Management Short-Notes PDF

Management Short-Notes 1. De ning Managers, Management and Organisation Types of Resources All organisations use four basic kinds of resources from their environment: human, nancial, physical, and information. Human resources: Manage...

Management Short-Notes 1. De ning Managers, Management and Organisation Types of Resources All organisations use four basic kinds of resources from their environment: human, nancial, physical, and information. Human resources: Managerial talent and labor. Financial resources: The capital used by the organisation to nance ongoing and long-term operations. Physical resources: Raw materials, o ce and production facilities, and equipment. Information resources: Usable data needed to make e ective decisions. This applies in all kinds of organisations: - Ex in an auditing company: Talents of executives, pro ts earned, o ce facilities, economic forecasts - Ex the mayor of a country: Police o cers, government funds, police stations, and detailed crime statistics to launch a major crime prevention program in the city. Managers combine and coordinate such resources by carrying out the 4 managerial resources: planning, organising, leading and controlling. A dynamic may be explained through VUCA as an acronym - Volatile (unstable) - Uncertain (of the future) - Complex (di cult to comprehend) - Ambiguous (not clear or decided) Management Management has no universal de nition or general consensus on what it’s about. De nition: A set of activities (planning, organising, leading, and controlling) directed at an organisation’s resources (human, nancial, physical, and information), with the aim of achieving organisational goals in an e cient and e ective manner “Knowing what you want people to do, and then seeing that they do it in the cheapest way” Organisations An organisation is a team of people working together towards a collective goal or central purpose. “Any structured group of people working together to achieve goals, that individuals could not reach alone” - Critical to any organisation is interaction and communication - May be pro t or non-pro t , but both require e ective management Gri n: Any group of 2 or more people working together to achieve a goal, requires the practice of management. Managers Primary responsibility: to carry out the management process. Someone who plans, organises, leads, and controls human, nancial, physical, and information resources. Face a variety of interesting and challenging situations The average executive works over 60 hours a week, has enormous demands placed on his or her time, and faces increased complexities posed by globalisation, domestic competition, government regulation, shareholder pressure, and Internet-related uncertainties. The job is complicated even more by rapid changes (such as the recession of 2008–2010 and the recovery that began in 2013), unexpected disruptions (including web hacks), and both minor and major crises (such as the Ebola scare in 2014 and terrorists attacks in 2015). 1 fi ffi fi fi ffi fi ffi fi fi ffi ffi ff ff fi ff fi fi ffi fi  2. The Need for E ective Managers Large businesses Most of what we know about management comms from large-pro t seeking organisations (ex: Toyota, BMW) What determines a large businesses? Revenue, number of employees, large o ces and market share? But it does not matter how much pro t is made, rather the value. - Tesla is running mega losses but shareholders still believe it has a future) The larger the business, the more complex Larger problems, larger workforce Small businesses and startups E ective managers also needed for small businesses Managers might be more needed in this case These business situations imply liabilities and fewer resources A small mistake might be the reason a small business comes to an end - Apply can easily recover from losing several thousand dollars on an incorrect decision, but a start up can ill a ord even a much smaller loss - Michael Dell start Dell Computer in 1984. It became one of the largest businesses by 2015 Easier to modify certain techniques - more exible Lack of economies of scale make it di cult International management Importance of international management increased dramatically Many US rms do business in other companies - Cocacola derives almost ½ its sales from foreign markets - Many rms that do business in the US have HQ in other countries (Ex: Nestle Switzerland) Communication may be a challenge Di erent laws across countries may pose a challenge Geopolitical uncertainty too Non-pro t organisations Primary aim: intangible goals (ex: education, social services) Ex: Girl Scouts of the USA, art galleries, museums, the Public Broadcasting System (PBS) Although they do not have to be pro table to attract investors, they still need sound management practices to survive and work towards goals Must deal with money in an e cient way - If money is dealt with poorly, contributors will lose con dence and make charitable donations elsewhere (i) Governmental - ex: military needs to make use of limited resources (ii) Educational - ex: public or private education need management for order and control (iii) Healthcare - ex: mistakes may result in the loss of life (iv) Non-traditional settings: ex: organised crime or religious organisations (need a manager to organise resources in line with their vision) The public service Public service: Any service intended to address the collective needs of all the community/ nation. The state is the largest and most important employer in most countries Public services authorities exist at the central, regional, and local levels Must provide high quality services to citizens and decent work for workers Provision of healthcare, education, transport, law and order 2 ff ff fi fi fi ff ff ffi fi fi ffi fl fi fi ffi  The New Workplace Managerial work is a ected by the rapidly changing workplace (VUCA) Workforce reductions and expansions - Economic Expansion 2002-2008: Many rms hired large numbers of workers during economic expansion - Recession of 2008-2010: Firms had to reduce their workforces - Economic Growth began anew 2011: Firms cautiously proceed with new hiring Workforce diversity: Di erences among individuals - Age Age of workers increasing (declining birthrate + decreasing death rate) Retirees as part-time workers (ex: McDonalds has hired 100s of elderly workers) Expertise of skilled mature workers - Gender 50 years ago: only ⅓ of US women worked outside their homes 2014: Over 57% of women Occupations previously dominated by women (nurse, teacher, secretary) are now popular amongst men too Occupations previously dominated by men (lawyer, doctor, executive) are now popular amongst women - Ethnicity Increasing number of hispanics and African Americans in the US workforce Many also hold executive positions In ux of immigrant workers - Disabilities The Americans with Disabilities Act Importance of providing equal opportunities to disabled people Organisations attracting quali ed employees from groups that might have been ignored 3 fl ff ff fi fi  3. Basic Management Functions The functions of management: 1. Planning Decision making: a part of the planning process, involves selecting a course of action from a set of alternatives. Establishing organisational goals and create a course of action to achieve them Evaluating the internal & external factors which may a ect the execution of the plan (such as competitors) Involves an in-depth analysis of the company’s current state of a airs Takes into consideration the vision and mission Strategic planning: Creates goals for the entire organisation - SWOT Tactical planning: Short-term planning that will take less than a year to achieve (for a speci c area or department) Operational planning (using tactical planning to achieve strategic planning and goals) 2. Organising Once goals have been set and a plan has been made, managers must organise people and resources to carry out the plan. Distributing resources and delegating tasks to achieve goals set in previous stage Managers strive to create a work environment which encourages productivity Important for managers to clearly explain employees’ duties Coordinating human, material and informational resources Alan Mulally clari ed Ford’s strategy, he then overhauled the company’s bureaucratic structure in order to facilitate coordination across divisions and promote faster decision making. 3. Leading Motivating employees and in uencing their behaviour to achieve organisational objectives Managing people, rather than tasks Managers should give encouragement, positive reinforcement and direction Di erent leadership styles Alan Mulally took several steps to change the leadership culture that existed at Ford. During the previous regime the rm had used a directive, top-down approach to management. But Mulally decentralised many activities so as to put the responsibility for making decisions in the hands of those best quali ed to make them. He also clari ed channels of communication and revamped the incentive system used for senior managers 4. Controlling Evaluating the execution of the plan and making adjustments to ensure that the organisational goal is achieved Monitor progress and evaluate quality of work Feedback is important for employee development Adjustments may be needed (budget or sta ng adjustments) 4 ff fi fi fl fi ffi fi ff ff fi  4. Levels of Management Di erent management roles are divided by 1. Level in organisation 2. Functional area of expertise Levels in organisation 1. Top Managers Responsible for organisations’ overall direction and strategy Establish long-term, company-wide goals Ex: President, CEO, managing director O cially represent the organisation to the external environment by meeting with government o cials, and executives of other organisations Set goals which naturally cascade down the hierarchy (a ecting all workers) Spend their time planning and leading Pressures may be intense Ex: Howard Schultz, CEO of Starbucks 2. Middle Managers