Summary Management Tools & Principles Notes PDF

Midterm : 1, 2, 3, 5, 6, 7, 8 To do : 15, 16, 11, 10, 12, 9, 4 CHAPTER 1 : DEVELOPING A BUSINESS MINDSET Business : profit seeking organisation that provides goods and services Revenue : money a company brings in through sale of goods and services Business model : concise description of how a busine...

Midterm : 1, 2, 3, 5, 6, 7, 8 To do : 15, 16, 11, 10, 12, 9, 4 CHAPTER 1 : DEVELOPING A BUSINESS MINDSET Business : profit seeking organisation that provides goods and services Revenue : money a company brings in through sale of goods and services Business model : concise description of how a business generates or intends to generate revenue Profit : money left after all expenses are paid for Adding value What a business do : transform lower-value inputs into higher value outputs Adding value to satisfy customers (example) 1. Wheat farm – convert soil seat to wheat 2. Flour mill – convert wheat to flour 3. Bakery – convert flour to bread 4. Grocery store – makes bread easier to purchase 5. Consumer – benefit from value added at every stage Each company made choices about what it will do to generate revenue Competing to attract and satisfy customers - Competition gives customers a wide range of options, tend to increase quality, improve customer service, lower prices - Free market economy, companies have lots flexibility to decide which customers to focus on and how they want to compete Competitive advantage : aspect of company or its operations that enables it to create products with more appeal to target customers Accepting Risks In Persuit of Rewards - Every company accept risks to conduct its business - Without promise of rewards, business no incentive to take on risks - Risks associated with business decisions allow responsible decision making - Business take risks in anticipation of future rewards Identifying major types of businesses Not-for-profit organizations : organisations that provide goods and services without having a profit motive Moral hazard : risk gets disconnected and someone else suffer from a bad decision Ways To Categorise Businesses : - Product types and ranges - Tangible goods – physical products - Intangible : non-physical products (software, downloaded music) - Company size  - Big companies employ hundreds of thousands - Geographic reach - Local, regional, national, international - Due to digital product formats and global transportation services - Ownership - Firms can be owned and structured in variety of ways - Sole proprietorships, partnerships, public corporations Seeing Business From The Inside Out Business mindset : adopting an insider’s view of business with an appreciation for the decisions to be made and challenges that managers face Consumer’s perspective Manager’s perspective Which product will meet my FUNCTION What products to make? needs? How to make? Are there safety issues? How can i learn more about MARKETING How to reach potential buyer? this product? How will it make me feel IMAGE What is our brand image? better about myself How to protect our brand? Change or improve? Can i afford it? PRICE How much it cost to produce? What price will market accept? How much competitor charge? Where to buy? AVALIABILITY Which are best retail channels? How much do channels cost? Can i get support after sale? SERVICE Will they pay for some services? What do competitors offer? Appreciating The Role of Business in Society Ways to contribute to society : - Offering valuable goods/services essential to quality of life - Providing employment - Provide salaries, cover cost of health care, childcare, retirement - Paying taxes - Help build highways, fund education, further scientific research - Contributing to national growth, stability, and security - Increase GDP and prevent job losses Negative effects of business to society : - Generate pollution and waste - Impact emvironment, soil, air, water - Health and safety risks - toxic material not handled/disposed properly cause serious illness or death - Disrupt communities - Occupying land, displacing existing businesses, overloading schools - Business in decline cna destabilise community - Cuase financial instability  - Poorly managed company become liability to society Social entrepreneurs : people who apply entrepreneurial strategies to enable large scale social change The Social Environment Social environment : trends and forces in society at large - Social trends affect composition of workforce and demand for goods/services - Young adults live with parents longer = influence # of people in workforce - Society have expectations about appropriate ways for business to operate Stakeholders : internal and external groups affected by a company’s decision and activities - Employees, community, shareholders, government Multiple Environments of Business Market environment - target customers, buying influences, and competitors Economic environment - Condition and forces that affect the cost and avaliability of goods, services, amd labour Social environment - Population trends, social values and behaviours, relationship of society and business Legal and regulatory environment - Laws and regulations that restrain, support, and protect businesses at local, state, national and international levels Technological environment - Forces resulting from practical application of science to innovations/products/processes Technological Environment Technical environment : practical application of sicence to innvations, products, processes - Firms that use or make advanced technologies moe likely to achieve market dominance Economic Environment Economic environment : conditions and forces that affect the cost and avaliability of goods, services, and labour → shape behaviour of buyers and sellers - Growing economy - increase demand and support higher prices - Raise cost of labour and materials - Shrinking economy - Limit demand and availability of loans/investments to expand Economic and technological environment intertwined – innovations reduce labour costs/productivity (labour is company’s biggest expenses) Gig economy: portion of economy composed of people who work as independent contractors on a series of short-term projects or tasks - Mainly technology based (website/mobile apps) Legal and Regulatory Environment Legal and regulatory environment : laws and regulations at local, state, national, and international levels (electricity and basic utility) - Tax, fees, permits, licenses, labour rules, environmental restriction Market Environment Market environment : company’s target customers, the buying influences that shape the behaviour of those customers and competitors that market similar products to those customers 1. Target customers 2. Buying influences 3. Competitors Nature of market environment varies between industries Barriers to entry : resources or capabilities a company must have before it can start competing in a given market Capital intensive : production of product relies heavily on machinery, equipment, or automated systems (requires high capital investment) Identifying Major Functional Areas in a Business Enterprise Research and Development R&D : functional area responsible for conceiving and designing new products - Provides ideas and designs that allow firms to meet customer needs in competitive markets - Important for companies that rely heavily on science and technology Manufacturing, Production, and Operations - Concerned with production of goods/services, purchasing materials, logistics (flow of materials), facilities management Marketing, Sales, Distribution, Customer Support - Marketing – identifying opportunities in marketplace and working with R&D to develop products to address those opportunities - Sales – develops relationships with potential customers and persuades customers to buy company’s goods/services - Distribution – responsible for delivering products to customers or intermediaries - Customer Support – give customer the support and information they need to be successful Finane and Accounting - Ensure companies has funds to operate, control how funds are spent, write reports for company management and outside audiences (investors/gov)  - Financial managers – responsible for planning anf funding - Accounting managers – responsible for monitoring and reporting - Coordinate with R&D and production to estimate manufacturing costs and marketing to determine price of product Human Resources - Responsible for recruiting, hiring, developing, supporting employees - Make sure company is in compliance laws concerning employee rights and workplace safety Business services - Help companies with specific needs in law, banking, real estate Careers in Business Operations manager - Management of people and processes involved in creating goods and services - Production engineering, assembly, testing, scheduling, quality assurance, information technology, forecasting, finance, logistics, customer support - Deals with fluctuating demand levels and supply/process problems Human resource specialist - Plan and direct personnel-related activities (recruiting, training&development, compensation) - Develop and implement systems and practices to accommodate firm’s strategy - Make sure company can attract, develop and retain people Information Technology Manager\ - Functional area of busines and systems responsible for gathering, processing, and distributing information where needed throughout organisation Marketing Specialist - Identifying and understanding market opportunities - Shaping product, pricing, communication strategies to pursue opportunities Sales professionals - responsible for building relationships with customers and helping make purchase decisions - Day-to-day freedom and flexibility Accountant - responsible for collecting, analysing, and reporting financial matters - Analysing budgets, assessing manufacturing costs of new pr5oducts, preparing state and federal tax returns Internal auditors - Verify work of accounting and look to improve efficiency and cost effectiveness Public accountants - Accounting, tax, preparations, investent advice to individuals/companies/organisations External auditors - Verify financial reports of public companies as required by law Forensic accountants - Investigate financial crimes Financial Manager - Perform variety of leadership and strategic functions Controllers - Oversee preparation of income statements, balance sheets, financial report Treasurers/Finance officers - More strategic role, establishing long-term financial goals and budgets, invest firm’s funds and raising capitals as needed Elements of Professionalism Striving to excel Being dependable and accountable Be a team player Demonstrate etiquette Communicating effectively Make ethical decisions Digital Enterprise - Company that uses digital system as one of the foundation of its value-creation processes regardless of industry or product Disruptive Innovations - Development so fundamentally different and far-reaching that it can create new professions, companies, or entire industries while damaging or destroying others Predicting disruptive innovations - Usually requires other factors to converge (tech, economic, social, legal) - Many promising technologies take years to have impact Gartner Hype Cycle Digital Transformation - Process of reimagining company’s business model and operations to become a digital enterprise  - Serve customer better, create new products, operate more efficiently, stave off new competitive threats, become more agile and resilient - Incorporate big data, Internet of Things, cloud computing, social media, mobile apps, AI, robotics, robotic process automation, virtual worlds Elements of digital transformation and optimization Digitising - Making digital copies of physical assets (scanning printed docs to digital data) Digitalising - Redesigning or entirely reinventing business procfesses to use digital data in innovative new ways Business Model Reimagination - Rethinking what value a company should create for its customers and how it should create that value Process Optimization - Redesigning or refining existing business processes to take them more effective and more efficient Big Data and Analytics - Big data – massive flows of data coming from customer records, social media, process sensors, financial transactions - Analytics – variety of computer-ddriven efforts to extract meaning from all that data, often using forms of artificial intlelligence Internet of Things(IoT) - Billions of devices now connected to the internet from simple sensors up to complex machinery - Goal of IoT : make systems smarter, more autonomous, more responsive to user needs Cloud Computing - On-demand approach to computing in which companies essentially rent online computing capacity and software from a service provider rather than buying and maintaining assets themselves Robotic Process Automation - Aims to do for knowledge work what robots do for manufacturing and other physical processes; targets the high-volume “paperwork” aspects of business and can automate some of the routine communication that this sort of work typically involves Artificial Intelligence - Application of computing power to replicate one or more aspects of human intelligence – collect data/information , analysing/processing input to make decisions , applying results of decision Digital Twins - Accurate, detailed digital models of physical entities that update in real-time using data from their physical counterparts – aid in trouble shooting, predictive maintenance, design improvement No-Code App Development - System that allow subject-matter experts to create apps without having in-depth programming knowledge or skills 5G Wireless - Play key role in moving massive amounts of data that other innovations often require Developing Skills for Your Career Communication Critical thinking Collaboration Knowledge application and analysis Business ethics and social responsibility Informational technology skills Data literacy CHAPTER 2 : ECONOMICS, MONEY, BANKING Economy : total of all economic activity within given region Economics : study of how society uses scarce resources to produce and distribute goods and services Factors of production : economic resources (natural, human resources, capital, entrepreneurship and knowledge) Scarcity : unlimited wants, limited resources Economic Indicators : - Statistics that measure the performance of the economy - Interest rates, unemployment rates, housing data, industrial productivity Leading indicators - Suggest changes that may happen to economy in the future - Housing stats, durable-goods order key indicators Lagging indicators - Provide confirmation that something has occurred in the past - Corporate profits and unemployment key indicators Coincident indicator - Reflect current economic condition or activities - Personal income, industrial production, variety of price indexes key indicators Price Indexes Consumer Price Index (CPI) - Monthly statistic that measures changes in prices of a representative collective of consumer goods and services - Measure inflation rate by comparing change in prices of representative “basket” of consumer goods Producer Price Index (PPI) - Statistical measure of price trends at the producer and wholesaler levels  - Help companies place an accurate value on inventories to protecting buyers and sellers with price-escalation clauses in long-term purchasing contracts Gross domestic product (GDP) : value of all final goods and services produced by businesses located within a nation’s borders; excludes outputs from overseas operation of domestic companies - Measures country’s output - Sum of all finished goods and services produced in a country during a specified period usually a year Gross National Product (GNP) : excludes value of production from foreign-owned businesses within a nation’s boundaries and includes receipts from the overseas operations of domestic companies - Considers who is responsible for production - Considers where production occurs Economic Systems - Policies that define a society’s particular economic structure; the rules by which a society allocates economic resources Planned System (command system) - Government controls allocation of resources Free market system - Individuals and companies own the factors of production and largely free to decide what to make, how to make, where to sell, price to charge Capitalism - Economic system based on economic freedom and competition - Business in free market system where private parties own and operate most business + and where competitors/supply/demand determine which goods are produced Mixed economy - Practice of limited intervention - Loca, state, national, international government intervene to accomplish goals that are deemed socially or economically desirable Price Control - Maximum allowable price (price ceiling) - - Minimum allowable price (price floor) - Establish minimum wage Nationalisation : Taking ownership of selected companies or industries Privatisation : allowing services once owned by government to be performed by private businesses Government Role in Free Market Regulation : relying more on laws and polices than market forces to govern economic activity Deregulation : removing regulations to allow market to prevent excess and correct itself over time Protecting stakeholders - Stakeholder conflict - US federal government established numerous regulatory agencies to balance interests of stakeholders Fostering competition - Gov intervene to preserve competition to make sure no single enterprise becomes too powerful - Laws and regulations established to prevent individual companies or groups of companies from taking control of markets - Retrain competitions + harm consumers Antitrust Legislation - Antitrust laws limit what businesses can and can’t do to ensure all competitors have same chance at succeeding - Lawsuits can result in penalties of billions of dollars or force companies to sell some operations or subsidiaries Mergers & Acquisitions - Gov occasional prohibit companies from merging - Divesting : selling some parts of company or making other concessions Government Agencies Encourage innovation and economic development - Regulations and policies to encourage specific types of economic activities - Promoting growth of alternative energy sources through economic incentives Stabilising and Stimulating Economy Monetary policy : adjusting nation’s money supply and amount of “spendable” money in the economy Fiscal policy : changes in government revenue and expenditures to stimulate slow economy or dampen growing economy thats in danger of overheating/inflation - Change tax rates - Gov increasing their purchase to stimulate Type of Taxes - Income tax - Real property tax - Sales tax - Excise tax – usually on harmful products - Payroll tax Forces of Demand and Supply Demand curve : graph showing amount of product buyers will purchase at various prices - Slope downwards = price drops, more people buy Supply : specific quantity of a product that seller is able and willing yo provide at a particular time at various prices Factors affecting demand - Customer income - Preferences and taste - Substitute products – good that can be used as an alternative for another - Complementary products – goods that are purchased to go with another - Marketing expenditures - Customer expectations about future prices/financial wellbring Understanding Supply Supply curve : graph of quantities of a product that sellers will offer for a sale, regardless od demand at various prices - Firm’s willingness to product and sell a product increases as price/profit per item increases - Price up → quantity up Factors affecting supply - Cost of inputs (wages) - Number of competitors - Advancements in technology Understand How Demand and Supply Interact Equilibrium price : point at which quantity supplied = quantity demanded - Customers are willing to buy as many product as the seller is willing to sell Understanding How an Economy Operates Competition in a Free Market System Competition : rivalry among businesses for same customers competition : situation where multiple suppliers exists that no single supplier are dominant enough to influence prices Monopoly : one supplier dominates the market to a degree that it can control prices - natural monopoly : company innovate and gain customers or as market evolves - Regulated monopoly : government mandate - Lack competition - Usually prohibited by law Monopolistic competition - Numerous sellers differentiate their products from one another in at least some small way - Lower barriers to entry Oligopoly - Small number of large companies influence each other through their production and pricing decisions Business Cycle Business cycles : fluctuations in the rate of growth that an economy experiences over a period of several years Economic expansion : occur when economy is growing and consumers are spending more money → higher employment and wages → more consumer purchases Economic contraction : spending declines → employment drops → economy slow down Recession : period which national income, employment, production all fall often at least 6 months of decline in GDP - Depression : deep prolonged recession - Catastrophic collapse of financial markets Recovery : when downward swing or recession is over Unemployment - Effects of economic contraction Unemployment rate : percentage of labour force currently without a job - Consist of people age 16+ who are either working or looking for job Frictional Unemployment : - Short term unemployment when people are in between jobs, have education left or waiting to take first jon Structural unemployment : - Permanent fall in demand for a particular type of labour or set of skills - Result in long term unemployment due to - Geographical mobility - Occupational mobility Cyclical Unemployment : - Caused by economic fluctuations Seasonal unemployment :  - Predictable increase/decrease in need for workers in industries with seasonal fluctuations in customer demand Inflation Inflation : steady rise in average prices - Affect purchasing power - Price up → purchasing power down Deflation : susained fall in average prices Money’s Role in Business Meaning of Money Money : anything generally accepted as a means of paying for goods and services Functions of Money - Medium of exchange – exchange money for goods/services - Unit of accounting – measure of value, buyers/sellers dont have to negotiate every transactions - Temporary store of value – holding money = accumulating wealth til needed - Standard of deferred payment – means of exchange overtime Fiat Money, Cryptocurrency, NFTS Fiat money : official currencies issues and maintained through government fiat or proclamation and value isn’t tied to physical asset Legal tender : can be used for any financial obligation Cryptocurrency : - currency represented by digital tokens (Bitcoin, Ethereum) - Not backed by real assets or tangible securities Impact : - Alternative to fiat currency - Value can’t be manipulated by central banks - Purchaser reluctant to spend if think value could increase , supplier reluctant to accept if think value could decrease - Disruptive force in global economics and politics - Threat of economic sanctions - Sanctions include currency, blocking international transfer, freezing bank accounts - Speculative investment - Some cryptocurrencies have experienced huge price increases - Invest at right time → substantial gains - Driver of potentially disruptive technologies - Technology required for its creation and use (blockchain & smart contracts) Nonfungible tokens : - Digital certificates that convey sole ownership of a digital asset - nonfungible asset : something that is unique, cant be interchanged  - Primarily used in sports, entertainment, art Characteristics of Money : - Any currency should be : divisible, portable, acceptable, scarce, durable, stable in value The Money Supply Money supply : the amount of money in circulation at any given point in time - M1 – cash held by public and money deposited in variety of checking accounts - M2 – M1 + saving accounts, balances in retail money market mutual funds, small time deposits Increase money supply → lower interest rate → more business activity Banking Institutions Federal Reserve : - Central banking system of US, responsible for regulating banks and implementing monetary policy - Independent from government Fed’s Major Responsibilities - Conducting monetary policy as required by Congress with objectives of maximising employment, keeping prices stable, keeping inflation under control - Maintaining stability of financial system by minimizing systemic risks - Supervising and regulating individual financial institutions - Ensuring a secure and efficient payment system to support financial transactions - Provide adequate supply of currency, processing checks,electronic payments - Protecting consumers nad promoting community development - Ensure fair lending, fair housing, community reinvestment *also approves bank mergers and acquisitions and implementing finance-related consumer protection laws - Monetary policy decided by Federal Open Market Committee (FOMC) Fed’s Tools for implementing Monetary Policy → Federal Funds Rate - Interest rate that member banks charge each other to borrow money overnight from the funds they keep in their Federal Reserve accounts - Influences short and long-term interest rates, foreign exchange rates, inflation → 3 Mechanism to Push Federal Reserve Fund to Target Rate - Buying and Selling Teasury bonds, bills, notes - Feds buy Treasuries → inject money into economy → increase money supply → decrease federal funds rate - Adjusting Reserve Requirements - All depository institutions required to hold portion of those deposits in reserve to make sure they can provide cash on demand - By changing reserve percentage, Fed allows institutions to lend out more or less of their deposited amounts → affecting money supply - Lending through discount window  - Process for making short-term loans into depository institutions when unable to get funds through normal interbank borrowing - Situation can occur when overall supply of funds available has dropped, an institution didn’t receive an expected loan from another institution or smaller bank needs to even out seasonal fluctuations in its deposits - The discount Rate : - Interest rate that member banks pay when they borrow funds from Feds through discount window - Feds set discount rates - When Fed change discount rate, banks changes its prime rate - Prime rate : interest rate bank charges its best loan customers Government Banking Agencies / Institutions - FDIC (Federal Deposit Insurance Corporations) : protect money in customer accounts, assess financial fondness of nation’s banks, manage transition of assets whenever a bank fails - Banks pay fee to join FDIC network - FDIC guarantees to cover any losses from bank failure up to maximum of $250,000 per account - NCUA (Nationanl Credit Union Administration) : provide regulatory supervision and account protection for credit unions - Fannie Mae and Freddic Mac : - Government-sponsored companies have mandate to support home ownership for low and moderate income buyers by making mortgage fund more readily available - Fannie Mae – Federal National Mortgage Association (FNMA) - Freddie Mae – Federal Home Loan Mortgage Corporation (FHLMC) - Dont extend loans themselves but purchase and guarantee loans made by banks and other primary lenders - In secondary market , individual loans often pooled together and transformed into investment products known as mortgage-backed securities Investment Banks - Offer variety of investing / advisory services to organisational customers (corporationsm financial institutions, pension funds, gov) - Services offered - Facilitating mergers, acquisitions, sales, spin-off of companies - Underwriting IPOs - Managing and advising on investments - Raising capital on behalf of corporate or government clients - Advising on and facilitating complex financial trasnactions - Investing in or lending money to companies - Providing risk management advice - Acting as an interim buyer or seller to help clients acquire or divest asset Commercial Banks - Financial institutions that accept deposits, offer various types of checking and savings accounts and provide loans  - Types of Commercial Banks - Retail banks – serve consumers with checking and savings account, debit and credit cards, loans for homes cars and other major purchases - Merchant banks – offer financial services to businesses and wealthy individuals, particularly international finance - Thrift Banks – offer deposit accounts and focus on offering home mortgage loans - Credit unions – not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses - Private Banking – range of services for wealthy individuals and families such as managing real estate and other investments, setting up trust funds, and planning philanthropic giving Private Banking - For more wealthy individuals Other Financial Services - Independent mortgage companies – originate mortgage using their own funds - Mortgage brokers – initiate loans on behalf of mortgage lender in exchange for a fee - Credit rating agencies – offer opinions about credit worthiness of borrowers and of specific investments such as corporate bonds CLASS NOTES Business : organization that takes lower value input and adds value and creates higher value output Create value through action / activities → resources / funds Business is a race to generate value for customer Adding value to satisfy customers (example) 6. Wheat farm – convert soil seat to wheat 7. Flour mill – convert wheat to flour 8. Bakery – convert flour to bread 9. Grocery store – makes bread easier to purchase 10. Consumer – benefit from value added at every stage Business model : concise description on how a business generates or intents to generate revenue - Important source of innovation For-profit organisations : provide goods/services with a profit and asset… CHAPTER 3 : GLOBAL MARKETPLACE Why Nations Trade Economic globalisation : increasing integration and interdependence of national economies around the world → Focusing on Relative Strengths - Comparative advantage suggests each country should specialize in areas where it can produce goods and services most efficiently → Expanding Markets - Expanding into different countries → Pursuing economies of scale - Enable companies to product goods and services at lower cost when operating at higher scale → Acquiring materials, goods, and services - consumers/companies reach across borders to find what they need → Keeping up with customers - To keep and attract multinational customers → Keeping up with competitors - Competitors benefit from selling internationally, must do same to compete 2 inventions that changed world through ecommerce : 1. Shipping container → safer, faster, cheaper 2. Letter of credit → bridge the gap risk between distant seller and buyer Measuring International Trade : Balance of Trade : total value of products a nation exports minus total value of products it imports over period of time Trade surplus : favourable trade balance created when country exports more than imports Trade deficit : undavourable trade balance created when a country imports more than export Balance of payments : sum of all payments one nation receives from other nations minus sum of all payments it makes to other nations over period of time Foreign Exchange Rates and Currency Valuations Foreign Exchange : when companies buy and sell goods/services in global market place Exchange Rate : rate at which money of one country is traded for money of another Floating exchange rate : currency’s value or price fluctuates in response to forces of global supply and demand Managed exchanged rate : intervention by selling or buying their currency in foreign exchange market to stabilise currency’s value or coordinate with other countries to stabilise a particular currency Strong currency : when its exchange rate is higher than what is considered normal - Advantages - Import cost less - Lower-cost import help stabilise inflation - Travel to other countries is cheaper - International expansion and investments cheaper - Disadvantages - Nation’s companies must compete with lower-priced imports - International tourists discouraged from visiting - International investors less likely to invest - Nation’s exports more expensive to overseas buyers Weak currency : when rate is lower than normal - Advantages - Less pressure for nation’s company to compete with imports - International tourists encouraged to visit - International investors more likely to invest - Nation’s exports more price-competitive - Disadvantages - Imports more expensive - Higher-price imports contribute to inflation - Travel to other countries more expensive - International expansion and investment more expensive Conflicts in International Trade Free Trade Free trade : international trade take place without government intervention on either side Protectionism : government policies aimed at shielding a country’s industries from foreign competition 6 important ideas : - Conflict between nations - Trade agreements often intertwined with international policies and foreign policy decisions - Conflict within nations - Trade policies can simutaneously help one segment and hurt another - Asymmetrical wins and losses - Often credited with lifting millions out of poverty around the world - One group wins at expense of another - Short term effects vs long term effects - Some decisions can be beneficial in short-term but have negastive long-term consequences - Broader business environment  - Trade takes place within broader economic, social, technological environment making it difficult to isolate effects of trade policies - Global interconnectednes - Many challenges world faces