Term
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Definition
| • Management = getting things done through other people |
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Term
| 2. What are the 2 key concerns of management? |
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Definition
• Effectiveness = doing the right things at the right time in the right way
o Concerned with the ENDS
o Ex…market shares
• Efficiency = minimizing waste and/or maximizing revenue
o Many resources are scarce
o Concerned with getting more bang for the buck such as increasing outputs while maintaining the same level of inputs or keeping the same level of outputs while decreasing the level of inputs
o Concerned with the MEANS to the ends
o Ex…cost |
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Term
| 3. What is effectiveness concerned with? efficiency? |
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Definition
• Just because you’re effective doesn’t mean you’re efficient
• However, high efficiency is more typically associated with high effectiveness than with low effectiveness
• The hallmark of good management is effectiveness combined with efficiency
• But remember out of the two: effectiveness is more critical |
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Term
| 4. How are effectiveness and efficiency related? |
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Definition
• Related in that it’s much easier to be effective if one disregards efficiency
o Ex… Seiko could produce more accurate and attractive timepieces if it disregarded labor costs and material input costs
• It becomes increasingly more difficult to be effective when one becomes more and more concerned with efficiency
o Ex… A state university will find it very difficult to give its students a high quality education if it has a shoe-string budget |
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Term
| 5. What is your important resource as a manager? |
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Definition
• Human resources
o The people that work for you
o Injellitence =
• Most adversely affects staffing
• Secondarily affects leading |
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Term
| 6. Is management art or science? When is it considered a science? an art? |
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Definition
• Academic = science
o We develop theories of managing, test these theories empirically using the scientific method, and refine, reformulate or discard these theories based upon the results of these studies
• Management = art (practice)
o For some, managing is really just a natural extension of their personalities
o Many different styles of mgt are successful backing the claim of it being an art |
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Term
| 7. How did management become important and why is it still significant today? |
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Definition
• When the Industrial Revolution occurred
• Basic change that occurred in the Industrial Revolution was the transfer of skills from the craftsmen to the machines
o In other words, the labor was divided in these factories, the skill level of the employee decreased as a result, and these employees and their efforts needed to be supervised and coordinated to get the goods produced
o Thus, you needed someone to manage these workers
• Significance of today…
o Because it’s the key to the efficient accomplishment of organizational and societal objectives
o Peter F. Drucker called management the lifeblood of every organization
o Societal Level…management still persists today because we need these organizations to provide the goods and services that we both want and need and that the craftsmen could not make themselves |
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Term
| 8. What was the basic change in the industrial revolution? |
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Definition
| • Skills of the craftsman were transferred to the machine |
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Term
| 9. What happened to productivity (supply), prices, and demand as a result of the industrial revolution? |
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Definition
• Productivity, supply, and demand all increased
• Prices decreased |
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Term
| 10. What was the pivotal event of our time, according to Drucker? |
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Definition
• According to Peter F. Drucker, the switch from owner/manager to professional manager is the pivotal event of our time
o The changes brought about by the Industrial Revolution created the need for professional management
o This is how professional management became significant |
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Term
| 11. Why do most businesses fail? |
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Definition
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Term
| 12. What does a first-line manager do? What are the names associated with 1st-line management? |
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Definition
• First-Line = first contact with labor or operative level employees
o Make sure plans developed by top and middle mgt are carried out
o Don’t manage other managers
o “Middle man”
o Most people enter management at this level
• Names Associated = supervisor or foreman |
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Term
| 13. What does a middle level manager do? What are the names associated with middle level manager? |
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Definition
• Middle Manager = interpret information from 1st line managers to top managers
o Manage other managers
o A testing ground from which many organizations fill top management positions
o 2 “I’s” of Middle Mgt…
• Integrator = coordinate the activities of different work groups so they operate in harmony with one another and are better able to cope with the demands made upon them
• Interpreter = transform top management directives into first-line management
• Communication channel between different levels of management |
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Term
| 14. What is corporate downsizing? What happens in corporate downsizing? What level of management is most adversely affected? |
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Definition
• Cut the “fat”/cut the cost; “lean and mean” philosophy
• Efficiency oriented
• 4 things happen
o Eliminate mgt levels (middle)
o Other managers take on more responsibility
o Farming out what had been staff managerial activities (legal counsel, training, and development of employees) to outside consulting firms
o Implement computer information technology
• Mgt information sources
o Survivor syndrom of downsizing (people feel guilty, and worry because they might be next) Victims actually have less stress |
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Term
| 15. What does a top manager do? What are the names associated with top management? |
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Definition
• Top Manager = determine the form of the organization and define its overall character, mission, and directions
o Legitimize the organization to society
• Achieve legitimacy by giving something back to the community, doing good things
o Determine the business the organization wants to be in and how the organization is going to compete in that business
• Set the strategy for the organization
o Determine the organizations general goals and the action plans to achieve those goals
o Ensure that goals are set and accomplished according to the organization’s purpose and they monitor the environment to identify potential problems and opportunities associated with the organization’s goals or purpose
• Names Associated = CEO, CFO, Chairman of the Board, Executive VP, etc… |
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Term
| 16. What is the difference between a line manager and a staff manager? |
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Definition
• Line manager = directly responsible for the work activities that contribute to the process of creating the organization’s basic product or service
o Have authority over the transformation process where inputs are transformed into outputs
• What goes where
o They are in all levels of the mgt pyramid They are located at every level of the pyramid
• Staff manager = use their special expertise to support the efforts of line managers
o Support and guidance manager. They guide the line managers
o “Heard the sheep”
o Have no authority over the transformational process
o Typically experts in specific areas
o For the most part middle level managers
• Can be downsized easier |
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Term
| 17. What is the difference between a functional manager and a general manager? |
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Definition
• Functional manager = manage one area
o Ex… areas of activity such as finance, production, human resources, accounting, etc…
o Most managers are functional managers
• General manager = responsible for more complex organizational subunits that include many functional areas
• Will technical skill get you to top manager?
