MGTS 1301 – Final Exam (Lecturer Uses Learning Objectives to write exam) Lecture 1: 1. To define management 2. To discuss the history of management 3. To describe the four functions of management 4. To identify the skills required by managers ‘Management is the attainment of organisational goals in an effective and efficient manner through planning, organising, leading and controlling organisational resources’ (Text: p.10) ‘Managers give direction to their organisations, provide leadership and decide how to use organisational resources to accomplish goals’ (Text p.10) An organisation is a social entity that is goal directed and deliberately structured (Text: p.16) Organizational Performance: The organisation’s ability to attain its goals by using resources in an efficient and effective manner Effectiveness is a measure of task output Efficiency is a measure of the resource cost 1. Classical Perspectives Scientific Management Administrative Principles Bureaucratic Principles 2. Humanistic Perspective Hawthorne Studies 3. Management Science Perspective 4. Recent Historical Trends Systems Theory Contingency View Sustainable Development 5. To understand how management thought has evolved historically 6. To evaluate the ongoing relevance of management theory today How a Field of Theory Evolves 1. Observation of a new phenomenon and the reporting of exploratory case studies 2. Definitions which capture operational characteristics and the context 3. Conceptualization of useful constructs and their dimensions to provide a deeper, more nuanced understanding of the possible relationships that underpin the phenomenon 4. Testing of theoretical relationships 5. Consistent body of knowledge within a field of theory Classical Management Perspective Scientific Management (Frederick Taylor) Developed standard method for performing each job Each worker had specific skills (trained) for each job Minimized interruptions by planning Provided wage incentives to workers for increased output/goals Bureaucratic Management (Max Webber) Clear definitions of authority/responsibility Clear hierarchy Selection based on technical qualifications Admin decisions are recorded in writing Management and ownership are separate Rules and procedures are applied to all employees Negatives; Excessive paperwork, slowness in handling problems, resistance to change Administrative Management (Henry Fayol) Planning Organising Commanding Coordinating Controlling Employees are grouped to combine individual talents for a greater good Organizations as cooperating ‘communities’ of managers and workers Employee ownership Private profits relative to public good Humanistic Perspectives Hawthorne Studies Series of experiments about productivity and work conditions A variety of different work conditions trialed and the greatest increases in productivity were due to: the group atmosphere and participative supervisions Conclusion: Work is a group activity and need for recognition, security and sense of belonging are more important in determining productivity than physical conditions of work Human Relations Movement: Emphasizes satisfaction of employees’ basic needs as key to increased worker productivity Human Resources Perspective: Suggests jobs should be designed to meet higher level needs by allowing workers to use their full potential Management Science Perspective Use the application of mathematics, statistics and other quantitative techniques to managerial problems Techniques included: Mathematical forecasting, Inventory modeling, Linear programming, Queuing theory, Simulation Recent Historical Trends Systems theory System: Set of interrelated parts that function as a whole Subsystem: A smaller component of a larger system Open System: Interacts with the external environment Contingency View Claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation Management Themes of the 21st Century Quality and Performance Excellence Global Awareness Learning Organizations Sustainable Development Four Functions of Management Planning: Defining goals for future organizational performance and deciding on the tasks and use of resources needed to attain them Organising: Assigning tasks, grouping of tasks into departments and allocating resources to departments Leading: Involves the use of influence to motivate employees to achieve the organisation’s goal Controlling: Monitoring employees activities, keeping the organization on track towards its goals, and making corrections as needed Manager Skills Conceptual Skills: Cognitive ability to see the organization as a whole and the relationship among its parts Human Skills: Ability to work with and through other people and to work effectively as a group member Technical Skills: The ability to apply expertise and perform a special task with proficiency Lecture 3 1. To describe the planning process and understand its importance to management 2. To distinguish between different levels in the planning process and analyse their alignment 3. To distinguish the difference between different planning types and models 4. To explain the challenges of planning in turbulent environments and how they can be resolved 5. To describe the shift towards new planning approaches and explain why the shift occurred 6. To describe the control process and understand its connection to planning 7. To distinguish between different types of focus for control and evaluate their usefulness 8. To explain the steps in the feedback control model and evaluate their usefulness 9. To explain the changing philosophy of control and why this change has occurred The Planning Process 1. Goal: A desired future state that the organization attempts to realize 2. Plan: A blueprint specifying the resource allocations, schedules and other actions necessary for attaining goals Why are these important? Legitimacy, source of motivation and commitment, direct resource allocation, guide to targeted action, provides rational for decisions, set performance standards Planning: The management function of defining goals for future organizational performance and deciding on the tasks and resource use needed to attain them Levels in the Planning Process 1. Mission Statement 2. Strategic Goals: Broad statements of where the