Principles of Management Dyck / Neubert Chapter 1 Introduction to Management.

Principles of Management Dyck / Neubert

Chapter 1 Introduction to Management

Amer Hamzah [email protected]

Tel: 03-89467781

HP: 012-2352592

Notes: http://econ3.upm.edu.my/kelasma

ya/

Figure 1.1: Four Reasons To Study Management

Important Managerial Skills

• Technical Skills– Expertise in a particular area—marketing,

accounting, finance or human resources

• Human Skills– Abilities in getting along with people, leadership,

helping others to be motivated, communication and conflict resolution

• Conceptual Skills– The ability to think about complex and broad

organization issues

Types of Managers

• First-Line Supervisors– Manage the work of employees who are involved

in the actual production or creation of an organization’s products or services.

• Middle Managers– Manage first-line managers and others.

• Top Managers– Have organization-wide managerial

responsibilities—Chief Executive Officers (CEOs), Vice-Presidents, and Board Chairs

What Is Management?

• Management– The process of planning, organizing, leading

and controlling human and other organizational resources towards the effective achievement of organizational goals.

• Organization– A goal-directed (planning), deliberately-

structured (organizing) group of people working together (leading) to achieve results (controlling).

Functions of Management (Fayol)

• Four Management Functions:– Planning– Organizing– Leading– Controlling

Managerial Roles (Mintzberg)

• Interpersonal Roles– Leader, Liaison and Figurehead

• Decisional Roles– Resource Allocator, Negotiator, Entrepreneur,

Crisis Handler

• Informational Roles– Monitor, Disseminator, and Spokesperson

Fayol’s Functions and Mintzberg’s Roles

Fayol Mintzberg

Planning Entrepreneur, negotiator, spokesperson

Organizing Resource allocator

Leading Leader, liaison, disseminator

Controlling Monitor, crisis handler, figurehead

Defining “Effective” Management

• Effectiveness– Choosing the “right” organizational goals to

pursue• What about moral obligations?• Is profit-maximization a legitimate goal?

• Efficiency– The level of output that is achieved with a

given level of inputs• Maximizing output while minimizing inputs


Chapter 3 The Task and Macro Environments of

Management

The Task And Macro Environments Of Management

• Task Environment– Has the greatest

immediate influence on managers.

– Contains four key groups of stakeholders:• Customers

• Members

• Owners

• Other organizations

• Macro Environment– Contains four

dimensions:• Socio-cultural• Natural• Political-legal• Economic-

technological

Figure 3.1: Three Basic Levels of the Environment for Managers

Summary: Task Environment

• All managers must pay attention to key stakeholders to:– Ensure that they are in tune with customer

needs and wants to serve them adequately.– Attract and retain an adequately qualified

workforce.– Ensure that owners’ needs are met.– Develop and maintain relationships with

suppliers, competitors and neighbors.

Summary: Macro Environment• Managers must pay attention to the key dimensions of

their macro environment to:

– Monitor socio-cultural trends and changes in demographics, health care, education and other social institutions.

– Consider how sensitive they will be with respect to the natural environment.

– Keep informed of developments in the political-legal environment.

– Pay close attention to economic opportunities and threats and remain technologically competitive.


Chapter 4 The International

Environment

Figure 4.1: Ways to Internationalize an Organization

How to Internationalize an Organization (cont’d)

• Exporting– When an organization manufactures products

in its home country and transports them to other countries for sale there.

• Importing– When a finished product is brought in from

another country for resale domestically.


• Global Outsourcing– When one or more sub-components for an

organization’s products or services are imported from another country.

• Counter-Trade– When products or services from one country

are traded (rather than bought and sold for currency) for products or services from another country.


• Licensing– When an organization in one country sells

specific resources to an organization in another country.

• Franchising– When a franchisor in one country sells to a

franchisee in another country a complete package required to set up an organization.


• Strategic Alliance– When managers from organizations in at least

two countries agree to pool their organizations’ resources and “know-how” in order to share the risks and rewards for developing a new market or product.

• Joint Venture– When partnering organizations agree to form a

separate, independent, jointly-owned organization.


• Foreign Subsidiaries– Maquiladoras

• Are assembly plants and factories in special regions in Mexico along the U.S. border where international corporations can take advantage of low wages and also enjoy low duties and tariffs when their products are exported to the U.S.

Figure 4.3: Overview of Hofstede’s Five Dimensions of National Culture

Hofstede’s Dimensions of National Culture (cont’d)

• Materialism– Is placing a high value on things like getting

better jobs, material possessions, money and assertiveness.

• Quality of Life– Is emphasized in cultures that overall tend to

value relationships, the welfare of others, and the intrinsic satisfaction that comes from performing meaningful work.

Figure 4.4: Relative Emphasis of Countries on Hofstede’s Materialism/ Individualism Scores


• Time Orientation– Short-term cultures live in the present.– Long-term cultures have a greater concern

for the future.

• Deference to Authority– The relative emphasis that a culture places

on power differences


• Uncertainty Avoidance– High uncertainty

avoidance cultures prefer predictable rules and regulation over ambiguity and risk.

