WEEK 6-7 MANAGER

- primary responsibility is to carry out the

management process.
Unit Learning Outcome: - Plans and makes decisions, organizes,
a. Discuss the purpose of management leads and controls human, financial,
b. Explain the manager’s job physical and information resources.
c. Discuss the different types of
managers and their roles
d. Analyze the ethical and social LEVELS OF MANAGEMENTS
environment of management,
including individual ethics, the
concept of social responsibility, and Top managers
how organizations can manage
social responsibility
e. Explain the importance and Middle managers
determinants of an organizations’
culture, as well as how organizational
culture can be managed
First-line managers

ULO A, B & C

Definitions:
1. Management
- Set of activities which includes
planning and decision making,
organizing, leading and
controlling. Classification:
- Directed at an organization’s 1. Top managers
resources: Human, Financial, - Small group of executives who
Physical and Information, with manage the organization’s
the aim of achieving overall goals, strategy, and
organization goals in an efficient operating policies.
and effective manner. 2. Middle managers
2. Efficiency - Largest group of managers who
- Using resources wisely and in a are primarily responsible for
cost-effective way. implementing the policies and
plans of top managers.
3. Effectively
- Supervise and coordinate the
- Making the right decisions and
activities of lower-level
successfully implementing them. managers.
4. Manager 3. First-line managers
- Someone whose primarily - Managers who supervise and
responsibility is to carry out the coordinate the activities of
management process. operating employees.
EFFICIENCY VS EFFECTIVENESS KIND OF MANAGER BY AREA or
Efficiency: DEPARTMENT
Operating in such a way that resources
are not wasted 1. Marketing Managers
• Getting consumers, customers
Effectiveness: and clients to buy the
Doing the right things in the right way organization’s product or
at the right time services.
 2. Financial Managers Four basic functions:
• Deals with the organization’s
financial resources. 1. Planning and Decision Making
3. Operations Managers
Planning
• Concerned with creating and
- Setting an organization’s goals and
managing the systems that
deciding how best to achieve them.
create organization’s products
and services.
Decision Making
4. Human Resource Managers
- Part of planning process
• Human resource planning
- Involves selecting a course of action
• recruiting and selection from a set of alternatives.
• training and development
• designing compensation and ➢ Help managers maintain their
benefit systems effectiveness by serving as guides
• formulating performance for their future activities.
appraisal systems. ➢ Organization’s goals and plans
5. Administrative Managers clearly help managers know how to
• Generalists who are familiar with allocate their time and resources.
all functional areas of
management and who are not 2. Organizing
associated with any particular
management specialty. - Organize people and the other
6. Other Kind of Managers resources necessary to carry out
• Specialized managerial the plan.
positions directly related to the - Determining how activities and
needs of the organization. resources are grouped.

3. Leading
MANAGEMENT, AND THE MANAGEMENT - Basic managerial function is
PROCESS IN ORGANIZATIONS leading
- Considered to be both the most
important and the most
challenging of all managerial
activities
- Set of processes used to get
organizational member to work
together to advance the interest
of the organization

4. Controlling
- Final phase of the management
process
- Monitoring the organization’s
progress toward its goals. As
the organization moves toward
its goals, managers must
monitor progress to ensure that
it is performing in such a way to
arrive at its “destination” at the
appointed time.
 SKILLS AND THE MANAGER investors, and other outside the
organization.

Conceptual Skills
Technical Skills - Depend on the manager’s ability to
think in the abstract.
- Managers need the mental capacity to
understand the overall workings of the
Interpersonal Skills organization and its environment, to
Fundamental Management

grasp how all the parts of the

organization fit together, and to view the
organization in a holistic manner.
Conceptual Skills - Allows them to think strategically, to see
the “big picture”, and to make broad-
based decisions that serve the overall
Skills