organization wants to be in the future pertaining to the organization as a whole 3. Tactical Goals: Define the outcomes that major divisions and departments must achieve 4. Operational Goals: Specific measureable results expected from departments, work groups and individuals Different Planning Periods 1. Long-term: five years and beyond (Strategical goals) 2. Intermediate-term planning: between 1-2 year (Tactical goals) 3. Short-term planning: One year of less (Operational goals) Note: goals at all these levels must be; aligned, specific, measureable, cover key result areas, challenging but realistic, defined time period, linked to rewards Types of Plans: Management by objectives: Managers and employees define goals for every department, project and person Single use plans Standing plans Planning in Turbulent Environments Contingency Plans: Define organistaion responses to specific situations, such as emergencies, setbacks or unexpected conditions Scenario Planning: Plans that anticipate various situations that could impact the organization Crisis Planning: Plans for unexpected disasters Traditional Approach to Planning Centralized planning department Formal topdown Modern Approach to Planning Decentralized planning staff High performance planning paradigm Organizational Control Planning Sets the Direction: Decide where you want to go and decide the best way to go about it Control ensures results: The systematic process through which managers regulate organizational activities to make the consistent with expectations established in plan, targets and standards of performance Feedback Control Model 1. Establish standards of performance 2. Measure actual performance 3. Compare performance with standards 4. Take corrective action 5. Or do nothing or provide reinforcement (if adequate) Characteristics of Effective Control Systems; Linked to strategy, understandable measures, acceptable to organizational members, objective and subjective data, accurate, timely, flexible to contingency, cost effective Changing Philosophy of Control Hierarchical control Stable environments Top-down, formal authority, measureable standards, extrinsic rewards, close supervision, rigid culture Decentralised Control Unstable environments Limited rules, flexible authority, emphasis on goals rather than rules and procedures, teams, employee participation, adaptive culture Lecture 5 1. To define managerial ethics and distinguish the ethical domain for human behavior 2. To explain different approaches for evaluating ethical decision making – utilitarian, individualism, moral rights, justice 3. To describe the factors that influence ethical decision making – individual, national culture, organization 4. To explain the concept of Corporate Social Responsibility and how it has emerged 5. To distinguish an organization’s different social reposibilities 6. To evaluate different responses an organization can take to social demands 7. To explain how organization can manage ethics and social responsibility Managerial Ethics Ethics The code of moral principles and values that governs the behavior of a person or a group with respect to what is right or wrong Sets standards of good or bad, or right or wrong, in a person’s conduct and thereby guides the behavior of that person or group Three types of human behavior Domain of codified law (legal standard) Domain of ethics (social standard) Domain of free choice (personal standard) Ethical Dilemma: A situation in which all alternative choices or behaviors have potentially negative ethical consequences, making it difficult to distinguish right from wrong Alternative Approaches for Ethical Decision Making 1. Utilitarian Approach- moral behavior produces greatest good to the greatest number of people 2. Individualism Approach- acts are moral when they promote the individuals best long-term interests 3. Justice approach – moral decisions are on stadards of equity, fairness and impartiality 4. Moral-rights- Moral decisions respect the fundamental rights and liberties of all people. Eg right to free speech, privacy and life safety Factors Affecting Ethical Choice The individual manager (Kohlberg’s levels of moral development) Pre-conventional: Follows rules to avoid punishment, acts in own interests and obedience for its own sake Conventional: Lives up to expectations of others, fulfills duties and obligations of social system and upholds laws Post-conventional: Follows self-chosen principles of justice and right, aware of differences and balances concern for individual with concern for common good National culture Cultural Relativism: Ethical behavior is always determined by cultural context Ethical Imperialism: Behavior that is unacceptable in one’s home environment should not be acceptable anywhere else The organization Values of an organistation or department The socialization employees into values of the organization Organisations rules and policies Reward System Staff selection Corporate Social Responsibility Corporate social responsibility (CSR): The obligation of the management of an organization to make decisions and take actions that will enhance the welfare and interests of social as well as the organization Represents a shift from classical economic perspectives on organisations to a stakeholder perspective An organizations performance should be measured by \ Traditional financial/economic outcomes Environmental outcomes Social outcomes Classical Economic Perspective: Managements only responsibility is to maximize profits for shareholders Stakeholder Perspective: Management must be concerned for the broader social welfare for all stakeholders, not just profits Organizations Social Responsibilities: Economic Responsibilities Legal Responsibilities Ethical Responsibilities Discretionary Responsibilities Organisational Responses to Social Demands Obstructive response:denies responsibility and obstructs investigation; concerned with meeting economic responsibilities only Defensive response:admits some errors, defends self but does not obstruc t; concerned with meeting economic and legal responsibilities Accommodative response:accepts social responsibility to (often under external pressure) to comply with public interest; concerned with meeting