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105 Cards in this Set

  • Front
  • Back
Define Planning
A decision making process that focuses on the future of the organization and how it will get there
Define Objectives
end states or targets for which organizational managers aim

End Goals
Plans
the means by which managers hope to hit desired targets
5 benefits of planning leading to____
Improved...
1. focus and flexibility
2. action orientation
3. coordination
4. time management
5. control

All of which lead to improved performance and productivity
Types of plans (3)
strategic
tactical
operational
Strategic plans (3 points)
focus on the broad future of the organization

Based on environmental analyses

Cover all major staff and operational areas of an organization
Tactical plans (3 points)
translate strategic plans into specific goals to be be met by specific parts of the company

shorter time frame and narrower range than strategic plans

generally applied to each single business unit
Operational plans
translate tactical plans into specific goals for individual units withing business unit

short term

narrow focus )just one department
Organizational levels
Corporate level: strategic planning

Business level: tactical panning

Functional level: operational planning
Corporate level
plans overall direction of company

answer questions for
1. which industries should we be in
2. resource allocation across SBUs
3. international presence (which countries and what markets should the firm be in_
Business level
Each unit is interested in how it can best compet with other organizations in its industry

Answer questiosn concerning
1. who are our competitors
2. what are our strengths and weaknesses
3. what do our customers like and want
Functional Level
individual department, regional or product managers plan how to acheive the aims of the SBU

These managers oversee the implementation of these plans and have responsibility for them

Q:
1. what info do we need
2. what activities must we perform to meet expectations
3. what are our strengths and weaknesses
The Planning Process (5 parts)
1. Analyze the environment

2. set objectives

3. develop action plans

4. implement plans

5. monitor and evaluate outcomes
Environmental analysis

Two types
Type one (general big picture)
1. step analysis
2. five forces analysis
3. SWOT
4. scenario planning

Type 2 (more specific, in response to big picture)
1. Forecasting
2. benchmarking
3. contingency planning
Setting Objectives
Priorize
1. important so that resources are allocated systematically rather than randomly
2. assures agreement with and understading of organizational priorities

set criteria for measuring results: this is important for later control process

Determine needed and available resources
Developing action plans
Sequence

Timing
-gantt and pert charts
-computer planning tools

Accountability
Implementing plans and monitoring outcomes
Feedback occurs at all points in the process but is particularly importnt in these stages

no matter how good your plan is, it can fail if not implemented right
Decision making
The first criteria for good decision making is good information
-timely
-high quality
-complete
-relevant
-easily understood
Effective managers (part 1)
1. Able to collect and analyze information
-keep current information on technology
-recognize need for high quality information

2. capable of both systematic and intuitive thinking

3. Problem seekers rather than problem solvers
Effective managers (part 2)
4. Understand the advantages and disadvantages of group decision making

5. understand, recognize and avoid or correct for decision biases
ex. Escalation and groupthink
Rational Decision making model (definitions and origin)
from economics

basic assumption: people are rational, logical, organized and have goals for each situations
Rational Decision Making Model Steps
1. Identify the problem

2. Develop key objectives and criteria

3. generate alternatives

4 analyze alternatives

5. select best solution

6. implement the decision

7. Monitor and evaluate results
Decision making
The first criteria for good decision making is good information
-timely
-high quality
-complete
-relevant
-easily understood
Effective managers (part 1)
1. Able to collect and analyze information
-keep current information on technology
-recognize need for high quality information

2. capable of both systematic and intuitive thinking

3. Problem seekers rather than problem solvers
Effective managers (part 2)
4. Understand the advantages and disadvantages of group decision making

5. understand, recognize and avoid or correct for decision biases
ex. Escalation and groupthink
Rational Decision making model (definitions and origin)
from economics

basic assumption: people are rational, logical, organized and have goals for each situations
Rational Decision Making Model Steps
1. Identify the problem

