Management Notes PDF

Test 1 and 2 https://chatgpt.com/share/67658907-9118-8001-bcb4-f80cae2a813d Test 3 and 4 https://chatgpt.com/share/6765899c-3f14-8001-8ba5-ecb26d614c74 Test 5 and 6...

Test 1 and 2 https://chatgpt.com/share/67658907-9118-8001-bcb4-f80cae2a813d Test 3 and 4 https://chatgpt.com/share/6765899c-3f14-8001-8ba5-ecb26d614c74 Test 5 and 6 https://chatgpt.com/share/6765892c-fae8-8001-9464-3e067a597616 Unit 1 The firm and its economic environment 1.1 Organizations, businesses and basic concepts Concept of Economy Economy = Eco (home) + nomy (administration) → greek Economy: Social science dealing with the allocation of limited resources to satisfy unlimited human needs. Key questions for any economy: ○ What goods to produce and in what quantities? ○ How to produce them (technology)? ○ For whom to produce? Organizations and Companies Key process = specialization + exchange → companies = products + services → households = buying them Organization: A deliberate arrangement of people to achieve specific purposes. ○ Key characteristics: Distinct purpose (goal) Composed of people Deliberate structure → can be flexible (no specific job duties, work teams) or traditional (explicit job arrangements, bosses) All businesses are organizations but not all organizations are businesses. NGO (Non-governmental organization) = no profits Company: A human organization aimed at producing goods/services to create value and generate profit for its owners using tangible, intangible and human resources. Mission, Vision, Values Mission: Statement of purpose, scope of products/services, and motivation for employees → not related to money (profit) → something the company does Vision: Long-term goal where the company sees itself in the future. ○ inspiring, motivating, realistic, clear Values: Principles that identify the company. Purpose of a Company Milton Friedman = maximizing profits Edward Freeman = stakeholder interest Michael Porter (+Mark Kramer) = creation of social value, meeting social needs A company's purpose is its reason for existing Open System & Subsystems A company is an open system, interacting with its environment for success.  Subsystems include: ○ Supply, Production, Commercial, Financial, R&D, Human resources, Management Stakeholders Stakeholders influence company objectives. Balancing their interests is crucial for sustainability. ○ internal (employees, owners) X external (customers, government, society) Conflict of interest among stakeholders is common, but companies need to manage it for long-term success. Ownership, Management, Entrepreneurs Owners: (owns the ownership = shares of the company) Provide capital, assume risks, and receive profits. Managers: Oversee and coordinate work to achieve goals → can be owner but also someone else Entrepreneurs: Innovators who are owners of the company and managers at the same time. ○ Profit theory (Knight): takes on risk by paying for the factors of production (e.g., labor, capital) before the outcomes of their efforts are realized. Profit compensates the entrepreneur for this risk. ○ Theory of Economic Development (Schumpeter): The entrepreneur is an innovator, combining the factors of production in new ways to improve processes, products, or services. Entrepreneurs may even create entirely new products or services, driving economic development. ○ 1.2 Basic concepts II Theories of Business Studies Psychological Approach: Studies the psychological profile of successful entrepreneurs. Sociocultural Approach: Examines how environmental factors, like culture, influence the decision to become an entrepreneur. Managerial Approach: Focuses on the skills and techniques needed to manage and create a business. Functions of Management (Henry Fayol, 1916) = manual “Industrial and General Management” Planning: Setting objectives and determining actions to achieve them. ○ A goal without a plan is just a wish. Organizing: Arranging resources and assigning tasks to meet objectives. ○ A good system shortens the road to the goal. Leading: Motivating and directing people to work towards the goals. ○ Leadership is not a position or a title, it is action and example. Controlling: Monitoring results and making adjustments to stay on track. ○ Evaluate/Control what you want - what gets measured, gets produced. Managerial skills and abilities are critical in getting things done → responsible for efficiency and effectiveness Management is a complex multidimensional range of skills. Efficiency vs. Effectiveness Performance = the ability of the organization to achieve its objectives by using resources following their efficient and effective manner Efficiency: maximizing output with minimal input → not wasting resources. Effectiveness: Doing the right things → reaching goals. Levels of Management First-line Managers: Manage non-managerial employees; focus on short-term goals. Middle Managers: Manage first-line managers; coordinate teams and implement strategies. Top Managers: Make organization-wide decisions, focusing on long-term strategy, affecting the whole company. New trends: self-control and self-correction of employees Management types Functional managers: ○ Manage one department (e.g., finance, sales, HR, accounting). ○ Employees have similar skills. ○ Line managers: Focus on production/marketing. ○ Staff managers: Support functions like finance, HR. General Managers: ○ Oversee multiple departments (e.g., store, factory). ○ Responsible for diverse functions within a division. ○ Example: Department store (El Corte Inglés), factory (Ford). ○ Project managers: Coordinate across departments for specific projects. Managerial Skills Conceptual Skills: Seeing the organization as a whole and understanding relationships between parts. Human Skills: Working effectively with others, essential for people-focused roles. Technical Skills: Mastery of specific tasks, often the reason for promotion to management. 1.3 Classification of companies Types of Companies By Size (it must meet the employee number and one of the two other criteria): ○ Micro: Very small companies, often less than 10 employees, low turnover, and minimal assets. ○ Small: Typically fewer than 50 employees, limited assets, and moderate turnover. ○ Medium: Fewer than 250 employees, more substantial turnover and assets. ○ Big: Large workforce, significant assets, and high turnover. By Ownership of Capital: ○ Public: The majority of capital is owned by the government (state, local councils), aiming to provide public services and benefit the community rather than profit maximization. ○ Private: The majority of capital is held by individuals or private companies and is profit-focused. ○ Mixed: A combination of public and private ownership, often seen in utilities or essential services, is used to balance profit with public needs. By Activity Sector: ○ Primary: Extraction or agriculture, like farming, mining, and fishing → raw materials ○ Secondary: Industrial production and manufacturing, transforming raw materials into finished products (e.g., factories). ○ Tertiary: Service-oriented businesses, such as retail, healthcare→ use finished goods.  ○ Quaternary: Knowledge and skills → IT, consulting, education, research ○ Quinary: economic and social decision-making → government organizations, public services By Area of Operation: ○ Local: Serve local markets and communities. ○ National: Supply the demand of a single country, in which they own all their assets and employees. ○ International: Produce domestically but export to foreign markets. Exporting: All production activity in the country of origin, but sell their products or services in a foreign market. Multinational: Operate globally, with assets and employees in multiple countries, adapting products/services to different regions. By Legal Form: ○ Sole Trader: Owned and managed by one person with unlimited liability; all profits/losses are the owner’s. ○ Partnership: Two or more people share responsibilities, profits, and liabilities → limited liability ○ Limited liability partnership: Liability is limited to the amount of money the partners have invested. ○ Limited liability company: Organized as a legal entity with shared ownership Public limited company (Plc) → offers shares to the public Private limited company (Ltd) → doesn’t offer shares to the public. Family Businesses Owned predominantly by one or more families, with family members often involved in management. Families aim to pass the business to future generations, ensuring continuity. Family values and strategies shape the company, balancing family interests with business goals. Startups Newly created businesses centered around innovative ideas, with high growth and scalability potential but also high failure risk. → “to be born and grow”, “rising start” Doesn’t have a business model, just an idea (at the start) Characteristics: ○ digital projects ○ few resources → attract business angels / private investors ○ high growth potential ○ innovation ○ young teams ○ high risk of failure Lean Startup Methodology: Focuses on quickly developing a minimal viable product (MVP) to test with early customers, gathering feedback to adjust and improve. This approach minimizes initial costs and relies heavily on customer validation. ○ not to spend a lot of resources on the idea until it has been validated  Incubators: free or low-cost workspace → Mentorship, and funding for early-stage startups to help them grow. Accelerators: Focus on growth-stage companies, providing intense support over shorter periods to scale quickly. Incubator = support stage (6-36 months) Accelerators = growth stage (3-12 months) Unicorns: Achieve a valuation of $1 billion without having a presence on the stock market and are the dream of any technology start-up that takes a step forward. Economy and firms are changing Todays society is driven by money → no alignment with Maslow pyramid → the highest is self-fulfilment Basic Needs (e.g., food, shelter) must be met first, while Social Needs (e.g., transport, technology) support a dignified life. Desires are limitless and driven by mindset; recognizing essential vs. non-essential needs helps promote sustainable living. Social economy: Prioritizing people and the planet over profit. Business schools are encouraged to teach sustainable values to future managers. Sustainable Development Goals (SDGs): 17 global goals established by the United Nations in 2015, aiming to address major world challenges by 2030 → poverty, hunger, health, education, gender equality, clean water, energy, economic growth, climate action. Social and Sustainable Business Models Corporate Social Responsibility (CSR): Companies choose voluntary actions to benefit society or the environment, such as reducing pollution, supporting local communities, or promoting fair labor practices. Social Enterprises (companies): Businesses designed with the core goal of creating social impact rather than maximizing profit. Examples include employing marginalized communities or producing environmentally friendly products. Greenwashing: Some companies falsely present themselves as environmentally responsible to attract customers, without substantial commitment to sustainability. New models of economy Collaborative Economy: Also known as the sharing economy, it emphasizes the sharing of resources (e.g., car sharing, co-working spaces) to reduce costs and environmental impact. Circular Economy (zero waste): Aims to reduce waste by designing products for reuse, recycling, and minimizing environmental impact. Key principles include rethinking product design, remanufacturing, and redistributing materials. Doughnut Economics (by Kate Raworth): A framework balancing essential social needs (food, shelter, health) within environmental limits to ensure sustainability. It discourages overproduction and consumption beyond the planet’s capacity → Everyone should have access to the basics but within the means and resources available on the planet. Ethical Banking: Financial institutions that invest savings into projects beneficial to society and the environment, rather than solely profit-driven ventures. Economy for the Common Good: Encourages companies to focus on social and environmental well-being, not just profit. Success is measured by positive impact, with values like honesty, fairness, and responsibility. → company’s overall impact on society and the environment. Economy of Communion is a model where businesses share profits in three ways: reinvesting in the company, educating on values, and supporting people in need. It emphasizes fairness, honesty, and strong community relationships. → community-building and direct aid through shared profits  B Corp Certification: Achieved by companies meeting rigorous standards for social and environmental performance. Certification requires transparency and stakeholder governance, assessing impact in areas like worker conditions, community benefits, environmental stewardship, customers. Economy of Francesco: An initiative by Pope Francis launched in 2019 to create a new economic model focused on social justice, sustainability, and inclusivity. It aims to inspire young leaders to collaborate on equitable economic systems that benefit everyone, especially the marginalized. Social Incubators and Ecosystems: Supportive structures that help social enterprises and environmentally focused startups develop and succeed, offering resources, mentorship, and funding. Case study: The company of the future Scale and customer intimacy Companies can successfully combine the benefits of scale with strong customer intimacy, enabling them to be both efficient and responsive to customer needs. This marks a shift from the traditional belief that firms must choose between being large and low-cost or focused and differentiated. Professional managers versus mission-critical roles Successful companies are shifting focus from traditional professional management to defining and empowering mission-critical roles that are essential for delivering their bold customer-centric missions, fostering agility and responsiveness in the organization. Assets versus ecosystems Successful firms of the future will need to strategically determine their core competencies and form win-win partnerships across different business models (platforms, outsourced service providers, and product/service companies) to maximize value for customers while navigating a landscape increasingly defined by collaboration and outsourcing. Capital gets a reset The traditional capital structure is transforming, with an increasing shift