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Final exam Study Guide

by: Briana Notetaker

Final exam Study Guide Management 490

Briana Notetaker
GPA 2.7

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Business Strategy
Yin-Chi Liao
Study Guide
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This 11 page Study Guide was uploaded by Briana Notetaker on Friday April 1, 2016. The Study Guide belongs to Management 490 at Western Illinois University taught by Yin-Chi Liao in Winter 2016. Since its upload, it has received 16 views. For similar materials see Business Strategy in Business, management at Western Illinois University.


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Date Created: 04/01/16
MGT 490 Final Exam Chapter 9­12 Chapter 9. Strategic Control and Corporate Governance Strategic Control involves monitoring performance toward strategic goals and taking corrective  action when needed via effective systems Why do we need it? It permits specialization: achieve higher levels of productivity Facilitates coordination: links groups with systems of communication, decision making and  control Alleviates agencies problems: deploys incentives to align individual and firm goals Types of strategic control:  Informational control systems  Behavioral control systems  Corporate governance Informational control deals with both internal and external environment:  Focuses on constantly changing information: continuous monitoring, testing, review  Updates and challenges assumptions Behavioral Control influences the actions of employees via:  Culture  Rules  Rewards Boundaries of Behavioral Control can be useful  They are specific, measurable, achievable, yet challenging enough to motivate  Focuses individuals efforts on strategic priorities Improves efficiency:  Environments are stable and predictable  Employees are largely unskilled and interchangeable  Consistency in product and services is critical  The risk of malfeasance is high Culture:  Symbols or artifacts  Behavior of key role models  Stories or myths ceremonies or rituals Norms of behavior:  What behaviors are expected?  What is important to us?  Beliefs about what leads to success Rewards:  Clear objectives that are well understood  Rewards are clearly linked to performance and desired behaviors  Feedback is prompt, clear, and unambiguous  The structure is flexible The Modern Corporation:  Shareholders(capital): legal owner, risk­bearing, limited involvement in daily operations  Managers/employers(expertise): provide professional skills  Board of Directors(Oversight): obligation is to protect shareholders interest Agency Theory problems:  Manager seeking self interest  Managers may fail to exert themselves fully  On the job consumption  Managerial myopia Solve Agency Theory problems:  Board of Directors  Executive compensation  Shareholder activism  The market for corporate control  Auditor, government regulations, and industry analysts Board of Directors:  Separate the duties of CEO and Chair  Increase diversity on board  Directors own stakes  Inside versus outside directors Executive Compensation:  Agents will act like principles if they have the same interest  Pay performance: bonuses, and long term incentive compensation( stock awards and  stock options) Shareholder Activism:   Active actions by large shareholders to protect their interests  Institutional owners have size to influence strategy and the incentive to discipline  ineffective managers Market for Corporate Control:  Address weak internal corporate governance   Discipline ineffective or opportunistic managers  Potential owners seeking undervalued firms and replacing their ineffective top level  management Chapter 10 Organizational Structure: Formalized patters of interactions that link a firms tasks,  technologies, and people Structure provides a balance between:  The need for division of tasks into meaningful groupings  The need to integrate these groupings for maximum efficiency Specialization:  Division of labor, high productivity  Tradeoff between breadth versus depth of knowledge Formalization:  Codified rules and formal procedures Elements of organizational structure:  Centralization: decision making is at the top of organizations  Hierarchy: levels (tall) high degree of centralization  Flat: low level of centralization Mechanistic:   High degree of specialization and formalization  High hierarchy  Centralized decision making Organic:  Flat structure   Decentralized decision making  Support differentiation strategy Simple structure:  Manager/owner makes most of the control decisions and activities, and the staff is an  extension of the top executive  Small firms with low complexity  Low degree of formalization and specialization Advantages:  Highly informal  Little specialization  Centralized decision making   Few rules and regulations; informal reward systems Disadvantages:  Employees may not understand their responsibility  Limited opportunities for upward mobility  Employees may take advantage of lack of regulations Functional Structure, an organizational form where the major functions are grouped internally  (marketing, accounting, and production) Advantages:  Centralized decision making  Enhanced coordination  Higher degree of specialization  More efficient use of talent Disadvantages:   Impeded coordination and communication  Difficult to establish uniform performance standards Divisional Structure: products, projects, and product markets are grouped internally Advantages:  Separation of strategic and operating control  Quicker response to changes in the market environment  Minimal problems sharing resources Disadvantages:  Duplication of activities  Can lead to dysfunctional; competition among divisions  Differences in image and quality may occur across divisions Forms of divisional structure; SBU’s (strategic business unit) and Holding company  structure SBU: similar products or markets are grouped into units to achieve synergy  :synergies are achieved through related diversification  Operate as profit center individually Holding company structure: The result of unrelated diversification  Similarities are few, so synergies are limited  Operating divisions have autonomy  Corporate staffs are small with little involvement  Matrix Structure: Functional departments are combined with product groups on a project basis  Functional departments, product groups & geographical units are combined  Individuals have two managers  Project managers & functional managers share responsibility Advantages:   Increases market responsiveness, collaboration & synergies  Allows more efficient utilization of resources  Improves flexibility, coordination  Disadvantages:   Dual reporting relationships lead to uncertainty regarding  accountability  Can lead to power struggles & conflict  Human resources are duplicated Boundless designs: A boundary less organizational design makes internal and external  boundaries more permeable  Barrier­free organizations  Modular organizations  Virtual organizations Barrier Free:  Higher level of trust and shared interests  Shift in philosophy from executive development to organizational development  Greater use of teams Modular organization: A modular organization requires seamless relationships with external  organizations:  