2. Develop key objectives and criteria

3. generate alternatives

4 analyze alternatives

5. select best solution

6. implement the decision

7. Monitor and evaluate results
Programmed Decisions
problem is simple routine, well defined and clearly understood

high levels of certainty in both formulation and problem solution

frequently can be solved by referring to rules and regulations (SOPs)
Non programmed decisions (and crisis decisions)
problems are poorly defined or new

no clear alternatives

past experience is not helpful

high levels of risk uncertainty
Three influences on decision making
individual
--knowledge, ability and motivation

problem:
--unfamiliarity, ambiguity, complexity, instability

Situation
--irreversibility, significance, accountability, time and money constraints
Advantages of group decision making
1. Larger knowledge base

2. Broader perspectives and can consider more alternatives

3. Individuals are more likely to support decisions made by a group they participated in
Disadvantages of group decision making
1. Groups work slower

2. often less than optimal comprimizes

3. can be dominated by single person/clique

4. managers may be too relient on group decision
Successful decision makers
Actually think fast

use real-time information

shortcut the time needed to make decisions
1. examine many alternatives simultaneously
2. acheive concensus during, rather than after decision process
3. plan implementation during decision making process
4. Have the confidence to act
5. smooth group processes
--two tiered
Groupthink
a mode of thinking in which pursuit of agreement among members becomes so dominant it overrides a realistic appraisal of alternative courses of action

pursuit of agreement

Occurs when groups are highly cohesive, insulated from outside information, leader focused

may feel illusions of invulnerability, morality, unamity

self-censorship, pressure for conformity, stereotyping of outsiders
Groupthink leads to
limited search for information

limited analysis of alternatives

rejection of expert opinions

few, if any, contingency plans
How to overcome groupthink
use more than one group to examine a problem

use outside experts

use devil's advocates

train decision makers in causes and consequences of groupthink
Escalation of commitment
occurs when a decision maker continues to invest resources well beyond the point at which a rational decision maker would have pulled the plug
Factors contributing to escalation behavior
retrospective rationality

norm for consistency

prospective rationality
How to improve decision making
be aware of personal style

recognize decision making biases

increase knowledge base

be flexible (build it into decision plan)

be creative
develop alternative solutions
--brainstorming
--nominal group techniques
--delphi technique
--+variation: computer posting
The Control Function
the regulation of activities and behaviors within organizations

a means of a acheiving a goal, not the goal itself

follows planning, organizing and leading in application, but must be planned for early on in other processses
The control process 4 parts
1. Establish objectives and standards

2. Measure actual performance

3. compare performance results against standards

4. Evaluate results and adjust as necessary
Strategic controls
how the org as a whole fits in with environment

dificult to do in uncertain environments
Tactical controls
assess the day to day function of the units of the org in achievement of strategy

include financial, budgetary, supervisory and hr controls
Operational Controls
asess and regulate specific activivies and methods used to produce goods and services
Types of operational controls
Precontrol (feed forward, preliminary_
--used before production begins
--raw material quality control

Concurrent (steering) controls
--used to monitor ongoing work
--allow for correction before work is completed
--reduces waste

Postcontrol (feedback)
--suggest needed changes by examinig the final product outcomes
Effectiveness of control
Key factors in effectiveness of controls and their concerns

Focus of control
--what will be controlled
--who is responsible

Amount
--too much too little

Quality of information collected by the controls
--Is it:
----useful, accurate, timely, objective

Flexibility of Controls
--are the controls able to respond to varying conditions

Favorable Cost-benefit ratio
--is the information being gathered worth the cost of gathering it?

