MNGT 215

Summary for Midterm Exam

Prepared by Riad Dimechkie

Chapters 1-4, 9
MCQs 40 x 1= 40%
Essays 2 x 30 = 60%
March 28 7:00 to 9:00 pm

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 Chapter 1: Summary of Key Concepts
• Classification of managers:
• First-line managers (supervise non-managers)
• Middle managers (supervise 1st line managers)
• Top Managers responsible for making organization-wide decisions and establishing plans
and goals that affect the entire organization.

• Management involves coordinating and overseeing the work activities of others

so that their activities are completed efficiently and effectively.
• Efficiency
• “Doing things right” Getting the most output for the least inputs
• Effectiveness
• “Doing the right things” Attaining organizational goals
• No sense having the best ladder in the world if you have it leaning on the wrong
wall
• Management is the art of getting the right things done through people
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 What Managers Do
Functions they perform, roles they play, skills they need:

• 4 Functions: Planning, Organizing, Leading and motivating, Controlling

• Mintzberg identifies 10 roles: interpersonal, informational and decision-making

• Interpersonal: Figurehead, Leader, Liaison
• Informational: Monitoring, disseminating info within and outside the org., and being the
spokesperson
• Decision-making: Entrepreneur, handles disturbances, allocates resources, negotiates

• Managers are expected to reflect and to act

• Skills mangers need: Technical (mainly lower and middle), human (interpersonal,
and communication at all levels) and conceptual (mainly at the top)
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 How the Manager’s Job is Changing
• Increasing importance of customers: Being customer-focused means segment the market,
understand their needs and pain-points, changing wants and needs, consistent high-quality
service, brand building

• Innovation: Importance of doing things differently, exploring new territory & taking risks.
Encourage employees to be aware of, and act on opportunities for innovation. New business
models (eg Uber, Amazon, Airbnb)

• Globalization – global markets, global sourcing, global competition

• Rapidly changing technology (digitization, IOT, AI, 3D Printing, bio-tech,..)

• Stakeholder involvement and becoming more vocal

• Increased competition: customer service, innovation, efficiency/productivity

• Empowered employees with different values, require more information to do their jobs, more
empowerment and demand their rights 4
Exhibit 1–6 Changes
Affecting A Manager’s
Job
Shifting organizational
boundaries:
- Vertical integration
- Partnerships with suppliers,
distributors and customers

5
 What Is An Organization?
•An Organization Defined
• A deliberate arrangement of people to accomplish some specific purpose (that
individuals independently could not accomplish alone)

•Common Characteristics of Organizations

• Have a distinct purpose (goal)
• Composed of people
• Have a deliberate structure

•Good management is needed in all types of organizations at many levels.

• The reality of work is that there usually is a hierarchy. Employees either manage or
are managed.
• Rewards and challenges of being a manager 6
Exhibit 1–10 Universal Need for Management

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Chapter 1 A: Management History--Major Approaches to Management

•Scientific Management
• Fredrick Winslow Taylor
• Frank and Lillian Gilbreth
(blue collar workers)
•General Administration
Theory (management level)
• Henri Fayol (5 Fns & 14
principals)
• Max Weber (Bureaucracy)

•TQM is related to quantitative

and to cultural/behavioral
approaches

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 Scientific Management
•Fredrick Winslow Taylor
• The “father” of scientific management

• Published Principles of Scientific Management

• Focus on first-line managers.

• Used scientific methods to define the “one best way” for a job to be done: He advocated

• Putting the right person on the job with the correct tools and equipment.

• Having a standardized method of doing the job.

• Providing an economic incentive to the worker.

• His methods regularly achieved productivity improvements of 200%

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 Taylor’s Scientific Management Principles (1911)
1. Develop a science for each element of an individual’s work, which
will replace the old rule-of-thumb method. “The one best way”.
2. Scientifically select and then train, teach, and develop the workers.
3. Heartily cooperate with the workers so as to ensure that all work is
done in accordance with the principles of the science that has been
developed.
4. Divide work and responsibility almost equally between
management and workers. Management takes over all work for which it is
better fitted than the workers.

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 Scientific Management (cont’d)
•Frank (mechanical engineer) and Lillian (psychologist) Gilbreth
• Focused on increasing worker productivity through the reduction of wasted motion.
Applied in bricklaying, hospitals, military, office work and manufacturing…
• Design & use of proper tools & equipment to optimize performance
• Filmed workers to time worker motions and optimize work performance.
•How Do Today’s Managers Use Scientific Management?
• Use time and motion studies to eliminate wasted motions and increase productivity.
• Hire the best qualified employees.
• Design incentive systems based on output.

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 Fayol’s 14 Principles of Management
1. Division of Work. Specialization increases output by making employees more efficient.
2. Authority. Managers must be able to give orders and authority gives them this right.
3. Discipline. Employees must obey and respect the rules that govern the organization.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. The organization should have a single plan of action to guide managers and
workers.
6. Subordination of individual interests to the general interest. The interests of any one employee or
group of employees should not take precedence over the interests of the organization as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralization. This term refers to the degree to which subordinates are involved in decision
making.
9. Scalar chain. The line of authority from top management to the lowest ranks is the scalar chain.
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 Fayol’s 14 Principles of Management
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. Management should provide orderly
personnel planning and ensure that replacements are available to fill
vacancies.
13. Initiative. Employees who are allowed to originate and carry out plans will
exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the
organization.

