Management notes for the week of 2/15
Management notes for the week of 2/15 MGMT 300
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This 14 page Class Notes was uploaded by Eric LaPree on Sunday February 21, 2016. The Class Notes belongs to MGMT 300 at University of North Dakota taught by Nikolaus Butz in Spring 2016. Since its upload, it has received 26 views. For similar materials see Principles of Management in Business, management at University of North Dakota.
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Notes for 2/16 Chapter 6 ***To review your exam you must send an email and schedule an appointment. You will get 1 hour to look over your exam Key Terms: Competitive intelligence – gaining info about competitor’s activities so you can anticipate their moves and react properly Forecasting – projections of the future. Businesslevel Strategies – how a single business unit will try to get a competitive advantage. Corporatelevel Strategies – how each business unit in a larger company will try to contribute to the larger umbrella company. Cost Leadership Strategy – keeping the costs and by extension the prices of goods and services down below the competition and to target large audiences Differentiation Strategy – offer products that are of unique and superior value to compared to those of competitors Focused Cost Strategy – Keep the costs and products below the prices of your competitors and to target a narrow market. Focused Differentiation Strategy – Offering a superior value and are unique to a small target audience. Market Growth Rate – How fast the entire industry is increasing Market Share – the business’ share of the market in relation to its competitors Competitive intelligence – gaining info about competitor’s activities so you can anticipate their moves and react properly Sources of CI: Public Print ads SEC reports Trade shows and informal sources S.W.O.T. analysis (also called situational analysis) S Strength (what the company is good at) W Weakness (what the company is poor at or needs improvements in) O Opportunity (where the company can grow or chances for the company to grow) T Threats (threats facing the industry as a whole not just the single company) SWOT analysis is environmental scanning Strengths and weaknesses are an internal examination while opportunities and threats are an external examination Forecasting – projections of the future. 2 types of forecasting Trend analysis – Hypothetical scenario where you foresee the the past events as continuing into the future. (Holding all current things constant what is the future going to be like?) Contingency planning – Creation of alternative hypothetical but equally likely future conditions 4 tools for strategy formulation Porter’s 4 competitive strategies Porter’s 5 competitive forces Diversification and synergy BCG Matrix Businesslevel Strategies – how a single business unit will try to get a competitive advantage. Corporatelevel Strategies – how each business unit in a larger company will try to contribute to the larger umbrella company (typically by expanding beyond the parent company’s original market). Diversification and getting a mix of businesses helps chances at success Porter’s 5 competitive forces I. Risk of entry by potential competitors (Is it easy for a business to start up in your industry?) II. Bargaining power of suppliers (Do suppliers get to determine prices?) III. Bargaining power of buyers (Do buyers get to make the prices?) IV. Threat of substitution (Is another product cheaper or of higher quality?) V. Intensity of rivalry among established firms Risk of entry: Barriers: Economies of scale Product differentiation Capital requirements Switching costs Cost disadvantages, independent of scale Access to distribution channels Bargaining power of suppliers Suppliers may be able to raise prices which reduces your profit margins or raises your prices Bargaining power of buyers Buyers can force down prices and demand higher quality or more services while pitting companies against each other Substitutes Substitutes limit potential returns of an industry Rivalry among competitors Price competition Advertisement battles Product introductions Increased customer service or warranties Porter’s 4 competitive strategies XXXXXXXXX XXXXXXXXX Competitive Advantage XXXXXXXXX XXXXXXXXX Lower Cost Differentiated Appeal Broad 1.Cost leadership 2.Differentiation i e Narrow or Niche 3.Focused cost 4.Focused e o differentiation m o e C (Ignore spaces filled in with “X’s”) 1. Cost Leadership – keeping the costs and by extension the prices of goods and services down below the competition and to target large audiences 2. Differentiation – offer products that are of unique and superior value to compared to those of competitors 3. Focused Cost – Keep the costs and products below the prices of your competitors and to target a narrow market. 