organization.
Diagnostic Skills
Diagnostic Skills
- Skills that enable them to visualize the
Communication most appropriate response to a
Skills situation.
- Physician diagnoses a patient’s illness
by analyzing symptoms and
Decision-Making determining their probable cause.
Skills - A manager can diagnose and analyze a
problem in the organization by studying
its symptoms and then developing a
Time Management solution.
Skills
Communication Skills
- Ability to both effectively convey ideas
and information to others and
Technical Skills effectively receive ideas and
- Necessary to accomplish or understand information from others.
the specific kind of work done in an - Enables a manager to transmit ideas to
organization. subordinates so that they know what is
- Important for first-line managers. expected, to coordinate work with
➢ These managers spend much of peers and colleagues so that they work
their time training their well together, and to keep higher-level
subordinates and answering managers informed about what is
questions about work-related going on.
problems. - Helps the manager listen to what others
➢ Effective managers = knowing to say and understand the real meaning
perform the task assigned to behind e-mails, letters, reports, and
those they supervise. other written communication.
Interpersonal Skills Decision-Making Skills
- Ability to communicate with, - Ability to correctly recognize and define
understand, and motivate both problems and opportunities and to then
individuals and groups. select an appropriate course of action
- A manager must be able to get along to solve problems and capitalize on
with subordinates, peers, and those at opportunities.
higher levels of the organization. - Effective managers make good
- Multitude of roles that managers must decisions most of the time
fulfill, a manager must also be able to
work with suppliers, customers,
Time Management Skills HUMAN RELATIONS MOVEMENT
- Ability to prioritize work, to work
efficiently, and to delegate work • Grew from the Hawthorne studies and
appropriately. was popular approach to management
for many years.
• Proposed that workers respond
MANAGEMENT SKILL MIXES AT primarily to social context of the
DIFFERENT ORGANIZATIONAL LEVELS workplace, including social
conditioning, group norms, and
interpersonal dynamics.
• Basic assumption of human relations
movement was that the manager’s
concern for workers would lead to
increased satisfaction, which would in
turn result in improved performance.
• Two writes who helped advance the
human relations movement were:
o Abraham Maslow (1908-1970)
o Douglas McGregor (1906-1964)
The Science and Art of Management • In 1943, Maslow advanced a theory
(Management: Science or Art) suggesting that people are motivated
by a hierarchy of needs, including
The Science of Management monetary incentives and social
- Assumes that problems can be acceptance.
approached using rational, logical,
objective and systematic ways.
- Requires technical, diagnostic, and
decision-making skills and techniques
to solve problems related to the
organization.

The Art of Management

- Decisions are made and problems are
solved using a blend of intuition,
experience, instinct, and personal
insights.
- Requires conceptual, communication,
interpersonal, and time management
skills to accomplish the tasks
associated with managerial activities. • Douglas McGregor’s Theory X and
Theory Y model best represents the
essence of the human relations
movement.

Theory X
- Is a relatively pessimistic and
negative view of workers and is
consistent with the views of
scientific management.

Theory Y
- More positive and represents the
assumptions made by human
relations advocates.
 • In McGregor’s view, Theory Y was a • These processes are major elements in
more appropriate philosophy for contemporary management theory.
managers to adhere to. Important topics in this field include job
• Both Maslow and McGregor notably satisfaction, stress, motivation,
influenced the thinking of many leadership, group dynamics,
practicing managers. organizational politics, interpersonal
conflict, and the structure and design of
organizations.
• Our discussions of organizing and
leading are heavily influenced by
organizational behavior. And, finally,
managers need a solid understanding
of human behavior as they address
diversity-related issues such as
ethnicity and religion in the workplace.
• Indeed, all these topics are useful to
help managers better deal with the
consequences of layoffs and job cuts
and to motivate today’s workers.
• The primary contributions of behavioral
management approach relate to how it
has changed managerial thinking.
• Managers are now more likely to
recognize the importance of behavioral
processes and to view employees as
valuable resources instead of mere
tools.
• However, organizational behavior is still
relatively imprecise in its ability to
predict behavior, especially the
THEORY X and Y behavior of a specific individual. It is not
• Munsterberg, Mayo, Maslow, always accepted or understood by
McGregor, and others have made practicing managers. Hence the
valuable contributions to management. contributions of the behavioral school
• Contemporary theorists, however, have are just beginning to be fully realized.
noted that many of the human
relationists’ assertions were simplistic
and provided inadequate descriptions
of work behavior.
• Current behavioral perspectives on
management, known as organizational
behavior, acknowledge that human
behavior in organizations is much more
complex than the human relationists
realized.
• The field of organizational behavior
draws from a broad, interdisciplinary
base of psychology, sociology,
anthropology, economics, and
medicine.
• Organizational behavior takes a holistic
view of behavior and addresses
individual, group, and organization
processes.
 ULO D & E Managerial Ethics
- Consists of the standard behavior that
Definitions: guide individual managers in their work.
- Important area is the treatment of
1. Ethics employees by the organization
- An individual’s personal beliefs - Includes: hiring and firing, wages and
about whether a behavior, working conditions, and employee
action, or decision is right or privacy and respect.
wrong.
2. Ethical Behavior Ethical scandals
- Behavior that conforms to
- Commonplace in today’s world
generally accepted social
- Have rocked stakeholder confidence
norms.
and called into question the moral
3. Unethical Behavior
integrity of our society.
- Behavior that does nor conform
- As we summarized several emerging
to generally accepted social
ethical issues in organizations, it is
norms.
important to remember that one cannot
4. Managerial Ethics
judge everyone by the transgression of
- Standards of behavior that guide
a few.
individual managers in their
work.
5. Code of Ethics
Ethical Issues in Corporate Governance
- A formal, written statement of the
values and ethical standards - Board of directors of a public
that guide a firm’s action. corporation is expected to ensure that
6. Social Responsibility the business is being properly
- Set of obligation that an managed and that the decisions made
organization has to protect and by its senior management are in the
enhance the societal context in best interests of shareholders and other
which it functions. stakeholders.

