MGM101 Test 3 notes

Planning Business Strategy Fundamental principals for long term success of an organization:

1. Ability to create a strategic direction and market position (strategic plan) 2. Ability to execute core tactical initiatives within plan

Strategies Customized for each business given market conditions and desired goals Understanding what opportunities exist in market place and which to

pursue “Where do we want to play?” “How do we plan to win?”

Core Elements For Assessing Strategy

1. Purpose Mission: organization’s purpose/reason for existence; company’s

broad goals Vision: a forward-thinking statement that defines what a company

wants to become and where it’s going 2. Markets

Markets the business sees itself competing in Harvesting: reducing focus in a certain market given perceived

weak future growth or profitability potential 3. Products & Services

Review of current and potential new products/services 4. Resources

Allocation of a business’s resources in support of strategic decisions

5. Business System Configuration Modifying infrastructure and system to ensure success of plan

6. Responsibility & Accountability Identifying key objectives to be achieved and who’s responsible

A business’s strategic plan is its roadmap to success

Defines specific route intended to take Provides benchmarks to measure success Identifies where and how business will interacts with customers in

meeting missions & vision

Strategic Planning Process Model

Steps associated with development of strategic plan: Revisit Purpose (Who are we? Where do we want to go?)

Assess fit of current mission and vision of organization Undertake Internal/External (I/E) Analysis to Understand Our Environment

Accessing business risk and change in o Macro-econ: Use PESTEL Analysis o Industry: Use Porter’s Five Forces o Competitor: Use SWOT (Strengths, Weaknesses, Opportunities,

Threats) o Company: Use SWOT and 3C (competencies, capabilities, capacity)

Analysis External:

o Focuses on understanding what is influencing markets today and what will influence them going forward

o Assessment of magnitude of change in a market arena & associated shifts in business risk

o Use PESTEL, Porter’s five forces, competitor SWOT Internal:

o Focuses on company competencies, resources, capacity & capabilities (3C analysis)

o Full internal audit o Company SWOT

Customer: o Changes in attitudes, behavior, needs

Assess our View of the World: Opportunities & Threats What are our options given what we know about customers, competitors,

overall environment and ourselves? Competitive advantage(s)?

Choose a direction Which opportunities make the most sense, given our market position,

resources, & environmental dynamics? What threats must we respond to?

Implement Strategy Develop plan Define key performance indicators for monitoring it Execute

Business Models PESTEL

Guides in developing understanding of macro-econ environment (political, economic, societal, technological, environmental, legal)

Porter’s Five Forces Guides in understanding dynamics of industry within which we compete

1. Intensity of rivalry 2. Threat of new entrants 3. Threat of new product/service substitutes 4. Power or control of supplies 5. Power or control of buyers

Types of Competition Guides in understanding nature of industry’s competitive landscape

o Perfect competition o Monopolistic competition o Oligopoly o Monopoly

SWOT Analysis Strengths, weaknesses, opportunities, threats Competitive SWOT: size up competition Company SWOT: define company’s SWOTs

3C Analysis Assessment of competencies, capabilities, and capacity with respect to

resources we possess Competitive Advantage Identification

Key outcome of I/E analysis Why a customer chooses to purchase your products over competitors’ Strategic

o “First mover” actions in marketplace- ability to see how organization change rules of game in market

Operational o Being more efficient and effective in transformation and marketing

processes (e.g. superior quality or customer support/response)

Strategy Development

Which opportunities to pursue and how resources will be allocated 1. Corporate Level Strategy

o Defines what the organization intends to accomplish and where it plans to compete (markets to focus on)

o High level strategy that guides organization’s overall activities o The “big picture”

2. Business Level Strategy o Defines how organization intends to accomplish corporate level

strategy o Outlines specific objectives for each of the organization’s identified

business initiatives/business units o Responds to questions of how to compete in chosen market

sectors 3. Operating Plan

o Defines detailed, immediate-term set of objectives and corresponding tactics designed to achieve a specific business initiative and business strategy

SME’S (Small and Medium-Size Enterprises)

Need to plan strategically is as important for small businesses as for major multinational organizations

NFPs (Not-for-Profit)

Must develop strategies and tactics that produce positive financial results otherwise they will not be able to sustain operations

Involves stronger inclusion of needs delivery based on collective interest and social goals

1. Mission Balance: Economic base versus social mission and goals 2. Vitality: Ability of NFP to grow and sustain its membership and donor

base 3. Collective Entrepreneurship: Ensuring involvement of community where

NFP is located and population it serves are reflected in strategy development and implementation

4. Rootedness: Ensuring NFP is interwoven into fabric of community it serves; strengthening partnerships and networks

5. Operational Effectiveness: Operating in manner that demonstrates NFP’s products/services are priced to ensure accessibility for its target social audience; provide support for those who are in need but unable to pay

Successful business, one common denominator:

Take time to plan how business will be positioned in market place What markets it will serve Execute critical components of strategy better than competitors

Successful businessperson

Knows their competitive advantages Knows how to leverage them to ensure business is “best of breed”

Successful Strategy

Properly assesses external environment Defines changes and opportunities within markets the organization

intends to serve Effectively allocates resources and maximizes capabilities

Organizing and Human Resources Primary Management Decision- How to organize work

How do we divide tasks into jobs? How do we coordinate the work and link jobs? Through division and integration

Organization architecture: totality of a firm’s organization

Formal organization structure o Location of decision-making responsibilities in firm o Formal division of organization into subunits o Establishment of integrating mechanisms to coordinate activities

of subunits Control systems

o Metrics used to measure performance of subunits; judge how well mangers are running units

Incentive systems o Devices used to encourage desired employee behavior

Organizational culture o Values and assumptions shared among employees of organization

People o Employees of organization o Strategy used to recruit, compensate, motivate, and retain

individuals o Type of people they are in terms of skills, values, and orientation

Designing Structure

Vertical differentiation o Location of decision-making responsibilities within structure o Centralization or decentralization?

Centralization: concentration of decision-making authority at high level in management hierarchy 1. Facilitates coordination 2. Ensures decisions are consistent with organizational

objectives 3. Avoid duplication of activities by various subunits 4. Can give top-level managers the means to bring out

needed major organizational changes Decentralization: decision-making authority in lower level

managers or other employees 1. Top management can become overburdened when

decision-making authority is centralized 2. Motivational research favors decentralization- people

like freedom and control over their work 3. Greater flexibility- more rapid response to

environmental changes 4. Can result in better decisions (e.g. doesn’t make sense of

CEO in U.S. to make decisions for branch in Germany) 5. Increase control

o Layer in a hierarchy: Tall or flat?

Tall: many layers and narrows spans of control (usually expanding firms)

Disadvantages: o Lowers organizational efficiency and

effectiveness o Tendency for information to get “accidentally

distorted” or “deliberately” (influence costs) as it passes through layers

o Expensive- salaries of multiple managers Flat: few layers and wide spans of control (usually new

firms) Horizontal differentiation: Formal division of organization into subunits

o Functional Structure: Structure that follows obvious division of labor within firm, w/different function focusing on different tasks

o Multidivisional Structure: Structure in which firm is divided into different division, each of which is responsible of a distinct business area

o Geographic Structure: structure in which a firm is divided into different units on basis of geography

o Matrix Structure: organization with two overlapping hierarchies

Decentralization of

decisions to a

subunit …

Increases

responsibility

…

Which

increases

accountability

Thereby

enhancing

control.

Formal Integrating mechanisms o Mechanisms for coordinating subunits

• High need for coordination • Firms that face an uncertain and highly turbulent competitive

environment • Rapid adaptation to changing market conditions is required for

survival. • Low need for coordination:

• Firm is based in a stable environment characterized by little or no change

• If developing new products is not a central aspect of firm’s business strategy

Informal Integrating Mechanisms Knowledge network: organization structure based on informal contacts

Human Resource Management Determine HR Needs

1. Prepare HR inventory of organization’s employees • Age, names, education, capabilities, trainings...

2. Prepare job analysis • Job analysis: What is done by employees who hold various job

titles • Job description: specifies objectives, type of work, responsibilities

of the job

• Job specifications: summary of minimum qualifications of worker 3. Assess future human resources demand

• Training programs • Ensures trained people are available when needed

4. Assess future HR supply • Shortages and oversupply caused by changes in technology and

shifts in society 5. Establish strategic plan

• Recruitment, selection, training, development, evaluation… Training and Developing Employees Employee orientation: introduces new employees to organization, fellow organization, and supervisors; to policies, practices, values and objectives of firm On-the-job training: training in which employee immediately begins his/her task and learns by doing and watching right at the work place Apprentice programs: training program involving period during which learner works alongside experience employee Off-the-job training: training that occurs away from workplace; consists of internal or external programs to develop variety of skills to foster personal development Online training: training programs where employees “attend” classes online Vestibule training: training done in schools where employees are taught on equipment similar to those used on the job Job simulation: use of equipment that duplicates job conditions and tasks before attempting them on the job Management Development On the job coaching: assisting lower level manager by teaching them skills and providing direction, advice and feedback Understudy positions: “undersecretary”, “assistant”- develop selected employees until they’re ready to be managers Job rotations: learn about different functions of organization; gain broad picture of organization Off-the-job courses and training: periodically going to schools, seminars to help develop skills Empowering Workers Enabling: giving workers the education and tools they need to make decisions

Networking: Process of establishing and maintaining contacts with key mangers in own organization and other organizations and forming informal development systems Mentor: experienced employee who supervises, coaches, and guides lower-level employees by introducing them to right people Evaluating Employee Performance Performance appraisal: evaluations in which performance levels of employees are measure against establish standards to make decisions about promotions, compensation, additional training, or firing

