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Mgmt. Midterm 2
Intro to Management Exam 2
| Question | Answer |
|---|---|
| Control | consists of monitoring performance, comparing it with goals, and taking corrective action as needed |
| The purpose of control: | to make sure that performance meets objectives |
| Control helps an organization... | 1. adapt to change & uncertainty 2. discover irregularities & errors 3. reduce costs, increase productivity, or add value 4. detect opportunities 5. provide performance feedback 6. decentralize decision making & facilitate teamwork |
| Step 1 of the Control Process | Establish standards |
| Step 2 of the Control Process | Measure performance |
| Step 3 of the Control Process | Compare performance to standards |
| Step 4 of the Control Process | Take corrective action, if necessary |
| control standard ("performance standard" or just "standard") | is the desired performance level of a given goal (objective) |
| By measuring performance, we want to observe: | “what is the actual outcome we got?" |
| Sources of performance data: | 1. Employee behavior and deliverables (are employees achieving their objectives?) 2. Peer input or observations 3. Customer feedback 4. Managerial observations 5. Output from a production process |
| Control charts | are a visual statistical tool used for quality control purposes |
| Management by exception | a control principle that states that managers should be informed of a situation only if data show a significant deviation from standards |
| After comparing performance to standards, there are three possible courses of action: | 1. Make no changes 2. Recognize and reinforce positive performance 3. Take action to correct negative performance |
| Concurrent control: | entails collecting performance information in real time |
| Feedback control: | amounts to collecting performance information after a task or project is done |
| Feedforward control: | focuses on preventing future problems |
| Balanced Scorecard (”BSC”) | a form of control; it provides top managers a fast but comprehensive view of the organization |
| The balanced scorecard uses four indicators: | 1. Financial metrics. 2. Customer metrics (customer satisfaction and retention) 3. Internal business process metrics 4. Innovation and learning metrics |
| The balanced scorecard establishes _____ , and ____________ according to these four perspectives | goals; performance measures |
| We can create BSC standards for the Financial Perspective by finding measures of performance from the following: | - Budgets - Financial statements (balance sheet and income statement) - Financial ratios |
| Budget | a formal financial projection |
| Fixed budget (also known as a static budget) | is a projection in which resources are allocated on a single estimate of costs |
| Variable budget (also known as a flexible budget) | allocates resources in proportion with various levels of activity |
| Financial statement | summary of some aspect of an organization’s financial status |
| Balance sheet | summarizes an organization’s overall financial worth – that is, assets and liabilities – at a specific point in time |
| Income statement | summarizes an organization’s financial results – revenues and expenses – over a period of time, such as a year |
| Financial ratios | indicators determined from a company’s financial information and used for comparison purposes. |
| Customer satisfaction | is the measure of how products or services provided by a firm meet customer expectations |
| Customer retention | refers to the actions companies take to reduce customer defections |
| Benchmarking | a process by which a company compares its performance to others |
| Best practices | refers to a set of guidelines, ethics, or ideas that have been shown to produce optimal results |
| Productivity | outputs (all goods and services produced) divided by inputs (includes labor, capital, materials, and energy) for a specified period of time |
| Effectiveness | measures typically look at the outputs (or outcomes) of a business process (can measure either Quality or Quantity) |
| Efficiency | means that we are minimizing the time, cost, and resources associated with achieving our goals |
| “Effectiveness” focuses on | outcomes |
| “Efficiency” focuses on | inputs |
| BSC measures and standards related to the Internal Business Perspective | include productivity, efficiency, and effectiveness |
| BSC measures related to the Innovation and Learning Perspective include: | – Number of new patents awarded in a year – Number of new product or service introductions – Number or magnitude of employee training programs – Measures of employee attitudes or culture through surveys – Employee turnover |
| Total quality management (TQM) | defined as a comprehensive approach – led by top management and supported throughout the organization – dedicated to continuous quality improvement, training, and customer satisfaction |
| Two core principles of TQM: | people orientation and improvement orientation |
| People orientation | everyone involved with the organization should focus on delivering value to customers |
| Improvement orientation | everyone should work on continuously improving the work processes |
| Quality | refers to the total ability of a product or service to meet customer needs |
| Quality control | is defined as the strategy for minimizing errors by managing each stage of production |
