Globalization

Today’s enterprises are global, with offices and production facilities in countries all
over the world
Means that a company’s talent can come from anywhere
Internet makes globalization inevitable

Technological Change: The Internet

Marketplace
Means for manufacturing goods and services
Distribution channel
An information service

Technological Change: The Internet

Drives down costs and speeds up globalization.
Improves efficiency of decision making.
Facilitates design of new products, from
pharmaceuticals to financial services

Knowledge Management
Knowledge management
 Practices aimed at discovering and harnessing an organization’s intellectual
resources

Knowledge Management
Knowledge workers
 Workers whose primary contributions are ideas and problem-solving expertise
Knowledge managers find these human assets, help people collaborate and
learn, help people generate new ideas, and harness those ideas into successful
innovations.
Knowledge Management
Knowledge management is about finding, unlocking, sharing, and altogether
capitalizing on the most precious resources of an organization: people’s expertise,
skills, wisdom, and relationships.

Collaboration across “Boundaries”

Requires productive communications among different departments, divisions, or
other subunits of the organization

Collaboration across “Boundaries”

Companies today must motivate and capitalize on the ideas of people outside the
organization e.g. its consultants, ad agencies, and suppliers

Managing for Competitive Advantage

Innovation Quality Service
Speed Cost
Competitiveness Sustainability

Managing for Competitive

Advantage
Innovation
 the introduction of new goods and services
A firm must:
 adapt to changes in consumer demands and to new competitors.
 be ready with new ways to communicate with customers and deliver the products
to them.

Managing for Competitive Advantage

Quality
 The excellence of your product (goods or services)
 Historically, quality referred to attractiveness, lack of defects, reliability, and long-
term dependability

Managing for Competitive Advantage

Today quality is about preventing defects and having continuous improvement in
how the firm operates

Managing for Competitive

Advantage
Service
 giving customers what they want or need, when they want it
 focused on continually meeting the needs of customers to establish mutually
beneficial long-term relationships.
Speed
 Fast and timely execution, response, and delivery of results.

Managing for Competitive Advantage

Cost competitiveness
 Keeping costs low to achieve profits and be able to offer prices that are attractive
to consumers.

Managing for Competitive Advantage

Sustainability
 The effort to minimize the use of resources, especially those that are polluting
and nonrenewable.

The Functions of Management

Management
 The process of working with people and resources to accomplish organizational
goals
 Efficiently, effectively

The Functions of Management

Planning
 Systematically making decisions about the goals and activities that an individual,
a group, a work unit, or the overall organization will pursue
 analyzing current situations, anticipating the future, determining objectives,
deciding in what types of activities the company will engage

The Functions of Management

Organizing
 assembling and coordinating the human, financial, physical, informational, and
other resources needed to achieve goals
 specifying job responsibilities, grouping jobs into work units, marshaling and
allocating resources,

The Functions of Management

Leading
 stimulating people to be high performers
Controlling
 monitoring performance and making needed changes.

Performing All Four Management

Functions
A typical day for a manager is not neatly divided into the four functions
Days are busy and fractionated, and spent dealing with interruptions, meetings,
and firefighting

Performing All Four Management Functions

Good managers devote adequate attention and resources to all four
management functions.

Management Levels and Skills

Top Level Managers

Middle-Level Managers
Frontline Managers
Management Levels and Skills
Top-level managers
 Senior executives responsible for the overall management and effectiveness of
the organization.
Middle-level managers
 Managers located in the middle layers of the organizational hierarchy, reporting
to topl evel executives.

Management Levels and Skills

Frontline managers
 Lower-level managers who supervise the operational activities of the organization
Transformation of Management Roles and Activities

Management Skills
Technical skill
 The ability to perform a specialized task involving a particular method or process

Management Skills
Conceptual and decision skills
 Skills pertaining to the ability to identify and resolve problems for the benefit of
the organization and its members.
Management Skills
Interpersonal and communication skills
 People skills; the ability to lead, motivate, and communicate effectively with
others.