o No |
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Term
| 18. What is the difference between an administrator and a manager? |
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Definition
• Administrator = public, not for profit
o Gotten bad name over past 20 yrs b/c of government affiliation
• Manager = private for profit |
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Term
| 19. What are the five functions of management? Be able to identify and describe the five functions of management. |
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Definition
• Planning = process of establishing goals and defining the methods by which they are to be attained
o Involves goal setting and action planning to achieve those goals
• Goals are important because they get us motivated, provide us direction, energize us, and get us to start thinking about strategies to achieve the goals
o Said to have primacy b/c its first thing you do as a manager
• Organizing = process of designing an organization’s structure to achieve its goals
o Includes the determination of what tasks are to be done, who is to do them, how the tasks are to be grouped into jobs, how these jobs are to be grouped into departments, how these departments are to be integrated or coordinated, who reports to whom, and where decisions are to be made
• Ex… job design, departmental design, organizational design, and authority relationships
• Staffing = process of assuring competent employees are selected, developed, and rewarded to help accomplish organizational goals
o Activities such as recruiting new employees, selecting the best employee for a position, developing employees to take on new jobs, providing training to employees whose skill levels are not up to par, compensating (i.e., paying) employees for their work and giving incentives for high performance are considered part of this function
• Leading = process of getting people to go along with you willingly and harmoniously in achieving your organization’s objectives
o Activities such as motivating employees, directing others, selecting the most effective communication channel, and resolving conflicts
• Controlling = process of assuring the efficient accomplishment of organizational objectives
o 3 Parts: 1)monitoring organizational performance, 2) comparing actual performance with “hoped for” performance (this “hoped for” comes from planning), and 3) taking corrective action in one or more the functions if actual results fall short of “hoped for” results
• Actual < hoped then diagnose problems and take action
• Synonymous with feedback (informational and reinforcing)
• Once a business is starting, its sequential
• Once its running its simultaneous
• All Managers perform all five |
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Term
| 20. What are the siamese twins of management? |
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Definition
• Planning and Controlling
o You cannot improve performance by having just one of these two present |
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Term
| 21. What is (are) the most important function(s) for a 1st-line manager? Middle manager? Top manager? |
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Definition
• Top = planning
• Middle = organizing
• 1st Line = staffing and leading |
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Term
| 22. What are three managerial roles Mintzberg identified? Be able to identify each role. |
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Definition
• Interpersonal = involves interacting through oral and written communications with others inside and outside your organization
o Purpose = develop and maintain positive relationships with others
o Sub Roles = figurehead, leader, and liaison
• Informational = involves information processing
o Receive information, you give information, and you analyze information, as a manager
o Makes the manager a nerve center for the entire organization
o Sub Roles = monitor, disseminator, and spokesperson
• Decisional = involves using information to solve problems or take advantage of opportunities
o Sub Roles = entrepreneur, disturbance handler, resource allocator, and negotiator |
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Term
| 23. What gives rise to the three managerial roles, according to Mintzberg? |
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Definition
| • These arise from the managers authority and status with the company |
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Term
| 24. What are three managerial skills identified by Katz? Be able to identify each skill. |
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Definition
• Technical = ability to use a special expertise relating to a method, process, or procedure in performing a task
o Ex…engineering, accounting, QBA, and finance
• As you go up the management pyramid, technical decreases in importance
• Human = ability to work well in cooperation with others
o This is a critical skill for managers due to the highly interpersonal nature of managing
o Ex…ability to motivate people, leadership, communication, self-awareness, and empathy
• Conceptual = ability to problem solve and think in the abstract and in terms of the future
o Ability to forecast events, to see opportunities that no one else sees, and to take advantage of these opportunities and see the big picture (i.e., gestalt thinking)
o Ability to see how the organization and its environment fit together and how a change in one part affects or causes changes in the other parts (i.e., systems thinking)
• Your “gut feeling”
• Conceptual skills are most important in carrying out Planning in the functions of management; it increases with importance
• Conceptual is hardest to develop |
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Term
| 25. At what level of management are conceptual skills most important? Technical skills? Human skills? |
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Definition
• Conceptual = found in various quantities at different levels of the management pyramid
o Generally, as you ascend the management pyramid, conceptual skills become more important
o As the emphasis on planning increases, so does the emphasis on conceptual skills
• Technical = 1st-line b/c they are dealing with the production process and technical employees
o Top-level managers must have some technical knowledge especially when technology is an important part of the product of service their organization provides
• Human = equally important at all levels of the management pyramid
• Important…middle mgt must have a fairly equal blend of all three skills, which is consistent with their job of interpreter
o They must speak the language of both top and 1st-line mgt |
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Term
| 26. What skill is most difficult to develop? Why? |
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Definition
| • Conceptual because it requires a minimum level of mental ability (i.e., reasonably intelligent) and time/experience to develop |
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Term
| 27. According to Luthans(1988), are effective managers successful managers in general? |
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Definition
• The answer he found was no they are not
o Effective managers are usually not the ones promoted rapidly through the organizational ranks
o The managers that were promoted rapidly through the organizational ranks were the best networkers
o Only 10% of the managers were successful |
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Term
| 28. What percent of effective managers are successful? |
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Definition
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Term
| 29. On what activity do effective managers spend the majority of their time? Successful managers? |