| Quality assurance | focuses on the performance of workers, urging employees to strive for “zero defects.” |
| Deming Management | W. Edwards Deming proposed ideas for making organizations more responsive, more democratic, and less wasteful |
| PDCA Cycle | Plan-Do-Check-Act |
| People Orientation of TQM | • Delivering customer value is most important • People will focus if given empowerment • TQM requires training, teamwork, and cross-functional efforts |
| Continuous improvement | is defined as ongoing, small, incremental improvements in all parts of an organization |
| Kaizen | a Japanese philosophy of small continuous improvement that seeks to involve everyone at every level of the organization in the process of identifying opportunities and implementing and testing solutions |
| Outsourcing | is the subcontracting of services and operations to an outside vendor |
| Reduced cycle time | is a reduction in the number steps in a work process |
| Statistical process control | a statistical technique that uses periodic random samples from production runs to see if quality is being maintained within a standard range of acceptability |
| Six sigma | a rigorous statistical analysis process that reduces defects in manufacturing and service-related processes |
| Lean six sigma | focuses on problem solving and performance improvement of a well-defined project |
| ISO 9000 series | consists of quality-control procedures companies must install – from purchasing to manufacturing to inventory to shipping – that can be audited by independent quality-control experts, or “registrars” |
| ISO 14000 series | extends the concept of ISO 9000 series, identifying standards for environmental performance |
| Reactive change | making changes in response to problems or opportunities as they arise |
| Proactive change (or planned change) | involves making carefully-thought-out changes in anticipation of possible or expected problems or opportunities |
| Outside forces for change | - demographic characteristics - technological advancements - shareholder, customer, & market changes - social & political pressures |
| Inside forces for change | - human resources concerns - managers' behavior |
| Adaptive change | Reintroduction of a familiar practice |
| Innovative change | Introduction of a practice that is new to the organization |
| Radically innovative change | Involves introducing a practice that is new to the industry |
| Lewin's Change Model | Unfreezing (create the motivation to change) ---> Changing (new information, models, & procedures) ---> Refreezing (support & reinforce the change) |
| Systems Approach to Change | 1. Analyze inputs 2. Target elements of change 3. Determine outputs |
| Readiness for change | defined as the beliefs, attitudes, and intentions of the organization’s staff regarding the extent of changes needed and how willing and able they are to implement them |
| Force field analysis | is a technique to determine which forces could facilitate proposed change and which forces could act against it |
| Organization development (OD) | is a set of techniques for implementing planned change to make people and organizations more effective |
| Change agent | is a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways |
| How Organizational Development Works | 1. Diagnosis 2. Intervention 3. Evaluation 4. Feedback |
| Resistance to change | is an emotional/behavioral response to real or imagined threat to an established work routine |
| Invention | the creation of a novel and useful idea |
| Innovation | the act of introducing novel and useful ideas into value-creating new products, new services, or new processes |
| Commercialize | to manage in such a way as to achieve a profit |
| New Product Development Strategy: | 1. Maximize the fit of the new product with customer requirements 2. Minimize the development cycle time 3. Control development costs and achieve a high Return on Invested Capital (ROIC) |
| A “sequential” process is one in which... | each step must be completed before the next step is started |
| A “parallel” process is one in which... | many steps are performed simultaneously |
| ROIC (Return on Invested Capital) on Innovation | is a common measure used to control development because it relates: (1) profits to (2) required investments and expenditures |
| ROIC on Innovation = | (Total Profits from New Products) / (Total Investments and Expenditures for New Products) |
| Stage Gate Process for Product Development | Stage: deliverables, criteria, outputs Gate: Go, Kill, Hold, or Recycle |
| economies of scale | the reduction in unit costs that results from being able to spread fixed costs over a greater volume of sales |
| market power | the ability to influence the market level of prices charged to customers, or market prices paid to suppliers |
| diseconomies of scale | an increase in unit costs associated with greater revenue |
| Penetration Strategies | intended to encourage current customers to buy more of a firm’s existing products |
| Product Development Strategies | developing and selling new products to current customers |
| Market Development Strategies | selling the firm’s existing products to new groups of customers (i.e. new markets) |
| Diversification Strategies | selling new products to new groups of customers (new markets) ---> relies on new product development and marketing |