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Weber’s Bureaucracy

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 What is Quality Management?
1. Intense focus on the customer. The customer includes outsiders who buy the organization’s
products or services and internal customers who interact with and serve others in the organization.
2. Concern for continual improvement. Quality management is a commitment to never being
satisfied. “Very good” is not good enough. Quality can always be improved.
3. Process focused. Quality management focuses on work processes as the quality of goods and
services is continually improved. This helps ensure consistency.
4. Improvement in the quality of everything the organization does. This relates to the final product,
how the organization handles deliveries, how rapidly it responds to complaints, how politely the
phones are answered, and the like.
5. Accurate measurement. Quality management uses statistical techniques to measure every critical
variable in the organization’s operations. These are compared against standards to identify
problems, trace them to their roots, and eliminate their causes.
6. Empowerment of employees. Quality management involves the people on the line in the
improvement process. Teams are widely used in quality management programs as empowerment
vehicles for finding and solving problems. 15
Early Advocates of OB

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 The Hawthorne Studies

• A series of productivity experiments conducted at Western Electric from

1924 to 1932.

• Experimental findings
 Productivity unexpectedly increased under imposed adverse working
conditions.
 The effect of incentive plans was less than expected.

• Research conclusion
 Social norms, group standards and attitudes more strongly influence individual
output and work behavior than do monetary incentives.
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 The Systems Approach
•System Defined
• A set of interrelated and interdependent parts arranged in a manner that produces a unified whole.
•Basic Types of Systems
• Closed systems
• Are not influenced by and do not interact with their environment (all system input and output is
internal).
• Open systems
• Dynamically interact to their environments by taking in inputs and transforming them into outputs
that are distributed into their environments.

•Implications of System approach:

• Coordination of the organization’s parts is essential for proper functioning of the entire organization.

• Decisions and actions taken in one area of the organization will have an effect in other areas of the
organization.

• Organizations are not self-contained and, therefore, must adapt to changes in their external 18
environment.
 The Contingency Approach
•Contingency (or “situational”) Approach
•There is no one universally applicable set of management principles (rules) by which to manage
organizations.
• Organizations are individually different, face different situations (contingency variables), and require
different ways of managing. The correct answer is “it depends” on….

• Typical contingency variables

• Organization size: As size increases, so do the problems of coordination.

• Routineness of task technology: Routine technologies require organizational structures, leadership

styles, and control systems that differ from those required by customized or non-routine
technologies.

• Environmental uncertainty: What works best in a stable and predictable environment may be
totally inappropriate in a rapidly changing and unpredictable environment.

• Individual differences: Individuals differ in terms of their desire for growth, autonomy, tolerance of
ambiguity, and expectations. 19
 Chapter 2: Managers as Decision Makers
•Decision
• Making a choice from two or more alternatives.

•The Decision-Making Process

• Identifying a problem and decision criteria and allocating weights to the criteria.
• Developing, analyzing, and selecting an alternative that can resolve the problem.
• Implementing the selected alternative.
• Evaluating the decision’s effectiveness.

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 Steps in Problem Solving
1. Identify the problem
• A discrepancy between an existing and desired state of affairs
• Define it clearly eg want a family car v. need transportation

• Characteristics of Problems
• A problem becomes a problem when a manager becomes aware of it
• There is pressure to solve the problem
• The manager must have the authority, information, or resources needed
to solve the problem

2. Identify the Criteria you will use to evaluate your options

• Costs that will be incurred (investments required)
• Risks likely to be encountered (chance of failure)
• Outcomes that are desired (EG growth or profitability, improved culture,..
of the firm) 21
 Steps in Problem Solving Cont’d
• Step 3: Assign a weight to each criteria places the items in
the correct priority order of their importance in the
decision-making process.

• Step 4: Identify viable alternatives that can resolve the

problem

•Step 5: Evaluate each alternative’s strengths and

weaknesses

•Step 6: Choose the best alternative

• The alternative with the highest total weight is chosen.
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Assessed Values of Laptops Using Decision
Criteria
(Weights)

(10) (8) (6) (4) (3) Total Score Avg

231 7.5
231 7.5
232 7.5
231 7.5
229 7.4
204 6.6
249 8.0
206 6.6

NOTE: The criteria, weights and evaluations are partly

Evaluation on criteria scale: 1-10 objective and partly subjective
Weight of Criteria on a scale of 1-10 We may lack information
Not everyone may agree, people change their minds
The environment may change causing a good
decision to give bad results 23
 Steps in Problem Solving Cont’d

•Step 7: Put the chosen alternative into action

• Conveying the decision to and gaining commitment from those
who will carry out the decision

• Step 8: Evaluate the decision’s effectiveness

• How effectively was the problem resolved by outcomes
resulting from the chosen alternatives?
• If the problem was not resolved, what went wrong?

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 Managers Making Decisions

• Decision making is part of all four managerial functions (next slide). In

fact, that is why we say that decision making is the essence of
management.

• And that is why managers ‒ when they plan, organize, lead, and control
‒ are called decision makers.

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Exhibit 2–5 Decisions in the Management Functions

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 Making Decisions
•Rationality
• In theory, managers make consistent, value-maximizing choices within specified
constraints.
• Assumptions are that decision makers:
• Are perfectly rational, fully objective, and logical
• Have carefully defined the problem and identified all viable alternatives
• Have complete information on all alternatives
• Have a clear and specific goal
• Will select the alternative that maximizes outcomes in the organization’s interests
rather than in their personal interests

•Intuitive decision making

• Making decisions on the basis of experience, feelings, and accumulated judgment.
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 Making Decisions (cont’d)
•Bounded Rationality
• Managers make decisions rationally, but are limited (bounded) by their ability to
obtain and process all relevant information
• Assumptions are that decision makers:
• Will not seek out or have knowledge of all alternatives.
• Will satisfice ‒ choose the first alternative encountered that satisfactorily solves the
problem ‒ rather than maximize the outcome of their decision by considering all
alternatives and choosing the best

• Influence on decision making

• Escalation of commitment: an increased commitment to a previous decision despite
evidence that it may have been wrong.
• Anchored to past memories or decisions
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 Types of Problems and Decisions

•Structured Problems
• Involve goals that are clear
• Are familiar (have occurred before)
• Are easily and completely defined ‒ information about the problem is
available and complete

•Programmed Decision
• A repetitive decision that can be handled by a routine approach.