You and Your Career

Emotional intelligence
 The skills of understanding yourself, managing yourself, and dealing effectively
with others.
Social capital
 Goodwill stemming from your social relationships

You and Your Career

Be both a specialist and a generalist

Be self-reliant
Be connected
Actively manage your relationship with your organization
Survive and thrive
Two Relationships:
Managerial Action Is Your Opportunity to Contribute
Common Practices of Successful Executives
They ask “What needs to be done?” rather than “What do I want to do?”
They write an action plan. They don’t just think, they do, based on a sound,
ethical plan.
They take responsibility for decisions.
They focus on opportunities rather than problems.
Open systems  Organizations that are affected by, and that affect, their
environment.
Open Systems
Inputs
Goods and services organizations take in and use to create products or services.
Outputs
The products and services organizations create.
Open Systems
External environment
All relevant forces outside a firm’s boundaries, such as competitors, customers, the
government, and the economy.
Competitive environment
The immediate environment surrounding a firm; includes suppliers, customers,
rivals, and the like.
Open Systems
Macroenvironment
The general environment; includes governments, economic conditions, and other
fundamental factors that generally affect all organizations.
The Economy
The economic environment dramatically affects managers’ ability to function
effectively and influences their strategic choices.
Interest and inflation rates affect the availability and cost of capital, growth
opportunities, prices, costs, and consumer demand for products.
The Economy
In publicly held companies, managers may feel required to meet Wall Street’s
earnings expectations.
Managers may focus on short-term results at the expense of long-term success
Some managers may be tempted to engage in unethical or unlawful behavior that
misleads investors
Technology
Technological advances create new products, advanced production techniques,
and better ways of managing and communicating.
As technology evolves, new industries, markets, and competitive niches develop.
Demographics
Demographics
Measures of various characteristics of the people who make up groups or other
social units
Demographics
Demographic trends
Growth of the labor force
Increasing education and skill levels
Immigration
Increased numbers of women in the workforce
Increasingly diverse workforce
Social Issues
Societal trends regarding how people think and behave have major implications for
management of the labor force, corporate social actions, and strategic decisions
about products and markets.
Family leave, domestic partner benefits
The Competitive Environment
Competitors
Competition is most intense when:
There are many direct competitors
Industry growth is slow
Product/service is not easily differentiated

New Entrants
Barriers to entry
Conditions that prevent new companies from entering an industry
Capital requirements, restrictive distribution channels
Substitutes and Complements
Substitutes
alternative products or services
Complements
Products or services that increase purchases of other products

Suppliers
Suppliers
provide resources or inputs needed for production
Switching costs
fixed costs buyer face if they change suppliers
Suppliers
Supply chain management
Managing the network of facilities and people that obtain materials from outside the
organization, transform them into products, and distribute them to customers

Customers
Final customers
Purchase products in their finished form
Intermediate customers
Purchase raw material or wholesale products before selling them to final customers

Environmental Analysis
Environmental uncertainty
Lack of information needed to understand or predict the future.

Environmental Uncertainty
Environmental complexity
The number of issues to which a manager must attend as well as the
interconnectedness of these issues
Environmental dynamism
The degree of discontinuous change that occurs within an industry

Environmental Analysis
Environmental scanning
Searching out information that is unavailable to most people and sorting that
information to interpret what is important and what is not.

Competitive intelligence
Information that helps managers determine how to compete better.

Environmental Analysis
Scenario development
A narrative that describes a particular set of future conditions
Best-case, worst-case

Forecasting
Method for predicting how variables will change the future

Environmental Analysis
Benchmarking
The process of comparing an organization’s practices and technologies with those
of other companies.
Changing the Environment You are In

Strategic maneuvering
An organization’s conscious efforts to change the boundaries of its task
environment
Domain selection
Entrance to a new market or industry with an existing expertise

Diversification
Occurs when a firm invests in a different product, business, or geographic area
Changing the Environment You are In

Mergers
One or more companies combine with another
Acquisitions
One firm buys another

Divestiture
A firm sells one or more businesses
Prospectors
Continuously change the boundaries of their task environment by seeking new
products and markets, diversifying and merging, or acquiring new enterprises

Defenders
Stay within a stable product domain as a strategic maneuver

Influencing Your Environment

Independent strategies
Strategies that an organization acting on its own uses to change some aspect of its
current environment.
Cooperative strategies
Strategies used by two or more organizations working together to manage the
external environment.
Adapting to the Environment
Buffering
Creating supplies of excess resources in case of unpredictable needs.
Smoothing
Leveling normal fluctuations at the boundaries of the environment.

Organization Culture
Organizational culture
The set of important assumptions about the organization and its goals and
practices that members of the company share.
In strong cultures, the majority of people within the organization agree on
organizational goals
In weak cultures, the majority of people within the organization disagree on
organizational goals

Lack of Structure
Programmed decisions
Decisions encountered and made before, having objectively correct answers, and
solvable by using simple rules, policies, or numerical computations.

Nonprogrammed decisions
New, novel, complex decisions having no proven answers.

Uncertainty and Risk

Certainty
The state that exists when decision makers have accurate and comprehensive
information.
Uncertainty
The state that exists when decision makers have insufficient information.
Uncertainty and Risk
Risk
The state that exists when the probability of success is less than 100 percent and
losses may occur.