towards long-term investment strategies, flexible capital arrangements, and the emergence of new funding vehicles that allow investors to align their risk preferences with specific projects, ultimately blurring the lines between public and private ownership. Engine 1, Engine 2 Companies need to adopt an "Engine 1, Engine 2" approach, simultaneously optimizing their core business (Engine 1) while developing a new business that addresses emerging customer needs and competition (Engine 2). This dual strategy involves different operational models, requiring discipline and efficiency for Engine 1 and agility and creativity for Engine 2, ultimately allowing firms to thrive in a rapidly changing environment. Engine 1: This is the core part of a company that focuses on making small improvements to existing products or services. It prioritizes efficiency and careful planning → stability, efficiency Engine 2: This part of the company is about creating new businesses or innovations that can change the industry. It requires creativity and a willingness to take risks to meet new customer needs → innovation, risk-taking, long-term growth The leader of tomorrow The most important point from the text is that future leaders must adapt their management styles to be more like venture capitalists, focusing on long-term growth and innovation while fostering flexibility, collaboration, and a strong organizational culture to navigate rapid changes in their industries.  Unit 2 Functions of Management and Decision Making Management Failures: Failure to adapt to change Creating a climate of fear Lack of creativity → wanting to stay on the boss’s good side Poor communication + failure to listen Team work vs. group work Team work = communication, listening, empathy, trust, diversity of roles, flexibility, participation, sharing, respect Managerial Roles (Belbin’s Theory) Mental (Thinking) Roles ○ Plant: Creative thinker who generates new ideas. ○ Monitor Evaluator: Objective analyst who assesses ideas critically. ○ Specialist: Expert in a specific area providing in-depth knowledge. Action (Decisional) Roles ○ Implementer: Practical organizer who turns ideas into action. ○ Shaper: Driven individual who challenges the team to achieve results. ○ Completer Finisher: Detail-oriented person focused on quality and completion. Social Roles ○ Coordinator: Facilitates team discussions and clarifies goals. ○ Teamworker: Supportive member who fosters harmony and collaboration. ○ Resource Investigator: Networker who explores opportunities and finds resources. Unit 2.1 Decision making Managers at all levels make decisions impacting goals, production, discipline, quality, etc. Top-level managers make decisions about their organization’s goals Decision-making is more than choosing alternatives; it’s a structured process. Problems and decisions Routine Decisions (Programmed): Handle structured, repetitive issues. Adaptive Decisions: Deal with changing situations using existing knowledge. Innovative Decisions (Non-Programmed): Unique, custom solutions for new problems. Problem types Structured Problems: Clear, defined (have occurred before), with available information; suitable for programmed (repetitive) decisions. Unstructured Problems: New or ambiguous, needing customized solutions → unique solutions Decision-making process steps 1. Identify the Problem: Recognize discrepancies (nesrovnalosti) between current and desired states. ○ Managers also have to be cautious not to confuse problems with symptoms of the problem. ○ Very subjective ○ A problem becomes a real problem when a manager becomes aware of it. ○ There is pressure to solve a problem. ○ The manager must have authority, information, and the necessary resources to solve a problem. 2. Identifying decision criteria: Define important factors, such as cost, risk, and alignment with goals and values.. 3. Allocate Weights to Criteria: Prioritize criteria based on importance. 4. Develop Alternatives: List all potential solutions without immediate evaluation. → quantity over quality 5. Analyze Alternatives: Use criteria to assess each alternative’s effectiveness. 6. Select an Alternative: Choose the highest-rated option. 7. Implement the alternative: Communicate and take action, gaining commitment from involved parties. ○ SMART objective → Specific Measurable Achievable Relevant Time-bound 8. Evaluate the Decision’s Effectiveness: Check if the decision resolved the problem and adjust if necessary. Tools for Identifying Problems Fishbone (Ishikawa) Diagram: Visual tool to analyze causes of issues, commonly used in quality control. ○ Kaoru Ishikawa, during the 1960s as a way of measuring quality control processes in the shipbuilding industry. Conditions of Decision Making Certainty: Known outcomes allow accurate decisions. Risk: Probable outcomes, requiring estimation. Uncertainty: Limited information, often relying on intuition. Trying to deduct programmed solutions Policy ○ Definition: A general rule for making decisions about a structured problem. ○ Example: Accept all goods returned by customers. Procedure ○ Definition: A series of interrelated steps used to respond (applying a policy) to a structured problem. ○ Example: Follow all steps to complete documentation for the return of goods. Rule and Regulation ○ Definition: An explicit statement of what a manager or employee can and cannot do when following the steps of a procedure. ○ Example: Managers must approve all refunds over $50. No cash refunds on credit purchases. Rational and Limited Rational Decision Making Rational: Logical, objective, goal-focused, and maximizes organizational interests. ○ They are perfectly rational, completely objective, and logical. ○ They clearly define the problem and identify all viable alternatives. ○ They have a clear and specific goal ○ They select the alternative that maximizes the organisation's interests, not their own Limited Rationality: Simplifies decision-making by choosing a satisfactory, rather than optimal, solution. ○ Not seeking knowledge of all alternatives. ○ Based on satisfaction. Selection of the alternative that satisfactorily solves the problem rather than maximising outcomes by considering all alternatives and choosing the best one. Common Mistakes in Decision Making Oversimplifying, overconfidence, instant gratification (choosing alternatives that offer instant benefits and avoid immediate costs), selective perception, blaming others, and selfishness. Effective Decision Making Characteristics Logical, consistent, flexible, and encourages relevant information gathering and analysis. Focuses on what is important, logical and consistent. Recognises subjective and objective thinking and blends analytical and intuitive thinking. Requires only the information and analysis necessary to solve a particular dilemma. Encourages and guides the gathering of relevant information and informed opinion. It is straightforward, reliable, easy to use and flexible. Ethical Decision Making Decisions should align with ethical standards for both goals and means. Ethical codes define acceptable and unacceptable behaviors in decision-making. Unit 3 Company strategy and company survival Unit 3.1 Corporate Strategy. External Analysis (Pestel) What is Strategy? Strategic Planning: Involves