ORGANIZATIONAL
SOCIAL RESPONSIBILITY

❖ Ethics are associated with individuals

and their decisions and behavior.
❖ Organizations themselves do not have
ethics, but they relate to their
environments in ways that often involve
ethical dilemmas and decisions.
❖ Situations are referred to within the
context of the organization’s social
responsibility.
❖ Social responsibility
- Set of obligations an
organization has to protect and
enhance the societal context in
which it functions.
 ARGUMENTS IN FAVOR • Critics argue that organizations lack the
AND AGAINST SOCIAL RESPONSIBILITY expertise to understand how to assess
and make decisions about worthy social
• In favor of social responsibility programs.
How can a company truly know, they
• People who favor social
ask, which cause or program is most
responsibility claim that:
deserving of its support or how money
o organizations create many of
might best be spent?
the problems that need to be
addressed, such as air and
water pollution and resource
depletion. ORGANIZATIONAL CULTURE
o Organizations should pay a - Set of values, beliefs, behaviors,
major role in solving them customs, and attitudes that helps the
• Sustainability matters feature organization’s members understand
discusses one such example. what it stands for, how it does things,
• Corporations are legally defined and what it considers important.
entities with most of the same
privileges as private citizens,
IMPORTANCE OF
businesses should not try to
ORGANIZATIONAL CULTURE
avoid their obligations as
citizens. Qualities that:
• Advocates of social 1. binds that organization together,
responsibility point out that, and prevents it from falling apart
whereas governmental 2. gives the organization the strength
organizations have stretched to deal with difficulties challenges
their budgets to the limit, many 3. makes it stand out from the rest
large businesses often have
surplus revenues that could be Culture
used to help solve social - Invisible yet powerful force that drives
problems. the thoughts and actions of each of its
members.
• Examples:
- System of shared values, beliefs, and
Dell donates surplus computers goals.
to schools, and many
restaurants give leftover food to Organizational Culture
homeless shelters. - Huge impact on the company’s ability to
succeed and make it big in the
competitive world that we live in today.
• Against social responsibility - Company without a tangible culture
• Argues that widening the finds it difficult to tap into the full
interpretation of social potential of its employees, and to keep
them happy.
responsibility will undermine the
- Puts both the organizations and its
US economy by detracting from people’s well-being at risk.
the basic mission of business: to
earn profits for owners. Reasons why:
• Examples: 1. UNITY
Money that Chevron or General - Organization, irrespective of its
Electric contributes to social actual size – whether it’s a start-
cause or charities is money that up with 10-15 employees or an
could otherwise be distributed to organization with a bigger
owners in the form of dividends. workforce, is strengthened by its
unity.
 - The unity results from a solid organization that creates the
organizational culture – a set of ‘brand image’. And, we know
shared values and principles what a big role the identity of the
that the members abide by in brand plays in how well it’s
every decision that they take. received by the market and how
- Similarity of thought and action far it goes.
enables the employees of a
company to work synergistically,
to help each other in their goals, MANAGING ORGANIZATIONAL CULTURE
and to stay strong as a group in
order to fight against the rival
forces.

2. BUSINESS SUCCESS
- Example is Google, the
company very well knows that
the secret to its people and the
culture they create and maintain.