Source
--is control imposed by others
--is the control decided by those who are affected
Define: Operations management
methods used by managers to insure that the conversion of resources into end products and services is accomplished effectively and efficiently

efectively = job gets done
efficiently = job gets done well
4 goals of ops mgmt
1. Achieving the desired quality
2. producing the proper quantity
3. assuring timely availability for customers
4. maintaining cost efficientcy whil acheiving the first three
Define goal #1 (total quality management)
quality = fitness for use
-reliability
-durability
-serviceability/repairability

Higher quality leads to:
-lower repair and warranty costs
-higher customer satisfaction
-higher revenues
How to reach goal #1 (total quality management)
advocate attention of quality as the main management and organizational objective
--make part of org's culture

Empowerment is critical for success
--commitment of employees on all levels to search for ways to improve cust satisfaction through better quality

--quality at all stages of production

Main purpose is to identify the causes of poor performance and fix it

Uses process control charts
-figure out process acceptability boundaries
-take measurement
-fix any problems
What is the intent of goal 1?
intent is to examine the processes used in an oranization and redesign them to improve throughput (the transformation of raw materials into goods and services), and the collection of revenues

Increase Throughput
Continuous process improvement
objective: what should this process accomplish

design: how can we minimize the complexity of critical sequences in the process
capabilities: what skills are needed to manage and/or perform the process effectively?

Infrastructure: do we need to add or change any organizational infrastructure elements in order for the process to succeed?

metrics: what data is needed to measure and evaluate success

Evaluate at every step
Six Sigma (goal 1)
data driven approach

seeks 99.99966% reliability in production

purpose is to have virtually zero variability

can be applied to existing and new processes
What are two issues addressed in goal 2 -- Produce the proper quantity
1. Capacity Planning

2. Inventory control
Capacity Planning
1. Design capacity: the maximum amount of products or services that could be produced under ideal conditions

2. Effective capacity: the actual expected maximum amount the unit can be produced

EC = EC/DC
Isues that might affect needed capacity might include:
changes in supplier material availability

changing customer demand

changing customer desires

future growth plans for yoru company

layoffs

economic changes

technology changes
Inventory control -- Materials Requirement Planning
Materials requirement planning
--systematic computer programs used to optimize odering and routing of raw materials

--analysis is frequently done using:
++economic order quantity
++abc analysis
Inventory Control

--Economic Order Quantity
--ABC Analysis
Economic Order quantity
--what is the most economic amount of material to order?
++you want to order in bulk quantity only if the carrying costs are less than the amount you would be ordering sequentially

ABC analysis
--Classifies goods or serices by their value

--let's managers know which goods or services require the most attention
++you don't want to order too many of your most expensive items
++you don't want people stealing your most expensive items
Goal 3
Assure timely availability of your products and services

What percentages of customers will leave during a stockout and go to another store?

What percent of stockouts is based on poor inventory control
between 20 and 40 %

72%
Methods for managing inventory

Just-in -time systems
produce stock the product or service just when it is needed, no earlier, not later

reduces inventory carrying levels and costs

reduces labor and equitment time, thus reducing production costs

improves customer satisfaction, improving revenues through increased purchases
goal 3
methods for timing segments

Gantt charts

Pert/CPM
gantt charts: track elements in a project to insure there are no gaps or overlaps in a sequence of activities

Pert cpm
--method to determine the optimal order of the steps in a process

--adds the avility to determine which are the most important steps, where a timing error would be most costly
Goal 4 -- achieving cost efficiency

What is the issue for goal 4

How do you measure how well an organization used its resources
the issue is increasing productivity while reducing costs

measured by productivity
--outputs/inputs
++products made per hour
++customers served per hour
Goal 4

Word standard

how is it measured
work standard: how long a trained employee should take to complete a process or activity

measured by
time and motion studies (for standardized jobs

work sampling (for non-routine jobs)
What is the main focus of strategic planning?
the main focus of strategic panning is to identify, develop and hopefully maintain a Sustainable Competitive Advantage for your firm

SCA = the ability of a firm to win consistently over the long term in a competitive situation
5 elements of a sustainable competitive advanatage
1. Superiority: you must have a comparative advantage

2. inimitability : your compartitive advantage must be difficult for others to replicate