deciding what to achieve and how to bridge the gap between the present and the desired future. Strategic Management: Defines long-term direction and scope of an organization, aligning resources to achieve competitive advantages in a changing environment → market needs, stakeholders expectations Why Strategic Management is Important? Strategic management is what managers do to develop the organization’s strategies (=plans). Helps organizations respond to global trends, technological changes, and shifting demographics. Involves managing resources to respond to competitors and external challenges. Strategic Management Process Questions managers should ask: What trends are occurring? Who are our customers? What products or services should we offer? Involves decisions and actions aimed at implementing strategies that give an organization a competitive edge, helping it achieve its goals and deliver value to clients. Focuses on core competencies, developing synergies (inside and outside the business) and creating value for customers A good Strategic Management process: Enhances organizational performance. Requires managers to assess and adapt to changes in the business environment, using the process to navigate uncertainty and make informed decisions. Coordinates various organizational units, ensuring they align their efforts toward common goals. Reasons for Strategic Planning Helps reflect, unify the organization's focus, establish priorities, and ensure effective resource use. Provides motivation and a flexible framework for adapting to changes. Without planning, control and learning would be impossible. Why is Strategic management difficult? Organizational environment: includes all external factors that can impact the organization. Organizational culture: refers to the shared values, principles, traditions, and practices that shape how members of the organization behave. Steps for Strategic Management Process External Environment Analysis General environment: broad economic, socio-cultural, political/legal, demographic, technological, and global conditions that may affect the organization ○ PESTEL = Political, Economic, Social, Technological, Environmental, and Legal factors. Specific external environment: factors affecting the industry → PORTER model. Analyzing these dimensions helps organizations anticipate changes in the external environment and plan accordingly. Political Dimension Political system (democracy, dictatorship…) Political stability versus turbulence environment, wars… Political relations with other countries Pressure groups (unions, banks…) Example: IKEA's store closures in Russia due to sanctions highlight the impact of political decisions on global business. Economic Dimension GDP trend (Gross Domestic Product) Economic cycles Interest rates Money supply Inflation, taxes Unemployment rate Example: The impact of the 2024 U.S. port strike on global supply chains and IKEA's investments in Shanghai. Sociocultural Dimension Demographics Income distribution Social mobility Urban planning Lifestyle changes – attitudes towards work and leisure Education and culture Example: IKEA's cultural sensitivity in advertising in Russia and Saudi Arabia. Technological Dimension Public expenditure on research Government and industry technology effort policies New discoveries/developments Speed of technology transfer Obsolescence rates Protection of industrial property Example: IKEA’s use of augmented reality (AR) in its shopping app enhances the customer experience. Environmental Dimension Recycling culture Production processes Use of alternative energies Packaging Environmental policies Example: IKEA’s commitment to sustainable wood sourcing and its efforts to become more circular in business practices. Legal Dimension Monopoly legislation Environmental laws Fiscal policy Foreign trade legislation Labor law Example: California’s climate disclosure laws, which require companies like IKEA to report emissions.  Unit 3.2 Corporate Strategy. External analysis (Porter) Steps in the Strategic Management Process ○ External Analysis of General Environment: Indirect impact on the company. The company can only adapt, not influence. ○ External Analysis of Specific Environment: Direct and immediate impact. The company can partly influence these factors. Porter’s analysis = analysis of the specific environment ○ External forces and stakeholders directly affect the organization, with reciprocal influence (they could affect our company, but our company could affect them too. Stakeholders in the Specific Environment 1. Customers ○ Acquire goods or services. ○ Influence reputation and sales through behavior and feedback (e.g., social media). ○ Customers are important because they determine the organization’s success. ○ Example: Teens targeted through platforms like Instagram, TikTok. 2. Competitors ○ Organizations in the same industry providing similar products/services to the same set of customers. ○ Competitive dynamics vary by industry. ○ Example: Netflix vs. Disney Channel. 3. Suppliers ○ Provide raw materials the organization uses to produce its output. ○ Fewer suppliers → building good relationships → stronger supplier power. ○ Example: Chinese Vitamin C producers control prices of the product in the USA 4. Labor Market ○ Represents potential employees. ○ Influenced by: Need for compter-literate knowledge workers. Continuous investment in human resources → training and education demands. Automation, outsourcing, and geographic shifts → unused labor pools and shortages 5. Employees ○ Affect company through quality of work and demands (e.g., better conditions). 6. Institutions ○ Banks, NGOs, unions, and lobbies influence company activities. ○ Example: Greenpeace pushing firms to adopt sustainable models. About stakeholders, we must focus on - Identify the organization’s stakeholders. - Determine the particular interests and concerns of stakeholders. - Decide how critical each stakeholder is to the organization. - Determine how to manage each individual stakeholder relationship. Porter's 5 Forces Model 1. Threat of New Entrants (How likely is it that new competitors will come into the industry?) ○ How easily new competitors can enter the market. ○ Barriers: Licensing, high investment, monopolies. ○ Example: Limited licenses in Spain for pharmacies. 2. Threat of Substitutes (How likely is it that other industries’ products can be substituted for our industry’s products?) ○ Likelihood of customers switching to alternatives ○ Factors: Switching costs, brand loyalty. ○ Example: Low-cost airlines disrupting travel agencies.  ○ 3. Bargaining Power of Buyers (How much bargaining power do buyers (customers) have?) ○ Customers' ability to influence prices and terms. ○ Few big buyers → risky for companies. ○ Social networks amplify customer influence. 4. Bargaining Power of Suppliers (How much bargaining power do suppliers have?) ○ Suppliers’ influence on pricing and availability. ○ The Internet tends to raise the bargaining power of suppliers. ○ Example: Few chipboard suppliers in Spain dominate the furniture industry. 