| New Geographic Market | selling the existing product in a new location |
| New Demographic Market | selling to a new type of customer, as described by such demographic characteristics as income, age, education level, gender, etc |
| New Product Use | finding new ways for customers to use an existing product |
| Related Diversification | which refers to an expansion into new markets or product capabilities similar to the firm’s current core business |
| Unrelated Diversification | refers to expansion into dissimilar markets or products |
| resource | a productive input or competitive asset that is owned or controlled by the firm |
| capability (or competence) | the capacity of a firm to perform some internal activity competently |
| Organic Growth | is to grow a business by increasing its output, by developing new products or by developing new markets using its own (or internally-generated) resources without resorting to acquiring other firms |
| Cooperative Strategy | a means by which firms collaborate for the purpose of working together to achieve a shared objective |
| Strategic Alliance | firms combine some of their resources and capabilities for the purpose of creating a competitive advantage |
| Equity Strategic Alliance | an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities for the purpose of creating a competitive advantage |
| Nonequity Strategic Alliance | an alliance in which two or more firms develop a contractual relationship to share some of their resources and capabilities for the purpose of creating a competitive advantage |
| Franchising | a strategy in which a firm uses a a contractual relationship to describe and control the sharing of its resources and capabilities with its partners |
| Franchise | a contractual agreement between two legally independent entities whereby the franchisor grants the right to the franchisee to sell the franchisor’s product or do business under its trademarks in a given location for a specified period of time |
| Two approaches to managing cooperative strategies are: | cost minimization and opportunity maximization |
| Cost minimization | – The firm develops formal contracts with its partners – The contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled – Goals: to minimize costs and prevent opportunistic behavior by the partner |
| Opportunity maximization | – Intended to maximize value-creating opportunities by sharing of ideas and resources – Less formal contracts and fewer constraints on partners’ behaviors – Based on values of trust, respect, and transparency (open and truthful sharing of information) |
| Globalization | the trend of the world economy toward becoming a more interdependent system |
| Globalization has been supported by three important trends: | 1. The rise of the global village and electronic commerce (e-commerce) 2. The world is becoming one market instead of many national ones 3. The rise of both megafirms and Internet-enabled minifirms worldwide |
| global village | refers to the shrinking of time and space as air travel and the electronic media have made it easier for the people around the globe to communicate with one another |
| E-commerce (or electronic commerce) | refers to the shrinking of time and space as air travel and the electronic media have made it easier for the people around the globe to communicate with one another |
| global economy | refers to the increasing tendency of the economies of the world to interact with one another as one market instead of many national markets |
| multinational corporation (or multinational enterprise) | a business firm with operations in several countries |
| multinational organization | is a nonprofit organization with operations in several countries |
| Ethnocentric managers | believe that their native country, culture, language, and behavior are superior to all others |
| Parochialism | a narrow view in which people see things solely through their own perspective |
| Polycentric managers | take the view that native managers in the foreign offices best understand native personnel and practices, and so every home office should leave them alone |
| Geocentric managers | accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective |
| Outsourcing | using suppliers outside the company to provide goods and service |
| Global outsourcing (or offshoring) | defined as using suppliers outside the United States to provide labor, goods, or services |
| importing | a company buys goods outside its country and resells them domestically |
| exporting | a company produces goods domestically and sells them outside its home country |
| Countertrading | consists of bartering goods for services |
| licensing | a company allows a foreign company to pay it a fee to make or distribute the first company’s product or service |
| Global franchising | a form of licensing in which a company allows a foreign company to pay it a fee and a share of the profit in return for using the company’s brand name and a package of materials and services |
| joint venture | a way for a company to form a strategic alliance with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country |
| wholly owned subsidiary | a foreign subsidiary that is totally owned and controlled by an organization |
| greenfield venture | a foreign subsidiary that the owning organization has built from scratch |