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 Types of Programmed Decisions with Examples
•Policy
• A general guideline for making a decision about a structured problem.
• E.G., Accept all customer-returned merchandise.

•Procedure
• A series of interrelated steps that a manager can use to respond (applying a policy) to a
structured problem.
• E.G., Follow all steps for completing merchandise return documentation.

•Rule
• An explicit statement that limits what a manager or employee can or cannot do. E.G.
• Managers must approve all refunds over $50.00.
• No credit purchases are refunded for cash.

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 Problems and Decisions
•Unstructured Problems
• Problems that are new or unusual and for which information is ambiguous or
incomplete.
• Problems that will require custom-made solutions.

•Nonprogrammed Decisions
• Decisions that are unique and nonrecurring.
• Decisions that generate unique responses.

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 Decision-Making Conditions

•Certainty
• A situation in which a manager can make an accurate decision because the
outcome of every alternative choice is known.

•Risk
• A situation in which the manager is able to estimate the likelihood
(probability) of outcomes that result from the choice of particular
alternatives.

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Exhibit 2–8 Expected Value for Revenues from the Addition of One
Ski Lift

Conclusion: Invest in a new ski lift if the investment will be < $687,500

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 Decision Making Conditions

•Uncertainty
• Limited information prevents estimation of outcome probabilities for alternatives
associated with the problem and may force managers to rely on intuition, hunches,
and “gut feelings”.

• Maximax: the optimistic manager’s choice to maximize the maximum payoff

• Maximin: the pessimistic manager’s choice to maximize the minimum payoff

• Minimax: the manager’s choice to minimize maximum regret

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 Payoff Matrix

Maxi-min (pessimist): S3 maximizes the minimum payoff at 15

Maxi-Max (optimist): S4 maximizes the maximum payoff at 28
Mini-Max: S1 minimizes maximum regret at 2

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 Decision-Making Styles

•Linear thinking style (S2)

• A person’s preference for using external data and facts and processing this
information through rational, logical thinking.

•Nonlinear/intuitive thinking style (S1)

• A person’s preference for internal sources of information and processing this
information with internal insights, feelings and hunches.

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 Exhibit 2–11: Common Decision-Making Errors and Biases

Need to understand each of these biases

and how they can impact decision-making.

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 Decision-Making Biases and Errors

•Heuristics
• Using “rules of thumb” to simplify decision making.

•Overconfidence Bias
• Holding unrealistically positive views of oneself and one’s performance.

•Immediate Gratification Bias

• Choosing alternatives that offer immediate rewards and avoid immediate
costs.
• Examples: Eat now, diet later. Buy now on credit

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 Decision-Making Biases and Errors (cont’d)
•Anchoring Effect
• Fixating on initial information and ignoring subsequent information.
• Halo effect: you think Bush is good at handling the economy because he
responded well to first responders. The wine is better if glass is crystal.
More expensive medicine is more effective

•Selective Perception Bias

• Selecting, organizing and interpreting events based on the decision
maker’s biased perceptions.

•Confirmation Bias
• Seeking out information that reaffirms first impressions, or past choices
and discounting contradictory information.

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 Decision-Making Biases and Errors (cont’d)
•Framing Bias
• Selecting and highlighting certain aspects of a situation while ignoring other
aspects.

•Availability Bias
• Losing decision-making objectivity by focusing on the most vivid or recent
events.

•Representation Bias
• Drawing analogies and seeing identical situations when none exist.

•Randomness Bias
• Creating unfounded meaning out of random events.
• People don’t like to admit that luck has a big role because that would mean that
we are not in control 40
 Decision-Making Biases and Errors (cont’d)
•Sunk Costs Errors
• Forgetting that current actions cannot influence past events and relate only to
future consequences.
• Example: If you already spent $50M on making a movie that is expected to net
$70M would you spend another $40M to complete it?

•Self-Serving Bias
• Taking quick credit for successes and blaming outside factors for failures.

•Hindsight Bias
• Mistakenly believing that an event could have been predicted once the actual
outcome is known (after-the-fact). People believe they could have predicted 9/11.
After the fact we can connect the dots that were not visible in all the “noise”

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 Decision Making for Today’s World

•Guidelines for making effective decisions:

1. Understand cultural differences.
• In some cases, there is no best way to make decisions. The best way may depend on the values,
attitudes, and beliefs that prevail in a specific culture.

2. Know when it’s time to stop.

• Good decision makers are not afraid to change their minds. They do not become attached to one
course of thinking, fall in love with one’s own project or their personal hire. Are not subject to
“Escalation of Commitment”.

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 Decision Making for Today’s World (cont’d)
3. Use an effective decision-making process. This process has six characteristics:
• It focuses on what is important.
• It is logical and consistent.
• It acknowledges both subjective and objective thinking and blends analytical
with intuitive thinking.
• It requires only as much information and analysis as is necessary to resolve a
particular dilemma.
• It encourages and guides the gathering of relevant information and informed
opinion.
• It is straightforward, reliable, easy to use, and flexible.

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 Decision Making for Today’s World (cont’d)
4. Build an organization that can spot the unexpected and quickly adapt to the
changed environment. Karl Weick calls such organizations highly reliable
organizations (HROs) and says they share five habits:
 Are not tricked by their success. It could be due to chance.
 Defer to the experts on the front line.
 Let unexpected circumstances provide the solution.
 Embrace complexity.
 Anticipate, but also recognize their limits. There is a lot of randomness out there!