– Low uncertainty avoidance cultures value risk-taking and innovativeness.


Chapter 5 Ethics

Why Study Ethics?

• The emphasis on ethics is related to:– The world is changing rapidly.– Unethical decisions by managers are

receiving more attention.– Managers are moral agents.

What Is Ethics?

• Ethics– A set of principles or moral standards that

differentiate right from wrong.

• Management Ethics– The study of moral standards and how they

influence managers’ actions.

Components of Management Ethics

1. Sources where a manager may get their moral standards

2. The moral-point-of-view that a manager follows

3. The process a manager uses to make decisions that are ethical

4. The influence of ethics on how managers practice the four management functions

Sources of Management Ethics

• Informal/Public– Work experiences, peers, managers– Ethical climate

• The informal shared perceptions of what are appropriate practices and procedures

• Informal/private– Examples set by the behavior of immediate

family members• Family, friends, peer groups, society, and unspoken

universal human norms

Table 5.1: The Four Types of Sources of Ethics

Levels of Personal Moral Development

• Pre-conventional– What is rewarded and punished

• Self-interest: “What’s in it for me?”

• Conventional– Social norms or external standards

• By others: “What is everyone else doing?”

• Post-conventional– Universal principles established through

conscience and reason• “What are timeless truths?”

Figure 5.2: Increasing Levels of Moral Development


Chapter 7 The Decision-Making Process

Introduction to Decision-Making

• Decision– A choice that is made among a number of

available alternatives.

• Decision Process1. Identify the need for a decision

2. Develop alternative responses

3. Choose the appropriate alternative

4. Implement the chosen alternative

Figure 7.1: The Four-stepDecision-making Model

Mainstream Approach to the Four-Step Decision-Making

Process• Step 1: Identify the need for a decision

– Identifying problems and opportunities to meet or surpass financial goals

– Using learned scripts:• Programmed decisions• Non-programmed decisions

– Mistaking symptoms for the underlying issue

Figure 7.2: Considerations that Influence How Much Time

Managers Invest in Developing Alternatives


Process• Step 3: Choose the appropriate alternative

– Choose an alternative, using a method based on how much goal consensus and knowledge is available for each alternative.

– Key Factors:• Goal consensus about which goals to pursue• Available knowledge about:

– How to achieve goals– Uncertainty about outcomes– Risk that alternative will result in negative outcome

• Classical Rational Approach– High consensus, high knowledge

• Political Approach– Low consensus, high knowledge

• Incremental Trial-and-Error Approach– High consensus, low knowledge– Continuous improvement– Intuition

Decision Making Approaches

Decision-Making Approaches (cont’d)

• Random (low consensus, low knowledge)– No agreement on goals and lack of knowledge

about how to reach goals

• Administrative model (medium consensus, medium knowledge)– Bounded rationality

• Limited cognitive capabilities and personal biases• Limited information—anchoring, past practices• Limited resources for processing information

– Satisficing—choosing an adequate response


Process• Step 4: Implement the chosen alternative

– Implement the alternative. Use a participative approach to overcome resistance• Involving members in earlier steps

– Factors in implementation• Significance of the problem for the organization• Competency to analyze the problem and develop

alternatives• Availability of adequate knowledge• Commitment to implementing the alternative

Poor Decisions• Causes

– Failure to recognize significance of problem– Lack of participation– Insufficient information– Failure to delegate/facilitate decisions– Lack of commitment and support

• Persistence Errors– Escalation of commitment– Information distortion– Administrative inertia


Chapter 8Setting Goals and

Making Plans

Introduction to Goals and Plans

• Goals– The desired results or objectives that

members in an organization are pursuing.

• Plans– Describe the steps and actions that are

required to achieve goals.

The Planning Process

• Steps in the Planning Process1. Setting an organization’s overarching mission

and vision.

2. Setting strategic goals and plans.

3. Taking the strategic goals and plans and putting them into practice in everyday operations.

4. Implementing and monitoring the goals and plans.

Figure 8.1: Overview of the Four Steps of the Planning Process

Organizational Goals and Plans

• Ongoing Goals and Plans– Guide the continuing activities that are

consistent with the basic purpose of the organization.

• Change-Oriented goals and Plans– Refer to new initiatives and changes to be

made in an organization’s practices.

Mission Statements

• Mission Statement– Identifies the fundamental purpose of the

organization.• Describes what the organization does, whom it

serves, and how it differs from similar organizations.

• Can provide social legitimacy and a sense of identity for the members of the organization.

Mission Statements (cont’d)

• Ideas are commonly mentioned in mission statements:

• Products/services

• Customers

• Organizational self-

• Survival/growth/pro

• Employees

• Markets

• Philosophy

• Technology

• Public image

Vision Statements

• Vision Statement– Describes what an organization is striving to

become.– Provides guidance to organizational

members.– Describes goals that an organization hopes to

achieve five or more years into the future.

The Mainstream Approach to Goals and Plans

• Step 1: Develop the Organization’s Overarching Mission and Vision– Mission/Vision Focus:

• Top-down management of the planning process to enhance financial well-being.

• Focus is on things that will contribute to the future competitiveness and financial success of an organization.