| Free trade | the movement of goods and services among nations without political or economic obstruction |
| Trade protectionism | the use of government regulations to limit the import of goods and services |
| Tariff | a trade barrier in the form of customs duty, or tax, levied mainly on imports |
| Revenue tariff | designed simply to raise money for the government |
| Protective tariff | intended to raise the price of imported goods to make the prices of domestic products more competitive |
| Import quota | a trade barrier in the form of a limit on the numbers of a product that can be imported |
| dumping | the practice of a foreign company exporting products abroad at a lower price than the price in the home market – or even below the cost of production – in order to drive down the price of the domestic product |
| Embargoes | Complete bans on trade between one country and another |
| Sanctions | A trade prohibition on certain types of products or services for a specific reason (for example, nuclear proliferation) |
| Organizations Promoting International Trade | - World Trade Organization (WTO) - The World Bank - International Monetary Fund (IMF) |
| World Trade Organization | Designed to monitor and enforce trade agreements |
| The World Bank | purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunications |
| International Monetary Fund (IMF) | Designed to assist in smoothing the flow of money between nations |
| trading bloc (also known as an economic community) | a group of nations within a geographic region that have agreed to remove trade barriers with one another |
| USMCA (U.S. – Mexico – Canada Agreement): | allows for freer flow of goods, services, and capital among the U.S., Mexico, and Canada. (USMCA replaced the similar NAFTA agreement in 2020) |
| EU (European Union): | 28 “borderless” trading partners in Europe – or 27 with “Brexit” (Britain’s exit) |
| APEC (Asia-Pacific Economic Cooperation): | group of 21 Pacific Rim countries, most with a Pacific coastline (U.S., Canada, China) |
| ASEAN (Association of Southeast Asian Nations): | trading bloc of 10 countries in Southeast Asia |
| Mercosur: | largest trading bloc in Latin America |
| CAFTA-DR (Central America Free Trade Agreement): | Central America, including the Dominican Republic |
| Trans-Pacific Partnership (TPP) | Trade agreement among 11 Pacific Rim countries. |
| culture | the shared set of beliefs, values, knowledge, and patterns of behavior common to a group of people |
| Low-context culture | shared meanings are primarily derived from written and spoken words (U.S., Great Britain, Scandinavia, Germany) |
| High-context culture | a culture in which people rely heavily on situational cues for meaning when communicating with others (China, Korea, Japan, Mexico, many Arab cultures) |
| The GLOBE Project | is a massive and ongoing cross-cultural investigation of nine cultural dimensions involved in leadership and organizational processes started by professor Robert J. House |
| Power distance | The degree to which a society’s members expect power to be unequally shared |
| Uncertainty avoidance | The extent to which a society relies on social norms and procedures to alleviate the unpredictability of future events |
| Institutional collectivism | The extent to which individuals are encouraged and rewarded for loyalty to the group as opposed to pursuing individual goals |
| In-group collectivism | The extent to which people should take pride in being members of their family, circle of close friends, and their work organization |
| Gender egalitarianism | The extent to which a society should minimize gender discrimination and inequalities |
| Assertiveness | The extent to which a society expects people to be confrontational and competitive as opposed to tender and modest |
| Future orientation | The extent to which a society encourages investment in the future, as by planning and saving |
| Performance orientation | The extent to which society encourages and rewards its members for performance improvement and excellence |
| Humane orientation | The degree to which individuals are encouraged to be altruistic, caring, kind, generous, and fair |
| Time orientation: | A preference for doing one thing at a time is “monochronic”. A preference for doing more than one thing at a time is termed “polychronic” |
| Expropriation | is defined as a government’s seizure of a domestic or foreign company’s assets |
| Foreign Corrupt Practices Act | makes it illegal for employees of U.S. companies to make “questionable” or “dubious” contributions to political decision makers in foreign nations |
| Expatriates | people living or working in a foreign country |
| Triple bottom line: | represents people, planet, and profit (the 3 Ps) |
| The triple bottom line measures an organization's: | social, environmental, and financial performance |
| Success can be measured through a social audit | A systematic assessment of a company’s performance in implementing socially responsible programs, often based on predefined goals |
| Stakeholders | consist of the people whose interests are affected by an organization’s activities |
| Internal Stakeholders | - Internal stakeholders (broad category): employees, owners, and the board of directors - Owners (internal stakeholder): all those who can claim the organization as their legal property - BOD (internal stakeholder): elected by the stockholders |