Outsources nonvital functions or non­core activities to outsiders  Activates knowledge & expertise of “best in class” suppliers but retains strategic  control  Focuses scarce resources on key areas Virtual organization: A virtual organization requires forming alliances with multiple  external partners:  Continually evolving network of independent companies  Linked together to share skills, costs, & access to one another’s markets  Coping with uncertainty through cooperative efforts Chapter 11 Strategic leadership Leadership is the process of transforming organizations from what they are to what the leader  would have them become. Successful leaders are  Proactive – dissatisfied with the status quo  Goal oriented – visualizing successful futures  Focused on the creation & implementation of a creative vision – understanding the  process Managers:  Cope with uncertainty, promote stability;       Planning/budgeting  Organizing/staffing  Controlling/solving Leaders:  Press for change  Setting direction  Inducing long­term vision,  creating unity of purpose  Aligning people  Communicating vision,   creating unity of action Leaders: Requires the ability to scan the environment for knowledge about  All stakeholders  Salient environmental trends & events  Increases market responsiveness, collaboration & synergies  Allows more efficient utilization of resources  Improves flexibility, coordination Design the organization:  Requires building mechanisms to implement the leader’s vision and strategies through  Structures & teams  Systems & processes Lack of appropriate design could cause problems  Managers who don’t understand their responsibilities  Reward systems that are not motivating  Inappropriate financial systems  Insufficient integrating mechanisms A key leadership activity, requiring that managers & leaders:  Accept personal responsibility for developing & strengthening ethical behavior  Consistently demonstrate that such behavior is central to the mission & vision of the firm Develop & reinforce  Role models  Corporate credos & codes of conduct  Reward & evaluation systems, policies & procedures Leaders must make effective use of power:  Influence other people’s behavior  Persuade them to do things they otherwise would not do  Overcome resistance & opposition Sources of power:  Organizational bases of power  Legitimate, reward, coercive, information  Personal bases of power  Referent, expert Key Leadership skills:  Technical skills  Cognitive abilities: Analytical reasoning, quantitative analysis  Emotional intelligence: Self­management, managing relationships with others Overcoming Barriers:  Leaders must overcome barriers to change  Organizations are prone to inertia, slow to learn, adapt, & change because of  Vested interests in the status quo  Systemic barriers  Behavioral barriers  Political barriers Create a learning organization: Successful learning organizations  Create a proactive, creative approach to the unknown  Actively solicit the involvement of employees at all levels  Enable all employees to use their intelligence & apply their imagination A learning environment involves  An organization­wide commitment to change  An action orientation, applicable tools & methods Creating an ethical organization: Ethics deals with right and wrong  Organizational ethics promote an operating culture & determine acceptable behavior  Ethical beliefs come from the values, attitudes, & behavioral patterns of leadership  Unethical business practices involve the tacit, if not explicit, cooperation of others The ethical orientation of the leader is a key factor in promoting ethical behavior Interrelated elements of a highly ethical organization include:  Ethical role models  Corporate credos & codes of conduct  Ethically­based reward & evaluation systems  Consistently enforced ethical policies & procedures Chapter 12 Managing Innovation and Fostering Corporate Entrepreneurship  Types of InnovationProduct innovation  Creates new product designs  Applies technology to develop new products for end­users  Common during early stages of an industry’s life cycle   Associated with a differentiation strategy Process innovation  Improves the efficiency of an organizational process  Improves materials utilization, shortens cycle time, increases quality  Common during later stages of an industry’s lifecycle  Associated with overall cost leadership strategies Incremental innovation:  Make small improvements in products & processes  Create evolutionary applications of earlier innovations Radical innovation  has a significant impact on a market and on the economic activity of firms in that market  Usually as a result of technological change  Can transform or revolutionize a whole industry Sustaining innovations  Extend sales in an existing market Disruptive innovations  Are technologically simpler & less sophisticated  Appeal to less demanding customers  Take time to take effect Managing Innovation Challenges:   Seeds versus weeds: Which project to invest?  Projects may require considerable investment before merit can be determined  Experience versus initiative: Who should lead an innovation project?  Senior managers versus mid­level employees  Building capabilities versus collaborating  Incremental versus preemptive launch: How to launch the product? Improving the process: Defining the scope of innovation Defining the strategic envelope  Focus on a common technology?  Focus on a market theme? Evaluating results  How much will the innovation initiative cost?  How likely is it to actually become commercially viable?  How much value will it add; what will it be worth if it works? Staffing to capture value from innovation  Effective human resource management practices for innovation projects include  Use experienced players from diverse areas  Once people have new venture experience, transfer them to mainstream management  positions to revitalize core businesses Corporate Entrepreneurship:  Focused approaches:  Autonomous corporate venturing workgroup separated from the rest of the firm  Frees entrepreneurial team members from constraints imposed by existing norms &  routines; facilitates open­minded creativity Isolate the group from the corporate mainstream via:  New venture groups  Business incubators Dispersed approaches:  Entrepreneurship is spread throughout the firm  Ability to change is a core capability  Stakeholders can bring new ideas or venture opportunities to anyone in the organization Three related aspects:  An entrepreneurial culture  Resource allotments to support entrepreneurial activities  Product champions Resource allotments involve the firm’s investment in the generation & execution of  innovative ideas  Time investment – free time to work on developing new products  Monetary investment – proposals are submitted for funding; further investments can  come from operating divisions Product champions are useful to:  Bring entrepreneurial ideas forward  Identify what kind of market exists for the product or service  Find resources to support the venture   Exit champions help avoid costly defeats by:  Questioning the viability of a venture project  Reducing ambiguity by gathering hard data  Developing a strong case for why a project should be killed


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