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Definition
• Found in his study that all managers (successful, effective, average, etc.) engaged in four managerial activities…
o Traditional management (TM) = planning, organizing, & controlling
o Communication (COMM) = exchanging information & processing information
o Human resource management (HRM) = motivating, disciplining, managing conflict, staffing, & training
o Networking (NET) = socializing, politicking, & interacting with outsiders
o Effective manages down, successful manages up |
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Term
| 30. What is the primary difference between derailed executives and executives who made it to top management, according to the Center for Creative Leadership? |
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Definition
• Derailed executives were insensitive to others
o The only way you “get ahead” or “get the job done” is through other people |
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Term
| 31. What are the three basic characteristics of an open system? |
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Definition
| • Input, Transformation, and Output |
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Term
| 32. What is the cyclical nature of the nature transformation process? Negative entropy? Buffering the technical core? Role differentiation and specialization? Synergy? Equifinality? |
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Definition
• Cyclical Nature = transformation activities produce outputs that alternatively will become new sources for inputs (provides a feedback loop)
• Negative Entropy = negative entropy is the ability of open systems to bring in new energy to arrest or delay this decaying process
o Entropy = the tendency for systems to decay over time.
• Buffering the Technical Core = maintain stability in production so as to increase efficiency
o Open systems try to maintain, or at least attempt to maintain, their basic character by controlling or neutralizing threatening external forces for change
o Ideally…want long runs of products using the same machinery so we can work out the kinks and become more proficient
• Role Differentiation/Specialization = develop specialized units to deal with particularly troublesome or challenging parts of the environment
o As open systems grow and develop, there is an increasing tendency toward the elaboration of roles and specialization of function
• Synergy = ability of the whole to equal more than the sum of its parts (2+2=5)
o An organization ought to be able to achieve its goals more effectively and efficiently than would be possible if the parts operated separately
• Equi-Finality = systems can often reach the same ends by different means
o Organizations facing the same environment can structure themselves differently and still be successful
• This concept emphasizes the flexibility and adaptability of organizations |
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Term
| 33. What are the five subsystems of an organization? What functions does each subsystem perform? |
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Definition
• Production = produces the product and service outputs of the organization
o Where the primary transformation process takes place
o Ex… production dept. in a manufacturing firm, the teachers and classes in a university, and medical activities in a hospital
o Remaining subsystems are organized around the production subsystem
o Totally internally oriented and is buffered by the other primary subsystems from threatening environmental focus
• Boundary-Spanning = handle transactions at organizational boundaries
o Control the boundary and are responsible for exchanges with the environment
o Two major purposes for the organization: 1) detect and process information about changes in the environment and 2) represent the organization’s interests to the environment
o Input side…acquire needed supplies and materials
• This subsystem is the purchasing department on the input side
o Output side…create and deliver outputs
• This subsystem is the marketing department on the output side
o Mostly externally oriented (must be somewhat internally oriented as well)
• Adaptive = responsible for organizational change
o Scans the environment for problems, opportunities, and technological developments
o Responsible for creating innovations and for helping the organization change and adapt
• Represented by the engineering dept., research and development dept., and the marketing research dept.
o Concerned more with organizational effectiveness than with efficiency
o Mostly externally oriented
o Should be proactive in its approach to dealing with the environment
o Activity that is a growing part of the adaptive subsystems is competitive analysis: espying and snooping on the competition
• Maintenance = responsible for the smooth operation and upkeep of the organization
o Maintenance includes cleaning and painting buildings and the maintenance of machines
• Tries to meet human needs such as morale, compensation, and physical comfort
o Ex… departments such as human resources, the employee cafeteria, and the janitorial staff (physical plant)
o Totally internally oriented
• Management = distinctive subsystem, responsible for directing the other subsystems of the organization
o Provides direction, strategy, goals, and policies for the entire organization; coordinates other subsystems and resolves conflict between departments, and is also responsible for developing an organizational structure and directing tasks within each subsystem
o Ex… consists of the chairman of the board, president, vice-president, and managers of functional areas such as marketing, production, etc…
o Must legitimize the organization to society (extremely important function)
• Ex… when society views a business as having a legitimate right to exist or sees the business as a benefit or being of value to society, the business can be proactive rather than reactive in its approach to managing its environment
• Primary Subsystems…the ones most closely associated with production
• Secondary Subsystems…support subsystems for the primary subsystems
o Internally and externally oriented |
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Term
| 34. What are the two major dependencies in the external environment? What is the threat to these 2 major dependencies? |
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Definition
• Direct-Action Components
o Customers
o Suppliers
o Competitors
• Indirect-Action Components
o Technology
o Economic
o Political, Legal, and Regulatory |
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Term
| 35. How do customers influence organizations and how do organizations influence customers? |
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Definition
• Customers Influencing Organizations…
o Naturally try to force down prices, obtain more or higher-quality products (while holding prices constant), and increase competition among sellers by playing one against the other
• Organizations Influencing Customers…
o Customers are critical, and managers must constantly be aware of the present needs and emerging needs of their clients
o May involve altering present products or services, developing new ones, or even entering new businesses
o The typical ways of dealing with customer aspect of the environment are advertising and market research
Make it easy to complain, make it timely, make it effective |
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Term
| 37. How do suppliers influence organizations and how do organizations influence suppliers (i.e., 3 ways to establish and maintain a positive relationship with suppliers)? |
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Definition
• Vertical integration = buy your supplier
o If you can’t maintain favorable relations with yourself, then who can you maintain them with?