5. Current Competition (How intense is the rivalry among current industry competitors?) ○ Rivalry intensity is based on market growth and demand → Intensity among rivals increases when industry growth rates slow, demand falls, and product prices descend (and also profits) ○ Example: Sony vs. Nintendo in gaming. Summarizing Porter’s Analysis Five forces determine industry attractiveness and profitability: Evaluation: ○ Grade each force to assess its impact on the organization. ○ Example: Rivalry: High Substitutes: Medium Unit 3.3 Corporate Strategy. Internal analysis (SWOT) Internal Analysis: Strategic Profile Identifies key factors in functional areas of the company critical to success: ○ Commercial Area: Market share, brand image, sales force. ○ Human Resources: Incentives, social climate, training. ○ Management & Organization: Style, culture, structure. ○ Production: Cost, quality control, productivity. ○ Finance: Structure, capital cost, ROI. ○ Technology: R&D, patents, technology usage. Each variable is evaluated on a Likert-type scale from 1 to 5. The company's strategic profile shows where it is stronger or better than the competition and where it has many areas for improvement. Resources and Capabilities Resources: ○ Tangible: Physical (machinery, buildings), financial. ○ Intangible: Technology (patents, R&D), reputation (brands, customer loyalty), human (training, commitment) Capabilities: the ability to organize resources and perform tasks using them efficiently and effectively ○ Capacity implies a dynamic management of resources. Competitive Advantage The internal analysis of a company is part of the strategic analysis and seeks to identify its strengths and weaknesses. Differentiators from competitors in key success areas. It should include at least one key market success factor and be substantial enough Must be sustainable, and align with market needs for a long period of time SWOT Analysis Combines internal analysis (strengths & weaknesses) with external analysis (opportunities & threats).  ○ Strengths: Positive internal aspects enhancing performance (e.g., skilled employees). ○ Weaknesses: Negative internal aspects to improve (e.g., poor training). ○ Opportunities: External favorable conditions to exploit (e.g., tax cuts). ○ Threats: External risks (e.g., economic crises). Info from reports, budgets, financial ratios, profit/loss, employee surveys Managers spend 80% of their time giving and receiving information. Using SWOT Analysis Steps: 1. Identify strengths, weaknesses, opportunities, and threats. 2. Formulate strategies: Exploit strengths and opportunities. Buffer, reduce or protect the organization from external threats Correct critical weaknesses. Unit 3.4 Types of Company Strategies Formulating Strategies: Develop and evaluate strategic alternatives. Select appropriate strategies for all organizational levels that provide a relative advantage over competitors. Match organizational strengths to environmental opportunities. Correct weaknesses and guard against threats. As managers formulate strategies, they should consider the realities of the external environment and their available resources and capabilities to design strategies that will help an organization achieve its goals. Corporate Level Focus: What business are we in? (Affect the whole company or several business units) Actions relate to: ○ Acquisition of new business (one business buys other) ○ Investments/divestments of business units,... ○ Joint ventures (=associations) with other corporations in new areas Based on the mission and goals of the company → general plan of major action to achieve long-term goals → to achieve a competitive advantage Key strategies: ○ Stability: Maintain current operations without significant changes. ○ Renewal: Examination of organizational weaknesses that are leading to performance declines. Growth Strategy ○ Expand markets or products (internally or externally via acquisitions). ○ May increase revenues, number of employees, or market share. ○ Internal growth By investing in expansion → development of new or changed products ○ External growth By acquiring additional business divisions → organizational and cultural conflicts Expanding into new business areas related to the company’s current product lines or completely new sectors. Alliances → pros = pooling/sharing of resources, cons = high failure rate, trust issues, cultural differences ○ Concentration Focusing on the primary line of business → increasing the number of products offered  ○ Diversification Related = company combines with other companies in different, but related industries Unrelated = company combines with firms in different and unrelated industries. ○ The ANSOFF Matrix ○ Vertical integration Backward = the organization becomes its own supplier so it can control its inputs Forward = the organization becomes its own distributor and can control its outputs ○ Horizontal integration = a company grows by combining with competitors. Stability strategy (pause strategy) ○ The organization continues to do what is currently doing → to remain the same size or grow slowly ○ Doesn’t grow, but doesn’t fall behind either Renewal strategy ○ Designed to address declining performance ○ Cutting costs and restructuring organizational operations Competitive/Business Level Focus: How do we compete? (Affect a particular business unit) ○ Unit = geographical units, or product units or customer units…depending on the business model Strategie concern: ○ Amount of advertising, ○ Direction and extent of research and development, ○ Product changes, new-product development, expansion or contraction of product and service lines. ○ Equipment and facilities, ○ Many companies have opened e-commerce units as a part of business-level strategy. When an organization is in several different businesses, those single businesses that are independent and that have their own competitive strategies are referred to as strategic business units (SBUs) Competitive advantage: ○ The organization’s core competencies → doing something others can not/doing it better ○ The company’s resources → they hove something others don’t ○ Quality can be the competitive advantage ○ How to sustain CA over time? Five Forces Model by Porter  Cost Leadership: Achieve the lowest costs in the industry ○ Minimize total costs ○ Obtain economies of scale (the more we produce, the less represent fixed cost per unit) ○ Customers must be sensitive to price → they will not be able to find lower price Differentiation: Offer unique, premium products or services. ○ Helps to reduce the bargaining power of large buyers because other products are less attractive → helps the firm fight off threats of substitute products ○ Creating high entry barriers = customer loyalty Product leadership → offering products that push the limits of performance and versatility = they are continuously innovating Customer intimacy → specialize in satisfying unique needs that only they know from their close relationship with the customer Focus: Target a niche market, tailoring services or products to specific needs. ○ Frequent, detailed controls ○ Value and rewards flexibility and customer intimacy ○ Measures the cost of providing services and maintaining customer loyalty ○ Pushes empowerment to employees with customer contact To be “STUCK IN THE MIDDLE” (Porter) ○ Can’t develop a cost or a differentiation advantage → its costs are too high to compete with the low-cost leader or when its