Generating Alternative Solutions

Ready-made solutions
Ideas that have been seen or tried before
Custom-made solutions
New, creative solutions designed specifically for the problem

Evaluating Alternatives
Evaluating alternatives
Involves determining the value or adequacy of the alternatives that were generated
Which solution will be the best?

Evaluating Alternatives
Contingency plans
Alternative courses of action that can be implemented based on how the future
unfolds.

Making the Choice

Maximizing
A decision realizing the best possible outcome
Making the Choice
Satisficing
Choosing an option that is acceptable, although not necessarily the best or perfect

Optimizing
Achieving the best possible balance among several goals

The Best Decision

Vigilance
A process in which a decision maker carefully executes all stages of decision
making

Psychological Biases
Illusion of control
People’s belief that they can influence events, even when they have no control
over what will happen
Framing effects
A decision bias influenced by the way in which a problem or decision alternative is
phrased or presented.

Psychological Biases
Discounting the future
A bias weighting short-term costs and benefits more heavily than longer-term costs
and benefits.

Potential Problems of Using a Group

Groupthink
A phenomenon that occurs in decision making when group members avoid
disagreement as they strive for consensus
Goal displacement
A condition that occurs when a decision-making group loses sight of its original
goal and a new, less important goal emerges.

Constructive Conflict
Cognitive conflict
Issue-based differences in perspectives or judgments.
Affective conflict
Emotional disagreement directed toward other people.

Constructive Conflict
Devil’s advocate
A person who has the job of criticizing ideas to ensure that their downsides are
fully explored.
Dialectic
A structured debate comparing two conflicting courses of action.

Brainstorming
Brainstorming
A process in which group members generate as many ideas about a problem as
they can; criticism is withheld until all ideas have been proposed.

Models of Organizational Decision Processes

Bounded rationality
A less-than-perfect form of rationality in which decision makers cannot be perfectly
rational because decisions are complex and complete information is unavailable or
cannot be fully processed
Incremental model
Model of organizational decision making in which major solutions arise through a
series of smaller decisions
Models of Organizational Decision Processes
Coalitional model
Model of organizational decision making in which groups with differing preferences
use power and negotiation to influence decisions.
Garbage can model
Model of organizational decision making depicting a chaotic process and
seemingly random decisions

Planning
Planning
conscious, systematic process of making decisions about goals and activities that
an individual, group, work unit, or organization will pursue in the future.
a purposeful effort that is directed and controlled by managers and often draws on
the knowledge and experience of employees throughout the organization.

Situational Analysis
Situational analysis
A process planners use, within time and resource constraints, to gather, interpret,
and summarize all information relevant to the planning issue under consideration.

Alternative Goals and Plans

Should stress creativity and encourage managers and employees to think in broad
terms about their jobs.
Goal
A target or end that management desires to reach
Specific, measurable, attainable, relevant, time-bound - SMART

Alternative Goals and Plans

Plans
The actions or means managers intend to use to achieve organizational goals
Contingency plans
sets of actions to be taken when a company’s initial plans have not worked well or
if events in the external environment require a sudden change

Goal and Plan Selection

Managers will select the option that is most appropriate and feasible
The evaluation process will identify the priorities and trade-offs among the goals
and plans
Scenario
A narrative that describes a particular set of future conditions.

Strategic Planning
Strategic planning
A set of procedures for making decisions about the organization’s long-term goals
and strategies
Strategic goals
major targets or end results that relate to the long-term survival, value, and growth
of the organization

Strategic Planning
Strategy
A pattern of actions and resource allocations designed to achieve the
organization’s goals

Tactical and Operational Planning

Tactical planning
A set of procedures for translating broad strategic goals and plans into specific
goals and plans that are relevant to a distinct portion of the organization, such as a
functional area like marketing.
Tactical and Operational Planning
Operational planning
The process of identifying the specific procedures and processes required at lower
levels of the organization.

Strategic Planning
Strategic management
A process that involves managers from all parts of the organization in the
formulation and implementation of strategic goals and strategies.

Establishment of Mission, Vision, and Goals

Mission
An organization’s basic purpose and scope of operations.