Groups are also subject to biases as well as dysfunctionality (eg. Group think). The
advantages of group decision-making over individual decision-making come into play when
the group is diverse (including outsiders not directly impacted by the decision), people are
encouraged to speak their minds and challenge the leader’s opinion or a hastily arranged
“consensus”. Also useful if you have someone play “devil’s advocate”. 44
 Chapter 2 A
Group Decision-Making
Advantages and Disadvantages (Biases)
Potential Advantages of group DM
1. More information
2. Greater number of perspectives, different experiences
3. Intellectual stimulation through group discussion
Implication: Decision is more fully informed and of higher quality
4. People understand the rationale: buy-in
5. Higher level commitment
Implication: increased chance of successful implementation
Potential Problems of Group DM
• Domination
• Louder people are heard only
• Not necessarily the most valid opinions
• If opinion is valid, still waste of everybody’s time

• Satisficing
• Rather than maximising or optimising
 Potential Problems of Group DM

• Groupthink
• Group members avoid
disagreement as they
strive for consensus
• No devil’s advocate!

• Goal displacement
• Group looses sight of original goal and a new less important
goal emerges (such as winning an argument!)
Group Decision-Making
• Groups typically encompass wider knowledge and a
diversity of points of view

• Unfortunately, most groups restrict discussion to

shared knowledge

• Encourage participants to bring new information and

perspectives into the group discussion

49
 Group Decision Making
• Decision will be affected by the composition of the group
• The team may be loaded for political reasons
• Some may be busy or unavailable
• Some may drop out over time. Replaced with less optimal
• Some may be there with a bad attitude, or a vested interest

• Individuals may be good but the group is weak

• Beware of situations where a senior executive seeks to

influence a decision
• by appointing “his person” to the team
• by signaling his preference by starting to “implement” the
decision

50
Group Decision Making Concerns
• One is more likely to participate if ones interests
are affected and whether he can affect the outcome
• You may want those with vested interest to
participate the most. But beware of conflict of
interest

• People may only examine data in the room

• High-status members often dominate a group.

Others find it hard to contribute

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 Group Decision Making Biases

• We tend to align ourselves with majority

decisions, especially if they are unanimous

• Teams facing uncertain conditions often engage in

groupthink: Once a course of action has gathered
support, others tend to suppress their objections
and fall in line.
• Groupthink is especially likely if the team is lead by an
overbearing manager who wants to minimize conflict, delay,
and challenges to their authority

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 Groupthink*
Groupthink reduces analytical rigor for fear of upsetting the cozy
atmosphere
• Group members consider too few alternatives

• They are reluctant to review initial decisions in the light of new information

• Once a certain consensus has been reached the group has little
patience or incentive to revise it

• They may ask questions to give the illusion of rigor but avoid the hard ones

• Everyone in the group thinks everyone else must know what they’re doing

• Since responsibility for failure is shared among the whole group, members
feel more comfortable moving to extremes

• When the group feels invulnerable, contingency planning seems superfluous

*Note pages where title has a (*) were adapted from Guide to Decision Making by Helga Drummond
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 Symptoms of Groupthink*

• Self serving explanations

• “It’s not fair that the market doesn’t understand us”

• Sense of moral superiority-seeing the other as the bad guy

• Shell sued Greenpeace for boarding the derelict Brent Spar
• Superficial analysis
• Tata launched the cheapest car in the world (Nano)

• Stereotyping and out-of-date perceptions

• West slow to recognize threat from Japanese cars
Stereotyped images can prevent firms from responding to weak
signals in a timely fashion

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 Symptoms of Groupthink*
• Self-censorship
• Individuals think they are the only ones with doubts

• Pressure to conform
• Avoid having the leader do most of the talking, or talking first
• “Oh, here comes Mr. It can’t be done.”

• An illusion of unanimous agreement

• Since everyone seems to be in agreement, the decision must be
sound

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Asch Experiment (1951-6) Line Judgement Task
Asch’s Conformity Studies (1951,
1956)
 Herd Mentality
• In Asch’s experiment, people conformed to the obviously
false group consensus one-third of the time

• The human tendency to conform is understandable.

Individual survival depended on the group working together

• We are social animals and what others think maters deeply

to us
• Even when the others are strangers, even when we are
anonymous, even when dissenting will cost us nothing, we want
to agree with the group
Candid Camera- Asch Experiment
Group Decision Making Biases
• Pressure to come up with a group “consensus” so
may have to word it ambiguously.
• Implementers interpret ambiguously worded decisions
to their own benefit

• Teams provide cover for diffusion of responsibility

• Teams take bigger risks than individuals

• Often recommendations are buttressed by overly-

optimistic forecasts which makes it a problem for
implementers

61
 Social Loafing – Why Teams are
Lazy
• People make less effort when they are part of a team than when
they are on their own
• 2 people apply 93% effort, 3 people85%, 8 people49%

• Most of the group work is done by a third of the members

• Social loafing is rational behavior (from an evolutionary point of
view), but is a form of cheating
• We are very clever to avoid others noticing we are putting in less effort
• We are very good at catching others using less effort

• Teams function best if they are small and diverse where others
can trace individual contributions to specific specialists
62
 Managing Groups – Suggestions*
We should manage the group decision-making process

• Where possible avoid having sharp divisions of status

• Draw out quiet members (in or outside of meetings)

• Dissuade leader from doing most of the talking

• Have group members write down their ideas and publicize them
anonymously before speaking to avoid anchoring and ego threatening

• Have someone (with credibility) play role of “devil’s advocate”

• Create parallel groups to work on a problem; or have different groups

analyze different options in depth (e.g., Turnaround strategy v. Divestment)

• Refresh “stale” groups where routine and predictability rule

63
 Constructive conflict
• Air legitimate differences:
• Legitimate: Cognitive conflicts are differences in
perspective or judgment
• Play devil’s advocate: criticising ideas to ensure their downsides
are fully exposed
• Dialectic: structured debate between plan and counterplan,
evaluate other options (how else can we increase market share,
rather than simply choosing between acquisition A vs B?)