| External Stakeholders | - External stakeholders: People /groups in the organization’s external environment that are affected by it. - Task environment: 10 groups that present an organization w/ tasks - General: the macroenvironment (economic, technological, and sociocultural) |
| Ethics | are the standards of right and wrong that influence behavior |
| Ethical behavior | behavior that is accepted as “right” as opposed to “wrong” according to these standards |
| Ethical dilemma | a situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but that is unethical or even illegal |
| Values | the relatively permanent and deeply held underlying beliefs and attitudes that help determine a person’s behavior |
| Value system | is the pattern of values within an organization |
| Five Most Common Unethical Behaviors at Work | 1. Misusing company time 2. Abusive behavior 3. Employee theft 4. Workplace cheating |
| Workplace cheating | unethical acts that are intended to create an unfair advantage or help attain benefits that an employee would not otherwise be entitled to receive |
| Four Approaches to Resolving Ethical Dilemmas | 1. Utilitarian Approach 2. Individual Approach 3. Moral Rights Approach 4. Justice Approach |
| The Utilitarian Approach | - Guided by what will result in the greatest good for the greatest number of people - Typically this is evaluated using a cost-benefit analysis (financial analysis) |
| The Individual Approach | Guided by what will result in the individual’s long-term interests, which ultimately are in everyone’s self-interest |
| The Moral Rights Approach | - Guided by respect for the fundamental rights of human beings, such as those expressed in the U.S. Constitution’s Bill of Rights - Examples of fundamental rights: life, liberty, privacy, health, safety, and due process |
| The Justice Approach | - Guided by respect for impartial standards of fairness and equity. - Policies administered impartially and fairly, regardless of gender, age, sexual orientation, and the like |
| How Organizations Can Promote Ethics | 1. Create a strong ethical climate 2. Screen potential employees 3. Institute ethics codes and training programs 4. Reward ethical behavior and protect whistle-blowers |
| code of ethics | consists of a formal written set of ethical standards guiding an organization’s actions |
| whistle-blower | an employee, or even an outside consultant, who reports organizational misconduct to the public |
| Social responsibility | is a manager’s duty to take actions that will benefit the interests of society as well as of the organization |
| corporate social responsibility (CSR) | is view that corporations are expected to go above and beyond following the law and making a profit |
| Carroll’s Global Corporate Social Responsibility Pyramid | Economic Responsibility ---> Legal Responsibility ---> Ethical Responsibility ---> Philanthropic Responsibility |
| Sustainability | is economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs |
| Climate change | refers to major changes in temperature, precipitation, wind patterns, and similar matters occurring over several decades |
| Global warming | is one aspect of climate change. It refers to the rise in global average temperature near the Earth’s surface, caused mostly by increasing concentrations in the atmosphere of greenhouse gasses, such as carbon emissions from fossil fuels |
| Natural capital | is the value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on |
| angel investor | Wealthy individuals or retired executives who invest in small firms |
| corporation | An entity that is separate from its owners, meaning it has its own legal rights, independent of its owners—it can sue, be sued, own and sell property, and sell the rights of ownership in the form of stocks |
| crowd investing | Allows a group of people—the crowd—to invest in an entrepreneur or business online |
| entrepreneurship | The process of taking risks to try to create a new enterprise |
| intrapreneur | Someone who works inside an existing organization who sees an opportunity for a product or service and mobilizes the organization’s resources to try to realize it |
| limited liability company (LLC) | A hybrid structure that combines elements of sole proprietor, partnership, and corporation |
| partnership | A relationship between two or more persons who join to carry on a trade or business |
| patents | Licenses with which the government authorizes a person or company to exclude others from making using or selling an invention for a time |
| self-employment | A way of working for yourself as a freelancer or the owner of a business rather than for an employer |
| social entrepreneurship | Consists of improvising systems, devising new approaches, grasping opportunities others miss and generating solutions to change society for the better |
| sole proprietor | Someone who owns an unincorporated business by himself or herself |
| standard of living | Is the level of necessaries, comforts and luxuries that a person is accustomed to enjoy |
| start-up | Newly created company designed to grow fast |
| venture capitalists (VCs) | Those who exchange funds for an ownership share in the company |
| entrepreneur | Someone who sees a new opportunity for a product or service and launches a business to try to realize it |
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