• Long term contracts = you lock in the supply at a lower price
o Here you are banking upon the fact that prices in the future will be much higher than they are currently
• Reducing the Number of Suppliers
o Allows you to give larger contracts to suppliers
• These contracts allow the suppliers to achieve economies of scale and the opportunity to automate which makes them more efficient and allows them to reduce costs
o Through cost reduction, these suppliers can reduce their prices for their suppliers
• This allows the organization to be more profitable |
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Term
| 38. What is the law of the marketplace? |
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Definition
• Dictates that companies that cannot compete will be faced with either changing their product line or being eliminated
• Ray Crock (founder of McDonald’s) “When your competitor is drowning, shove a hose down its throat.” |
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Term
| 39. What are the five forces of competition and how does each influence the level of competition within an industry? |
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Definition
• Rivalry Among Organizations = jockeying for position in a market (the use of price competition, comparative advertising and increased customer service or warranties)
o Most intense when there are many direct competitors and when industry growth is slow
o New, high-growth industries have enormous opportunities for profits
o When an industry matures and growth slows, profits drop
o Intense competition causes industry shakeout – weaker companies are eliminated and the stronger companies survive
o When do you have the greatest rivalry? With many organizations in the market
• Threat of New Entrants = new entrants compete with established companies
o They generally increase product supply, seek to gain market share, and often possess substantial resources
o Effects…1) prices will be forced down and 2) resource costs will be inflated
• This reduces profitability and increase competition
o If few barriers to entry...the threat to established companies is more serious
• Ex…government policy, capital requirements, brand identification, cost disadvantages, and distribution channels
o If many barriers to entry…prevent new companies from entering the industry, the threat of new entrants is less serious
• Threat of Substitutes = industry could suffer in earnings and growth unless it improves the quality of its products or launches an effective, aggressive marketing campaign
o Substitutes could make the existing product obsolete (i.e., CDs made vinyl records a thing of the past and MP3 players will make CDs a thing of the past)
o Can affect an organization’s profitability
• This threat places a ceiling on an organization’s prices for its products
• If the customer finds the substitute at a more attractive price, performance alternative, the organization will feel pressure to reduce its prices to entice the customer back
• The lower prices can translate into lower profitability
• Power of the Suppliers = can raise prices or reduce the quality of their goods and services
o Powerful suppliers can reduce an organization’s profits, particularly if the organization cannot pass on price increases to its customers
o Organization has a disadvantage if it’s too dependent on a powerful supplier
• A supplier is powerful if the buyer has few other resources of supply or if the supplier has many other buyers
• Power of the Customer = customers are important to an organization for more reasons than just the money they provide for goods and services
o Can demand higher quality, lower prices, or more services
o Can also play competitors off one another
o Organization has a disadvantage if it’s too dependent on powerful customers
• Customers are powerful if they make large purchases or if they can easily find alternative places to buy |
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Term
| 40. What are process and product innovations? What is the focus of each? |
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Definition
• Product Innovations = innovation made in the basic good or service an organization provides
o Ex… compact discs, MP3 players, high definition TV, light beer, and arena football
• Process Innovation = innovation made in the technology used in transforming inputs into goods and services
o Ex… assembly line, the computer, and automation and robotics |
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Term
| 41. What are the general effects of technology on an industry? |
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Definition
| • Product obsolescence and increased competition |
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Term
| 42. How does the economy influence an organization? |
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Definition
• An expanding economy has an effect on the demand for a company’s product or service
• Facilitates the establishment of new enterprises
o A major slowdown in economic growth can bring failure to some organizations, as was common in the early 80’s
• Impact of the economic environment on management practices is almost certain to be unpredictable
o There will be many shifts and changes in inflation rates, productivity, unemployment, energy use, etc…
o Managers must continually monitor changes in economic factors in order to minimize threats and capitalize on opportunities |
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Term
| 43. What are the four ways that government influences organizations? |
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Definition
• Government Regulations
o Purpose = to improve quality of life
o There to make sure that the organization (i.e., specific departments of the organization) is complying with laws and regulations governing the department’s activities
• It costs time, money, and effort to meet these regulations
o May look like government regulations only provide constraints on organizational activities, they also create numerous opportunities such as consulting firms are called in to help the organization deal with equal employment opportunity regulations
• Ex… DuPont sells air pollution control equipment so that organizations can comply with EPA standards, and Exxon sells products to clean up oil spills
• Government Subsidizations