economic, legal and ethical responsibilities Proactive response:seeks to learn what is in public interest and to respond without external pressure; concerned with meeting economic, legal, ethical and discretionary responsibilities Managing Organisational Ethics and Social Responsibility Leadership by example Leaders make a commitment to ethical values and help others throughout the organization to embody and reflect those values Codes of ethics A formal statement of the organisations values regarding ethics and social issues Principle-based statements to define fundamental organizational values Policy-based statements to outline procedures to use in specific ethical situations Ethical Structures Ethics committees Chief Ethics Officer heading an ethics department Ethics training programs Supporting Whistle Blowers Whistle Blowing: disclosure by an employee of illegal, immoral or illegitimate practices by the organization Law vs organizational barriers Lecture 6 1. To explain the environment of an organisation and its importance within an open systems view 2. To distinguish between the external and internal environment of an organ isation 3. To distinguish between the general and task environment as the two layer s of the external environment 4. To identify the dimensions that make up the general environment of an organisation and analyse their impact on the organisation 5. To identify the sectors that make up the task environment of an organisati on and analyse their impact on the organisation 6. To explain the strategies an organization has for dealing with environmental uncertainty 7. To identify corporate culture as a major factor in the internal environment of an organisation and explain the difference between visible and invisible culture 8. To explain the relationship between corporate culture and external enviro nment and describe different types of cultures that fit with different environment s and strategies 9. To explain the relationship between corporate culture and business perfor mance and describe ways leaders of an organization can use culture to improve performance The Environment of Organisations 1. External Environment: All elements existing outside the boundaries of the organization that have the potential to affect it 2. Internal Environment: Elements within an organisations boundaries – corporate culture The External Environment General Environment: The outer layer of the external environment that affects the organization indirectly Provides the general context for management decision making Task Environment: The inner layer of the external environment that directly influences the organisation’s operations and performance Includes sectors that conduct day-to-day transactions with the organizations The General Environment International dimension: events originating in foreign countries, as well as opportunities for local organisations in other countries Technological dimension: scientific and technological advancements in a specific industry and society at large, including advances in methods available for converting resources into products and services Sociocultural dimension: the demographic characteristics, norms, customs and values of the population within which the organization operates Economic dimension: the overall economic health of the country or region in which the organization operates Legal-political dimension: government regulations at the local, state and federal levels, and political activities designed to control organization behavior Natural dimension: all elements that occur naturally on earth, including plants, animals, rocks and natural resources such as air, water and climate The Task Environment Customers People and organisations in the environment who acquire goods or services from the organization Competitors Other organisations in the same industry or type of business that provide goods and services to the same set of customers Suppliers Provide the human, information and financial resources and raw materials that the organization uses to produce its output Labour Market The people available for hire by the organization The Organisation-Environment Relationship Environmental Uncertainty: Managers know what goal they wish to achieve, but information about alternatives and future events is complete Managers have two choices when managing the relationship between their organization and the external environment 1. Adapt to the external environment; make changes within your organization to cope with uncertainty 2. Influence the external environment; try to change the external environment Choice 1: Adapting Boundary spanning roles Roles assumed by people and/or departments that link and coordinate the organization with key elements in the external environment Detect and process information about changes in the environment Forecasting and scenario planning Flexible structures Interorganisational partnerships – partnership orientation based on trust and long-term contracts Mergers and joint ventures Scale advantages, spread risk across organisations Choice 2: Influencing Advertising and public relations Managing customer perceptions about your products and organsation Political activity Building relationships with key members of government Trade Associations An association made up of organisations with similar interests The Internal Environment – Corporate Culture The internal environment comprises factors inside the boundaries or the organization Internal environments are important because they affect what people think and do at work A key component of the internal environment is corporate culture, which is the system of shared beliefs and values that develops within an organization and guides the behavior of it members (corporate culture: the set of key values, beliefs, understandings and norms shared by members of an organization) Visible manifestations of corporate culture: all the things one can see, hear and observe by watching members of the organization: Symbols Stories Heroes Slogans Ceremonies Invisible Culture: Expressed values and beliefs can be interpreted from visible culture – can be discerned from how people explain and justify what they do Underlying assumptions and beliefs are the essence of culture