3. STABILITY
- Lack of purpose and motivation
is one of the major reasons why
people are often dissatisfied at
work and why they quit their jobs
and look for greener pastures.
- Organizational culture ensures
that the purpose of its members
is aligned with the purpose of the
organization. ❖ How can managers deal with culture,
- Compatibility of goals and way of given its clear importance but intangible
thinking drives the members to nature? Essentially, the manager must
perform well, be self-directed, understand the current culture and then
and be loyal to the organization
decide whether it should be maintained
they belong to.
or changed. By understanding the
organization’s current culture,
4. SENSE OF DIRECTION managers can take appropriate actions.
- When an organization has laid Culture can also be maintained by
out its values, beliefs and goals, rewarding and promoting people whose
its employees have a clear behaviors are consistent with the
direction to work towards. existing culture and by articulating the
- They can discern between right culture through slogans, ceremonies,
and wrong, important and and so forth.
unimportant and this clarity
ensures a focused approach to ❖ Managers must walk a fine line,
work, and a productive use of the however, between maintaining a
organization’s time and
culture that still works effectively and
resources.
changing a culture that has become
5. IDENTIFY dysfunctional. For example, many of
- Identity and brand image the firms already noted, as well as
emerge from an organization’s numerous others, take pride in
culture and its people. perpetuating their culture. Shell Oil, for
- It’s the people who create the example, has an elaborate display in
organization and it’s the the lobby of its Houston headquarters
 that tells the story of the firm’s past. But
other companies may face situations in
which their culture is no longer a
strength. For example, some critics feel
that General Motors’ culture places too
much emphasis on product
development and internal competition
among divisions, and not enough on
marketing and competition with other
firms. They even argue that this culture
was a major contributing factor in the
business crisis that GM faced in 2009.

❖ Culture problems sometimes arise from

mergers or the growth of rival factions
within an organization. For example,
Delta recently merged with Northwest
Airlines. Combining the two companies
led to numerous cases of conflict and
operational difficulties because the
cultures of the two firms were so
different. To change culture, managers
must have a clear idea of what they
want to create. When United and
Continental Airlines merged, top
managers stressed that they wanted
the new firm to personify Continental’s
employee-friendly culture and avoid the
old United culture that was fraught with
hostility and mistrust between
management and labor.
 BOOK increase in the output of about
200%.
Lillian Gilbreth
CHAPTER 1
➢ Helped shape the field of
industrial psychology, and made
THE CLASSICAL substantive contributions to the
MANAGEMENT PERSPECTIVE field of personnel management.
Two different viewpoints:
2. Administrative Management
1. Scientific Management
❖ Focuses on managing the total
❖ experts began to focus on ways to
organization.
improve the performance of
❖ Primary contributors were:
individual workers.
• Henri Fayol (1841-1925)
❖ Earliest advocate of scientific
• Lyndall Urwick (1891-1983)
management is:
• Max Weber (1864-1920)
• Frederick W. Taylor (1856-1915)
• Frank Gilbreth (1868-1924) Henri Fayol
• Lilian Gilbreth (1878-1972) ➢ Most articulate spokesperson
❖ Taylor’s first job was a foreman at ➢ French Industrialist
the Midvale Steel Company in ➢ General and Industrial
Philadelphia. He observed Management – was translated
soldiering. into English in 1930.
➢ Drawing his own managerial
Soldiering experience, he attempted to
- Employees deliberately working systemize management practice
at a phase slower than their to provide guidance and
capabilities. direction to other managers.
➢ First to identify the specific
❖ Taylor introduced rest periods to managerial functions of
planning, organizing, leading,
reduce fatigue and implemented a
and controlling.
piecework pay system. The
results were higher quality and Lyndall Urwick
quantity of output, and improved ➢ Advanced modern thinking
morale. about the functions of planning,
organizing, leading, and
controlling.
Develop a Scientifically Supervise
➢ Developed a list of guidelines for
science for select employees to Continue to improving managerial
each element employees make sure plan the
of the job to and then they follow work, but use effectiveness.
replace old train them to prescribed workers to
rule-of- do the job as methods for get the work
thumb described in performing done
methods step 1 their jobs
Max Weber
➢ German Sociologist
➢ His important work was not
translated into English until
Frank and Lillian Gilbreth 1947.
• Team of industrial engineers ➢ His work in bureaucracy laid the
• Developed numerous techniques and foundation for contemporary
organization theory – a set of
strategies for eliminating inefficiency.
guidelines for structuring
Frank Gilbreth organizations in the most
➢ Craft of bricklaying efficient manner.
➢ Reduction from 18 separate
physical movements to 5 and an
 The Classical Management QUANTITATIVE
Perspective Today MANAGEMENT PERSPECTIVE
❖ Focused on stable, simple ❖ Applies quantitative techniques to
organizations; many organizations management.
today, in contrast, are changing and ❖ Focuses on decision making, cost-
complex. They also proposed universal effectiveness, mathematical models,
guidelines that we now recognize do and the use of computers.
not fit every organization.
❖ A third limitation is that it slighted the BRANCHES:
role of the individual in organizations. 1. Management Science
- Focuses specifically on the
development of mathematical
THE BEHAVIORAL models.
MANAGEMENT PERSPECTIVE
❖ Emphasizes individual attitudes and Mathematical models
- Simplified representation of a
behaviors and group processes.
system, process, or relationship.
❖ Industrial Psychology, the practice of
applying psychological concepts to
2. Operations Management
industrial settings.
- Concerned with helping the
Hugo Munsterberg (1863-1916) organization more efficiently
produce its products or services.
➢ German psychologist
- Form of applied management
➢ Recognized as the father of industrial
science.
psychology
- Operations management
➢ Established a psychological laboratory
techniques can be used to
at Harvard University in 1892.
manage their inventories.
➢ Suggested that psychologists could
make valuable contributions to Examples:
managers in the areas of employee
• Inventory management
selection and motivation.
- Concerned with specific
Mary Parker Follett (1868-1933) inventory problems, such as
balancing carrying costs and
➢ Her work clearly anticipated the
ordering costs, and determining
behavioral management perspective,
the optimal order quantity
and she appreciated the need to
understand the role of human behavior • Linear programming
in organizations. - Computing simultaneous
solutions to a set of linear
equations.
The Hawthorne Studies
• Queuing theory, break-even analysis,
➢ were a series of early experiments that
and stimulation.
focused on behavior in the workplace.
➢ In one experiment involving this group Note:
of workers, for example, researchers
All these techniques and procedures apply
monitored how productivity changed as
directly to operations, but they are also helpful
a result of changes in working in areas such as finance, marketing, and
conditions. human resource management.
➢ The Hawthorne studies and
subsequent experiments led scientists
to the conclusion that the human
element is very important in the
workplace.
 CONTEMPORARY The Contingency Perspective
MANAGEMENT PERSPECTIVES
❖ The classical, behavior, and quantitative
approaches are considered universal
The Systems Perspective perspectives because they try to identify
❖ Managers can better understand the the “one best way” to manage
importance of their environment and organizations.
the level of interdependence among
their organization’s subsystems. Universal perspectives
❖ System - are interrelated set of - An attempt to identify one best way to
elements functioning as a whole. do something.