Largest group of managers in most organisations Receive broad strategy from top managers, and translate them into speci c goals and plans for rst line management Focus on coordinating employees, determining what products and services to provide Ex: Department Head, Plant Manager, Director of Finance 3. First-line Managers Directly responsible for the production of goods and services Ex: Sales Managers, Section Heads, Supervisors Spend little time with high management Most time is spent with the people they supervise Spend more time directing and controlling, rather than directing and inspecting Strong technical expertise Functional Area of Expertise In smaller companies - founder carries the whole load (Jack of all trades) and there is no di erentiation of management In large organisations, managers at each level are responsible for di erent tasks (i) Marketing Crucial role in helping a business to promote and sell its products In uence the way a brand looks and feel sin the market Focus on the 4 Ps: product, price, place, promotion New product development, promotion and distribution Identifying current and potential customers (ii) Finance Oversees the nancial health of an organisation Monitor cash ow, determine pro tability and manage expenses. Granting and using the organisations’ credits Investing funds Safeguarding the organisations’ assets Preparing budgets 5 ffi ff fl ff fi fl fi ffi fi ff ff fi (iii) Operations Concerned with creating and managing systems which create products and services Perform operations needed to manufacture an item or provide a service Controlling inventory levels and deliveries Determining factory layout Scheduling production Maintaining equipment Meet quality requirements (iv) Human Resources Responsible for building and aligning a competent and stable workforce Recruitment and selection Performancer appraisal Reward and motivation system Employee events Overseeing relations with unions within legal regulations (v) IT Responsible for developing information systems as a strategic tool for the organisation and its employees Knowledge is used to create, store, share and apply pieces of information Important information technologies (the internet, intranet and extranet) 6 6. The 6 Dimensions of E ective Management Competency: The ability to do something successfully or e ciently. Managers need a combination of education and experience. Education: educational quali cations Experience: through a variety of job assignments There are 6 dimensions of e ective management: 1. Communication Competency Most fundamental competency for the deployment of all other competencies Required for e ective transfer of information Informal communication: promotes 2-way communication and feedback, relationships Formal communication: writes concisely, and e ectively Negotiation: skilled at developing relationships and exercising in uence up, down, and laterally. 2. Planning and Administration Competency Involves deciding which tasks to be done, how to do them, allocating resources to do them, and monitoring they are done Information gathering, analysis and problem solving Planning and organising projects Time management Budgeting and nancial management 3. Teamwork Competency Accomplishing goals through groups who are collectively responsible and interdependent Fostering a supportive environment Teams must be supported by management Designing teams: clear objectives Managing team dynamics: con ict, strengths and weaknesses of individuals, open communication 4. Strategic Action Competency Involves understanding the overall missions and values of the organisations, ensuring that actions are aligned with company mission and values Understanding the industry (history & evolution, actions of competitors, analysis of trends, future implications) Understanding the organisation (shareholders’ concerns, strengths and weaknesses of strategies, organisation culture and competency) Taking strategic actions (consider the long-term implications of actions, to develop the organisation) 5. Global Awareness Competency Involves work entailing resources ( nancial, material, informational) from multiple countries and serving markets spanning multiple countries. Cultural knowledge and understanding: Informed of political, social and economic trends around the world, speaks languages. Cultural openness and sensitivity: recognises variation within culture, and avoids stereotyping 6. Self-Management Competency Involves taking responsibility for life at work and beyond Not involving personal life into work Integrity and ethical conduct Personal drive and resilience Balancing work and life issues Self-awareness and development 7 ff fi ff fi fl fi ff ff ffi fl  7. Strategy The word ‘strategy’ is derived from the Greek word ‘stratos’, meaning army. It is a comprehensive plan for accomplishing an organisations’ goals Strategic management: a way of approaching business opportunities and challenges by formulating and implementing e ective strategy E ective