products and services aren’t differentiated enough to compete with the differentiator SBU = the single independent business of an organization that formulate their own competitive strategies ○ Corporate portfolio matrix ((Boston Consulting Group (BCG) Matrix)→ a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. ○ A business unit is evaluated using a SWOT analysis and placed in one of the four categories. ○ Stars → large market share in a rapidly growing industry → has additional growth potential, visible, attractive → will generate profits and a positive cash flow Heavy investment → developing into cash cows (mature market) ○ Cash cows → large market share in a mature, slow-growth industry → heavy investments are no longer required = company earns a positive cash flow  Company should “milk” cash cows, limit any new investments, use the large amounts of cash generated to invest in stars and question marks ○ Question marks → small market share in a nrapidly growing industry → they are risky Investing cash from cash cows → could develop into star Some will be sold off ○ Dogs → small share in a slow-growth market → poor performers May be a target for divestment or liquidation Functional Level Focus: How do we support the business-level strategy? How are we going to use the resources of each department? Departments involved: ○ Marketing → Analyze the environment, the market and the competition Customer segmentation (who are our customers?), positioning (How do we want to be recognizers? ○ HR: Tailoring training and incentives to strategies. ○ Finance: Cost reduction, long-term supplier negotiations Strategy Implementation Align organizational structure with strategy. Performance depends on effective implementation. Evaluating Strategies How effective have strategies been? What adjustments, if any, are necessary? First mover = an organization that brings a product innovation to the market Blue and Red Ocean Strategies Blue Ocean = Untapped market spaces –.product to the market before competitors → create new demand → Get the product on the market with low cost and unique value before others Red Ocean = Competitive, saturated markets → enter saturated market → differentiate to win over the competitors → serve existing demand → Choose between providing lower cost or special value to the customers  Unit 4 Planning and controlling Unit 4.1 Planning A goal without a plan is just a wish What is planning? May itself add value → if done badly, planning has the opposite effect = confusion, frustration, waste Good plans give direction to people whose work contributes to their achievement Everyone knows their purpose = working more effectively Plan helps to cope with the unexpected changes Planning Process Define goals Establish strategy for achieving those goals Purposes of planning Provides direction = they can coordinate their activities, cooperate with each other Reduces uncertainty = forces managers to look ahead and anticipate change → it will not completely eliminate uncertainty Minimizes the waste and redundancy = inefficiencies become obvious and can be corrected or eliminated Sets the standards for controlling = establishes benchmarks for monitoring Goals (=objectives) Desired outcomes for individuals, groups, or entire organizations Provide direction and evaluation performance criteria Should be well-written → SMART (specific, measurable, achievable, realistic and timed) ○ Bad: "Sell more." ○ SMART: "Increase sales by 20% in 2024 for kids' toys in the EU market." Strategic goals = Related to the performance of the firm relative to factors in its external environment. (eg. competitors) Financial goals = Related to the expected financial performance of the organization. Plans Documents that outline how goals are to be accomplished Describe how resources are to be allocated and establish activity schedules Traditional goal setting Broad goals set at the top → then broken into sub-goals for each organizational level Goals lose clarity Assumption that the top managers know the best because they see the “big picture” Setting goals Review the organization’s mission statement → Do goals reflect the mission? Evaluate available resources → Are resources sufficient to accomplish the mission? Determine SMART goals → Are goals specific, measurable, and timely? Write down the goals and communicate them → Is everybody on the same page? Review results and whether goals are being met. → What changes are needed in mission, resources, or goals? Formal Planning Specific, written goals covering specific time periods shared within the organization. Creates a common understanding and promotes efficiency. A single goal can’t adequately define an organization’s success. Associated to: higher profits, positive financial results The quality of planning and implementation affects performance more than the extent of planning  The external environment can reduce the impact of planning on performance Goals specify future ends; plans specify today’s means Types of Planning Strategic Plans ○ Apply to the whole organization ○ Establish the organization’s overall goals ○ Seek to position the organization in terms of its environment ○ Cover extended periods of time. ○ ‘The basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’ Operational Plans ○ Specify the details of how the overall goals are to be achieved ○ Short-term, detailed plans for departments or teams. Short-term vs. Long-term: ○ Annual (financial/budget) plans vs. extended strategies (3+ years). ○ Activity plans are short-term plans that deal with immediate production or service delivery ○ Enterprise resource planning (ERP, eg SAP) to integrate the day-to-day work of complex production systems Directional ○ Flexible plans that set out general guidelines provide focus, yet allow discretion in implementation. ○ “In two years, we aim to add two more products to the company’s portfolio.” Specific ○ Plans that are clearly defined and leave no room for interpretation. They are quantified and unambiguous. ○ “The new product, X350, will be launched on the Japanese market on November 1st, 2025 with an important event in Tokyo at the company’s headquarters. ” Single-use ○ A one-time plan specifically designed to meet the need of a unique situation. ○ “The new product, X350, will be launch on the Japanese market on November 1st 2025 with an important event in Tokyo at the company’s headquarter. ” ○ *that product and that launch are done only once! Standing ○ Ongoing plans that guide activities performed repeatedly. ○ “Marketing Plans regarding the summer and Winter Promotions” ○ *thinking that every year these events will take place Management by Objectives (MBO) Steps: ○ Set specific performance goals collaboratively determined by employees and managers ○ Develop action plans. ○ Review progress and performance periodically ○ Allocate rewards based on goal achievement. Key elements: ○ goal specificity ○ participative decision making ○ an explicit performance/evaluation period ○ feedback Benefits: ○ Corporate goals are more likely to be achieved when they focus on manager and employee efforts. ○ Goals at lower levels are aligned with and enable the attainment of goals at top management levels. ○ Helps employees see how their jobs and performance contribute to