FOUR BASIC ELEMENTS: ❖ Contingency perspective

- Suggests that appropriate managerial
• Inputs
behavior in a given situation depends
• Transformational processes
on, or is contingent on, unique elements
• Outputs in a given situation.
• Feedback

CONTEMPORARY MANAGEMENT
ISSUES AND CHALLENGES
1. Contemporary applied perspectives
- Systems perspectives
- Contingency perspectives
2. Contemporary management challenges
- globalization
CONCEPTS: - ethics and social responsibility
1. Open Systems - product and service quality
- A system that interacts with its - the service economy
environment. - the economic recession of 2008-
2010
2. Closed Systems - the new workplace
- A system that does not interact with its - workforce diversity
environment. - organization change
3. Subsystems - technology
- A system within another system
4. Synergy
- Two or more subsystems working
together to produce more than the total
of what they might produce working
alone.
5. Entropy
- A normal process leading to system
decline.
- When an organization does not monitor
feedback from its environment and
make appropriate adjustments, it may
fail.
 CHAPTER 2 country unless trade
relationships with that
THE ORGANIZATION’S ENVIRONMENTS country are relatively well.
❖ External environment 2. Task Environment
1. Everything outside an - Specific organizations or groups
organization’s boundaries that that affect the organization.
might affect it. Includes:
Two separate external environments: a. Competitors
1. General Environment - An organization that
- The set of broad dimensions and competes with other
forces in an organization’s organizations for resource.
surroundings that determines its b. Customers
overall context. - Whoever pays money to
acquire an organization’s
Dimensions: product or services.
a. Economic Dimension c. Supplier
- Is the overall health and - An organization that provides
vitality of the economic resources for other
system in which the organizations.
organization operates. d. Regulator
- Important factors: - A body that has the potential
o General economic growth to control, legislate, or
o Inflation otherwise influence the
o Interest rates organization’s policies and
o Unemployment practices.
- Kinds of regulators:
b. Technological Dimension Regulatory agency
- Methods available for - An agency created by the
converting resources into government to regulate
products or services. business activities.