Establishment of Mission, Vision, and Goals

Strategic vision
the long-term direction and strategic intent of a company
provides a perspective on where the organization is headed and what it can
become

Analysis of External Opportunities and Threats

Stakeholders
Groups and individuals who affect and are affected by the achievement of the
organization’s mission, goals, and strategies

Analysis of Internal Strengths and Weaknesses

Resources
Inputs to a system that can enhance performance
Tangible, intangible assets
Analysis of Internal Strengths and Weaknesses
Benchmarking
process of assessing how well one company’s basic functions and skills compare
with those of another company or set of companies.
goal of benchmarking is to thoroughly understand the “best practices” of other firms
and to undertake actions to achieve both better performance and lower costs

SWOT Analysis and Strategy Formulation

SWOT analysis
A comparison of strengths, weaknesses, opportunities, and threats that helps
executives formulate strategy.

SWOT Analysis and Strategy Formulation

Corporate strategy
The set of businesses, markets, or industries in which an organization competes
and the distribution of resources among those entities
Concentration
A strategy employed for an organization that operates a single business and
competes in a single industry.

SWOT Analysis and Strategy Formulation

Vertical integration
The acquisition or development of new businesses that produce parts or
components of the organization’s product
Concentric diversification
A strategy used to add new businesses that produce related products or are
involved in related markets and activities.

SWOT Analysis and Strategy Formulation

Low-cost strategy
A strategy an organization uses to build competitive advantage by being efficient
and offering a standard, no-frills product
Differentiation strategy
A strategy an organization uses to build competitive advantage by being unique in
its industry or market segment along one or more dimensions.

Strategic Control
Strategic control system
A system designed to support managers in evaluating the organization’s progress
regarding its strategy and, when discrepancies exist, taking corrective action

Ethics
Ethics
The system of rules that governs the ordering of values

Ethics
Ethical issue
Situation, problem, or opportunity in which an individual must choose among
several actions that must be evaluated as morally right or wrong
Business ethics
The moral principles and standards that guide behavior in the world of business.

Ethical Systems
Moral philosophy
Principles, rules, and values people use in deciding what is right or wrong
Universalism
The ethical system stating that all people should uphold certain values that society
needs to function.
Caux Principles
Caux Principles
Ethical principles established by international executives based in Caux,
Switzerland, in collaboration with business leaders from Japan, Europe, and the
United States.

Caux Principles
Kyosei
living and working together for the common good, allowing cooperation and mutual
prosperity to coexist with healthy and fair competition
Human dignity
concerns the value of each person as an end, not a means to the fulfillment of
others’ purposes

Ethical Systems
Egoism
An ethical system defining acceptable behavior as that which maximizes
consequences for the individual
Utilitarianism
An ethical system stating that the greatest good for the greatest number should be
the overriding concern of decision makers.

Ethical Systems
Relativism
Philosophy that bases ethical behavior on the opinions and behaviors of relevant
other people
Virtue ethics
Classification of people based on their level of moral judgment.

Ethical Systems
Kohlberg’s model of cognitive moral development
Perspective that what is moral comes from what a mature person with “good” moral
character would deem right.

The Ethics Environment

Sarbanes-Oxley Act
An act passed into law by Congress in 2002 to establish strict accounting and
reporting rules in order to make senior managers more accountable and to improve
and maintain investor confidence

Business Ethics
Ethical climate
In an organization, the processes by which decisions are evaluated and made on
the basis of right and wrong

Danger Signs
Ethical leader
One who is both a moral person and a moral manager influencing others to behave
ethically.

Ethics Programs
Compliance-based ethics programs
Company mechanisms typically designed by corporate counsel to prevent, detect,
and punish legal violations.
Ethics Programs
Integrity-based ethics programs
Company mechanisms designed to instill in people a personal responsibility for
ethical behavior

Ethical Decision Making

Making ethical decisions takes:
Moral awareness
realizing the issue has ethical implications

Moral judgment
knowing what actions are morally defensible

Moral character
he strength and persistence to act in accordance with your ethics despite the
challenges

Courage
Behaving ethically requires not just moral awareness and moral judgment but also
moral character, including the courage to take actions consistent with your ethical
decisions

Corporate Social Responsibility

Corporate social responsibility (CSR)
Obligation toward society assumed by business.

Corporate Social Responsibility

Economic responsibilities
To produce goods and services that society wants at a price that perpetuates the
business and satisfies its obligations to investors.
Legal responsibilities
To obey local, state, federal, and relevant international laws

Corporate Social Responsibility

Ethical responsibilities
Meeting other social expectations, not written as law.

Corporate Social Responsibility

Philanthropic responsibilities
Additional behaviors and activities that society finds desirable and that the values
of the business support.