3. Durability: your comparative advantage must last a long time (brand image, patents, etc.)

4. Nonsubstitutability: your competition should not be able to substitute something else for your comparative advantage

5. Appropriability: your comparative advantage must provide for subnormal returns
4 opurtunities for competitive advantage
Cost and quality
--operating efficientcy; product/service quality

Knowledge and speed
--innovation, time to market

Barriers to entry
--protection against competition

Financial Resources
--investments
Vrio anaysis part one
Determine if your company has any comparative advantages over your competition in these areas:

1. human: employees and their skill
2. Physical: capital assets (plant equipment
3. Financial: cash reserves, borrowing capacity
4. Organizational: culture, leadership, reputation etc
Vrio analysis part 2

4 criteria
evaluate any comparative advantage using the four vrio criteria

1. Is the resource valuable
(does it help neutralize threats and exploit opurtunities

2. Is the resource rare?
(is it not widely owned in the industry?)

3. Is the resource inimitatable
(is it difficult to copy)

4. Is the resource exploited by the ORG?
(is the org taking full advantage of the resources that it owns?
The Industry's environment
Porter's five forces
competitive rivalry

threat of new entrants

threat of substitute products

power of the customers

power of the suppliers
Porter's five forces

Competitive Rivalry
What are the two basic type's of competition?
Price
-if prices drop faster than costs, industry profits fall (gas, wars, airlines)

-when costs drop faster than prices, price competition is not as damaging to the industry

-customers are price sensitive

-little profit per sale; lots of sales

Quality

-if the cost of adding additional features rises faster than the price, profits are hurt

-generally, this type of rivalry results in higher industry profits

-customer's don't usually care about price

-lots of profit per sale, few sales
Porter's five forces

Threat of new entrants
how likely is it that new companies will enter your industry and try to take your customers?

Factors taht limit entry include,

1. starting costs
2. switching costs
3. exit costs
Porter's five forces

Threat of substitute products
Competitive products -made within the industry

substitute products -- made in other industries that can take the place of yoru product

Industry boundaries make the differene
--in the sweetner industry, sugar, sweet n low and equal are all competitors

to the sugar industry: sweet n low and equal are substitutes
Porter's five forces

The power of customers
THIS IS AN ESTIMATE OF THE POWER HELD BY THE CUSTOMERS IN AN INDUSTRY

--Few or organized customers have power to dictate prices, quality, deliver schedules

--when customers have power, your profits are reduced
Porter's five forces

the power of suppliers
An estimate of the power held by the suppliers of the industry

--few or organized suppliers have power to dictate terms and prices of raw materials

--when suppliers have power, your profits are reduced
Higher profits come from...:
1. few competitors

2. quality based competition

3. high entry barriers

4. few new entrants

5. few substitutes

6. many customers

7. fragmented customers

8. many suppliers
Lower profits come from
1. price based competition

2. lowe entry barriers

3. many new entrants

4. many substitutes

5. few customers

6. united customers

7. few suppliers
The domestic Environment: Step analysis

Sociocultural factors
1. Demographics

2. societal values
The domestic Environment: Step analysis

Technological factors
1. product technology changes

2. process technology changes
The domestic Environment: Step analysis

Economic factors factors
current conditions

economic cycles

structural changes
The domestic Environment: Step analysis

Political and Legal factors
political
-government spending
++how much and in which industries
++effects of deficits on availability of money

Legal
--laws and regulations
++originate at all levels of government
The Global Environment: STEP +2:

Sociocultural Forces
1. Demographics: average age, birthrate, education levels

2. Cultural Issues: elder care, attitudes towards work and time
The Global Environment: STEP +2:

Technological Forces
1. new technology

2. Technology Transfer

3. Technological sophistication
The Global Environment: STEP +2:

Economic Forces
Interest Rates

Unemployment Rates

Inflation

Gross Domestic Product
The Global Environment: STEP +2:

Political and Legal Forces
Environmental laws

tariff regulation

taxes

foreign policy

Monetary and fiscal policies

industrial policies

social policies
Strategic Formulation
Firms seek to create competitive advantage through the adoption of an appropriate strategy

Strategies can be formulated at all three organizational levels
-corporate (what types of businesses should we be in)

--business how should we compete

--functional (what can this department do to help achieve the goals of the other levels
Corporate level strategies

Growth
Concentration

Diversification
--related diversification

--unrelated diversification

--vertical integration
++forward (distribution channels)
++backward (supplier channels)
Corporate level strategies

Retrenchment Strategies
Cooperative Strategies
Retrenchment Strategies
--liquidation

--divestiture

--restructuring
++downsizing

Cooperative Strategies
--joint ventures
--strategic alliances
++outsourcing
++supplier
++distribution

Cooperative Strategies
Porter's generic strategies
Cost Leadership

Differentiation

Focused Low Cost

Focused differentiation
Strategy Implementation

What are two things to be considered with any scheme?
considered
1. Is it good in itself
2. can it be easily put into practice

An average strategy superbly implemented is better than a great strategy poorly implemented
Strategy Implementation

McKinsey 7S model
A new strategy must fit with all elements of the organization

strategy, structure, shared values, systems, skills, style, staff
3 Elements of Organizational Structure

Summary
1. Differentiation / Integration

2. Formalization / Informalization

3. Centrilazation / decentrilization
3 Elements of Organizational Structure

Differentiation
The extent to which tasks are divided into sub-tasks and performed by individuals with specialized skills

Key benefit: greater specialization

questions: which activities should be divided and to what extent
4 types of differentiation
1. Task
--how tasks are broken down

2. Cognitive
--how people talk about things

3. Horizontal
--how many departments are there

4. Vertical
--how many layers of management there are
3 Elements of Organizational Structure

Integration
The degree to which various parts of the organization interact with each other and are interdependent

Key benefit: coordination between people and activities to meet organizational goals

Key Drivers of integration:
1. Interdependence
2. Uncertainty

Ways to accomplish integration
--rules
--goals
--values
Key reason for needing integration:

Interdependence
the degree to which one unit or one person depends on another unit or person in order to accomplish an assigned task
Two types of interdependence
Pooled interdependence

Sequential interdependence
Key reason for needing integration:

Uncertainty
the extent to which you can predict future needs for the organization

the greater the levels of uncertainty, the greater the need for effective and efficient integration
How to accomplish integration
Rules
--useful when tasks are independent

Goals
--helpful in uncertainty and interdependence increase
--specify quantitative outcomes

Values
--act as a unifier
--when there are high levels of uncertainty
--do no specify quantitative outcomes
--specify underlying objectives (ex. customer satisfaction
Formalization vs. informalization
variance as to the use of formal or defined structures and systems in decision making, communication and control
Formal organizations
< have a high level of reliance on:...

1. Chain of command
--trend is to shorter chains

2. Unity of
--trend is cross-functional teams, task forces, and horizontal structures thus fracturing unity of command

3. Specified spans of control
--trend is to widen spans of control
Centralization vs. Decentralization
Refers to the level at which decisions are made

1. Centralized: decision making restricted to a very fe individuals, usually high up in the org.

2. Decentralized decision making authority pushed down to the lowest possible level
Functional Structure
Environment:
1. small organiztions
2. stable, predictable environments

Advantage:
1. economies of scale
2. efficient use of resources
3. expertise leading to high quality of problem solving

Disadvantages
1. assigning accountability for cross-functional concerns such as containment quality
2. functional chimney problems (cognitive differentiation)
Holy shit... I'm not going to do it.... at least not now. These structure slides are too long to type out.
11. Structure of org
International Structures
Growth of an international organization

--domestic org with export department
--domestic org with international division
--advanced global structures based on the 6 basic structures
Globalization / Localization
Globalization:
--the need to integrate activities on a coordinated, worldwide basis

Localization
--the need to differentiate activities country by country