strategy: promote a superior alignment between the organisation and its environment, and the achievement of strategic goals Provides organisations with (i) Focus and rationale for ordering and deploying resources (ii) Helps determine what actions or process promote/obstruct progress (iii) Helps measure progress (iv) Promotes creativity and innovation towards a central purpose Levels of strategy: 1. Business-level strategy (A set of strategic alternatives from which an organisation can choose, as it conducts business in particular industry or market) 2. Corporate-level strategy (A set of strategic alternatives from which an organisation chooses as it manages its operations simultaneously across several industries and markets) Strategy formulation: Creating/determining strategies Strategy implementation: Operationalising/executing strategies SWOT analysis to formulate strategy - Strengths and weaknesses of a rms’ microenvironment (internal) - Opportunities and threats of a rms macroenvironment (external) In SWOT analysis, the best strategies are those which accomplish an organisations mission by: a) Exploiting opportunities and strengths b) Neutralising threats c) Correcting/avoiding weaknesses Product Life Cycle to formulate Strategy PLC shows how sales volume changes over the life of products 8 ff fi ff fi  8. The Evolution of Management Classical Management Theory Classical management theory consists of 3 distinct ideologies; bureaucratic, scienti c, and administrative management. They were brought about as a result of the Industrial Revolution (18th century) Bureaucratic Management A system relying on rules, hierarchy, division of labour, and detailed rules and procedures Focus is on the entire organisation and its processes Max Weber, a German scientist, de nes bureaucracy as a highly structured, formalised, and also an impersonal organisation. The Bureaucratic school prescribe 7 characteristics for e ective managerial operation 1) Rules (formal guidelines for employees’ behaviour on the job - discipline, uniformity) 2) Impersonality (employees evaluated based on objective data - fairness, objectivity) 3) Rationality (the use of the most e cient means available to accomplish a goal) 4) Division of labour (optimum use of manpower) 5) Hierarchical structure (ranks jobs according to amount of authority in each job) 6) Authority structure (right to make decisions of varying importance) 7) Lifelong career commitment (employees view themselves committed to each other over the working life of the employee - no career development) - RIRDHAL - Pros: (i) E ciency (ii) Consistency Cons: (i) Rigid adherence to rules for their own sake (ii) Focus on authority rather than employee productivity (iii) Slow decision making (iv) Incompatible with changing technology and advancing knowledge (v) Poor innovation Scienti c Management Productivity emerged as a serious business challenge during the early 1900s (the emergence of the Industrial Revolution) A system focusing on economic e ciency and labour productivity Pioneer: Frederick Taylor (Taylorism) Other advocates: Lilian and Frank Gilbreth, Henry Gantt (Taylor played a dominant role) One of the earliest attempts to apply science to the processes of management Taylor published ‘The Principles of Scienti c Management’ in which he proposed that productivity would increase by optimising and simplifying jobs. The principles of scienti c management are as follows: a) Replace working by ‘rule of thumb’ and habit, and instead use the scienti c method to study work and nd the most e cient way to do things b) Studying tasks systematically at the micro-level to speed up work c) Match workers to their jobs based on capability and motivation d) Monitor performance and provide feedback to ensure e ciency Frank Gilbreth: studied the speci c standard materials and techniques to perfect the craft of bricklaying Henry Gantt: created the Gantt chart (a means of scheduling work which can be generated for each worker) 9 ffi fi fi fi ffi fi ffi ffi fi fi ffi ff fi fi  Pros: (i) Provides employees with skills and training (ii) Improves employee selection and sets the best way for performing tasks (iii) Repetition = improved skill Cons: (i) Prioritises money, rather than social needs, working conditions and job satisfaction (ii) Limits morale and participation Adminsitrative Management Focuses on managing the total organisation Founder: Henri Fayol Fayol was 1st to identify the 4 functions of management (planning, organising, leading and controlling) Other contributors: Chester Bernard Focused on organisation and structure of work tasks. He looked speci cally at how management and workers are organised within a business to allow for the completion of task. Fayol’s 14 principles managers must apply: 1. Division of Labor (individuals can become more pro cient) 2. Authority (the authority to issue commands) 3. Discipline (subordinates must fully obey instructions from superiors) 4. Unity of Command (only 1 boss from whom a worker receives instructions) 5. Unity of Direction (each group works under a singular plan) 6. Subordination for common good (the interests of individuals are subordinate to the general interests of the group or department or company) 7. Remuneration (compensation to incentivise worker performance) 8. Centralisation (decision making should be either centralised (management makes all decisions) or decentralised (employees also make decisions) depending upon the characteristics of the organisation and worker competency. 