• Illegitimate: Affective conflicts are emotional and directed

at other people
• Stay task-related and be impersonal: it’s not about you, it’s about
the task!
 Team-Based Values*
Develop a culture of mutual respect where members
of the group are encouraged to disagree

• Receptive to new information

• Value diversity, not conformity

• Active listening and asking questions

• Mutual respect

• Seek unity of action, not unity of thought

65
 Chapter 3. Organizational Culture and Environment
•Omnipotent View of Management
• Managers are directly responsible for an organization’s success or failure.
• Their decisions and actions have an impact
• The quality of the organization is determined by the quality of its managers.
• Managers are held accountable for an organization’s performance,
yet it is difficult to attribute good or poor performance
directly to their influence on the organization.

•Symbolic View of Management

• Much of an organization’s success or failure is due to external forces outside of managers’
control.
• The ability of managers to affect outcomes is influenced and constrained by external
factors.
• The economy, customers, governmental policies, competitors, industry conditions,
technology, and the actions of previous managers
66
• Managers symbolize control and influence through their action.
 Constraints on Managerial Discretion

Leaders don’t make strategic decisions in a vacuum they must take into consideration two main
constraints:
• Internally: The organization’s vision, mission, positioning and strategies; its culture as well as
its internal strengths and weaknesses relative to competitors
• Externally The organization’s macro and micro-environment
The external environment includes the general environment (PESTEL) and the specific
environment (customers, suppliers, competitors, substitute products and pressure groups). How
will they impact and/or react to a particular managerial decision? 67
 The Organization’s Culture

•Organizational Culture
• A system of shared meanings and common beliefs held by organizational members that
determines, to a large degree, how they act towards each other.
• “The way we do things around here.”
• Values, symbols, rituals, myths, and practices

• Implications:
• Culture is a perception
• Culture is shared
• Culture is descriptive

68
Dimensions of Organizational Culture

69
Strong Versus Weak Organizational Cultures

70
 Organizational Culture
•Sources of Organizational Culture
• The organization’s founder
• Vision, mission and purpose
• Past practices of the organization
• The way things have been done
• The behavior of top management
•Continuation of the Organizational Culture
• Recruitment and promotion of like-minded employees who “fit” the culture
• Socialization of new employees to help them adapt to the culture

71
 How Employees Learn Culture
•Stories
• Narratives of significant events or actions of people that convey the spirit of the
organization. EG Nordstrom flat tire and wedding dress
•Rituals
• Repetitive sequences of activities that express and reinforce the values of the
organization.
•Material Symbols
• Physical assets distinguishing the organization. Eg Frugality at Walmart
•Language
• Acronyms and jargon of terms, phrases, and word meanings specific to an organization.
• EG IBM could not talk of competition: fear of anti-trust
• Militaristic culture at Wood: Good soldier, give the troops their marching orders

Simple rule for getting ahead in an organization: Find out what the organization rewards
and act accordingly. 72
 Managerial Decisions Affected by Culture

• Planning
• The degree of risk that plans should contain.
• Whether plans should be developed by individuals or teams.
• The degree of environmental scanning in which management will engage.
• How thorough and detail oriented is the plan
• How we communicate the strategy and to whom

• Organizing
• How much autonomy should be designed into employees’ jobs.
• Whether tasks should be done by individuals or in teams.
• The degree to which department managers interact with each other.
• How vertical or flat is the organization

73
 Managerial Decisions Affected by Culture (cont’d)
• Leading
• The degree to which managers are concerned with increasing employee job
satisfaction.
• What leadership styles are appropriate. Dictatorial, consensus building, open door
policy
• Whether all disagreements ‒ even constructive ones ‒ should be eliminated.
• Controlling
• Whether to impose external controls or to allow employees to control their own
actions.
• What criteria should be emphasized in employee performance evaluations.
• What repercussions will occur from exceeding one’s budget, or not meeting targets

74
 Creating an Ethical Culture

• Be a visible role model “Walk the Talk”. It’s what you do that matters

• Communicate ethical expectations and provide ethics training

• No harassment or discrimination of any kind will be tolerated

• Visibly reward ethical acts and punish unethical ones

• Provide protective mechanisms so employees can discuss ethical dilemmas and
report unethical behavior without fear. Ombudsman.
• Low to moderate aggressiveness vs customers, suppliers and competitors
• Living wage, work-life balance, no sweat shops, safe environment
• Focus on sustainability
75
• Focus on means as well as outcomes
 Creating an Innovative Culture

• Challenge and involvement. Are employees involved in, motivated by and

committed to company strategy and success?
• Freedom. Can employees independently define their work, exercise discretion, and
take initiatives in day-to-day activities?
• Trust and openness. Are employees supportive and respectful of each other?
• Idea time. Do employees have time to elaborate on new ideas before taking
action?
• Playfulness/humor. Is the workplace spontaneous and fun?
• Conflict resolution. Do employees make decisions based on the good of the
organization vs. personal interest?
• Debates. Are employees allowed to express opinions and put forth ideas for
consideration and review?
• Risk-taking. Do managers tolerate uncertainty and ambiguity and are employees
rewarded for risk taking? EG Honda 76
 Creating a Customer-Responsive Culture
• Hiring the right type of employees (those with a strong interest in serving
customers).
• Having few rigid rules, procedures, and regulations.
• Using widespread empowerment of employees (training, information,
authority to make decisions).
• Having good listening skills in relating to customers’ messages.
• Providing role clarity to employees to reduce ambiguity and conflict and
increase job satisfaction.
• Having conscientious, caring employees willing to take initiative.

77
 The External Environment – Macro and Micro

The general/macro-environment impacts all firms in

a country, but differently. Analyzing the macro
environment requires asking oneself “so what?” and
“now what?”
How does this impact my organization and what
should I do about it, tactically and strategically.

The specific/micro environment includes customers,

suppliers, competitors, pressure groups, substitute
products. We need to assess the impact we will have
on these stakeholders and how they might respond.
We also need to ask the questions: “so what” and
“now what”.