1. Establish Performance Standards • Must be understandable, subject to measure, reasonable • Must be accepted by both manager and subordinate

2. Communicating Standards • Employees must be clearly and precisely told of standards and

expectations and how they are to be met 3. Evaluating Performance

• See if employee’s behavior matches standards 4. Discuss Results 5. Take Corrective Action

• Provide feed back 6. Use results to make decisions

• Promotions, compensation, additional training, firing? Compensating Employees - Attract people needed by organization and in sufficient numbers - Provides incentives to work efficiently and productively - Keep valued employees from leaving to competitors or starting competing firms - Provide employees with sense of financial security through insurance and retirement benefits Pay Equity: equal pay for work of equal value (male vs. female) -On average, women get paid less than men. Scheduling Employees

• Flextime plans: gives employees some freedom to choose when to work as long as they work required number of hours

• Compressed workweek: allows an employee to work a full number of hours per week but in fewer days

• Telework (Telecommuting): when workers work away from normal play of business

• Job-sharing plans: arrangement where two part-time employees share one full-time job

Career Management

• Promoting and Reassigning Employees • Allow employees to develop/ display new skills and learn more

about company overall

• Motivates experienced employees to remain in company • Terminating Employees

• Downsize, restructuring company • Global competition and shifts in technology

• Retiring Employees • Offer early retirement benefits (entice older workers to retire) • Increases promotion opportunities for younger employees

• Losing Employees • Employees pursuing opportunities elsewhere • Learn why people leave can help prevent it from occurring in the

future Human Resource Legislation (Laws affecting Human Resources Management)

• The Human Rights Act: equal employment opportunities without regard to people’s race, national/ethnic origin, color, religion, age, sex, sexual orientation, marital status, family status, disability, or conviction for offense which a pardon has been granted

• Federal government jurisdictions: banks, insurance companies, airlines, railways, shipping companies, telephone, radio, TV, cable companies…

• Province jurisdictions: employment standards (minimum wage, hours of work, over time, statutory holidays, parental leave, employment of people under 18…)

Leadership Leaders

“Doing the right things” Focus on vision, mission, and goals

Managers “Doing things right” Focuses on preserving the status quo

What Makes Leaders Great?

1. Self-awareness 2. Personal conviction 3. Courage 4. Creativity 5. Curiosity 6. Ability to inspire 7. Ability to listen 8. Eagerness to experience 9. Willingness to reflect

Perspectives on Leadership Competency Perspective: traits that can be acquired through learning

Emotional intelligence o Self-awareness o Self-regulation o Empathy o Social skills o Motivation

Strategic thinking Achievement motivation Charisma Power motivation Limitations & Implications Not all traits are equally important Not all great leaders demonstrate all traits Importance of traits is context dependent

Behavior Perspective Assumption: certain leadership behaviors result in greater commitment on the part of subordinates and hence higher performance in pursuit of organization goals People-oriented behavior: leadership style that includes showing mutual trust and respect for subordinates, demonstrating genuine concern for their needs Task-oriented behavior: style of leaders who assign employees to specific tasks, clarify their work duties and procedures, ensure they follow company rules, and push them to reach performance capacity

Contingency Perspective: Fiedler’s Leadership Theory: based on assumption that leadership style can’t be changed Contingencies (factors that may affect leadership)

Leader-member relations Task structure Position power

Weaknesses of theory Simplistic Classification into two broad types (people-oriented/task-oriented)

seems an unwarranted generalization Some leaders can exhibit both people-oriented & task-oriented characters Assumes leaders can’t change their style

Path-Goal Theory: based on assumption that leadership style can be changed

Effective leadership: Clarifying and clearing path; identifying and offering rewards Leadership styles:

1. Directive leadership If task of subordinates is ambiguous Helps clarify path subordinates must follow

2. Supportive leadership If followers lack confidence Help increase subordinates’ confidence

3. Participative leadership Allows leader to clarify needs of subordinates and change rewards

to improve performance 4. Achievement-oriented leadership

If task of subordinates is standardized and dull

Can motivate subordinates by setting high goals and expressing confidence in their abilities

Limitations of theory Assumption that leader can adopt only one style at a time Doesn’t explain what is required for effective leadership Narrow definition of leadership effectiveness Other potentially important factors of leadership process are ignored Provides only partial definition

Transformational Leadership: agents of strategic and organizational change

Reenergize troubled organizations, pushes them in new strategic directions

Transformational Leader:

Envisioning a new future Communicating persistently Modeling desired behaviors Empowering employees Meaningful changes in strategy and organization Leading with integrity Creating an enduring organization

Gender Differences in leadership Women

More people-oriented, participative leadership More relationship-oriented, cooperative, nurturing, and emotional in

leadership roles -However, men and women do not differ in task-oriented or people-oriented leadership