9. Line of Authority (Scalar Chain) (a hierarchy of authority that places workers below managers in the reporting structure) 10. Order (well-de ned rules and standards for the work environment and work responsibilities) 11. Equity (organisation must be run based upon principles of fairness) 12. Stability of Tenure (employees work better when they feel job security) 13. Initiative (managers must promote initiative by allowing employees to create plans and carry them out) 14. Esprit de Corps (establishing a sense of belonging within the organisation creates a sense of unity and moral) - DADUSU ROCLISEE- (Division of labour, Authority, Discipline, Unity of command, Subordination, Unity of Direction) (Remuneration, Order, Centralisation, Line of Authority, Initiative, Stability of Tenure, Esprit de Corps, Equity) (There is an overlap between the above principles, and Weber’s principles of Bureaucratic management) Pros: (i) Provides a clear structure (ii) Professionalism of managerial roles Cons: (i) Internal focus (ii) Over emphasises the rational behaviour of managers 10 fi fi fi Behaviouralist Management Theory Emphasis on individual attitudes and behaviours on group processes Sometimes referred to as the Human Relations Movement, due to its focus on the human dimension of work Contrasts classical management (optimising man as a machine) - Weber, Taylor, Fayol Concerned with how to manage productivity by understanding workers motivation (expectations, needs, interests, group dynamics) Mary Parker Follett: focuses on people-oriented methods of management - Autonomy: workers will be more engaged and productive if they are given autonomy, treated as intelligent, and allowed to work cooperatively - Flat hierarchy structure: employees shouldn’t feel devalued - Principles of coordination (consulting all persons concerned before making a decision) Chester Barnard - Acceptance Theory of Authority: A managers authority rests on the workers acceptance of his right to give orders, and to expect compliance. - Workers feel as though they will be rewarded for compliance, and disciplined for non- compliance - they also respect the manager for his experience - An order is accepted if the subordinate understands it, is able to comply with it, and views it as appropriate. The importance of Barnard’s work is enhanced by his experience as a top manager. The Hawthorne Contributions - The Hawthorne studies tested such variables as the e ect of lighting, work breaks and pay incentives. - Group of researches led by Elton Mayo and Fritz Roethlisberger of Harvard Business School - The experiment brought out that the productivity of employees is not the function of only physical work conditions and wages. - Productivity depends heavily on satisfaction of employees. Logical factors < emotional factors - in determining productivity e ciency - The Illumination Experiments When intensity of light increased, production also increased. However, when illumination was brought down to the normal level, output till showed an upward trend. However, these gains in productivity disappeared when the attention faded The outcome implied that the increase in productivity was merely the result of a motivational e ect upon the company’s workers Thus there is no consistent relationship between the 2 Pros - Takes motivation, group dynamics and interpersonal process into consideration - Focuses managerial attention on these process - Employees are valuable resources, not tools Cons - Individual complexity makes behaviour prediction di cult - Many managers are reluctant to practice such concepts (due to ego) - However the best managers are the ones willing to unleash the capabilities of their employees. However, some managers may be unwilling to practice behavioural management as they fear losing their power 11 ff ffi ffi ff  Systems Management Theory Ludwig von Bertalan y A theoretical framework for understanding how organisations work. System: An entity which has all the elements needed to function A computer is made up of smaller systems which have to work together (the processes, RAM, motherboard, hard drive etc) Each part of the overall system is dependent on the others and cannot function optimally without them. Thinking of organisations as systems provides us with a variety of important viewpoints on organisations. - Open systems: Systems which interact with their environment - Closed systems: Systems which do not interact with their environment. - Synergy: 2 or