c. Political-Legal Dimension Interest group

- The government regulation - A group organized by its
of business and the members to attempt to
relationship between influence organizations.
business and government. - Lacks the official power of
- Important for three basic government agencies,
reasons: however, they can exert
o The legal system partially considerable influence by
defines what an using the media to call
organization can and attention to their
cannot do. positions.
o Pro- or anti- business
sentiment in government e. Strategic partners / strategic ally
influences business - An organization working
activities. together with one or more
o Political stability has other organizations in a joint
ramifications for planning. venture or similar
No business wants to set arrangement.
up shop in another
❖ Internal environment organization’s stance on social
1. Consist of conditions and forces responsibility.
within the organization.
• Whistle-blowing
1. Owners - The disclosure, by an employee,
- Whoever can claim property rights of illegal or unethical conduct on
to an organization. the part of others within the
- Can be single individual who organization
establishes and runs a small
business, partners who jointly own
the business, individual investors LEVELS OF INTERNATIONAL
who buy stock in a corporation or BUSINESS ACTIVITY
other organizations.

2. Board of directors
- Governing body that is elected by a
corporation’s stockholders and
charged with overseeing the
general management of the firm to
ensure that it is being run in a way
that best serves the stockholders’
interests.

3. Employees
- Major element of the organization’s
internal environment.
4. Physical Work Environment
- The organization’s actual physical
environment and the work that
people do. Exporting
- Making a product in the firm’s domestic
marketplace and selling it in another
MANAGING SOCIAL RESPONSIBILITY country.
Formal Organizational Dimensions Importing
• Legal compliance - Bringing a good, service, or capital into
- The extent to which an the home country from abroad.
organization complies with local, Licensing
state, federal, and international - An arrangement whereby one company
laws. allows another company to use its
• Ethical compliance brand name, trademark, technology,
- The extent to which an patent, copyright, or other assets in
organization and its members exchange for a royalty based on sales.
follow basic ethical standards of
behavior. Strategic alliance
- A cooperative arrangement between
Informal Organizational Dimensions two or more firms for mutual gain.
➢ Leadership, organizational culture, and Joint Venture
how the organization responds to - A special type of strategic alliance in
whistle-blowers all help shape and which the partners share in the
define people’s perceptions of the
 ownership of an operation on an equity • Northern American Free Trade
basis. Agreement (NAFTA)
- An agreement among the United
Direct investment
States, Canada, and Mexico to
- When a firm builds or purchases
promote trade with one another.
operating facilities or subsidiaries in a
different country from the one where it • General Agreement on Tariffs and
has its headquarters. Trade (GATT)
- A trade agreement intended to
Maquiladoras promote international trade by
- Light assembly plants that are built in reducing trade barriers and
Northern Mexico close to the U.S. making it easier for all nations to
border and are given special tax breaks compete in international
by the Mexican government. markets.
• World Trade Organization (WTO)
- An organization which currently
THE CONTEXT OF includes 140 member nations
INTERNATIONAL BUSINESS and 32 observer countries, that
The Cultural Environment requires members to open their
markets to international trade
• A country’s culture includes all the and to follow WTO rules.
values, symbols, beliefs, and language
that guide behavior.
• Cultural differences between countries
can have a direct impact on business
practice.

Controls on International Trade

• Tariff
- Tax collected on goods shipped
across national boundaries.
• Quota
- A limit on the number or value of
goods that can be traded.
• Export restraint agreement
- Accords reached by
governments in which countries
voluntarily limit the volume or
value of goods they export to or
import from one another.

Economic Communities
• A set of countries that agree to
markedly reduce or eliminate trade
barriers among member nations
• A formalized market system
• European Union (EU)
- The first and most important
international market system.
 CHAPTER 3 Operational Goals
- A goal set by and for an organization’s
lower-level managers.
THE PLANNING PROCESS - Concern with shorter-term issues
Purpose of Goals associated with the tactical goals.