o Government subsidizes certain businesses to help them survive and prosper (i.e., low-interest loans to Chrysler, $56 million dollar subsidies to U.S. shoe industry, and $5.6 billion dollars in contracts to minority owned businesses)
o Government taxation can also be used to encourage or discourage business (i.e., import tariffs, quotas, excise taxes)
• Government Competition
o State and national parks compete with private enterprises such as Disney World for vacation dollars
• Government Economic Policies
o Affect organizations ability to thrive and prosper
o Ex…supply-side economics which is based upon Say’s law which says that supply creates its own demand. As a result, supply-side economics advocates a free market place without artificial obstacles to trade |
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Term
| 44. What are the four ways organizations influence the government? |
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Definition
• Political
o Direct Political Action = voting
• Organizations can use grass roots programs to help elect candidates
• Can also form political action committees (PACs)
• Generally illegal for organizations to directly contribute to political campaigns
• However, they may form PACs to solicit voluntary contributions from employees and stockholders
o PACs are restricted to giving $5,000 to a candidate for each election race
o There are no restrictions on how much a PAC can spend independently to help elect or defeat a candidate
o Illegal Action = bribes, kickbacks, and blackmail
• Lobbying
o Ex… Philip Morris spent $5.9 million and GM spent $5.2 million lobbying the federal government in 1998
• Cultural/Social
o Managers must identify the changing cultural and social conditions that will influence their organizations
o Organizations influence society through a number of different means such as philanthropy, support of charity drives and fund-raising, community service work, advisory service, ads, and funding of community programs
• These activities help legitimize the organization to its society
• Organizations also use image advertising to legitimize the organization
• In image advertising, an organization sells its ideas on societal issues directly related to its business
• International = provides managers with both opportunities and threats
o Ex… selling products in new markets such as China [opportunity], foreign competition such as the Japanese in the American marketplace [threat], and dependence on foreign resources such as oil [threat]
o Organization must be aware of all aspects of the environment (customers, suppliers, competitors, technology, economy, government, and culture)
o The foreign culture can present problems for an organization
• Can be prevented if an organization has a thorough knowledge of the culture (its language, its customs, its norms, and its values) |
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Term
| 45. What is the shadow bureaucracy? |
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Definition
| • Nearly every department within an organization has a counterpart in one or more federal agencies |
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Term
| 46. What is environmental scanning? How is it related to planning and organizational performance? |
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Definition
• Environmental Scanning = process of monitoring and evaluating changes and trends in the environment
o Lies at the heart of successfully coping with environmental exigencies
o Relation with planning and organizational performance…
• Organizations that gather a great deal of environmental information tend to perform better than organizations who gather comparatively little environmental information |
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Term
| 47. What are the three purposes of planning? |
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Definition
• Fundamental = establish and help achieve organizational objectives
• Protective/Defensive = to offset future uncertainties by reducing the risk surrounding organization’s operations
• Affirmative/Offensive = seeking out and taking advantage of opportunities to increase organizational success |
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Term
| 48. Why is planning important? |
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Definition
• Organizational Success
o Studies have shown that organizations that emphasize planning tend to have higher profits and sales than organizations that do not
• Sense of Unity and Direction
o Helps managers to make decisions for the future within a broader framework
o Enables them to coordinate and unify their action-achieves coordinated effort
• Coping with Change
o Managers who plan have more control than managers who do not plan
o Planning puts the manager in a position to affect their future rather than simply accepting it
• Performance Standards
o Managers who plan have more control than managers who do not plan
• Thus, planning puts the manager in a position to affect her future rather than simply accepting it
o Performance of the manager can be assessed in terms of how close that manager’s unit comes to accomplishing its objectives
• Through planning, management derives a rational, objective basis for performance standards
• Without planning, performance standards are likely to be non-rational and subjective
• Managerial Development
o Those who plan must deal with the abstract and uncertain ideas and information
o Managers must think systematically about the present and the future
o Managers not only develop their ability to think futuristically, but to the extent that their plans are effective, their motivation to plan is reinforced |
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Term
| 49. Why do managers resist planning? |
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Definition
• One of many functions they perform
• Planning is hard work
• Can be used to measure results (screw-ups or poor performers don’t want this!)
• Takes time and is expensive
• Lack of immediate feedback
o Managers prefer to work on immediate problems (i.e., day to day problems) because they provide instant feedback
o Long-range planning (5-15 years) involves delayed feedback
• At top management, often times you will not know whether you were successful or not in planning until 5-10 years later
• Involves changes (fear of the unknown)
• Fear of failure/lack of self-confidence (creates a self-fulfilling prophecy)
• May not be rewarded by the organization (WIFM – what’s in it for me?)