more subsystems working together to produce more than they could alone Disney is a master of synergy - their movies, theme parks and merchandise are all linked together so that each enhances the others. The Disney movie Frozen was widely promoted at Disney world before it was premiered, and long after it left the cinemas, people can still buy Frozen DVDs at all Disney retail outlets. Although some organisations are open systems, they make the mistake of ignoring their environment. Broke away from classical management theory that viewed organisations as machines and moved toward a more holistic view that sees them as networks of people, procedures and activities. Solving problems by diagnosing them within a framework of; inputs, transformation process, outputs, feedback Quantitative Management Theory This branch of management theory focuses on the development of mathematical and statistical models as a simpli ed representation of a system, process, or relationship as models, formula, and equations Theory used by the government, scientists and managers to help military deploy resources e ciently and e ectively Focus: decision making, mathematical models. Involves trying to nd the optimal mix of resources for e ciency and e ectiveness Has 2 main branches: (i) Management Science - Not related to scienti c management - Focuses on the development of mathematical models (using systems and - Ex: Banks use mathematical models to gure out how many tellers need to be on duty at each location at various times throughout the day (ii) Operations Management - Less mathematical and statistically sophisticated than management science and can be applied more directly to managerial situations. - A form of applied management science - Generally concerned with helping the organisation produce its products or services more e ciently and can be applied to a wide range of problems. - Ex: Home Depot each use operations management techniques to manage their inventories. Pros - Sophisticated decision making techniques - Models increase awareness of complex organisational processes - Very useful in planning and controlling processes 12 ffi ffi ff fi fi ff fi fi ffi ff  Cons - Cannot fully explain and predict people’s behaviour in organisations - Maths sophistication may come at expense of other skills - Models may require unrealistic / unfounded assumptions - Models cannot account for human / individual behaviour and attitude Contingency Management Classical, behavioural, quantitative approaches: considered universal perpectives (they try to identify the 1 best way to manage) Contingency: Suggests that universal theories cannot be applied to organisations (because each organisation is unique) Thus, managerial behaviour is contingent on unique elements in that situation Not a 1 size ts all approach Total Quality Management Founded by W.E. Deming Became accepted in the US after his ideas helped to rebuild Japan after WWII States that poor quality is unacceptable, customer ultimately de nes quality in the marketplace The quality control process: - Focuses on measuring inputs, transformation operations and outputs - enabling members and employees to make decisions about product quality at each safe of the process. The 9 Dimensions of Quality 1. Performance - primary product characteristics 2. Features - secondary characteristics 3. Aesthetics - sensory characteristics (ex: exterior nish) 4. Conformance - meeting speci cations 5. Reputation - people’s opinions 6. Reliability - consistency of performance 7. Durability - useful life 8. Serviceability - resolution of problems (ex: ease of repair) 9. Responsiveness - human - to human interface (ex: courtesy of the dealer) 13 fi fi fi fi  9. Environmental Forces To illustrate the importance of the environment to an organisation, consider a swimmer crossing a wide stream: - He must assess the current, obstacles, and distance before setting out - If such elements are not understood, he might get injured or end up in the wrong place An organisation is like the swimmer, and the environment is the steam. The organisation must understand the basic elements of its environment to properly manoeuvre them. NO organisation exists or operates in a vacuum. (Thus, we must address the challenges and opportunities being presented to us) Old Economy New Economoy Size of organisation (manufacturing) Value of organisation (information) De ned market segments New markets Lifetime of loyalty (repeat business) Customers buy activities not products Physical + capital assets (tangible) Human capital Di erent organisations value di erent things from their environment: Private university (ex: Harvard) may be less concerned about economic conditions than a state university - which relies on state funding External Environment Refers to everything outside an organisation’s boundaries which might a ect it. Made up of 2 parts: The general environment: The set of broad dimensions and forces in its surrounding that create its overall context - Economic: The overall health and vitality of the economic system in which the organisation operates Trends in how groups produce, distribute and use goods and services The state of the economy: recession, recovery, boom, depression Taxes, wages, interest rates, government spending, subsidies, unemployment, demand - Technological: The methods available for converting resources into products and services The combined e ects of processes, materials, knowledge and other discoveries resulting from research and development Breakthroughs in technology in uence operating e ciency, competitiveness, quality of goods and services. - Sociocultural: The customs, mores, values, and demographic characteristics of the society in which the organisation functions Demographics (age, gender, race of consumers) Ex: ageing population: development of luxury elderly homes Demographics determine the products that society will value - Political-legal: Government regulation of business and the relationship between business and government Legal systems, regulations and agreements among governments and companies De ning what the organisation can or cannot do Laws may a ect pollution, equality, employment, competition, safety - International: The extent to which an organisation is involved in or a ected by business in other countries 14 ff fi fi ff ff ff fl ffi ff ff  The task environment: The task environment consists of speci c external organisations or groups that in uence an organisation. - Competitors: An organisation that competes with other organisations for resources - Customers: Whoever pays money to acquire an organisation’s products or services - Suppliers: An organisation that provides resources for other organisations - Strategic partners: Organisations that work together with one or more other organisations in a joint venture or similar arrangement (strategic allies) Ex: McDonald’s promotes Disney movies in its stores, and Disney has built McDonald’s restaurants at some of its resorts. - Regulators: A unit that has the potential to control, legislate or otherwise in uence the rm’s policies and practices Regulatory agencies: Created by the government to protect the public from certain business practices or to protect organisations from one another. Interest groups: Any group which has an interest in the operations of a business and which to a ect it Internal Environment Refers to the conditions and forces within the organisation Consist of owners, boards of directors, employees, physical work environments, and cultures. - Owners: The people who have legal property rights to that business (sole trader or partnerships) - Board of Directors: A governing body elected by the stockholders, which is charged with overseeing the general management of the rm to ensure that it is being run in a way that best serves the stockholders’ interests - Employees: Changing nature of the workforce - Physical work environments: Facilities in downtown skyscrapers, suburban or rural settings, long halls lined with traditional o ces 15 fi ff fl ffi fi fi fl Competitive Forces (Porter’s 5 Forces Model) Organisations in any industry are directly a ected by at least 5 competitive forces in the task environment. 1. Threat of new entrants (depends on the relative ease with which new rms can compete established rms) Lack of Economies of scale Poor access to distribution channels Capital cost of entry Customer loyalty to existing brand Government policy (ex: licensing) 2. Threat of substitute products or services (products and services which may be alternatives to those supplied by the rm) Switching costs ( nancial terms or hassle and convenience terms) - if someone has all apple products - switching to a Samsung will destroy the seamless integration Relative price and performance of substitutes 3. Buyer bargaining power (try to force down prices, obtain more and higher quality products, also increase competition among sellers by playing them against each other) Buyers had a lot of power if: There are many customers who have the power to boycott Many substitutes exists Good access to product information 4. Supplier bargaining power (often control how much they can raise prices above costs, or reduce the quality of goods they provide before loosing customers) They are grouped and well integrated (a cartel of suppliers) - which limits competition and gives the cartel more power They supply small customers The threat of Forward integration: exists in business-to-business (B2B) relationships. It occurs when a manufacturer threatens to sell directly to a consumer or retailer, and thus cut out the wholesaler or distributor acting as a middleman. This looming threat gives bargaining leverage to the manufacturer. 5. Rivalry among existing competitors (apart from customers, competitors are the most important day-to day force) Rivalry increases when competitors are under threat Industry growth (more opportunities) Industry slow down (stealing competitors) Price wards Switching costs 16 fi fi fi ff fi