1. They provide guidance and a unified

direction for people in the organization. KINDS OF ORGANIZATIONAL PLANS
• Goals can help everyone
understand where the Strategic Plan
organization is going and why - General plan outlining decisions about
getting there is important. the resource allocation, priorities, and
2. Goal-setting practices strongly affect action steps necessary to reach
other aspects of planning. strategic goals.
• Effective goal setting promotes - Planned by board of directors and top
good planning, and good management, generally have an
planning facilitates future goal extended time horizon, and address
setting. questions of scope, resource
3. Goal can serve as source of motivation deployment, competitive advantage,
for an organization’s employees. and synergy.
• goals that are specific and
moderately difficult can motivate Tactical Plan
people to work harder, - Aimed at achieving tactical goals, is
especially if attaining the goal is developed to implement specific parts
likely to result in rewards. of a strategic plan.
4. Goals provide an effective mechanism - Involves upper and middle
for evaluation and control. management, and somewhat shorter
• Means that performance can be time horizon and more specific and
assessed in the future in terms of concrete focus.
how successfully today’s goals
are accomplished. Operational Plan
- Plan that focuses on carrying out
tactical plans to achieve operational
Kinds of Goals goals.
Mission - Developed by middle- and lower-level
managers
- Statement of an organization’s - Short-term focus and are relatively
fundamental purpose. narrow in space.
Strategic Goals
- A goal set by and for an organization’s THE NATURE OF
top management. STRATEGIC MANAGEMENT
- Focus on broad, general issues.
Strategy
Tactical Goal
- Comprehensive plan for accomplishing
- A goal set by and for an organization’s an organization’s goals.
middle management
Strategic Management
- Focuses on how to operationalize
actions necessary to achieve the - A comprehensive and ongoing
strategic goals. management process aimed at
 formulating and implementing effective 4. Strategy Implementation
strategies - Methods by which strategies are
- A way of approaching business operationalizes for executed
opportunities and challenges. within the organization.
- Focuses on the processes
Effective Strategy
through which strategies are
- A strategy that promotes a superior achieved.
alignment between the organization
and its environment and the
achievement of strategic goals. USING SWOT ANALYSIS
TO FORMULATE STRATEGY

Components of Strategy SWOT

1. Distinctive competence ❖ Strengths, weaknesses, opportunities, and
- An organizational strength threats
possessed by only a small ❖ Careful evaluation of an organization’s
number of competing firms. internal strengths and weakness as well as
2. Scope its environmental opportunities and
- When applied to strategy, it threats.
specifies the range of markets in ❖ Best strategies accomplish an
which an organization will organization’s mission by
compete. 1. Exploiting an organization’s
- Some organizations, called opportunities and strengths
conglomerates, a compete in a 2. Neutralizing its threats
dozen or even hundreds of 3. Avoiding or correcting its
markets. weaknesses
3. Resource Deployment
- How an organization distributes
its resources across the areas in Evaluating an:
which it competes.
➢ Organizational Strength
- A skill or capability that enables
an organization to create and
Types of Strategic Alternatives implement its strategies.
1. Business-level Strategy ➢ Organizational Weakness
- Set of strategic alternatives from - A skill or capability that does not
which an organization chooses enable an organization to
as it conducts business in a choose and implement
particular industry or market. strategies that support its
2. Corporate-level Strategy mission.
- Set of strategic alternatives from ➢ Organizational Opportunity
which an organization chooses - An area in the environment that,
as it manages its operations if exploited, may generate higher
simultaneously across several performance.
industries and several markets. ➢ Organizational Threat
3. Strategy Formulation - An area that increases the
- Set of processes involved in difficulty of an organization
creating or determining an performing at a higher level.
organization’s strategies.
- Focuses on the content of
strategies.
 FORMULATING Growth Stage
BUSINESS-LEVEL STRATEGIES
• More firms begin producing the product,
and sales continue to grow.
Porter’s Generic Strategies • Important management issues:
Differentiation Strategy o Ensuring quality
o Delivery
- A strategy in which an organization o Beginning to differentiate an
seeks to distinguish itself from organization’s product from
competitors through the quality of its competitors’ product
products or services. • Entry into the industry growth stage
Overall Cost Leadership Strategy may threaten an organization’s
competitive advantage.
- A strategy in which an organization • Strategies to slow the entry of
attempts to gain a competitive competitors are important.
advantage by reducing its costs below
the costs of competing firms. Maturity Stage