• Goes against “doer” mentality
o Managers tend to be doers not “ivory tower” thinkers and they see themselves in this way as well
o Systematic, reflective planning is not consistent with how they view their jobs as managers |
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Term
| 50. What is Gresham's law of planning |
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Definition
• His law = the tendency for routine, repetitive problems to overshadow planning problems
o Happens because managers try to get their desks cleared of the routine decisions before they get down to the really serious ones
o Unfortunately, their desks rarely get cleared; therefore, planning decisions are often neglected |
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Term
| 51. What does the non-planner typically blame for his/her poor performance |
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Definition
• Non-Planner (AKA “The Fire Fighter) = tending to brushfires while the whole forest is going up around them
o Tend to emergencies rather than preventing them (They are reactive!)
o Place blame… bad luck (they have an EXTERNAL LOCUS OF CONTROL) |
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Term
| 52. What are the five phases of the planning process and what happens at each phase? |
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Definition
• They are repetitive and interactive
• Phase 1: Establishing Objectives
o Objectives = starting point for planning function (basis of phase 1)
• They provide the direction for all other management functions
• They’re based on “perceived opportunities and threats” that exist in an organization’s environment (this points out the fact the importance of environmental scanning – if your scanning is faulty then your planning will be faulty)
• Use the SMART Model to set goals for objectives
• Phase 2: Developing Premises
o Developing premises about the future environment in which the objectives are to be accomplished
o Involves such things as forecasting events or conditions likely to influence goal attainment
• Ex…forecast a declining economy so you don’t expand product lines perhaps cut back a couple
o Multiple Scenarios (Contingency Planning/”What If” Planning) = when one develops multiple future scenarios and the plans to accompany each scenario
• Most are never used, but they are of crucial importance because they allow you to act rather than react (i.e., throw a plan together in a hurry under pressure)
• Allows greater flexibility and is particularly useful in a dynamic, changing environment
• On the down side, it requires greater time and resources than normal planning
• Important…“FOREWARNED IS FOREARMED”
• Phase 3: Decision Making
o Involves selecting a course of action to accomplish the goals set in phase 1
o 3 Aspects…
• Indentifying alternatives
• Evaluating the alternatives in light of premises about the future
• Selecting the alternative with the highest probability of success (course of action is adopted)
o Fosters creativity and innovations
• Phase 4: Implementing a Course of Action (People Skills)
o Once action is adopted, it must be implemented
o Must assign and direct personnel to carry out the plan
o A great plan poorly implemented = poor plan (unlikely success)
o 3 Keys to Effective Implementation…
• Tie planning to the budgetary system
• Make sure people understand the plan
• Motivate people to implement the plan
• Phase 5: Evaluating Results
o Must constantly evaluate plans and their implementation
o Must compare the actual results of the planning with the “hoped for” or intended results and take action accordingly
• Ex…either by modifying/refining present plans or adopting new plans
o Outcome of this phase is to improve the effectiveness of plans due to control and feedback [function of management used – control (to get feedback)] |
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Term
| 53. What are SMART goals? |
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Definition
• S = goal should be specific in terms of the desired result
o Should be clear what the desired result is
o Should be clearly understood
o Should also contain a specific time limit
• M = goal should be measurable
o If you can’t measure it, you can’t manage it
o Once you have a measurable goal, you can now track your progress toward the goal
• Allows you to manage your plan by receiving feedback on your plan
• A = goal should be achievable (and challenging)
o Goals that are not achievable are demodulating (often times when trying to achieve very difficult goals you realize midway that you cannot achieve them and you give up trying)
o Should make you stretch to obtain it and once you have stretched you should be able to attain it
o Easy goals are achievable but not very motivational because they don’t require you to stretch (once you attain easy goals you tend to stop)
• R = goal should be relevant
o Should only be set in the important areas of the job or plan only
o When you set goals, this tells you what’s important and where your attention and effort should be directed (goals provide guidelines for action)
o They tell you what you should not be doing (goals provide constraints on behavior)
• T = goal should be trackable
o Progress toward the goal should be monitored and corrective action should be taken |
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Term
| 55. What are the different failures to avoid in planning? Be able to identify. |
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Definition
• Top-down delegation of a plan
• Key line managers left out
o Will result in less commitment to the plan and poorer implementation
• Lack of supportive climate for planning
o Ex…time, training, money resources, rewards, etc…
• Plans that are too rigid and/or complex
o Stifles creativity on one hand and confuses on the other (often try to do everything at once)
• Failure to manage your plan
o Managers plan their work but often fail to work their plan
o Managers sometimes assume that a formulated plan is an implemented plan...WRONG!