are global in nature, climate change, deadly viruses to transborder crime Government Intervention in International Trade - Tariffs - Taxes, surcharges, duties levied against imported goods - Generate revenue, restrict trade or punish other countries for disobeying international trade laws - Import quotas - Limit amount of particular goods that countries allow to be imported in a given year - Embargoes - Complete ban on import/export of certain products or even all trade between countries - Restrictive import standards - Requiring special liscenses for doing certain kinds of business and making it difficult/expensive for foreign companies to obtain such license - Export subsidies - Financial assistance where producers receive enough oney from government to allow them to lower their prices to compete moe effectively - Antidumping measures - Dumping : practice of exporting large quantities of a product at lower price than production cost - Used to win customer overseas or reduce product surpluses - Sanctions - Politically motivated embargoes that revoke a country’s normal trade relations status International Trade Organisations World Trade Organisation (WTO) - Permenant forum for negociating, implementing, monitoring international trade procedures and mediating disputes but its 160+ member countries - Prevent discriminatory policies that favour some trading partners over others, reduce trade barriers, promote economic progress in less developed countries International Monetary Fund (IMF) - Foster international financial cooperation and increase stability of international economy - Monitor global financial developments, offering technical advice and training to help countries manage their economies more effectively and provide short term loans The World Bank - Group of 5 financial institutions whose primary goals are eradicating most extreme levels of poverty around the world, creating sustainable economic growth, helping fragile economies beecome more resilient  - Improve economic conditions by investing in education, healthcare, other concerns Trading Blocs Trading Bloc / Common market : - Regional orgnaisation that promote trade among member nations - Primary objective to ensure economic growth and benefit membeers - Promote trade inside region while creating uniform barriers against goods and services entering region from nonmember countries *EU , USMCA , ASEAN , APEC , GAFTA European Union (EU) : - Creating its own currency (euros) which has adopted by more than half its ember states - Simpler financial transactions and less expensive , lowered inflation and interest rates, improved transparency in pricing, provided a more stable currency Asia-Pacific Economic Cooperation (APEC) : - Long term goal of encouraging trade and investment among member countries and helping region achieve sustainable economic growth Global Business Environment Culture : share system of symbols, beliefs, attitudes, values, expectations, and norms for behaviour - Shapes business practices in multiple ways – communication practices, social norms and customs, way people respond to differences in gender, religion, age, other aspects of diversity Ethnocentrism : tendency to judge other groups according to standards, behaviours, customs of one’s own culture Stereotyping : assigning a wide range of generalised and often false attributions to an individual based on membership in a particular culture or social group Cultural pluralism : practice of accepting multiple cultures on their own terms - Avoid assumptions - Dont assume others will act same way as u do, use language and symbols the same way you do - Avoid judgements - Dont conclude people are in error or their way is invalid or inferior when they act differently - Acknowledge distinctions - Dont ignore differences between another person’s culture and your own Legal Differences in the Global Business Environment Tax Havens - Country whose favourable banking laws and low tax rates give individuals and companies the opportunity ro shield some of their income from higher tax rates in their home countries or other countries where they do business Bribery - Making payments to government officials in order to secure contracts or otherwise gain a business advantage - Discourage much-needed investment in developing countries, undermine democratic processes and weaken trust in government, raise orices for consumers by inflating business costs, potentially create environmental degradation by letting companies skirt regulations, facilitate criminal activities and present security risks Forms of International Business Activity Importing and Exporting Importing : involves buying goods or services from supplier in another country Exporting : selling of products outside the country in which they are produced - Allow firms to enter foreign market, assess local conditions, fine-tune products to meet needs of local markets - Variety of intermediaries exist to help companies get started with exporting International Liscensing Licensing : agreement to produce and market another company’s product in exchange for royalty or fee - Patents, trademarks, brand names, copyrights, trade secrets - Licsense agreements entitle one company to use some or all of another firm’s intellectual property in return for royalty payments - Benefits - Quicker market entry, lower financial commitment, lower risk, ability to get around import/export restrictions International Franchising Franchising : Form of business ownership whereby an individual or business buys a license to trade using another company’s products, logo, brands, name, trademarks ; franchisee pays fee to franchisor - Reduce costs and risks of expanding internationally while leveraging investments in branding and business processes International Strategic Alliances and Joint Ventures Strategic Alliance : Long-term partnerships between 2+ companies to jointly develop, produce, sell products - Share ideas, expertise, resources, technologies, investment costs, risks, management, profits Joint ventures : 2+ firms join together to create new business entity that is legally separate and distinct from its parents Foreign Direct Investment (FDI) - Investment of money by foreign companies in domestic business enterprises - Gives company greater control but carries much greater economic and political risk Multinational Corporations (MNCs)  - Companies with operations in more than one country Strategic Approaches to International Markets Organisational strategies for international expansion Multidomestic strategy : - Decentralised approach to international expansion in which a company creates highly independent operating units in each new country - Help company respond more quickly and effectively to local market needs - Doesnt always delivery EOS advantages Global Strategy : - Highly centralised approach to international expansion with headquarters in home country making all major decisions Transnational strategy : - Hybrid approach that attempts to reap benefits of international scale while being responsive to local market dynamics - Major strategic decisions, product planning, business systems (accounting and purchasing) are centralised Functional Strategies for International Expansion Product : - Mass standardised or customised Customer support - Add another layer of complexity to international business - Adds value Promotion - Consider variety of cultural differences and nonverbal symbols Pricing - Make sure to cover costs while being competitive Staffing  - Mixing company experience with local connections and lifelong knowledge of working culture Thriving in the Digital Enterprise : AI-Assited Translation Machine Translation : Any form of automated translation - Text translation - Real-time voice translation CHAPTER 4 : BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Defining ethical behaviour : Ethics : principles and stndards of moral behaviour that are accepted by society as right and wrong - Competing fairly and honestly - not deceive or intimidate customers / competitors - Communicating truthfully - Not causing harm to others Forces that promote unethical behaviour Management Pressure and Corporate Culture - Pressure to meet certain organisational goals can cause unethical behaviour - Workforce burnout can pressure employees to bend or break ethical rules Willful Blindness to Harm - People don’t want to see their companies or products they sell might be causing harm Strategies for supporting ethical behaviour - Start from the top - Top executives set example - Define expectations and set an example - Create company culture that reward good behaviour - Craft code of ethics with visible consequences - Code of ethics – written statement that sets forth the principles that guide an organisation’s decisions - Train and support employees - Can help employee avoid ethical missteps and resolve ethical dillemas - Practice transparency - Businesses need to and have the right to withold various types of information - Transparency : degree to which information flows freely within an organisation, among managers and employees, and outward to stakeholder - Building trust helps prevent unethical cultures from taking root - Provide feedbakc channels - Two-way communnication – giving employees and other parties a safe and confidential way to share questions and concerns with management - Whistleblowing : reporting unethical or illegal behaviour - Ethics hotline : phone number or online portal that lets employee report instances of questionable ethics  - Put your money where your morals are - Companies need to demonstrate positive ethical behaviour even if it means losing business Guidelines for making ethical decisions : - Ethical lapse – a situation in which an individual or a group makes a decision that is morally wrong, illegal, or unethical - Ethical dillema : a situation in which more than one side of an issue can be supported with valid ethical arguments Conflicts of interest : situations in which competing loyalties can lead to ethical lapses such as a when a business decision may be influenced by the potential for personal gain Corporate Social Responsibility CSR : idea that business has obligation to society beyond he pursuit of profits Relationship between business and society 4 rules to understand this relationship : - Consumers in contemporary societies enjoy and expect a wide rane of benefits - Profit-seeking companies are the economic engine that powers modern society; they generate vast majority of money in nation’s economy either directly or indirectly Philanthropy VS strategic CSR Philanthropy : the donation of money, time, goods, or services to charitable, humanitarian, or educational institutions Strategic CSR : social contributions that are directly aligned with a company’s overall business strategy Perspectives VS CSR Minimalist CSR : - Only pay taxes and obey law Defensive CSR : - Companies face pressure from variety of activists and NGOs - NGO : nonprofit groups that provide charitable services or promote social and environmental causes - Engage in CSR to avoid criticism Cynical CSR : - Company accused of irresponsible behaviour promotes itself as being socially or environmentally responsible without making substantial improvements in its business practices Proactive stance : moving beyond CSR - Company leader believe they have responsibilities beyond making a profit and back up their beliefs and proclamations with actions taken on their own initiative  - Purpose-driven business – any company that aspires to accomplish more than just make money for owners and investors - Triple bottom line ; seek profitable opportunities to pursue a social or environmental goal – profit, social contribution, and environmental sustainability Resolving CSR Dilema - Two tiered approach to CSR - First tier - Companies take responsibility for consequences of their actions and limit negative impact of their operations - Second tier - Companies choose to help in ways that investors, managers, employees see fit - Social license to operate – minimum level of business practices that society demands from companies Carbon offsets ; entities that can’t reduce carbon emissions enough can essentially “exchange carbon” with entities that can Carbon market provide trading mechanism for entities on both sides of the equation Sustainable development : operating business in a manner that minimises pollution and resources depletion, ensuring that future generations will have vital resources Circular economy : model of resource usage that operates a series of loops in which CHAPTER 5 : FORMS OF OWNERSHIP Sole Proprietorships : business owned by one period Unlimited liability : legal condition under which any damages or debts incurred by business are owner’s personal liability Advantages - Simplicity – easy to establish, less paperwork, less legal - Single layer of taxation – income tax - Privacy – aren’t generally required to report anything - Flexibility and control – make your own decisions - Fewer limitations on personal income – keep all after-tax - Personal satisfaction Disadvantages - Financial liability – unlimited liability - High pressure and demand on owner - Limited managerial perspective – might not have expertise in all areas - Resource limitation – fewer financial resources - No employee benefits for owner – no vacation time, sick leave, insurance - Finite lifespan – owner’s death may mean demise for business Partnerships : incorporated company owned by 2+ people General partnerships - Partnership which all partners have joint authority to make decision for firm and joint liability for firm’s financial obligations Limited partnerships - Partnership which one or more persons act as general partners who run the business and have same unlimited liability as sole proprietors Limited liability : legal condition in which maximum amount of each owner is liable for is equal to whatever amount each invested in the business Advantages - Simplicity - Single layer taxation – income tax - More resources – partners pool assets together - Cost sharing - Broader skill and experience base - Longevity Disadvantages - unlimited liability - Potential for conflict - Expansion, succession, termination issues Partnership agreement Factors to take into consideration for partnership agreement - Type of partnership  - Investment percentages - Profit-sharing percentages - Management responsibilities - Decision-making strategies - Succession plans and exit strategies - Criteria for admitting new partners - Dispute-resolution procedures Corporations : legal entity distinct from any individual persons that has the power to own property and conduct business - Owned by shareholders - Investors who purchase shares of a stock in corporation Public corporation - Stock is sold to anyone who has the means to buy it Private corporation - Stock is owned by only a few individuals or companies and is not made available for purchase by public Advantages - Ability to raise capital - Liquidity – high degree of liquidity - Measure of how easily and quickly an asset such as corporate stock can be converted into cash by selling iy - Longevity - Limited liability Disadvantages - Cost and complexity – more expensive and complicated to start - Reporting requirements – government agencies require publicly traded companies to publish extensive and detailed financial reports - Managerial demands – top executives must devote time/energy to meet with shareholders, media - Possible loss of control – hostile takeover through acquiring company stocks - Double taxation – corporation pays federal and state corporate income tax on its profits and individual shareholders pay income tax - Short-term orientation of stock market – managers pressured to show earnings by quarters so wing up from short term solution to the next Special types of corporations S corporation - Type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership - Maximum 100 investors Limited liability company (LLC)  - Structure that combines limited liability with the pass-through taxation benefits of a partnerships; number of shareholders not restricted Benefit corporations - Profit seeking corporation whose charter also requires it to pursue a stated social or environmental goal Subsidiary - Corporation owned by another company Corporate Governance Board of Directors : group of professionals elected by shareholders as their representatives with responsibility for overall direction of company and selected top executives Corporate governance : all policies, procedures, relationships, system in place to oversee successful and legal operation of the enterprise; responsibilities and performance of board of directors Shareholders - Proxy : document that authorises another person to vote on behalf of shareholder in corporation - Shareholder activism : activities undertaken by shareholders to influence executive decision making in areas ranging rom strategic planning to social responsibility Board of directors - Inside directors – people with direct stake in company, including top company executives and shareholders who own more than 10% of voting shares - Outside directors – people who are affiliated with company and have demonstrated major accomplishments in their own fields and can bring wide range of experience and perspectives to board discussions Corporate officers - Top executives who run a corporation - Chief executive offers : highest-ranking officer of corporation - CFO, CIO, CTO, COO works for CEO Mergers and acquisitions Merger : action taken by two companies to combine as single entity Acquisition : action taken by one company to buy a controlling interest in the voting stock of another Hostile takeover : acquisition of another company against wishes of management Leveraged buyout (LBO) : acquisition of a company’s publicly traded stock, using funds that are primarily borrowed, usually with intent of using some of acquired assets of pay back loans used to acquire company Advantages - Tool to expand - Increasing buying power - Increase revenue - Increase market share - Gain access to new expertise Disadvantages - Executives must agree on how merger will be financed - Managers need to decision who will be in charge after merging - Marketing departments decide how to blend product lines, branding strategies, advertising - Incompatible information systems may have to be rebuilt to operate together - Company deals with layoffs, transfers - Corporate culture clash Vertical merger : different stages, same industry Horizontal merger :same stages but different industry Conglomerate merger : companies in different industries Merger and acquisition defenses Tender offer : offers to buy a certain number of shares of stock at specific price generally higher than current stock prices so shareholders motivated to sell Proxy fight : raider tries to persuade other shareholders to vote the way it wants in hopes of compiling enough votes to oust board and management Poison pill : targeted company invokes some move that makes it less valuable to potential raider with hope of discouraging take over White knight : third company invited to acquire company that is in danger of being swallowed up in hostile takeover Corporate divestitures - Company deicde to divest parts of itself as separate companies - Common reasons - Increasing shareholder value in belief that parts of company will collectively be more valuable as separate companies - Giving parts of company more freedom to pursue strategic goals - Refocusing firm’s strategy if its lines of business have evolved over the years Strategic alliances and Joint ventures Strategic alliance : long term partnership between companies to jointly develop, produce, sell products - Help gain credibility in new field, expand market presence, gain access to technology, diversified offerings Joint ventures : separate legal entity established by two or more companies to persue shared business objectives Big data and analytics Big data : massive data sets that companies collect and analyse to find important trends and insights - 5 Vs - Volume - big data is big requiring huge data files - Velocity - comes fast with continuous realtime - Variety - wide variety of formats - Value – investment in data collection pays off in meaningful insights - Veracity – quality of data a system collects Analytics : computing tools and technique used to analyse big data; major types include data mining, text mining, predictive analytics - Data mining – finding patterns in numerical data - Text mining – extracting meaning from text files - predictive analytics – identifying most likely outcomes of a decision - Business intelligence – system and techniques for gather and processing valuable information CHAPTER 6 : ENTREPRENEUSHIPS & SMALL BUSINESS OWNERS Small business : company that is independently owned and operated  - Not dominant in its field - Employs less than 500 people Economic roles of small businesses - Provide jobs - Introduce new products that fulfil unmet market needs - Meet needs of larger organisations - Take risks that larger companies may avoid - Provide economic opportunities for diverse range of people Characteristics - Narrow focus – fewer goods , fewer market segments - More freedom to innovate and move quickly Entrepreneurial spirit - Positive, forward-thinking desire to create profitable, sustainable business enterprises Qualities of successful entrepreneurs - confidence - Passion - Drive Business plan : document that summarises a proposed business venture, its goals, plans for achieving those goals - Summary - Mission objectives - Company overview - Products / services - Management and key personnel - Target market - Marketing strategy - Design and development plans - Operations plan - Start-up schedule - Major risk factors - Financial projections and requirements - Exit strategy Why business fail : - Strategic issues - Leadership issues - Marketing and sales issues - Financial issues Pivoting : adjusting a firm’s business model when a better opportunity presents itself Advice and support for business owners : - Gov agencies and not-for-profit organsiations - Business partners  - Mentors and advisory boards \ - Advisory board : team of people with subject-area expertise or vital contacts who help a business owner review plans and decisions - Network and support groups - Business incubators and accelerators - Incubators : facilities that help early stage entrepreneurial teams fevelop ideas into workable business models and establish company framework for commercialiding products - Accelaerators : organisations that work with existing companies with primary goal of making them more attractive to investors Seed money : first infusion of capital used to get business started Microlenders : organisations, often not-for-profit lend smaller amounts of money to business owners who might not qualify for conventional bank loans Venture capitalists : investors who provide money to finance new businesses in exchange for a portion of ownership, with the objective to selling their shares at a significant gain Angel investors : private individuals who invest money in start-ups, usually earlier in business life and in smaller amounts than VC’s are willing to invest or banks willing to lend Initial public offering : corporation’s first offering of shares to public Crowdfunding : soliciting project funds, business investments or business loans from members of public Types of franchises : Franchise : business arrangement in which one company obtain rights to sell products, use various elements of ab business system of another company Franchisor : company that liscenses elements of its business system to other companies Franchisee : business owners who pays for the right to sell the products and use the business system of a franchisor Machine learning : general capability of computers to learn and adapt without receiving explicit human instructions Deep learning : type of machine learning that uses layer of neural networks to attack problems at multiple levels CHAPTER 7 : MANAGEMENT ROLES, FUNCTIONS, SKILLS Management : process of planning, organising, leading, and controlling to meet organisational goals  - Interpersonal roles – leading employees, building relationships, fostering relationships - Informational roles – gather information from sources inside and outside an organisation - Decisional roles – make many decisions Executive dashboard : control board of managers Functions of executive : Planning : establishing objectives and goals for an organisation and determining the best ways to accomplish them Organising : process of arranging resources to carry out organisation’s plans Leading : process of influencing and motivating people to work willingly and effectively toward common goals Controlling : process of measuring progress against goals and objectives and correcting deviations if results aren't as expected Strategic plans : plans that establish actions and resource allocation required to accomplish strategic goals; usually defined for periods of 2-5 years and developed by top managers Strategic Planning process : 1. Define mission, vision, values 2. SWOT analysis 3. Develop forecasts 4. Analyse competition 5. Establish goals and objectives 6. Develop action plans Mission statement : brief statements of why an organisation exists; in other words, what the organisation aims to accomplish for customers, investors, and other stakeholders Value statement : brief articulation of principles that guide a company’s decisions and behaviours SWOT Goal : broad long ranged target Objective : specific short range target SMART – specific , measurable, attainable, relevant, time limited Organising : process of arranging resources to carry out organisation’s plans Management pyramid : organisational structure divided into top , middle, and first-line management Top managers  - Those at highest level of organisation's management hierarchy, responsible for setting strategic goals and have most power and responsibility in organisation Middle managers - In middle of management hierarchy; develop plans to implement goals of top managers and coordinate work to first-line managers - Play essential role in translating strategic goals and objectives into actions First line managers - Lowest level of management hierarchy; supervise the operating employees and implement plans set by higher management levels Leading function Leading : process of influencing and motivating people to work willingly and effectively toward common goals - Cognitive intelligence: reasoning, problem solving, memorisation, rational stills - emotional intelligence: measure of person’s awareness of and ability to manager their own emotions - Social intelligence: social awareness, ability to grasp situations and social dynamics and social facility Leadership styles : Autocractic leadership - Leader doesn't involve others in decision making - Down chain of command - Subordinates little to no own decision making Democratic leadership - Leader who delegate authority and involve employees in decision making - Shares decision making authority - Seek input and invite subordinates to participate in coordinated planning process - Collaborative leaders - Participative management : philosophy of allowing employees to take part in planning and decision Laissez-faire leadership - Leader who leaves most decision to employees, particularly those concerning day-to-day matters - Act as advisor and supporter - Offer input when asked - Let subordinates make own decisions - Employee empowerment : giving employees power to make decision that apply to their specific aspect of work Coaching and mentoring Coaching  - Helping employees reach their highest potential by meeting them, discussing problems that hinder their ability to work effectively, and offering suggestions and encouragement to overcome these problems Mentoring - Experienced managers guide less-experienced colleagues nuances of office politics, serving as role models for appropriate business behaviour and helping to negotiate corporate structure - Often a challenge for many organisation - Mentors exceed employees seeking mentoring Managing change Model of change management by Kurt Lewin 1. Unfreezing the status quo – making change 2. Freezing new behaviours – ensure people dont slip back to old ways 1. Study forces that will work for and against upcoming change 2. Engage people who will be affected by change 3. Listen to their inputs and accommodate their concerns as much as possible Building positive organisational culture Organsiational culture : - Set of shared values and norms that support the management system and guide management and employee behaviour Positive culture - Created environment that encourages employees to make smart decisions for the good of the company Consider to create ideal culture - Vision - Values - Leadership - People - Stakeholder communities - Communication - Employee performance The controlling function Controlling : process of measuring progress against goals and objectives and correcting deviations if results aren't as expected Servant leadership : enabling and supporting employees more than controlling The control cycle 4 steps process 1. Establishing performance standards based on strategic plan 2. Measuring performance 3. Comparing performance standards 4. Responding as needed Establishing performance standards - Most important standards are called “key performance indicators” (KPI) - Benchmarking - Collecting and comparing process and performance data from other companies - Quality falls under managerial control - Measure of how closely activities or outcomes conform to predetermined standards and customer expectations 1. Set strategic goals 2. Establish performance standards 3. Measure performance Measuring performance and responding as needed - Second step of cycle, managers use both quantitative and qualitative performance measures - Balanced scorecard - Method of monitoring performance from four perspectives; finances, operations, customer relationships, and growth and development of employees and intellectual property - Monitors performance from multiple perspectives – finances, customers, other stakeholders, internal processes, organisational capacity Crisis management Crisis management - Procedures and systems for minimising harm that might result from some unusually threatening situations Essential management skills Interpersonal skills - Skills required to understand other people and to interact effectively with them - Effective communication increases organisation’s productivity and shapes impressions made on colleagues, employees, investors, customers Technical skills - Ability and knowledge to perform mechanics of a particular job - Most important in lower organisational levels - Administrative skills – technical skills necessary to direct an organisation, including scheduling, researching, analysing data, and managing projects Conceptual skills - Ability to understand relationship of parts to the whole - To visualise organisations, systems, markets and solutions - Important for top managers Decision making skills - Ability to identify a decision situation, analyse the problem, weigh alternatives, choose alternative, implement it, and evaluate results 1. Recognise and define problem or opportunity 2. Identify and develop options 3. Analyse options 4. Select best option 5. Implement decision 6. Monitor results AI to The Rescue : Cognitive automation : AI tech aims to help professionals and managers with complex questions that present some of the most daunting decision scenarios Example of cognitive automation : - Assembling teams by matching colleagues who are most likely to work together productively - Analysing financial contracts - Identifying reputational threats - Understanding supply chain risks - Assisting layers with research by finding relevant legal case histories - Assessing staff and management performance CHAPTER 8 : ORGANISATION AND TEAMWORK Designing an Effective Organisation Structure Organisation structure : framework that enables managers to divide responsibilities, ensure employees accountability, and distribute decision-making authority - Influence the way employees and managers make decisions, communicate and accomplish important tasks - Help achieve goals by providing framework for managers to divide, coordinate, and control organisational activities Organisation chart : diagram that shows how employees and tasks are groups and where the lines of communication and authority flow - Formal organisation : official designs for accomplishing tasks that lead to achieving organisational goals - Informal organisation : network of interactions that develop on a personal level among workers - Employees from various parts of company participate in sports, social, or charitable activities together to reach across organisational barriers Identifying core competencies Core competencies : activities at which company excels and that give it the potential to create competitive advantages Identifying job responsibilities Work specialisation : specialisation in or responsibility for some portion of an organisation’s overall work tasks Division of labour : degree of which organisational tasks are broken down into separate jobs - Can improve efficiency - Employees can perfect their skills and perform tasks more quickly - Prevents overlapping responsibilities and communication breakdowns Simplified Organisational Chart Defining chain of command : Chain of command : pathway for flow of authority from one management level to the next - Connect various groups and levels within organisation - Make 2 things clear - Who is responsible for each task - Who has the authority to make decisions Responsibility : obligation to perform duties and achieve goals and objectives associated with their jobs Accountability : obligation to report results of their work to superiors or team members and to justify any outcomes that fall below expectations Authority : power to make decisions, issue orders, carry out actions, and allocate resources Delegation : assignment of work and the transfer of authority, responsibility, and accountability to someone lower down the chain of command Line organisation : establishes clear line of authority flowing from top down Line and staff organisation : managers in chain of command are supplemented by functional groupings of people known as staff Staff : people who provide advice and specialised services but aren't in line organisation’s overall chain of command Span of management : number of people under one manager’s control (span of control) - Common in flat organisations (few levels in management hierarchy) - Wide : large number of people report directly to one person - Tall organisations (many hierarchical levels) - Narrow : ewer people reporting to each manager Centralisation VS decentralisation Centralisation : decision making authority at top of organisation - Decision making authority in paper tiers of chain of command - Take advantage of top management’s experience and broad view of organisational goals - Simplify decisions - Reduce number of overlapping capabilities Decentralisation : delegation of decision-making authority to employees in lower-level positions - Decision making authority pushed down to lower organisational levels while control over essential companywide matters remain with top management - Make company more responsive to forces and changes in marketplace and workforce - More diverse range of perspectives - Give employees more input into decisions Agility Organisations Structure can bring stability and predictability to an organisation - But can make company unresponsive and inflexible Agile organisations : company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in business environment - Key competent of agile mindset is giving teams authority to act quickly and adapt to customer needs and changing market conditions Organising the Workforce Departmentalisation : grouping people within an organisation according to function, division, matrix, or network Vertical structure : how many layers chain of command is divided into from the top of the company to the bottom Horizontal structure : how various business functions and work specialties are divided across the company Functional structure : grouping workers according to their similar skills, resource use, and expertise - Common functional subgroups include R&D, production or manufacturing, marketing and sales, and human resources - Advantages - Economies of scale - Opportunity for people to pursue upward career path within their professional specialties and chance for companies to develop deep expertise in each functional area - Disadvantages  - Silo effect – people become isolated within vertical towers of their own functional areas which can inhibit communication and collaboration across function - Usually use cross-functional teams to coordinate efforts across functional boundaries Divisional Structures : grouping departments according to similarities in product, process, customer, or geography - R&D, manufacturing, finance, marketing - Sometimes called business units - Product division – grouping around each of the company’s products or family of products - Process division – based on major steps of production process - Customer division – concentrates activities on satisfying specific groups of customers - Geographic divisions – help companies respond more easily to local customers, styles, and product preferences Advantage - Can react quickly to change - Flexible organisation - Provide better customer service as each division focus on limited number of products Disadvantage - Increase costs through duplication - Poor coordination between divisions may cause them to focus too narrowly on division goals Matrix structure : structure which employees are assigned to both a functional group and a project team - Allows company to pool and share resources across divisions and functional groups - May be permanent feature or established to complete project - Allow team to devote attention to specific projects - DOWNSIDE : - More communication and coordination required - Can foster unhealthy competition - 2 bosses Network structure : structure in which individual companies are connected through digital communication to perform selected tasks for a small headquarter organisation - Virtual organisation – outsource engineering, marketing, research, other functions - Can lower costs and increase flexibility - Boost competitiveness by taking advantage of specific skills - Rely too heavily on outsiders Distributed and hybrid workplaces Distributed work model – fully virtual workplace Hybrid model – some employees work from home and others from office - Requires high communication Traditional model – office Organising in Teams : Team : unit of 2+ people who share a mission and collective responsibility as they work together to achieve a goal Types of teams : Problem solving team – team that meets to find improving quality, efficiency and the work environment Self-managed team – team where members are responsible for an entire process or operation - Lower cost - Faster decision making - Greater flexibility and innovation - Not necessarily more productive than manager-led teams - Success dependson commitment of people involved Functional team – team whose members come from a single functional department and thar is based on the organisation’s vertical structure Cross-functional team – team that draws together employees from different functional areas Task force : team of people from several departments who are temporarily brought together to address a specific issue Committee : team that may become a permanent part of organisation and is design to deal with regularly recurring tasks Virtual team : team that uses communication, technology to bring together geographically distant employees to achieve goals Hybrid team : some members co-located in same office, other members remote Advantages - More effective more engaged and productive - More creative and responsive to market conditions - Reduce amount of travel Disadvantages - Relies on technology - Interpersonal communication is constant challenge can foster competitive mentality - Succeed quickly, fail slowly Ensuring team productivity : Advantage of working in teams - More information and knowledge - Learning opportunities - Boldness - Accountability - Trust building - Broader range of viewpoints - Buy-in for solutions the team creates - Improved performance - Sense of community Disadvantages - Groupthink – uniformity of thought that occur when peer pressures cause individual team members to withhold contrary or unpopular opinions - Hidden agenda – private, counteeproductive motives in team setting - Cost and inefficiency - Overload Characteristics of effective teams : - Shared sense of purpose - Clear and challenging goal - Belief in teams effort - Diverse balanced mix - Size that aligns with teams responsibilities - Willingness to put team needs > personal - Open and honest communication Fostering teamwork Team development - Forming – group comes together - Storming – discuss positions, establishing roles, disagreements - Norming – conflicts resolve and team begins to take on cohesive personality - Norms : informal standards of conduct that guide team behaviour - Performing – cohesive and positive norm, group ready to perform - Adjourning – team disband Team conflict Sources of team conflict : - Structural – permanent aspect of doing business - Situatoinal – based on temporary forces - Interpersonal – personal choices, behaviours, personality differences Solutions to team conflict : - Proactive attention - Communication - Openness - Research - Flexibility - Fair play - Alliance Managing unstructured organisation Unstructured organisartion : no conventional structure but instead assembles talent as needed from open market (virtual and networked organisation concepts) Advantages Task bot : software agent that can be assigned to complete a variety of tasks within an app or business system Robotic process automation (RPC) : software capability that does for knowledge work what mechanical robots do for manufacturing other physical processes CHAPTER 9 : Production Systems System : an interconnected and coordinated set of elements and processes that converts inputs to desired outputs Managing systems for peak performance - System analysts can run computer simulations to experiment with changes before making any resource decisions Principles to keep in mind : - Help everyone see big picture - Understand how individual systems really work and how they interact - Understand problems before you try to fix them - Understand potential impact of solutions before you implement them - Don’t just move problems around – solve them  - Understand how feedback works in the system - Use mistakes as opportunities to learn and improve Value chain : all elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer Outsourcing : contracting out certain business functions or operations to other companies Value webs : multidimensional networks of suppliers and outsourcing partners Offshoring : transferring a part or all of a business function to a facility (a different part of the company or another company entirely) in another country Reshoring : bringing previously offshored operations back to their original location Nearshoring : companies move production from a distant country to one closer to home Supply chain : set of connected systems that coordinates the flow of goods and materials from suppliers all the way through to final customers Supply Chain Management (SCM) : business procedures, policies, and computer systems that integrate various elements of supply chain into a cohesive system Strategic role of supply chain management - Managing risks – - Responding to customer needs - Managing business relationships - Promoting sustainability Supply chain systems and methods Inventory : goods and materials kept in stock for production or sale Inventory control : determining the right quantities of supplies and products to have on hand and track where those items are Procurement : acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services Planning systems : - Way to acquire materials to conduct business - Materials requirements planning (MRP) : planning system that works backward from a company’s sales forecasts to make sure it has enough of everything required to build goods or perform services in a timely manner, taking into account the firm’s inventory levels and production capacity - Enterprise resource planning (ERP) : planning system that expands MRP concept to address the needs of the entire organisation from manufacturing to sales to human resource Tracking methods : - Accurate resource management requires ability to identify and track where everything is in the system at any point in time - Radio frequency identification (RFID) - Tags attached to products or shipping container and can track flow of goods through supply chain Blockchain : - Can connect all participants in supply chain in a single, secure database that