the business, ○ Employees are committed to attaining the goal Challenges: ○ Ineffective in dynamic environments → The environment has to be stable for performance to be measured ○ Can overemphasize paperwork over practical execution. ○ Poor employer-employee relations Project Management A project is a one-time-only set of activities that has a definite beginning and ending point in time. Project management = getting a project’s activities done on time, within budget, and according to specifications. Some projects are unique with specific deadlines requiring specialized skills Environmental Scanning → planning in dynamic environments Screening info to detect trends and anticipate competitor actions. Competitor intelligence = gathering information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them. Develop plans that are specific but flexible. Understand that planning is an ongoing process. Change plans when conditions warrant alterations. Persistence in planning eventually pays off. Flatten the organizational hierarchy to foster the development of planning skills at all organizational levels. Criticism of Planning May create rigidity. Hard to adapt in dynamic environments. Over-focuses on current competition, risking future innovation. Formal plans cannot replace intuition and creativity. Planning focuses managers’ attention on today’s competition—not tomorrow’s survival. Formal planning reinforces today’s success, which may lead to tomorrow’s failure. Planning isn’t enough. Planning tools will never replace the manager’s skills  Unit 4.1 Controlling 1. The Process of Management Functions: Planning, Organizing, Leading, Controlling. Resources Used: Human, Financial, Raw Materials, Technological, Information. Goals: Attaining efficiency and effectiveness in products, services, and performance. 2. What is Control? Monitoring, comparing, and correcting work performance is used to achieve goals. To ensure that activities are completed in ways that lead to the accomplishment of organizational goals. Purpose: ○ Ensure activities align with organizational objectives. ○ Involves quality control, productivity, financial management, human resource development, and productivity evaluation. 3. Importance of Control It is the final link in management functions Planning: Controls let managers know whether their goals and plans are on target and what future actions to take. Empowering Employees: Provide managers with information and feedback on employee performance. Protecting the Workplace: Enhances physical security and minimizes disruptions. 4. Control Process 1. Measuring (what and how) ○ How (sources of info) = observation, reports, surveys ○ What (Control criteria) i. Employees (satisfaction, turnover, absenteeism) ii. Budget (cost, output, sales) 2. Comparing: Match actual performance against standards. 3. Correcting: Address deviations and improve inadequate standards. 5. Types of Controls Feedforward Control (preliminary or preventive control) → Focus on Inputs ○ Attempts to identify and prevent deviations ○ Focus is on: Human, Material, Financial resources ○ Examples: Pre-employment testing, and raw material inspection. Concurrent Control → Focus on Ongoing Processes ○ Personal values & attitudes ○ Real-time monitoring of activities → to ensure consistency with performance standards ○ Current work activities – Relies on performance standards – Includes rules and regulations  ○ Direct supervision! = Management by walking around ○ Examples: Adaptive culture Total quality management Employee self-control Feedback Control → Focus on Outputs ○ Evaluate outputs after activities → Solves problems after they occur ○ Examples: Sales analysis, customer surveys, Final quality, Inspection Budgetary Control → The Most commonly used method of managerial control ○ Monitors results versus budgets ○ EXPENSES: all the costs required by the company’s activity. Anticipated and actual expenses ○ REVENUES: the total sales of the products & services of the company. Forecasts and actual revenues. ○ CASH. Estimate and reports about cash flows. ○ CAPITAL. Plans and reports investments in major assets to be depreciate. 6. Tools and Techniques for Turbulent Times Open-Book Management ○ Shares financial information across the organization. Balanced Scorecard ○ Examines more than just the financial perspective ○ Evaluates performance in four areas: 1. Financial 2. Customer 3. Internal Processes 4. People/Innovation/Growth Assets Unit 5 Organizing What is organizing? Arranging and structuring work to accomplish organizational goals Adapt the company's organizational chart Key Aspects: ○ Division of labor into jobs and departments. ○ Establishment of formal authority lines. ○ Coordination mechanisms for diverse tasks. Strategy defines "what to do," while organizing defines "how to do it." Structure is a powerful tool for reaching strategic goals, and a strategy’s success often is determined by its fit with organizational structure. Purposes of Organizing Assign and group tasks into units. Coordinate organizational tasks. Establish relationships among individuals, groups, and departments. Allocate resources effectively. Organizational structure = formal arrangement of jobs within an organization. Organizational Design = when managers create or change the structure Work Specialization (division of labour) ○ The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person ○ Advantages: Efficient use of diversity of skills, specialization ○ Disadvantages: Boredom, isolation, fatigue, stress, and reduced coordination. Departmentalization: ○ After deciding what job tasks will be done by whom, common work activities need to be grouped back together ○ Common types: 1. Functional = Grouping jobs by functions performed 2. Product = Grouping jobs by product line 3. Geographical = Grouping jobs on the basis of territory or geography 4. Process = Grouping jobs on the basis of product or customer flow 5. Customer = Grouping jobs by type of customer and needs Chain of Command ○ The continuous line of authority that extends from the upper levels of an organization to the lowest levels of the organization — clarifies who reports to whom ○ Authority refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it. ○ Responsibility - the obligation or expectation to perform. When managers use their authority to assign work to employees, those employees take on an obligation to perform those assigned duties. ○ Unity of Command - the concept that a person should have one boss and should report only to that person. Span of Control ○ The number of employees reporting to a manager ○ Traditional = 7 subordinates → 1 manager ○ Lean organizations = 30+ subordinates → 1 manager ○ Wider spans reduce costs but may decrease managerial effectiveness. Centralization vs. Decentralization: ○ Centralization Decision-making is concentrated at the top. Stable environment Large company Strategies depend on managers ○ Decentralization: Decision-making delegated to lower levels. Complex, uncertain environment Lower level managers want a voice in decisions Geographically dispersed company Employee empowerment ○ Depends on environment, manager skills, and organizational goals. ○ In times of crisis or risk of company failure, authority may be centralized at the top.  