Focus Strategy • Overall demand growth for a product

and number of established firms
- A strategy in which an organization producing the product begins to
concentrates on a specific regional decline.
market, product line, or group of buyers. • An essential period if an organization
Strategies Based on the Product Life Cycle is going to survive in the long run.
• Product differentiation concerns are still
Product Life Cycle important during this stage, but keeping
- A model that portrays how sales volume costs low and beginning the search for
for products changes over the life of new products or services are also
products. important strategic considerations.
Decline Stage
• Demand for the product or technology
decreases, the number of organizations
producing the product drops, and total
sales drop.
• Organizations that fail to anticipate the
decline stage in earlier stages of the life
cycle may go out of business.
• Those that differentiate their product,
keep their costs low, or develop new
Introduction stage products or services may do well during
this stage.
• Demand may be very high and
sometimes outpaces the firm’s ability to
FORMULATING
supply product.
CORPORATE-LEVEL STRATEGIES
• Managers need to focus their efforts on
“getting product out the door” without
sacrificing quality. Diversification
• Managing growth by hiring new - The number of different businesses that
employees and managing inventories an organization is engaged in and the
and cash flow are also concerns during extent to which these businesses are
this stage. related to one another.
Single-Product Strategy Unrelated Diversification
- A strategy in which an organization
- A strategy in which an organization operates multiple businesses that are
manufactures just one product or not logically associated with one
service and sells it in a single another.
geographic market.
Advantages:
Strength Weakness
1. A business should be able to achieve
By concentrating its Staking it survival on a
stable performance over time.
efforts so completely single product, the
on one product and organization works
market, a firm is likely very hard to make sure During any given period, some
to be very successful that the product is a businesses owned by the organization
in manufacturing and success. are in a cycle of decline, whereas
marketing the product. others may be in a cycle of growth.
If the product is not
accepted by the 2. Unrelated diversification is also thought
market or is replaced to have resource allocation
by a new one, the firm advantages.
will suffer.
Every year, when a corporation
allocates capital, people, and other
Related Diversification resources among its various
- A strategy in which an organization businesses, it must evaluate
information about the future of those
operates in several businesses that are
businesses so that it can place its
somehow linked with one another.
resources where they have the highest
Three Advantages: potential for return.

1. Reduces an organization’s Disadvantage:

dependence on any of its business
activities and thus reduces economic 1. Corporate-level managers in such a
risk. company usually do not know enough
about the unrelated businesses to
2. By managing several businesses at the
provide helpful strategic guidance or to
same time, an organization can reduce allocate capital appropriately.
the overhead costs associated with 2. Because organizations that implement
managing any one business. unrelated diversification fail to exploit
important synergies, they are at a
if the normal administrative costs competitive disadvantage compared to
required to operate any business, such organizations that use related
as legal services and accounting, can diversification.
be spread over a large number of
businesses, then the overhead costs Managing Diversification
per business will be lower than they
would be if each business had to Portfolio Management Techniques
absorb all costs itself. Thus, the - Methods that diversified organizations
overhead costs of businesses in a firm use to determine in which businesses to
that pursues related diversification are engage and how to manage these
usually lower than those of similar businesses to maximize corporate
businesses that are not part of a larger performance.
corporation

3. Related diversification allows an

organization to exploit its strengths and
capabilities in more than one business.
Two important portfolio management
techniques:
1. BCG Matrix
- BCG (Boston Consulting Group)
matrix
- A framework for evaluating
businesses relative to the growth
rate of their market and the
organization’s share of the
market.
- Helps managers develop better
understanding of how different
strategic business unit
contribute to the overall TACTICAL PLANNING
organization. By assessing each
Tactical Plans
SBU on the basis of its market
growth rate and relative market - plan aimed at achieving tactical goals
share, managers can make and developed to implement parts of a
decisions about whether to strategic plan.
commit further financial - an organized sequence of steps
resources to the SBU or to sell or designed to execute strategic plans.
liquidate it. - must flow from strategy, specify
resource and time issues, and commit
human resources.

OPERATIONAL PLANNING
Single-use Plan
- developed to carry out a course of
action not likely to be repeated in the
future.
Program
− single-use plan for a large set of
2. GE Business Screen activities.
- A method of evaluating
businesses along two Project
dimensions: − single-use plane of less scope and
1. Industry attractiveness complexity than a program.
2. Competitive position Standing Plan
- in general, the more attractive - developed for activities that recur
the industry and the more regularly over a period of time.
competitive the position, the
more an organization should Policy
invest in a business. − standing plan specifying the
organization’s general response to a
designated problem or situation.
 Standing Operating Procedures
− A standard plan that outlines the
steps to be followed in particular
circumstances.
Rules and Regulations
− Describe exactly how specific
activities are to be carried out.

CONTINGENCY PLANNING
AND CRISIS MANAGEMENT

Contingency Planning
- The determination of alternative
courses of action to be taken if an
intended plan is unexpectedly disrupted
or rendered inappropriate.
Crisis Management
- The set of procedures the organization
uses in the event of a disaster or other
unexpected calamity.