o Even the best plans will require modification (must manage your plan)
o Get feedback on your plan to discover what’s going right, what’s going wrong, and what you need to do to improve the plan (take corrective action to fix what is wrong)
o A BAD PLAN ADMITS NO MODIFICATION
• Getting bogged down in the details of planning
o Often see this problem with forecasting
• People create these elegant forecasts and then never use them
• They forget their purpose (i.e., to help prepare you for roadblocks to your plan so you can avoid or eliminate them)
• Unrealistic expectations |
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Term
| 56. What is the crystal ball syndrome? Cure-all syndrome? Persian messenger syndrome? |
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Definition
• Crystal Ball Syndrome = sees planning primarily as an activity to forecast the future
o You believe once you have forecasted a future scenario and developed a plan for that future that is all you need to do as a manager to make your plan successful
• This neglects the fact that the future often does not pan out as you forecasted and that you often need to make continual adjustments to your plan to be successful
• Cure-All Syndrome = assumes planning will cure all your problems as a manager
o You are likely to see planning negatively because planning will never cure all your problems
o Planning will never meet your expectations and you will be dissatisfied with it; as a result, you will be less likely to plan
• Persian Messenger Syndrome = when you punish the person who brings you bad news about your plan
o You are only hurting yourself as a manager because a plan can only be improved when you are aware of what’s wrong with it
o In the future, your employees will be less likely to come to you with problems about your plan and as a result your plans will be less effective |
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Term
| 57. What is the focus of strategic planning? |
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Definition
• Focus = organization’s long-term relationship to its environment
o Strategic Planning = organization’s way of maintaining a positive relationship with its external environment
o Richard Daft says…strategic planning is probably the single most important responsibility of top managers
o Top management is primarily responsible for developing a strategic plan, or grand strategy that serves to define the organization’s character, mission, and direction
• Defines the major objectives of the organization and defines the ways or means that an organization will use to achieve those objectives |
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Term
| 58. What are the four components of a well-thought out strategy? Be able to identify. |
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Definition
• Scope = specifies the range of markets in which the organization will compete
o Deals with the organization’s domain
• Resource Deployment = how it will distribute its resources among various areas of the business
o Ex…a company may decide to use the profits from its bread and butter areas to finance new ventures
• Distinctive Competence = something an organization does well that sets them apart from other organizations
• Synergy = refers to how the different areas of the business enhance or complement one another
o Ex…Disney achieves synergy among its various operations. Disney makes movies, which make money at the box office, and these movies then spur the sales of videotapes. Its network television program results in vacations to Disneyland and Disney World and these vacations lead to the purchases of licensed souvenirs and greater interest in movies. Finally, the Disney cable channel helps promote the entire empire |
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Term
| 59. What is corporate strategy and business level strategy? |
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Definition
• Corporate Level Strategy = focuses on what businesses do we want to be in
o Focused primarily on scope and resource deployment
• Business Level Strategy = focuses on how do we want to compete in a business, market, or industry
o Primarily concerned with competitive advantage and synergy |
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Term
| 60. What are the four elements of strategy formulation and what does each element consist of? |
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Definition
• Analysis of the Organizations Mission and Objectives – What is its purpose?
o Strategic Planning Principle No. 1 = strategy and objectives must direct effort toward the accomplishment of the organization’s basic mission and overall purpose
• Analysis of the Environment – What are the threats and opportunities?
o Strategic Planning Principle No. 2 = strategy and objectives should target efforts on specific results that will solve key problems and exploit key opportunities in the organization’s environment
• Analysis of the Organization – What are its strengths and weaknesses?
o Strategic Planning Principle No. 3 = strategy should build upon the strengths and minimize the weaknesses of the organization
• Analysis of Managerial Values – What’s the corporate culture?
o Strategic Planning Principle No. 4 = strategy and objectives should be consistent with prevailing managerial values and the corporate culture |
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Term
| 61. What are benefits of a mission statement? |
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Definition
• Mission statements provide a sense of common direction to the members of the organization by defining what business each organization wants to be in and setting each clearly apart from its competitors
• Mission statements are also a source of legitimacy because they create a clear sense of how each of the major stakeholders in the organization will be served
• Mission statements are also important because they are the goals that the members of the organization identify with and become committed to |
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Term
| 62. What is a SWOT analysis? |
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Definition
• SWOT Analysis = Strengths, Weaknesses, Opportunities, and Threats Analysis
o aka WOTS UP = Weaknesses, Opportunities, Threats, and Strengths Underlying Planning Analysis
• A company can develop a market niche (place in the market) that is particularly advantageous (setting itself apart and above its competitors and thereby acquiring market share) by matching outside opportunities with inside strengths
• Organization should be aware of its strengths so it can fully capitalize on the opportunities that exist in the environment
o You may waste or miss an opportunity or choose an action that leads to less success or perhaps even failure
• Organization should also be aware of its weaknesses
o Unless an organization is aware of its weaknesses it may be unprepared to deal effectively with and counter unexpected environment threats |
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Term
| 63. What is the goal of the Business Portfolio Matrix Approach? |
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Definition
• Goal = assist managers in allocating resources to strategic business units (SBUs) in order to maximize profit and market share goals (corporate strategy)
o Helps the manager decide which strategy to use for each SBU (business level strategy) |
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Term
| 64. What levels of strategy does the Business Portfolio Matrix Approach deal with? |