Formalization ○ the degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures. ○ High formalization: explicit job descriptions, rules, and defined procedures (e.g., police). ○ Low formalization: Flexible and less constrained (e.g., Google). Factors Affecting Structural Decisions ○ Organizational strategy: Innovation = Pursuing competitive advantage through meaningful and unique innovations favors an organic structuring Cost minimization = = Focusing on tightly controlling costs requires a mechanistic structure for the organization ○ Technology use = adapt their structures to their technology ○ Organizational size and structure: Larger firms tend to adopt mechanistic structures (more specialization, departamentalization, centralization. ○ Degree of environmental uncertainty = Organic structures suit dynamic environments (mechanic = stable simple environments) Traditional Organizational Designs Simple Structure ○ Suitable for small businesses, simple (dynamic/stable) environment ○ Pro: Efficient and flexible but risky due to reliance on one person (does not failitate growth). Functional Structure: ○ Suitable for complex but not really dynamic environment ○ NOT SUITABLE: for innovation, growth, too many products or too many different businesses ○ Promotes specialization (cost saving advantages), clear hierarchy ○ Can create rigid silos and conflict, Divisional Structure: ○ Suitable for: effective for growth in new business, geographic areas, innovation by business. ○ Not suitable: For a very low cost strategy. ○ Focuses on results and decentralization, clear responsibility ○ Conflicts between divisions, restricted innovation, increased costs. Contemporary Organizational Designs Organizations need to be lean, flexible, and innovative; that is, they need to be more organic Team Structure ○ Promotes empowerment, reduces barriers ○ Lacks clear command lines and there is pressure on teams Matrix Structure ○ Specialists from different functional areas to work on projects ○ Suitable for: decentralized power, dynamic environments, high uncertainty ○ Fluid, flexible, faster decision-making, sharing resources, high info processing capacity ○ Complex to manage, risk of anarchy Boundaryless Organizations ○ Not defined by or limited ○ Virtual and network types of organizations. ○ Flexible and talent-focused ○ Lack control, communication difficulties Learning Organizations: ○ Employees continually acquire and share new knowledge and apply that knowledge. ○ Competitive advantage ○ Faces resistance from employees, retiring Influence of Informal Structures Informal relationships are shaped by organizational culture, which can either support or hinder formal structures. Culture and strategy are also mutually linked. A strategy is formulated based on cultural assumptions and a strategy must be consistent with the culture A culture adaptable to change is crucial in competitive environments.  Unit 6 Leadership and Motivation Management Process Key Functions: Planning, Leading, Organizing, Controlling. Resources: Human, Financial, Raw Materials, Technological, Information. Performance Goals: Efficiency, Effectiveness, Product and Service Delivery. Organizational Behavior = the study of the actions of people at work Focus Areas: 1. Individual Behavior: Attitudes, personality, perception, learning, and motivation. 2. Group Behavior: Norms, roles, team building, leadership, and conflict. 3. Organizational Behavior: Structure, culture, HR policies. Leadership Leader = someone who can influence others and who has managerial authority. Leadership = The process of influencing a group to achieve goals. ○ Is reciprocal, occurs among people Key Traits of Effective Leaders: ○ Drive - high effort level, persistence, a lot of energy ○ Desire to lead - willingness to take responsibility ○ Honesty and integrity - building trusting relationships ○ Self-confidence - ○ Intelligence ○ Job-relevant knowledge ○ Extraversion - energetic, sociable Transactional = Leaders who guide or motivate by clarifying role and task requirements. ○ Focused on role clarification, rewards, and meeting basic needs. Transformational = Leaders who inspire followers to transcend their own self-interests ○ Recognizing their needs, questions norms, and encourages innovation. Charismatic = An enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. ○ Vision-driven, risk-taking, and emotionally engaging. Visionary = A leader who creates and articulates a realistic, credible, and attractive vision ○ Explains, and expresses vision through behavior Empowerment Expanding workers’ decision-making authority. Benefits: ○ Faster decision-making ○ Relieves managerial workload → Increases the span of control Empowerment Continuum: Reflects varying degrees of autonomy. Cross-Cultural Leadership Elements of Effective Leadership = Vision, trustworthiness, empowerment, proactiveness, positiveness, dynamism Examples of cultural expectations: ○ Korea: Paternalism. ○ Arab regions: Reserved generosity. ○ Japan: Humility and active engagement. ○ Scandinavia/Dutch: Avoid public praise to prevent embarrassment. ○ Germany: High autonomy, low compassion. Motivation Energizing and sustaining efforts toward goals. Higher motivation leads to happier employees and as a result most of the time, to better performance Rewards: ○ Intrinsic: Personal satisfaction. because of the interest and enjoyment in the task itself ○ Extrinsic: External rewards from others. Because of the outcome that will result by doing the task Flexibility ○ Compressed workweek ○ Telecommuting (working from home) ○ Flexible work hours Working methodology ○ Self-managed teams ○ Decentralized decision-making ○ Open communication ○ Performance-based compensation Training career development Human Resource Management (HRM) Importance ○ Creates competitive advantage and superior shareholder value ○ Strategic tool → treating employees as partners ○ Enhances performance. Key Activities: ○ Recruitment and selection. ○ Training and career development. ○ Employee retention and satisfaction. Human resource planning - ensuring that the organization has the right number and kinds of capable people in the right places and at the right times. Job analysis - an assessment that defines jobs and the behaviors necessary to perform them. Job description - a written statement that describes a job. Job specification - a written statement of the minimum qualifications that a person must possess to perform a given job successfully. Recruitment - locating, identifying, and attracting capable applicants. ○ Internet, employee referral. company website, college recruiting, recruiting organizations Decruitment - reducing an organization’s workforce. ○ Firing, layoffs (temporary), attrition (voluntary resignation, retirement), transfer, reduced worksheets (working less hours), early retirements, job sharing Selection - application forms, written tests, performance simulation tests, interviews, background investigation, physical examination Job Satisfaction = person’s general attitude toward his or her job Higher satisfaction correlates with better organizational performance, lower absenteeism, and increased customer loyalty. European statistics: 19.4% low satisfaction, 24.8% high satisfaction, 55.8% moderate satisfaction.