Strategic Planning for Business: A Comprehensive Guide - Prof. Christopher P. Neck, Study notes of Introduction to Business Management

Download Strategic Planning for Business: A Comprehensive Guide - Prof. Christopher P. Neck and more Study notes Introduction to Business Management in PDF only on Docsity! Suzanne Lee 10/22/08 MGMT 3304 Study Guide Exam 2 CHAPTER 3: Ethics and Corporate Responsibility - Ethics: the system of rules that governs the ordering of values o Motivations to go against ethics are greed and pressure to meet unrealistic goals and deadlines o Most ppl think they’re good decision makers but in fact, have unconscious biases that favor themselves and their own group o Reasons for lying: conflicting expectations, negotiation, keeping a confidence, and reporting your own performance within an organization. Chart on pg 51 o Employers are concerned with computer users introducing viruses, leaking confidential info, and creating a hostile work environ by d/l inappropriate content o The aim of ethics is to identify the rules that should govern behavior and the “goods” that are work seeking. Ethical decisions are guided by the underlying values of the individual o Ethical issue: a situation in which an individual must choose among several actions that must be evaluated as morally right or wrong. o Business ethics: moral principles and standards that guide behavior in the world of business o Moral philosophy: the principles, rues and values people use in deciding what is right/wrong. - Five major ethical systems used as guides: o 1. Universalism: all ppl should uphold certain values that society needs to function – values that are fundamental to human existence – rules against murder, torture, etc. o Caux Principles for Business: tow basic ethical ideals  Kyosei: living and working together for the common good and mutual prosperity.  Human dignity: the value of each person as an end and not the fulfillment of other’s purposes. o 2. Egoism: acceptable behavior that maximizes benefits for the individual. If everyone follows this, the well-being of society should increase o 3. Utilitarianism: directly seeking the greatest good for the greatest # of people.(Citibank student loan/school kickbacks example) o 4. Relativism: ethical behavior based on the opinions and behaviors of relevant other ppl. It acknowledges the existence of diff ethical viewpoints – norms of expected behavior vary in other countries o 5. Virtue ethics: a perspective that what is moral comes from what a mature person with “good” moral character would deem right - Kohlberg’s model of cognitive moral development: classifies ppl into categories based on level of moral judgment.  Preconventional stage – make decisions based on rewards/punishments and immediate self-interest  Conventional stage – conform to the expectations of ethical behavior held by groups/institutions  Principled stage – see beyond authority, laws, etc. and follow self- chosen ethical principles. - Sarbanes-Oxley Act of 2002: responding to a series of corporate scandals, passed to improve and maintain investor confidence o Requires companies to: have more independent board directors, adhere strictly to accounting rules, and have senior managers personally sign off financial results o The US Sentencing Commission modified the sentencing saying that organizations convicted of fed criminal laws may receive more lenient sentences if shown to have an effective compliance and ethics program - Ethical climate: the processes by which decisions are evaluated and made on the basis of right/wrong - Danger signs of unethical behavior: o Excessive emphasis on short-term revenues rather than long-term o Failure to estab. Written code of ethics o Desire for simple, quick-fix, solutions to ethical problems o Considering ethics solely as a legal issue o Lack of clear procedures for handling ethical problems - Managers must lead others to behave ethically - Ethical leader: those who are both personally moral and a moral manager o IBM’s guideline: if under full glare of examination by associates/friends/etc, would you remain comfortable with your decisions – “light of day” or “sunshine” ethical framework - Ethic codes must be tailored to individual companies’ philosophies o Involve those who must live with the code in writing it o Focus on real-life situations o Short and simple o Beliefs that people can really believe in - Ethics programs: o Compliance-based ethics programs: designed by corporate counsel to prevent, detect and punish legal violations. They increase surveillance and punish wrongdoers o Integrity-based ethics programs: concerned with the law but also with instilling in people a personal responsibility for ethical behavior Making ethical decisions takes 3 things: o Moral awareness, moral judgment and moral character – strength and persistence to act in accordance with your ethics - Corporate social responsibility: obligation toward society assumed by business – maximizes positive effects on society and minimizes negative effects o Strategic vision: provides perspective on where the org is headed o Strategic goals evolve the org’s mission and vision - Second, analyze external opportunities and threats o The mission and vision drive analysis of the external environ.  Environ. Elements: industry profile, industry growth, industry forces, competitor profile, competitor analysis, competitor advantages, legislation, social issues, tech factors, etc. o Stakeholders: individuals/groups who affect and are affected by achievement of the org’s mission, goals, and strategies. (ie buyers, suppliers, competitors, gov’t and regulation agencies) - Third, analyze internal strengths and weaknesses o Financial analysis: examines financial strength/weaknesses o Human resource assessment o Marketing audit: strengths/weaknesses of major marketing activities o Operations analysis: s/w or org’s manufacturing, production, delivery o Resources: inputs to production that can be accumulated over time to enhance the performance of a firm  Tangible assets: real estate, raw materials  Intangible assets: patents, culture, tech knowledge, experience o Core competence: something a company does especially well relative to its competitors (Honda has a small-engine design; FedEx = good customer service) o Benchmarking: process of assessing how well one’s company’s functions/ skills compare to competitors - Forth, conduct a SWOT analysis and formulate strategy o Corporate strategy: identify the set of businesses in which the org competes and the distribution of resources among those  Concentration: focusing on a single business competing in a single industry  Vertical integration: company handles all aspects of processing – Henry Ford  Concentric diversification: moving into new businesses related to the company’s original core business  Conglomerate diversification: expansion into unrelated businesses to minimize risks due to market fluctuations in one industry  BCG Matrix (Boston Consulting Group)  Question marks: high growth, weak competitive position  Stars: high growth and strong competitive position  Cash cows: low growth, strong competitive position – generate excess revenues and fund other businesses  Dogs: low growth, weak competitive position – business should be divested o Business strategy: the major actions by which an org builds and strengthens its competitive position in the marketplace  Low-cost strategy: be efficient and offer a standard, no-frills product (ie: Southwest Airlines)  Differentiation strategy: company tries to be unique in its industry (ie: Scott Paper Co. and free dispenser that holds larger rolls.  The most effective strategy: one that competitors are unwilling or unable to imitate  Functional strategies: implemented by each functional area of the org to support the business strategy - Fifth, strategy implementation involves 4 major steps: o Define strategic tasks o Assess org capabilities o Develop an implementation agenda o Create an implementation plan - Sixth, finally – control your progress o Strategic control system: designed to support managers in evaluating the org’s progress with its strategy and taking corrective action when discrepancies exist  The dual responsibilities of a control system – efficiency and flexibility Managerial decision making - Decision making is so challenging because most managerial decision lack structure and entail risk, uncertainty and conflict o Risk: when you can estimate the likelihood of various consequences but still don’t know what will happen  When the prob.of an action is less than 100% and losses may occur  Web technology may help to reduce uncertainty: including customers in the design process - Formal decision making has 6 stages: o Identify and diagnose the problem o Generate alternative solutions o Evaluate alternatives – paralysis by analysis  Maximizing: achieving the best possible outcome that gains the greatest positive consequences and fewest neg consequences  Satisficing: choosing the first option that is minimally acceptable or adequate  Optimizing: achieving the best possible outcome among several goals – interested in quality as well as price o Make the choice o Implement the decision o Evaluate the decision  Psychological biases:  Illusion of control: belief that one can influence events even when one has no control over what will happen  Framing effects: phrasing or presenting problems in a way that subjectively influences or overrides the facts- the way options are expressed determine the managers’ choices  Discounting the future: weighing short-term costs and benefits more heavily than longer-term costs/benefits Chapter 5: Entrepreneurship - Managers operate in a formal management hierarchy with well/defined authority while entrepreneurs use networks of contacts more than formal authority - Small business: fewer than 100 employees and expect normal, moderate sales - Entrepreneurial venture: growth and high profitability as its primary objectives. Manage aggressively and have innovative strategies - Since 1980, more than 95% of the wealth of the US has been created from entrepreneurs. In states with more small business start-ups, economies grow faster and employment levels are higher - Entrepreneurs: individuals who establish a new org w/out the benefit of corporate support - Intrapreneurs: new-venture creators working inside big companies – corporate entrepreneurs - Immigrants find conventional paths to economic success closed to them and turn to entrepreneurships - “It’s how you look at something and how it’s managed that makes the difference” - What business should you start? o Many great orgs have been built on diff kind of idea: the founder’s desire to build a great org THEN think of the product/service o To spot opportunities, think carefully about events/trends as they unfold  Tech discoveries, demographic changes, lifestyle/taste changes, econ dislocations (booms and failures) – rising oil  solar cells o Franchising: entrepreneurial alliance btwn two parties:  Franchisor: innovator who has created at least one successful store and seeks partners to operate the same concept in other local markets (wealth creation through growth)  Franchisee – operator of one or more stores according to the terms of the alliance (wealth creation via proven business concept)  65% of franchiese succeded/still were operating at end of the 6 year period compared to 72% of independent businesses  Next frontiers: outer space and homeland security o Internet  Transaction fee model: companies charge fee for goods/services (amazon.com)  Advertising support model  Intermediary model: website brings buyers/sellers together and charges a commission for each sale (eBay) Vision: a mental image of a possible and desirable future state of the org. It expresses the leader’s ambition for the org - Many ppl including managers who do not develop into strong leaders, fail to develop a clear vision – instead they focus on performing or surviving day by day - Leaders must know what they want and ppl must understand what it is. Leading and Managing - Managing requires planning and budgeting routines while leadership includes setting the direction- creating a vision for the firm - Supervisory leadership: behavior that provides guidance, support and corrective feedback for day-to-day activities - Strategic leadership: purpose and meaning to organizations by working with others to initiate changes that create such a future - Power: the ability to influence other ppl or in orgs- the ability to get things done/accomplish one’s goals despite resistance from others o Legitimate power: authority to tell others what to do o Reward power: influences others because controls rewards people want o Coercive power: control over punishments o Referent power: personal characteristics that appeal to others: admiration o Expert power: expertise/knowledge – ppl comply cuz they believe - Three traditional approaches to studying leadership: o Trait approach: focuses on individual leaders and tries to determine the personal characteristics that great leaders share: assumes leaders are born, not made. Leaders have:  Drive: high need for achievement, ambition, striving for improvement  Leadership motivation: the want to lead, be extroverted  Integrity: correspondence btwn actions and words. Honesty  Self-confidence: setbacks are inevitable. Be ready w/ confidence  Knowledge of the business: high level of knowledge about their industries Certain behaviors may make leaders effective - Behavioral approach: identify what good leaders do. Focus on getting the job done and keeping followers happy…how both at once? o Task performance behaviors: leader’s efforts to ensure the org reaches its goals – referred to as concern for production, directive leadership, initiating structure, or closeness supervision o Group Maintenance behaviors: action to ensure the satisfaction of group members, maintain harmonious work relationships, and preserve the group’s social stability o Leader-Member Exchange (LMX) theory: importance of leader behaviors not just toward the group but toward individuals on a personal basis o Autocratic leadership: make decisions then announce them to the group – highest performance o Democratic leadership: solicits input from others – most positive attitudes o Laissez-fair style of leadership: leader essentially made no decisions – leads to more neg attitude and low performance The best way to lead depends on the situation - Situational approach: universally important traits/behaviors don’t exist – effect leader behaviors vary from situation to situation - Vroom model: emphasizes the participative dimension of leadership: how leaders go about making decisions – assessing the situation before approaching it o Decision significance, importance of commitment, leader’s expertise, likelihood of commitment, group support for objectives, group expertise, team competence - Five leader decision styles: o Decide: make decision then announce/sell it to the group o Consult individually o Consult the group o Facilitate: make sure that your ideas are not given any greater weight than those of others because of your position o Delegate - Fiedler’s contingency model of leadership effectiveness: effectiveness depends on two factors: the personal style of the leader and the degree to which the situation gives the leader power, control, and influence o Measured leadership styles based on assessing a leader’s least preferred coworker (LPC) – the attitude toward the follower the leader liked the least  Low LPC is more likely in Task-motivated leadership  High LPC is more likely in relationship-motivated leadership - Situational theory: aka life-cycle theory of leadership o Job maturity: level of the followers’ skills o Psychological maturity: self-confidence/self-respect - Path-goal theory: concern with how leaders influence followers’ perceptions of their work goals and the paths they follow toward goal attainment o 4 pertinent leadership behaviors: directive leadership (task oriented), supportive leadership (group maintenance), participative leadership, achievement orientated – setting challenging goals/rewarding good performance o Theory also specifies which follower/environ characteristics important  Authoritarianism: degree to which individuals respect, admire and defer to authority  Locus of control: extent to which individuals see environment as responsive to their own behavior. Internal – what happens to them is their own doing; external – what happens is cuz of fate/luck  Ability: ppl’s beliefs about their own abilities to do their jobs - Substitutes for leadership: sometimes leaders don’t have to lead o Leadership has very little impact/ is not necessary o Group Maintenance Substitutes: Close-knit group, professional orientation, job is satisfying, great physical distance btwn leader and followers o Task performance leadership substitutes: ppl with a lot of experience/ability, feedback is supplied to them directly from the task or a computer, rules and procedures are rigid - Charismatic leaders: dominant, exceptionally self-confident. Strong conviction in moral righteousness – arouses sense of excitement/adventure - Transformational leaders: get ppl to transcend their personal interests for the sake of the larger community – generate excitement and revitalize orgs o 4 skills needed: have a vision, communication vision, building trust, having positive self-regard - Transactional leaders: view management as a series of transactions in which they use their legitimate, reward and coercive powers to give commands and exchanges rewards for services - Level 5 leadership: combination of strong professional will and personal humility that builds enduring greatness. A Level 5 leader is relentlessly focused on the org’s long-term success while behaving with modesty, directing attention toward the org, rather than him or herself. - Authentic leadership: rooted in the ancient Greek philosophy, “to thine own self be true.” This is in the form of honesty, genuineness, reliability, and trust - Pseudotransformational leaders: the opposite – they talk a good game but ignore followers’ real needs as own self-interests take precedence. - Servant leader: “leader” and “servant” are usually opposites but in this case they’re put together – like serving customers. Usually easier for orgs focused on what their product or org can do for society - Bridge leaders: those who leave their cultures for a significant pd of time. Then they return and through expanded repertoire, serve as bridges btwn conflicting value systems within their own cultures or btwn their and other cultures. - Shared leadership: leadership rotates to the person with the key knowledge, skills and abilities for the issue facing the team at a particular time - Lateral leadership: does not involve hierarchical, superior-subordinate relationship How do I start? Seek developmental experiences - Assignments – build something from nothing - Other ppl – exposure to positive role models and increase visibility to others - Hardships – overcoming ideas that fail and deals that collapse - Other events – formal courses – challenging jobs