4. Focused Differentiation – Offering a superior value and are unique to a small target audience. Single product Vs. Diversification: Single product strategy only sells one product within its market, making it highly focused but vulnerable. Diversification operates with under a single ownership that isn’t related to another business owned. Unrelated diversification – operating several businesses under one ownership that are not related to one another Related diversification – organization under one ownership operates separate businesses that are related to one another Diversification offers less risk by offering more than one product, gives management efficiency because a manager can manage several businesses at once, this also gives synergy by allowing you to crosspromote a product or business from another owned business adding up to being a stronger company. BCG Matrix – Matrix made by the Boston Consulting Group to evaluate strategic business units based on market growth rates, and the product’s share of the market. Market growth rate – How fast the entire industry is increasing Market share – the business’ share of the market in relation to its competitors BCG MATRIX Market share Market share (for the visual learner) High Low Market growth rate Star Question Mark High High growth rates, high market Risky new ventures that may shares. (Good product you want succeed or flop. WAIT AND to keep) INVEST SEE WHAT HAPPENS Market growth rate Cash Cow Dog Low Have slow growth but high Low growth and low market market shares. MILK THE share, should be gotten rid of. PRODUCT LIKE A PRIZED DIVEST HEFFER Much wow, plz divest immediately Notes for 2/18 Ch. 7 Key terms: Decision – Choice made from among available alternatives. Decisionmaking: Process of identifying and choosing alternative courses of action. Problem: Difficulties that inhibit you from reaching your goal Opportunity: Situations that present possibilities for exceeding your current goal(s). Diagnosis: Analyzing the underlying causes of emergent problems or opportunities. Evidencebased decision making: Translating evidence to principles for organizational practices. Risk propensity – The willingness to gamble or to take risk for the chance to get bigger payouts. Availability bias: Using only readily available info. Representativeness or ignoring–randomness bias: Tendencies to decide based on small samples of data instead of larger more accurate samples. Confirmation or prior hypothesis bias: Supporting your own data and discrediting opposing data. Sunk cost bias: Adding up the money spent on a project and saying you have spent too much to just abandon the project. Anchoring and adjustment bias: Tendencies to make decision based on initial findings. Overconfidence bias: Subjective confidence in their decision making being better than objective accuracy. 2020 hindsight bias: Tendency for people to believe things are more predictable after events have passed. Framing bias: Tendency for people to be influenced by the way data is presented to them. Escalation of commitment bias: When people increase their commitment to a project despite negative feedback about it. Participative Management (PM): The process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization. Consensus: When the group is able to express their ideas and reach an agreement to support the final decision (not necessarily unanimous). The Delphi technique: A process that uses geographically dispersed experts where a single question is sent to the experts and then the answers are collected anonymously and dispersed again to the experts again for judgement in the hopes of reaching a consensus. Decision – choice made from among available alternatives. Decisionmaking: Process of identifying and choosing alternative courses of action. Rational (classical) model of decision making explains how managers should make decision however it assumes managers are logical and will make the best decision to benefit the company. There are 4 stages of rational decision making 1. Identify the opportunities before you 2. Think up alternative solutions 3. Evaluate alternatives and pick a solution 4. Implement solution Step 1. Identifying the opportunity: You must decide what opportunities are an actual chance vs what is a desirable opportunity. Problem: Difficulties that inhibit you from reaching your goal Opportunity: Situations that present possibilities for exceeding your current goal(s). Diagnosis: Analyzing the underlying causes of emergent problems or opportunities. Step 2. Make alternative solutions: Start making up alternate ways of answering the problem before you or pick up some of the obvious and easily graspable answers or solutions. Step 3. Evaluate alternatives and pick a solution: You will need to determine the cost of the solution, the quality of the solution as well as deciding whether or not it is ethical and effective. Step 4. Implement your solution and evaluate your decision: Implementation: Putting a plan into effect. Evaluation: Examine unintended consequences Decide whether to stick with the plan, start over, modify the plan slightly, or to try a new plan. Rational model assumptions: 1. The decision maker has all the available information. This means you have analyzed all possible outcomes and have errorfree info. 2. The decision will be analyzed logically and without emotion No bias or personal desires are involved in the decision making process. 