78
General (Macro-) Environment (cont’d)

•The most rapid changes have

occurred in technology.
•Machine learning, AI
• IOT
•3D printing

•Companies that capitalize on

Technological technology, such as Apple, Amazon,
Tesla, eBay, and Google, prosper.

79
General/Macro environment (cont’d)
Global Globalization (mainly impacted by lowering
communication and transportation costs) is
one of the major factors affecting managers
and organizations.
Managers are challenged by an increasing
number of global competitors.

What happens in one country affects others

• Subsidizing agriculture in Europe
• US banking laws impact Lebanon
• Bad housing loans in US bankrupt Iceland
Trade wars affect any by raising prices to
80
intermediaries and final consumers
 How the Environment Affects Managers
•Environmental Uncertainty
• The extent to which managers have knowledge of and are able to
predict change which their organization’s external environment is
affected by:
• Complexity of the environment: the number of components in an
organization’s external environment.
• Degree of change in environmental components: how dynamic or
stable the external environment is.
• The extent to which they communicate information internally and
ensure the organization leverages opportunities (e.g., integrates new
technology into products and services) and minimizes threats (e.g.,
builds multiple warehouses)
81
Environmental Uncertainty Matrix

82
 Stakeholder Relationships

•Stakeholders
• Any constituencies in the organization’s environment that are affected by the
organization’s decisions and actions

•Why Manage Stakeholder Relationships?

• It can lead to improved organizational performance.
• It’s the “right” thing to do, given the interdependence of the organization and
its external stakeholders.

83
Organizational Stakeholders

84
 Chapter 4: The Global Marketplace

•Globalization is the trend of the world economy becoming a more

interdependent system.
•Opportunities and Challenges
• Coping with the sudden appearance of new competitors.
• Acknowledging cultural, political, and economic differences.
• Dealing with increased uncertainty, fear, and anxiety.
• Adapting to changes in the global environment.
• Benefitting from lower costs of inputs (labor, raw materials,..)
• Avoiding parochialism (understanding and valuing the local culture).
85
 What’s Your Global Perspective?
•Parochialism is
• viewing the world solely through one’s own eyes and perspectives
• not recognizing that others have different ways of living and working
• a significant obstacle for managers working in a global business world
• falling into the trap of ignoring others’ values and customs and rigidly
applying an attitude of “ours is better than theirs” to foreign cultures

86
 Adopting a Global Perspective
•Ethnocentric Attitude
• The parochialistic belief that the best work approaches and practices are
those of the home country.

•Polycentric Attitude
• The view that the managers in the host country know the best work
approaches and practices for running their business.

•Geocentric Attitude
• A world-oriented view that focuses on using the best approaches and
people from around the globe.

87
 Different Types of International Organizations
•Multinational Corporation (MNC)
• Maintains operations in multiple countries.
•Multidomestic Corporation
• Is an MNC that decentralizes management and other decisions to the local
country.
•Global Company
• Is an MNC that centralizes its management and other decisions in the home
country.
•Transnational Corporation (Borderless Organization)
• An MNC that has eliminated structural divisions that impose artificial
geographic barriers and is organized along business lines that reflect a
geocentric attitude. 88
 Exhibit 4–3 How Organizations Go Global

Invest in the Relationship

Direct Investment

•MAP source: http://www.gcccountries-business.com/_mgxroot/page_10769.html

Minimal risk Maximum Control

89
 Other Forms of Globalization
•Strategic Alliances
• Partnerships between and organization and a foreign company in which both
share resources and knowledge in developing new products or building new
production facilities. Or, “A” distributes a product invented/produced by “B”

•Joint Venture
• A specific type of strategic alliance in which the partners agree to form a
separate, independent organization (Different legal entity) for some business
purpose.

•Foreign Subsidiary
• Directly investing in a foreign country by setting up a separate and independent
operation (production facility or office).
• Acquisition
• Green Field operation 90
 Managing in A Global Environment

•The Legal and Political Environment

• Stability or instability of legal and political systems
• Legal procedures are established and followed
• Fair and honest elections held on a regular basis

• Differences in the laws of various nations

• Effects on business activities
• Effects on delivery of products and services

91
 The Economic Environment
•Economic Systems
• Free market economy
• An economy in which resources are primarily owned and controlled by the private sector.
• Planned economy
• An economy in which all economic decisions are planned by a central government.
• Health of economy
• Size (GNP) and growth, income distribution, inflation/deflation
• Reliance on extraction, import/exports, SMEs
• Workforce (education, hardworking,..)
• Infrastructure (capital, transportation, electricity, internet…) cost availability and reliability
• Relations with other countries (eg EU, NAFTA, GCC,..)
•Monetary and Financial Factors
• Currency exchange rates
• Inflation rates
• Diverse tax policies
92
 The Cultural Environment
•National Culture
• Are the values and attitudes shared by individuals from a specific
country that shape their behavior and their beliefs about what is
important.
• May have more influence on an organization than the organization
culture.

93
Hofstede’s Framework for Assessing Cultures

Individualism
versus
Collectivism

Long-Term
versus Power
Short-Term Distance
Orientation
Culture

Achievement
Uncertainty
versus
Avoidance
Nurturing

94
Hofstede’s Five
Dimensions of National
Culture
Explain the individualistic and
collectivistic perspectives and the
differences between them and how
they may create friction between
managers from different cultures

Same for high power distance v.

lower power distance
etc.

95
 GLOBE Highlights
•Power distance
• The degree to which members of a society expect power to be unequally shared.

•Uncertainty avoidance
• A society’s reliance on social norms and procedures to alleviate the unpredictability of future events.

• Assertiveness
• The extent to which a society encourages people to be tough, confrontational, assertive, and competitive
rather than modest and tender.

•Humane orientation
• The degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring,
and kind to others

•Future orientation
• The extent to which a society encourages and rewards future-oriented behaviors such as planning, investing
in the future, and delaying gratification.

•Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier.
96
 GLOBE Highlights (cont’d)
•Institutional collectivism
• The degree to which individuals are encouraged by societal institutions to be
integrated into groups in organizations and society.

•Gender differentiation —
• The extent to which a society maximizes gender role differences, as measured by how
much status and decision-making responsibilities women have.

•In-group collectivism —
• The extent to which members of a society take pride in membership in small groups,
such as their families, their circles of close friends, and the organizations in which they
are employed.

•Performance orientation —
• The degree to which a society encourages and rewards group members for
performance improvement and excellence.
Source: M. Javidan and R. J. House, “Cultural Acumen for the Global Manager: Lessons from Project GLOBE,” Organizational Dynamics, Spring 2001, pp. 289–305. Copyright © 2001. Reprinted with permission from Elsevier. 97
 Global Management in Today’s World
•Challenges
• Openness associated with globalization
• Globalization associated with “Americanization.”
• Significant cultural differences makes it difficult to succeed globally
• Adjusting leadership styles and management approaches

•Risks
• Loss of investments in (politically or economically) unstable countries
• Increased terrorism
• Economic interdependence (if one country falters it could impact others)

98
Chapter 9: Why Is Strategic Management Important?
1. It usually results in higher organizational performance
2. It requires that managers examine and adapt to business
environment changes.
3. Helps allocate resources
4. It coordinates diverse organizational units, helping them
align their activities and focus on organizational goals
5. Enables a company to take advantage of unexpected
opportunities

99
 Exhibit 9–1 The Strategic Management Process

Strategic, financial and

operational/functional goals

100
Step 1: Identifying the Current Mission,
Goals, and Strategies
 Mission: a statement of the purpose of an
organization
• The scope of its products and services
and where it competes
 Goals: the foundation for further planning
• Measurable performance targets

101
Step 2: Doing an external analysis
 The environmental scanning of specific
(micro) and general (or macro)
environments
• Focuses on identifying opportunities
and threats

102
Step 3: Doing an internal analysis
 Assessing organizational resources, capabilities,
and activities relative to competitors:
• Strengths create value (lower cost, better
product, convenience, design) for the customer
and strengthen the competitive position of the
firm.
• Weaknesses can place the firm at a competitive
disadvantage.
 Analyzing financial and physical assets is fairly easy,
but assessing intangible assets (employee’s skills,
culture, corporate reputation, and so forth) isn’t as
easy.
103
SWOT Analysis

Steps 2 and 3 combined are called a SWOT analysis:

• Strengths (VRIO)
• Weaknesses
• Opportunities
• Threats

104
Step 4: Formulating strategies
 Develop and evaluate strategic alternatives (or
options).
 Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors (lowering costs or increasing value to
customers and consumers).
 Match organizational strengths to environmental
opportunities.
 Correct weaknesses and guard against threats.

105
Step 5: Implementing strategies
 Implementation: effectively fitting organizational
structure and activities to the environment.
 The environment dictates the chosen strategy; effective
strategy implementation requires an organizational
structure (including resources, technology, culture,
policies, processes) which is aligned and matched to the
requirements of the external environment and to the
firm’s positioning/strategy.
106
Step 6: Evaluating results
 What (KPIs) should we measure?
 How effective have strategies been?
 What adjustments, if any, are necessary?

107
 Exhibit 9–4 Types of Organizational Strategies

WHERE?

HOW?

108
Planning depends on level in the organization
(corporate v. SBU, function), degree of
environmental uncertainty (eg around the 5
forces, technology,..), culture, current
resources vs. future commitments

109
 What is a Corporate Strategy?
•A corporate strategy is one that specifies what businesses a company is in or wants
to be in (i.e., where to compete), and what it wants to do with those businesses.

•Types of Corporate Strategy:

1. Growth:
-expansion into new products and markets
2. Stability:
-maintenance of the status quo
3. Renewal:
-Examination and correction of organizational weaknesses that are leading to performance
declines

110
 1. Growth Strategy

Seeking to increase the organization’s business by expansion into new products and markets.

•Types of Growth Strategies

- Concentration
- Vertical integration (forward or backward)
- Horizontal integration
- Diversification (may be related or unrelated)

111
 1. Growth Strategy (cont’d)
•Concentration
- Focusing on a primary line of business and increasing the number of
products offered or markets served.

•Vertical Integration
- Backward vertical integration: attempting to gain control of inputs
(become a self-supplier).
- Forward vertical integration: attempting to gain control of output through
control of the distribution channel or provide customer service activities
(eliminating intermediaries).

112
 1. Growth Strategy (cont’d)
•Horizontal Integration
- Combining operations with another competitor in the same industry to
increase competitive strengths (eg reduce costs, broaden product range) and
lower competition among industry rivals.

•Related Diversification
- Expanding by combining with firms in different, but related industries that are
“strategic fits” (They may leverage each others’ value chains). E.g., shampoos
and soaps)

•Unrelated Diversification
- Growing by combining with firms in unrelated industries where higher financial
returns are possible. (G.E. Jet engines, medical equipment and light bulbs)
• Internationalization

113
 2. Stability Strategy

This strategy is appropriate if:

-Managers want to maintain the status quo to deal with the
uncertainty of a dynamic environment.
-The industry is experiencing slow- or no-growth conditions.
-If the owners of the firm elect not to grow for personal
reasons.

114
 3. Renewal Strategies

• Developing strategies to counter organization weaknesses that

are leading to performance declines.
• Retrenchment:
• focusing of eliminating non-critical weaknesses and restoring
strengths to overcome current performance problems.
• Eliminating less profitable products, customers or markets

• Turnaround:
• addressing critical long-term performance problems through the
use of significant cost reduction measures and large-scale
organizational restructuring or reorganization solutions.

