may be objective or subjective, an objective assessment is quantifiable, while a subjective is not. Another performance appraisal method used by many companies is the 360-degree feedback system, which provides feedback from a panel that typically includes superiors, peers, and subordinates. Another trend occurring at some companies is the decrease in negative employee feedback. Executives have begun to recognize that hard tactics can harm employee confidence. Negative feedback tends to overshadow positive feedback, so employees may get discouraged but at the same time, it is important for managers to provide constructive criticism on employee weaknesses in addition to their strengths, so workers know what to expect and how they are viewed. - **Turnover** occurs when employees quit or are fired and must be replaced by new employees; it comports losses in productivity. - **Promotion** advancement to a higher-level job with increased authority, responsibility, and pay. - **Transfer** move to another job within the company at the same level and wage. - **Separations** occur when employees resign, retire, are terminated, or laid off. Traditionally, employees could be fired at-will, but now legislation requires that companies fire employees fairly, for just cause only. Wants to minimize losses due to separations, recruiting and training is expensive, exit interviews. Actions you should and shouldn't take when you are terminated do not criticize your boss who terminated you, do not take files or property that is not yours, do try to get a reference letter, do not criticize your former employer during job interviews, do look to the future and be positive about new job opportunities. **Compensating the workforce**: - **Wage/salary survey** pay and benefits represent a substantial expense for a firm. Compensation for a specific job is typically determined through a wage/salary survey. Tells a company how much compensation comparable firms are paying for specific jobs that the firms have in common. - **Financial Compensation** wages: hourly wages provide no incentive to increase productivity. Commission: can motivate employees. Salary: may be required to work beyond usual hours without additional compensation. Bonuses. Profit sharing: ESOPs. - **Benefits** nonfinancial forms of compensation provided to employees, ex: pension plans, health insurance, paid vacation, holidays, employee assistance program (EAP). Fringe benefits sick leave, vacation pay, pension plans, health plans. Soft benefits perks that help balance life and work. Cafeteria benefit plans provide financial amount employees can use to select specific benefits that fit their needs. **Labor Unions** employee organizations formed to achieve better pay, hours, and working conditions. On average, union workers make about \$200 more than nonunion workers. Union growth has slowed in recent years. Significant aspects of HRM, particularly compensation, are dictated by union contracts. **Collective bargaining** negotiation process by management and unions to reach an agreement about compensation, working hours, and working conditions for the bargaining unit. **Labor contract** formal written document delineating the relationship between union and management for a specified period, usually two or three years. Cost-of-living escalator (COLA) clause and givebacks. **Resolving Disputes** Labor tactics: picketing, strikes and boycotts. Management tactics: lockout, strikebreakers. **Outside Resolution** **Conciliation**: a third party is brought in to keep the two sides talking. **Mediation**: the third party's role is to suggest or propose a solution to the problem. **Arbitration**: settlement of a labor/ management dispute by a third party whose solution is legally binding and enforceable. Compulsory arbitration: an outside party (usually the federal government) requests arbitration as a means of eliminating a prolonged strike that threatens to disrupt the economy. The Importance of Workforce Diversity, Equity, and Inclusion: - **Diversity** Presence of differences within an organization based on factors such as race, gender, religion, sexual orientation, ethnicity, nationality, socioeconomic status, language, abilities, age, or political beliefs. - **Equity** Providing equal opportunities and fair treatment for all employees. - **Inclusion** Degree to which diverse individuals are valued and welcomed by the organization. The Characteristics of Diversity: - **Primary characteristics** sexual orientation, age, gender, race, ethnicity, and abilities - **Secondary characteristics** education, work background, income, marital status, parental status, military experience, religious beliefs, geographic location. Each person is defined by the interrelation of all characteristics, and the managers must consider the complete person. The U.S. **workforce is increasingly diverse**. Once dominated by white men, today's workforce includes significantly more women, Blacks, Hispanics, and other historically underrepresented groups, as well as employees with disabilities and older workers. Now, for the first time, more than half of the population under age 16 **identifies as a racial or ethnic minority**. These groups have traditionally faced discrimination and higher unemployment rates and have been denied opportunities to assume leadership roles in corporate America. Consequently, more and more companies are trying to improve HRM programs to recruit, develop, and retain more diverse employees to better serve their diverse customers. **Benefits of diversity, equity and inclusion**: - More productive use of human resources - Reduced conflict among employees - More productive working relationships - Increased commitment to organizational goals - Increased innovation and creativity - Increased ability to serve the needs of an increasingly diverse customer base - Contributions, presence, and perspectives of different groups are integrated into the work environment **Affirmative action** legally mandated plans that try to increase job opportunities for underrepresented groups by analyzing the current pool of workers, identifying areas where certain groups are underrepresented, and establishing specific hiring and promotion goals, along with target dates, for meeting those goals to resolve the discrepancy. CUSTOMER-DRIVEN MARKETING (chapter 11) ====================================== **Marketing** group of activities designed to expedite transactions by creating, distributing, pricing and promoting goods, services and ideas. These activities create value by allowing individuals and organizations to obtain what they need and want. Marketing is an important part of a firm's overall strategy. Marketing is NOT manipulating consumers to get them to buy products they don't want or just advertising and selling. With social media, companies enhance customer relationships and create value for their brands. **Exchange** act of giving up one thing (money, credit, labor, goods) in return for something else (goods, services or ideas). Each participant must be willing to give up "something of value" to receive the "something" held by the other. Product itself may not be as important as the image of the benefits associated with the product (capability gained from using a product, imaged evoked by it, brand name) Functions of marketing: - **Buying** Everyone who shops for products decides whether and what to buy. - **Selling** The exchange process is expedited through selling. Marketers usually view selling as a persuasive activity that is accomplished through promotion - **Transporting** The process of moving products from the seller to the buyer - **Storing** Part of the physical distribution of products and includes warehousing goods. Warehouses hold some products for lengthy periods to create time utility. Time utility has to do with being able to satisfy demand in a timely manner. Usually, it's impossible to store services - **Grading** Standardizing products by dividing them into subgroups and displaying and labeling them so that consumers clearly understand their nature and quality. - **Financing** For many products, especially large items, the marketer arranges credit to expedite the purchase. - **Marketing research and data analytics** Through research, marketers ascertain the need for new goods and services. By gathering information regularly, marketers can detect new trends and changes in consumer tastes. Data analytics is widely used to understand consumers. - **Risk taking** Chance of loss associated with marketing decisions **Value** a customer's subjective assessment of benefits relative to costs in determining the worth of a product. **Customer value = customer benefits -- customer costs** **Benefits** are anything a buyer receives in exchange and **costs** are anything a buyer gives up to obtain a product's benefits. **Marketing concept** idea that an organization should try to satisfy customers' needs through coordinated activities that also allow it to achieve its own goals. Businesses must: - Find out what **consumers desire** - Develop the good, service or idea to **satisfy that want** - Get the product **to the customer** - Continually alter, adapt, and add products to **keep pace with changing customer demands** Determining customer needs is difficult. While customer satisfaction is the goal, businesses must achieve their own objectives. To implement the marketing concept, a business must: - Have good information about **what consumers want** - Adopt a **customer orientation** - Coordinate its **efforts** throughout the entire organization - Make the customer's perception of **value the focus** A breakdown at any point in an organization can result in lost sales, lost revenue and dissatisfied customers. Evolution of marketing concept: - **Product orientation**: during the second half of 19^th^ century the Industrial revolution was well underway. New technologies have made it possible to manufacture goods with ever increasing eff