Corporate Social Responsibility

Transcendent education
An education with five higher goals that balance self-interest with responsibility to
others
Empathy, generativity, mutuality, civil aspiration, intolerance of ineffective humanity

Ecocentric Management
Ecocentric management
Goal is the creation of sustainable economic development and improvement of
quality of life worldwide for all organizational stakeholders.
Ecocentric Management
Sustainable growth
Economic growth and development that meet present needs without harming the
needs of future generations

The Role of Outsourcing

Outsourcing
Contracting with an outside provider to produce one or more of an organization’s
goods or services.
Offshoring
Moving work to other countries.

The Americas
North American Free Trade Agreement (NAFTA)
An economic pact that combined the economies of the United States, Canada, and
Mexico into the world’s largest trading bloc

Choosing a Global Strategy

International model
composed of a company’s overseas subsidiaries and characterized by greater
control by the parent company over the research function and local product and
marketing strategies than in the multinational model.

Multinational model
consists of the subsidiaries in each country in which a company does business,
with ultimate control exercised by the parent company.
Global model
consists of a company’s overseas subsidiaries and characterized by centralized
decision making and tight control by the parent company over most aspects of
worldwide operations

Transnational model
characterized by centralizing certain functions in locations that best achieve cost
economies
basing other functions in the company’s national subsidiaries to facilitate greater
local responsiveness
fostering communication among subsidiaries to permit transfer of technological
expertise and skills.

International licensing
an arrangement by which a licensee in another country buys the rights to
manufacture a company’s product in its own country for a negotiated fee (typically,
royalty payments on the number of units sold)

Franchising
the company sells limited rights to use its brand name to franchisees in return for a
lump-sum payment and a share of the franchisee’s profits.

Joint ventures benefit a company through:

the local partner’s knowledgeof the host country’s competitive conditions, culture,
language, political systems, and business systems

Expatriates
Parent-company nationals who are sent to work at a foreign subsidiary
Host-country nationals
Natives of the country where an overseas subsidiary is located
Third-country nationals
Natives of a country other than the home country or the host country of an
overseas subsidiary.

Understanding Cultural Issues

Ethnocentrism
The tendency to judge others by the standards of one’s group or culture, which are
seen as superior
Culture shock
The disorientation and stress associated with being in a foreign environment.

Understanding Cultural Issues

Power distance
the extent to which a society accepts the fact that power in organizations is
distributed unequally
Individualism/collectivism
the extent to which people act on their own or as a part of a group.

Understanding Cultural Issues

Uncertainty avoidance
the extent to which people in a society feel threatened by uncertain and ambiguous
situations.
Masculinity/femininity
the extent to which a society values quantity of life over quality of life
Entrepreneurship
Entrepreneurship
The pursuit of lucrative opportunities by enterprising individuals.
creating new systems, resources, or processes to produce new goods or services
and/or serve new markets

Entrepreneurship
Small business
A business having fewer than 100 employees, independently owned and operated,
not dominant in its field, and not characterized by many innovative practices.

Entrepreneurship
Entrepreneurial venture
A new business having growth and high profitability as primary objectives.

Entrepreneurship
Entrepreneur
Individuals who establish a new organization without the benefit of corporate
sponsorship.
Intrapreneurs
New-venture creators working inside big companies.

The Idea
A great product, a viable market, and good timing are essential ingredients in any
recipe for success.
Franchising
An entrepreneurial alliance between a franchisor (an innovator who has created at
least one successful store and wants to grow) and a franchisee (a partner who
manages a new store of the same type in a new location).

Transaction fee model

Charging fees for goods and services.
Subscription model
Charging fees for site visits.
Advertising support model
Charging fees to advertise on a site.

Intermediary model
Charging fees to bring buyers and sellers together.
Affiliate model
Charging fees to direct site visitors to other companies’ sites.

Business incubators
Protected environments for new, small businesses

Initial public offering (IPO)

Sale to the public, for the first time, of federally registered and underwritten shares
of stock in the company

Opportunity analysis
A description of the good or service, an assessment of the opportunity, an
assessment of the entrepreneur, specification of activities and resources needed to
translate your idea into a viable business, and your source(s) of capital.

Business planA formal planning step that focuses on the entire venture and
describes all the elements involved in starting it.

Legitimacy
People’s judgment of a company’s acceptance, appropriateness, and desirability,
generally stemming from company goals and methods that are consistent with
societal values.

Social capital
A competitive advantage in the form of relationships with other people and the
image other people have of you.

Skunkworks
A project team designated to produce a new, innovative product.

Bootlegging
Informal work on projects, other than those officially assigned, of employees’ own
choosing and initiative.

Entrepreneurial orientation
The tendency of an organization to identify and capitalize successfully on
opportunities to launch new ventures by entering new or established markets with
new or existing goods or services