3. Whatever is decided is the best for the company/group Nonrational decision making Explains how managers actually make their decisions Assumes that the decision is always uncertain and involves risk which clouds their judgement making it tough to make the best decision Bounded Rationality: Suggests that the reason the decision maker has issues thinking of it rationally is because they are limited by numerous constraints. 8 hindrances to rational decision making I. Information overload (too much info to handle) II. Overwhelming complexity III. Limited cognitive capacity (limited intelligence) IV. Imperfect information V. Limited time and money (often one of the biggest factors) VI. Priorities, values, and habits VII. Unconscious reflexes VIII. Conflicting goals Satisficing Model “good enough, let’s just do it”: managers seek alternatives until they find an option that is optimal. (A less than optimal option is implemented in the meantime to buy time to think of better ideas). Alternatives to satisficing: Delay the decision until you have all the info you need and all the data is considered Incremental Model (BandAid solution that doesn’t really solve the issue): Taking very small steps to solve a larger problem Alternatives: dedicate resources to get a more longterm solution Intuition Model “go with your gut”: making decisions based on feelings or hunches. Holistic hunch: explicit or tacit knowledge about the situation or thing at hand Explicit knowledge: Well documented knowledge that is easy to share (how to assemble Legos) Tacit knowledge: Highly personal knowledge that is hard to share (how to paint a masterpiece) Automated experiences: The involuntary emotional response or feelings related to a person, situation, object, or opportunity. Opposite of intuition is making a decision logically or with logical thought 6 techniques to develop intuition I. Open up the closet by trusting your feelings II. Don’t mix up the “I’s” (instinct insight and intuition aren’t synonyms) III. Elicit good feedback IV. Get a feel for your batting average (how often your instinct is right) V. Play devil’s advocate VI. Capture and validate your intuition Evidencebased decision making: Translating evidence to principles for organizational practices. 7 implementation principles of evidencebased decision making I. Treat your organization as an unfinished prototype II. No bragging, only facts III. See yourself and your organization from the perspective of someone that’s not involved IV. Evidencebased management is not just for senior executives V. You need to sell your idea(s) VI. If that doesn’t work slow the growth of the bad practices VII. Diagnose what happens if the plan fails 7 challenges to implement evidencebased decision making I. Too much evidence II. Not enough good evidence III. Evidence doesn’t apply to the issue at hand IV. People are trying to mislead you V. The side effects outweigh the outcome VI. Stories that are not based on evidence can be more persuasive Analytics: Predictive modeling data mining technique used to predict future behaviors and anticipate the consequences of change Portfolio analysis – looking into how sound your invested stocks are Timeseries forecast predict the future based on past events, assuming past events will continue to happen Data mining (big data) – using large data deposits to analyze information General decisionmaking styles Risk propensity – The willingness to gamble to take risk for the chance to get bigger payouts. Decisionmaking style – reflects the combination of how an individual perceives and responds to information 2 dimensions I. Value orientation – reflects the extent to which a person focuses on the task and technical concerns or people and social concern when making decision II. Tolerance for ambiguity – extent to which a person has a high need for structure or control his or her life Decisionmaking styles 1. Directive: action oriented decision maker who focuses on facts (logical and efficient at the cost of making autocratic decisions) 2. Analytic: careful decision maker who takes their time to evaluate all the facts and options at the cost of taking too long to make a decision despite adapting to change well 3. Conceptual: decision makers that use intuition and focus on the longterm willing to take risks and come up with creative solutions at the cost of being indecisive 4. Behavioral: focuses on keeping social cohesion by tending to go along with what the group is thinking or wanting at the cost of having a hard time saying no 3 ways