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Definition
| • Corporate and Business-Level and Generic Strategies |
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Term
| 65. How are SBUs classified in the Business Portfolio Matrix Approach? |
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Definition
• STAR = in the beginning require large amount of short run cash to support their rapid growth (CASH HOGS)
o Relatively large share of high growth market and has additional growth potential
o Provides increasing sales for the corporation, and the profits are plowed back into the star in the form of investment for future growth
o Highly visible and attractive, and will generate profits and positive cash flow as the product matures
• Ex…Eli Lilly’s anti-depressant drug, Prozac, in the 90s and Pfizer’s male impotence drug, Viagra today
• CASH COW = as the market matures, many stars become cash cows
o The business has a large share of a market that is no longer growing
o Investment in advertising and plant expansion is minimal, just enough to keep its market share
o As a result, the cash cow has a huge positive cash flow (profits)
o The corporation can milk the cash cow to fund new ventures and rising stars
• Ex…Crest toothpaste or Coca-Cola
• NEW VENTURES = new business with high potential growth but little market share
o Requires a large amount of cash (CASH HOGS)
o Manager here must decide whether to commit financial resources to these or not (risky situation)
o When market share increases rapidly, the business is a prize heifer and will become a star
• If market share stays low, its’ a problem child
o Under ideal conditions, the prize heifer becomes a star, and eventually a cash cow
• Under poor conditions, a problem child becomes a dog
• Ex 1…in the early to mid 1990s was Proctor & Gamble’s fat substitute, Olestra
• Ex 2…today, Pioneer’s plasma television sets
• DOGS = SBU with a small share of a low growth market
o Not likely to be around very long
o Often unable to support themselves and are a cash drain on the organization’s other SBUs
o Ex…Montgomery Ward’s in the retail industry |
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Term
| 66. What business strategy is used for a Cash Cow? Star? Dog? New Venture? |
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Definition
• STARS = select growth strategy
• CASH COWS = select stable growth strategy or possibly in some instances a retrenchment strategy
• NEW VENTURES = if you believe that the new venture has a good chance of succeeding (becoming a prize heifer and then a star) select a growth strategy
o If you believe that a new venture does not stand a good chance of succeeding (becoming a dog is highly likely), then select a divestiture strategy or a retrenchment strategy
• DOGS = if it has positive cash flow (supports itself), then you may select a retrenchment strategy; if it is losing money, then get rid of it (divest) |
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Term
| 67. What is the basic idea behind Generic Strategies? What are the 3 strategies? |
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Definition
• Generic Strategies = can be applied to a wide variety of industries
o Porter believes that top managers should develop a feel for their industries and then define a competitive niche by adopting one of these three strategies
• Differentiation = involves developing an image of the organization’s product or service in such a way that customers view it as being different from all others
o The product/service can be differentiated in terms of quality, design, and future service, among others
o The rationale behind this strategy usually is that the organization can charge a higher price for their unique product
o Ex… Rolex watches and Mercedes automobiles
• Overall Cost Leadership = attempts to maximize sales by minimizing cost per unit and hence prices
o It tries to increase sales volume by charging lower prices
o It is achieved by increasing the operating efficiency (lowers costs) of the company so that profit margins are greater even at a lower price
o Ex… Wal-Mart, Super 8 motel, Hyundai, etc…
• Focus = involves an organization concentrating its attention on a specific segment of an overall market such as a customer group (teenagers or the elderly), a certain geographical location (the northeast or the deep south), or a specialized product line (running shoes)
o Organization that employs a focus strategy tries to serve the needs of its selected market segment more effectively or efficiently
o Focus strategy also entails an overall cost leadership or differentiation strategy
o Ex… regional foods (clam chowder in the Northeast, Bryan hot dogs in the South!), Toy ‘R Us, and Lady Foot Locker |
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Term
| 68. What is the basic idea behind the Adaptation model of strategy? |
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Definition
• In order to be effective, an organization’s strategy must be aligned with the environment or be congruent with the environment
• This process of alignment is based upon the top manager’s interpretation of the environment
• This interpretation forms the basis for the answers to three different questions…
o Entrepreneurial Question = How do we want to compete in the market? What type of product mix do we want to have? What type of market do we target?
o Engineering Question = How do we produce and distribute this product or service?
o Administrative Question = How do we design our organization to achieve the solutions to the above two questions? |
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Term
| 69. What is a Defender? Prospector? Analyzer? Reactor? When is a defender strategy the best? Prospector? Analyzer? Reactor? |
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Definition
• 4 Types of Strategy…
o Defender = mgt sees demand for their product as not growing (stable environment)
• ENTR = seal off market share (defend market share) through overall cost leadership (lower prices); Stable growth strategy
• ENG = efficient production (to lower cost per unit/price)
• ADMIN = tight control (stay within budget, a lot of cost controls, etc…); centralized decision making
o Analyzer = mgt sees environment as moderately changing
• ENTR = to defend market share with some products and innovate with other products
• Scan for new opportunities while protecting current position
• ENG = efficient production for some products and flexibility for new lines
• ADMIN = tight control over old lines and loose control for new lines
• Centralized decision making for old lines and decentralized for new lines
o Prospector = mgt sees environment as dynamic, growing
• ENTR = find and exploit new markets (prospect)
• Scan the environment constantly for new opportunities
• ENG = flexible production
• Don’t get tied to one technology or invest heavily into a certain production system
• ADMIN = loose control to encourage innovation, coordination, and creativity
• Decentralized decision making
o Reactor = worst strategy
• Reacts to environment/No set strategy
• Therefore, no set production process or organizational design
• Answers to the three questions always changing…INEFFICIENT
• Each strategy (except for reactor) is best when it’s congruent with the environment
o Defender = best (worst) when the environment is stable (dynamic)
o Analyzer = best when it’s intermediate in terms of change
o Prospector = best (worst) when it’s dynamic (stable)
o Reactor = always worst |
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