The Mainstream Approach to Goals and Plans (cont’d)

• Step 2: Develop Strategic Goals and Plan– How managers can position the organization

in the eyes of stakeholders so as to achieve advantages over its competitors.

• Step 3: Develop Operational Goalsand Plans

– Are set by lower-level managers.– Have a less than one-year time horizon.

The Mainstream Approach to Goals and Plans (cont’d)

• Stretch Goals (Jack Welch)– Are so difficult that people do not know how

to reach them.– Cannot be achieved simply by making

incremental changes to the status quo.– Require outside-the-box thinking that

dramatically improves productivity, efficiency, and profitability.

Figure 8.3: Checklist for Making a Plan

Why Goals Aren’t Achieved

• Unexpected changes in other parts of the organization or in the larger environment

• Some stakeholders are not convinced of the legitimacy of a goal.

• Too much emphasis placed on members’ change-oriented goals rather than on their ongoing goals.


Chapter 9 Strategic Management

Importance of Strategic Management

• Why Is Strategic Management Important?– Because managers vary in how well they

formulate and implement strategies, and this affects their organization’s competitiveness.

– Strategic management• The analysis and decisions that are necessary to

formulate and implement strategy.

– Strategy• The combination of goals, plans and actions

designed to accomplish an organization’s mission.

Strategic Management Process

1.Review the mission and vision of the organization

2.Analyze the organization’s external environments and internal resources

3.Choose and develop the strategy to be followed

4.Implement the chosen strategy.

Figure 9.1: Overview of the Strategic Management Process

Mainstream Strategic Management

• Step 1: Review mission and vision– Emphasis is on maximizing competitiveness.– Plan is revisited on a regular basis.

• Step 2: Analyze internal and factors– (SWOT)

• Internal strengths and weaknesses• External opportunities and threats

– An analysis of the external environment is key to uncovering what current and future opportunities and threats might exist.

SWOT Analysis

Strengths Valuable or unique resources of an organization or any activities that it does particularly well that can help managers to achieve their strategic objectives.

Weaknesses A lack of specific resources or abilities that an organization needs in order for it to do well; a characteristic that hinders the achievement of the strategic objectives of an organization.

Opportunities Conditions in the external environments that have the potential to help managers meet or exceed organizational goals.

Threats Conditions in the external environments that have the potential to prevent managers from meeting organizational goals.

Table 9.1: Overview of Porter’s Five Competitive Forces and Strategic

Management

Strategies

• Competitive Strategy– A strategy that seeks to create value for

customers by providing low prices or unique features that are not offered by rival organizations.

• Sustained Competitive Advantage– A competitive strategy that other

organizations are unable to duplicate.


• Step 3: Formulate Strategy– Competing within a specific industry

• Business level strategies– Cost leadership strategy– Differentiation– Focus strategy

– Competing multiple industries• Diversification strategies

– Related– Unrelated

Business-Level Strategies

• Cost Leadership– Increase the profit margin by keeping overall

costs lower than competitors through efficiencies in production and distribution.

– Maintaining price and quality at roughly the same level as competitors.

– Gaining economies of scale as the market leader.

Business-Level Strategies (cont’d)

• Differentiation Strategy– Offering a product or service with a significant

difference for which buyers are willing to pay a higher price than they would for a competitor’s product or service.

• Focus Strategy– Choosing a small niche in the overall market.– Strategy can be based on either cost

leadership or differentiation.

Diversification Strategies

• Related Diversification– Involves expanding an organization’s activity

in industries related to its current activities.

• Synergy– The performance gain that results from two or

more units working together is greater than the sum of their individual contributions.

Diversification Strategies (cont’d)

• Horizontal Integration– Services and products are expanded or

offered in new markets.

• Vertical Integration– Occurs when an organization produces its

own inputs (backward integration) or sells its own outputs (forward integration).

Diversification Strategies (cont’d)

• Unrelated Diversification– Occurs when an organization grows by

acquiring or entering new industries unrelated to its current activities.

– Reasons for diversification:• When there are no opportunities for expansion in

current markets.• When current markets are beginning to decline.

Business Portfolio Planning

• BCG Matrix– Developed by the Boston Consulting Group.– Classifies portfolio businesses by relative market

share (strength) and market growth rate (potential).• Stars—high growth, high market share• Cash cows—low growth, high market share• Question marks—high growth, low market share• Dogs—low growth, low market share

– Is limited by its focusing exclusively on market share and market growth.

Figure 9.2: BCG Portfolio Matrix for Managing Diversified Organizations

Figure 9.3: The Product Life Cycle


• Step 4: Implement Strategy– Content school approach to strategy

• Emphasizes the rational-analytic, top-down and linear aspects of strategy formulation.

• Aligned with mainstream approach.

– Process school of strategic management• Bottom-up, emergent (un-planned), and egalitarian

approach that emphasizes strategic learning—strategy formulation and implementation are ongoing and iterative.

• Aligned with the Multistream approach.

Principles of Management Dyck / Neubert Chapter 1 Introduction to Management.

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Transcript of Principles of Management Dyck / Neubert Chapter 1 Introduction to Management.