verifies and record every transaction AI assisted optimisation : - AI tools help optimise transportation costs, inventory levels, staffing, other key parameters Production and operations management : overseeing all activities involved in producing goods and services Productivity : efficiency with which an organisation can convert inputs to outputs Lean system : systems that maximise productivity by minimising waste Just-in-time ; inventory management in which goods and materials are delivered Mass production ; creation of identical goods or services usually in large quantities Customised production : creation of unique good or service for each customer Mass customization : manufacturing approach in which part of product is mass produced and the remaining features are customeised for each buyer Faculty layout : the arrangement of production work centers and other elements, equipemnets, services Capacity planning : establishing the overall level of resources needed to meet customer demand Production forecast : estimates of future demand for the company’s products Critical path : in a PERT network diagram, the sequence of operations that requires the longest time to complete Challenges of Service Delivery : - Perishability - Location and constraints and virtual delivery - Scalability challenges and opportunities - Scalability : potential to increase production by expanding or replicating another business’ initial production capacity  - Performance variability and perception of quality - Customer involvement and service provider interaction Quality : degree to which a product or process meets reasonable or agree-upon expectations - Performance, capability, reliability, conformance to specifications, and aesthetics Strategies for ensuring product quality Quality control : measuring quality against established standards after the good or service has been produced and weeding out any defective products Quality assurance : strategic approach of companyiwide policies, practice and procedures to ensure that every product meets quality standards Total Quality Management (TQM) : an approach to quality assurance that encompasses every aspect of a company’s operations Statistical process control (SPC) : use of random sampling and tools such as control charts to monitor the production process Six Sigma : rigorous quality management program that strives to eliminate deviations between the actual and desired performance of a business system - Lean Six Sigma applied at strategic levels to identify opportunities in market place and align resources needed to persue them - Work better for highly mechanised or automated process ISO 9000 : - Globally recognised family of standards for quality management systems - Based on seven quality management principles - Customer focus, engagement of people, evidence based decision making Industry 4.0 : digital transformation of manufacturing, moving from automated factories to smart factories that emphasisxe the use of cyber-physical systems CHAPTER 10 : EMPLOYEES MOTIVATION Motivation : combination of forces that move individuals to take certain actions and avoid other actions - Can be assessed by measuring 4 indicators - Engagement, satisfaction, commitment, and rootedness Engagement : employee’s rational and emotional commitment to work Satisfaction : how happy employees are with the experience of work and the way they’re treated Commitment : degree to which employees support the company and its mission Rootedness : predicts the likelihood that employees will stay or leave their jobs Taylor’s Scientific Management Scientific : a management approach designed to improve employee’s efficiency by scientifically studying their work - Financial incentives to boost productivity - Doesn’t consider other motivational elements Hawthorne Studies and “Hawthorne Effect” - Testing the effect of various level of electric lighting on worker productivity - No correlation between level of lighting and level of productivity - Researchers concluded that group norms affected individual performance - Hawthorne effect : a supposed effect of organisational research in which employees change their behaviour because they’re being studied and given special treatment - Validity of the effect is uncertain Maslow’s Hierarchy of Needs - Human needs arranged into hierarchy, with the most basic needs at bottom and more advanced needs towards top Theory X and Theory Y : - Psychologist Douglas McGregor Theory X : managerial assumption that employees are irresponsible, are unambitious and dislike work and that managers must use force, control, or threats to motivate them - Employees only motivated by fear of losing job or extrinsic rewards Theory Y : managerial assumption that employees enjoy meaningful work, are naturally commitment to certain goals, are capable of creativity, and seek out responsibility under the right conditions - Employees motivated through intrinsic rewards Herzberg’s Two Factors - Model that divides motivational forces into satisfiers (motivators) and dissatisfiers (hygiene factors) - Hygiene factors : extrinsic – working conditions, company policies, pay and job security - Motivators : intrinsic – achievement, recognition, responsibility, personally rewarding factors McClelland’s Three Needs : - David McClelland’s model of motivation that highlights the needs for power, affiliation, and achievement - Need for affiliation – accepted by others and having opportunities for social interactions - Need for achievement – attaining personally meaningful goals - Need for power – having and demonstrating control over others Expectancy theory : - Idea that the effort employees put into their work depends on expectations about their own ability to perform, expectations about likely rewards, and attractiveness of those rewards - Self-efficacy – belief in your ability to complete task Equity Theory : - Idea that employees base their level of satisfaction on the ratio of their inputs to the job and the outputs or rewards they receive from it The Four-Drive Theory : - Theory that employee choices are shaped by the drive to acquire, drive to bond, drive to comprehend, drive to defend - Drive to acquire - Need for enjoyable experiences and psychological goods such as prestige - Individuals want to know how well they’re doing compared to others around them - Supported by Reward system and performance - Drive to bond  - Need to feel part of something larger - Supported by inclusive organisational culture - Drive to comprehend - Learning, growing, meeting tough challenges, making sense of things - Supported by challenging, interesting and varied work - Drive to defend - Defend people, ideas, organisations they hold dear - Supported by ethical practices so employees know they are defending worthy cause Goal Setting Theory : - Motivational theory suggesting that setting goals van be effective way to motivate employees Management by objectives (MBO) : - A motivational approach in which managers and employees work together to structure personal goals and objectives for every individual, department, and project to mesh with the organisation’s goals - 4 steps - Setting goals - Planning actions to meet goals - Implementing plans - Reviewing performance Risks and Limitations of Goal-Setting Theory : - Overly narrow goals - Overly challenging goals - Inappropriate time horizons - Unintentional performance limitations - Missed learning opportunities - Unhealthy internal competition - Decreased intrinsic motivation Job characteristics model - Proposed by Richard Hackman and Gerg Oldman - 5 core job dimensions - Skill variety - Range of skills and talents needed to accomplish responsibilities associated with the job - Broader the skills required, more meaningful the work - Task identity - Degree to which the employee has responsibility for completing an entire task - Greater task identity contributes to sense of meaning in work - Task significance - Employee’s perception of the impact the job has on lives of others - Autonomy - Degree of independence employee has in carrying out the job  - Feedback - Timely information that tells employees how well they’re doing in their jobs - 3 critical psychological states - Experienced meaningfulness of the work - Measure of how much employees care about jobs they’re doing - Experienced responsibility for results - Sense employees have that their efforts contribute to the outcome - Knowledge of actual results - Employee’s awareness of real-life results of their efforts - Approaches to modify core job dimensions - Job enrichment - Make jobs more challenging and interesting by expanding range of skills required - Job enlargement - Adding tasks that aren’t necessarily more challenging - Cross training (job rotation) - Training workers to perform multiple jobs and roate them to combat boredom \ Reinforcing high-performance behaviour Reinforcement Theory : - Motivational approach based on the idea that managers can motivate employees by influencing their behaviours with positive and negative reinforcement - Types of reinforcement - Positive reinforcement - Encouraging desired behaviour by offering pleasant consequences for completing or repeating those behaviours - Chaining : employees who receive positive reinforcement for one type of behaviour motivated to perform well in other areas - Incentives : monetary payments and other rewards of value used for positive reinforcement - Negative reinforcement - Encouraging repetition of particular behaviour (desireable or not) by removing unpleasant consequences for behaviour - Punishment : actions used to diminish repetition of unwanted behaviour by adding unpleasant outcomes - unintended consequences of reinforcement - Manager on constant alert for unintended consequences od incentives and other reinforcement efforts Motivational strategies beyond money - Providing timely and frequent feedback - Making it personal - Gamifying for healthy competition - Gamificaiton : applying game principles such as scorekeeping to various business processes - Addressing workplace negativity - Being an inspiring leader  - Micromanaging : overseeing every small detail of employee’s work and refusing to give them freedom or autonomy Performance Management Systems - Systems that help companies establish goals for employees and track performance relative to those goals - Systems have potential to avoid human biases and errors - Recency bias : manager overemphasises the most recent work an employee has done because manager remembers it most vividly CHAPTER 11 : HUMAN RESOURCE MANAGEMENT Human Resource Management : specialised function of planning how to obtain employees, oversee their training, evaluate them, and compensate them Contemporary HR Challenges : Workforce Alignment - Retaining current employees - Attracting new employees - Developing employees - Reskilling employees Workplace Safety - Physical safety - Psychological safety Fairness - Recruiting - Development - Compensation Employee Experience - Whole life - Well-being - Belonging Aligning Workforce with Business Requirements - HR managers need to focus on - Retaining firm’s existing talents - Attracting new talent to fill newly created positions or replace employees who leave - Developing employees to take on positions with greater responsibility (