to apply decision making knowledge I. Understand yourself and strive to better yourself II. Understand your coworkers and use your appeal to help them make the best decisions they can using their own style III. Gives awareness of how people can get to different answers from the same info Decision trees help map out whether a task is ethical or not and whether or not you should do it Things to avoid when making decisions: Complacency (not doing anything) Satisficing (taking the easy way out) Resignation and denial (saying there is no reason to change what currently exists) Panic (doing anything to get out of the situation) 3 factors that are important for making decisions: Importance of the issue Credibility of the information available Urgency of the problem Decision making biases: Heuristics – strategies that simplify the decision making process like a rule of thumb (can be bad). Availability bias: Using only readily available info. Representativeness or ignoring–randomness bias: Tendencies to decide based on small samples of data instead of larger more accurate samples. Confirmation or prior hypothesis bias: Supporting your own data and discrediting opposing data. Sunk cost bias: Adding up the money spent on a project and saying you have spent too much to just abandon the project. Anchoring and adjustment bias: Tendencies to make decision based on initial findings. Overconfidence bias: Subjective confidence in their decision making being better than objective accuracy. 2020 hindsight bias: Tendency for people to believe things are more predictable after events have passed. Framing bias: Tendency for people to be influenced by the way data is presented to them. Escalation of commitment bias: When people increase their commitment to a project despite negative feedback about it. 5 reasons that diverse groups tend to be better for making better decisions: 1. Greater pool of knowledge. 2. Different perspectives 3. Intellectual stimulation 4. Better understanding of decision rationale (able to explain their reason for a decision) 5. Deeper commitment to dedication Disadvantages of group work 1. A few people dominate or intimidate the rest of the group 2. Groupthink – Acting like sheeple (sheeplike people) by just going along with the group and not wanting to strive to get a better result than what the group is currently headed for. 3. Satisficing: people wanting to just get done with the meeting so they don’t have to care anymore about the subject. 4. Goal displacement when the largest goal is replaced by a less important goal. Things to know about groups and decision making: Groups take longer to make decisions If the group gets too large the decision tends to become poorer Groups may be too confident which leads to groupthink Group configuration makes a large difference. (People that are familiar with one another are more likely to bring unique information while strangers will bring more overlapping information) Groups can increase the quality of decisions, increase the acceptance of the decision, and can increase development. Participative Management (PM): The process of involving employees in setting goals, making decisions, solving problems, and making changes in the organization. Factors that affect PM: Top managers must remain involved throughout the entire process Middle and supervisory managers must be supportive Employees must trust their managers Employees can’t work in interdependent jobs TM is implemented with Total Quality Management (TQM) Consensus: When the group is able to express their ideas and reach an agreement to support the final decision (not necessarily unanimous). Brainstorming: Meeting of people to develop alternative ways of solving a problem and generating ideas. 4 steps of brainstorming: I. Group meets and reviews problem II. Members are asked to silently generate ideas III. Ideas are gathered and posted anonymously IV. (In a second session) Ideas are evaluated 7 Rules of brainstorming: I. Defer judgement (don’t judge ideas right away) II. Build on the ideas of others III. Encourage wild ideas IV. Go for quantity over quality V. Be visual VI. Stay focused on the topic VII. One conversation at a time The Delphi technique: A process that uses geographically dispersed experts where a single question is sent to the experts and then the answers are collected anonymously and dispersed again to the experts again for judgement in the hopes of reaching a consensus. 4 steps of the Delphi technique: 1. Facilitator sends out question 2. Facilitator complies responses into an anonymous report 3. Distribute responses back to participants 4. Rinse and repeat until consensus is reached Computeraided decision making Chauffeurdriven systems: Asking participants to answer predetermined questions on electronic keypads (like Top Hat). GroupDriven system: Meeting within a room of participants who express their ideas anonymously over the computer network (like the scaleup room).