115
 How are Corporate Strategies Managed?
•Managers manage a portfolio (or collection) of businesses using a
corporate portfolio matrix such as the BCG Matrix.
•BCG Matrix
• Developed by the Boston Consulting Group.
• Considers relative relative market share and industry growth rate.
• Classifies firms as:
• Cash cows: low growth rate market, firm has high market
share
• Stars: high growth rate market, firm has high market share
• Question marks: high growth rate market, firm has low market share
• Dogs: low growth rate market, firm has low market share
116
Exhibit 9–5 The BCG Matrix

Main objective:
establish priorities
for the allocation of
resources.
Investment and/or
divestment of
businesses

117
 What is a Competitive Strategy?
A strategy focused on how an organization will compete in its business(es).
- For an organization in only one line of business, the competitive strategy
describes how it will compete in its primary or main market.

- For organizations in multiple businesses, however, each business has its own
competitive strategy that defines its competitive advantage, the products or
services it will offer, the customers it wants to reach, and the like.

118
 The Role of Competitive Advantage
1. Competitive Advantage is derived from an organization’s
distinctive competitive edge (for a targeted segment of the
market).
2. That distinctive edge comes from the organization’s core
competencies because the organization does something that
others cannot do or does it better (or at lower cost) than others
can do it.

119
 Quality as a Competitive Advantage
• Differentiates the firm from its competitors.
• Can create a sustainable competitive advantage.
• Represents the company’s focus on quality management to achieve
continuous improvement and meet customers’ demand for quality.
• Competitive advantage is relative to your competition. As
competitors improve you must stay ahead of them.
EG. Lee Iacoca of Chrysler and his shoes.

Must also ensure costs are under control. Do not add features unless the
customer is willing to pay mare than it will cost you to develop and
maintain.
120
 Sustaining Competitive Advantage
• Continuing over time to effectively exploit resources and develop core
competencies that enable an organization to keep its edge over its
competitors.
• It is not easy to create a sustainable competitive advantage due to market
instabilities, changing customer preferences, international competition, new
technology, and other changes.
• By using strategic management, managers can better position their
organizations to get a sustainable competitive advantage.

• There are 2 ways to sustain Competitive Advantage:

• Having something no one else can copy e.g., unique raw material source, monopoly, IP
• Keep improving faster than competitors can copy you

121
 Michael Porter’s Five Forces Model
Companies often define competition
too narrowly considering only direct
competitors. Porter suggests that
there are 5 sources of competition
over profits including competition
from current competitors, from
suppliers and buyers as well as from
Or collaboration
new entrants into your market and
substitute products eg bottles made
of plastic, cans or glass.
Make sure you know what the 5F’s
are, what they mean, what causes
them to be strong or weak and how
they impact profits.
Potential competition from new Or collaboration
entrants or substitutes determine how
much profit the industry will enjoy
Competition from (or collaboration
with) suppliers and buyers determine
how the industry profits are divided

Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980).

122
 Five Competitive Forces
•Threat of New Entrants
- The ease or difficulty with which new competitors can enter
an industry.

•Threat of Substitutes
- The extent to which switching costs and brand loyalty affect
the likelihood of customers adopting substitute products and
services.

•Bargaining Power of Buyers

- The degree to which buyers have the market strength to hold
sway over and influence competitors in an industry.

123
 Five Competitive Forces (cont’d)
•Bargaining Power of Suppliers
- The relative number of buyers to suppliers and threats
from substitutes and new entrants affect the buyer–
supplier relationship.

•Current Rivalry
- Intensity among rivals increases when industry growth
rates slow, demand falls, there is overcapacity or high fixed
costs, and product prices descend.

124
 Choosing a Competitive Strategy

•Cost Leadership Strategy

• Seeking to attain the lowest total overall costs relative to other industry
competitors.

•Differentiation Strategy
• Attempting to create a unique and distinctive product or service for which
customers will pay a premium.

•Focus Strategy
• Using a cost or differentiation advantage to exploit a particular market
segment rather than a larger market.

125
 Strategic Flexibility

Involves the ability

1. to recognize major external changes

2. to quickly commit resources

3. to recognize when a strategic decision is not working

126
 Exhibit 8–7 Creating Strategic Flexibility
• Know what’s happening with strategies currently being used by monitoring
and measuring results.

• Encourage employees to be open about disclosing and sharing negative

information.

• Get new ideas and perspectives from outside the organization.

• Have multiple alternatives when making strategic decisions.

• Learn from mistakes.

Source: Based on K. Shimizu and M. A. Hitt, “Strategic Flexibility: Organizational Preparedness to Reverse
Ineffective Strategic Decisions,” Academy of Management Executive, November 2004, pp. 44–59.

127
New Directions: Strategies for Applying e-Business Techniques

• Cost Leadership
• On-line activities: bidding, order processing, inventory control,
recruitment and hiring

• Differentiation
• Internet-based knowledge systems, online ordering and
customer support

• Focus
• Chat rooms and discussion boards, targeted Web sites

128
 New Directions: Customer Service Strategies
-Segmenting the market into homogeneous groups with special needs
-Giving the (selected) customers what they want
-Communicating effectively (the value proposition, positioning) with them
-Providing employees with customer service training
-Ensuring the processes, policies, procedures, management information,
new product development, location/convenience and the culture support
customer service.

129
 New Directions: Innovation Strategies
•Possible Events
- Radical breakthroughs in products
- Application of existing technology to new uses

•Strategic Decisions about Innovation

- Basic research
- Product development
- Process innovation

• Disruptive Technology
•First Mover
- An organization that is first to bring a product innovation to market or use a new
process innovation.
-----------------
- What are the advantages and disadvantages of being the first mover?? 130
Exhibit 9–8 First-Mover Advantages–Disadvantages
Advantages Disadvantages
 Reputation for being  Uncertainty over exact
innovative and industry direction technology and
leader market will go
 Cost and learning benefits  Risk of competitors
 Control over scarce imitating innovations
resources and keeping  Financial and strategic
competitors from having risks
access to them  High development costs
 Opportunity to begin building
customer relationships
and customer loyalty

131