and may be so deeply embedded members may not be consciously aware of them Determines why things are the way they are Unwritten but shared understandings of the way things are done in the organization (eg customer is always right) Culture and the External Environment Strong organizational cultures are those where the core values are uniformly held by organizational members Strong culture organisations operate with a small but enduring set of organizational values Highly successful organisations typically emphasise values of quality, performance excellence, innovation, social responsibility, integrity, worker involvement, customer service and teamwork BUT strong corporate culture alone does not ensure business success as corporate culture needs to fit with the external environment and the organsation’s strategy Four types of corporate cultures based on; 1. The extent to which the external environment requires flexibility or stability 2. The extent to which a company’s strategic focus is internal or external Connecting Culture and Business Performance Leaders in the organization should establish and maintain core values that are; relevant, pervasive and strong Leaders can influence culture by Symbolic Leadership Leaders can use the observable culture to establish and maintain a desired culture Leaders can influence culture by: 1. What they pay attention to and notice 2. Their reactions to problems and crises 3. Role modeling, coaching and mentoring 4. Criteria for reward, promotion, punishment Lecture 8 To define strategy and explain why it is important To describe the process of strategic management To explain the steps in the strategic management process To conduct a SWOT analysis to help formulate strategy To distinguish between corporate and business levels of strategy To describe different types of corporate-level strategies and use portfolio analysis to explain when each is appropriate To conduct a Porter’s Five Forces analysis to help formulate business-level strategy To describe the generic types of competitive strategies at the business level and explain when each is appropriate To explain the challenges in strategic implementation Basic Concepts of Strategy Strategy: is the plan of action that prescribes resource allocation and other activities for dealing with the environment, achieving competition advantage and helping the organisation achieve its goals Competitive Advantage: What sets the organisation apart from the others and provides it with a distinctive edge in the marketplace Operating in a successful way that is difficult for competitors to imitate Strategy should focus on: Exploiting a Core Competence – a business activity that an organisation does particularly well in comparison to competitors Building Synergy – the organisation’s parts interact to produce a joint effect that is greater than the sum of the parts acting alone Delivering Value to Customers – combination of benefits customers receive and costs paid Strategic Management: The process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage Strategy Formulation: The stage of strategic management that involves the planning and decision making that lead to the establishment of the organisations goals and a specific strategic plan Strategy Implementation: The stage of strategic management that involves the use of managerial and organisational tools to direct resources towards achieving strategic outcomes Step 1: Evaluate Current Position Mission – organisations reason for being Goals (eg profitability, market share) Existing Strategy Step 2: Analysis of Environment SWOT Analysis: Assessing the STRENGTHS and WEAKNESSES in the internal environment of the organisation along with OPPOURTUNITIES and THREATS in the external environment Objectives of the SWOT is to identify core competencies (core competencies: special strengths that give an organisation a competitive advantage because that are rare and difficult to imitate) Step 3: Levels of Strategy Corporate Strategy: Concerned with the question ‘what business are we in?’ Relates to the organisation as a whole and the combination of business units and product lines that make it up Business Strategy: Concerned with the question ‘how do we compete?’ Relates to each business unit or product line within the organisation Functional Strategy: Concerned with ‘how do we support the business level strategy?’ Relates to all of the organisation’s major departments Types of Strategy’s 1. Growth Strategies: Expanding the scale of current operations (eg diversification, concentration – growth in the same business area) 2. Retrenchment Strategies: Decreasing scale of current operations (eg liquidation, restructuring) 3. Co-operative Strategies: Strategic alliances to partner with other organisations for mutual benefit 4. Portfolio Approach: The organisations mix of strategic business units and product lines that fit together in such a way as to provide the organisation with synergy and competitive advantage 5. Strategic Business Units: A division of the organisation that has a unique business mission, product line, competitors and markets relative to other SBU’s in the same organisation 6. BCG Matrix: A concept developed by the Boston Consulting Group that evaluates strategic business units with respect to the dimensions of business growth rate and market share To find a competitive advantage within these five forces, Porter suggested an organisation can adopt one of three generic business-level strategies: Cost leadership strategy – organisation aggressively seeks efficient facilities, cuts costs and employs tight cost controls to be more efficient than competitors ie seeks to operate with lower costs than competitors Differentiation strategy – organisation seeks to distinguish its products or services from those of its competitors ie offers products that are unique from competitors and for which consumers will pay a premium Focus strategies – organisation concentrates on a specific regional market or buyer group Focused cost leadership – low cost operations in special market segment Focused differentiation – unique product to special market segment Step 4: Implementation Challenges and Problems in Implementing Strategy Failures of Substance: Inadequate attention to major strategic planning elements Failures of Process: Poor handling of strategy implementation Emergent Strategy: Not all strategies are systematically and deliberately formulated prior to implementation – strategies emerge over time as managers learn from experience Issues of Corporate Governance – System of control and performance monitoring of top management Leadership – How to get people to engage in the continuous change, refinement and implementation of strategy Lecture 9: To identify basic concepts involved in organising as a management function (work specialisation; chain of command; authority, responsibility and delegation; span of control; centralisation and decentralisation; formalisation) To describe the five major types of organisational structures and to evaluate their usefulness (functional, divisional, matrix, team, network) To describe organisational design and compare the two major choices in organisational design (mechanistic vs organic designs) To explain the contingency factors that influence the choice of organisational design Organising – Basic Concepts Organaisational Structure: The framework in which the organization defines how tasks are divided, resources are deployed and departments are coordinated 1. Set of formal tasks assigned to individuals and departments 2. Formal reporting relationships 3. Design of systems to ensure effective coordination of employees across department Organisational Chart Work Specialisation: The degree to which organisational tasks are subdivided into individual jobs, also called division of labour Chain of command: An unbroken line of authority that links all individuals in the organisation and specifies who reports to whom Authority, responsibility and delegation: Authority – the formal and legitimate right of a manager to make decisions, issue orders and allocate resources Responsibility – the duty to perform an assigned task or activity Delegation – process managers use to transfer authority and responsibility to positions below them in the hierarchy Span of Control: The number of employees who report to a supervisor Centralisation and decentralisation: Centralisation – The location of decision authority near top organisational levels Decentralisation – The location of decision authority near lower organisational levels Formalisation: the written documentation used to direct and control employees Types of Organisation Structures: Departmentalisation – the process of grouping together people and jobs into work units Traditional Organisation Structures which achieve departmentalisation are; 1. Functional Structures 2. Divisional Structures 3. Matrix Structures Newer organisation structures are: 1. Team Structures 2. Network Structures Functional Structure: An organisation structure in which positions are grouped into departments based on similar skills, expertise and resource use Works well for small organisations producing few products or services Advantages Economies of scale and efficient resource use Task assignment consistent with expertise and training In-depth training and skill development within functions Clear career paths within functional departments Top manager direction and control Excellent coordination within functions High quality technical problem solving Disadvantages Poor communication and coordination across functional departments – ‘functional chimneys problem’ Slow response to external changes, lagging innovation Decisions concentrated at top of hierarchy, leading to delay Responsibility for problems is difficult to pinpoint Limited view of organisational goals by employees Limited general management training for employees Divisional Structures An organization structure in which departments are grouped based on similar organizational outputs Group together people who work on the same product or process, serve similar customers and/or located in the same area or geographical region Common in complex organisations Avoid problems associated with functional structures Advantages • Fast response, flexibility in unstable environments • Fosters concern for customer needs • Improved coordination across functional departments • Easy to pinpoint responsibility for product problems • Emphasis on overall product and division goals • Develops general management skills Disadvantages • Duplication of resources across divisions • Less technical depth and specialisation in divisions • Poor coordination across divisions • Less top management control • Competition between divisions for corporate resources Matrix Structures: An organizational structure which uses functional and divisional chains of command and simultaneously in the same part of the organization Dual lines of authority – running vertically and horizontally Team Structures: Cross-functional teams – a group of employees assigned to a functional department that meets as a team to resolve mutual problems Permanent teams – a group of participants from several functions who are permanently assigned to solve ongoing problems of common interest Network Structures: An organization structure that subcontracts major functions to separate organisations and coordinates their activities from a small headquarters organization The network structure can be viewed as a central hub surrounded by a network of outside specialists to who major functions are outscored Organisational Design Choosing and implementing structures that best arrange resources to serve the organisation’s mission and objectives The right structure must fit contingency factors: Strategy Environment Technology Fitting structure to the environment Mechanic Design: Bureaucratic Rigid, vertical, centralized structure Lots of rules, procedures and clear lines of authority Organic Design: Adaptive Wider span of control so more horizontal, decentralized structure Lots of delegation of authority to lower levels Environmental Uncertainty causes: Increased differences among departments Need for increased horizontal coordination to keep departments working together Need to be flexible and responsive toward environment Lecture 10 • To describe the process of international strategic management • To explain the reasons why organisations expand internationally • To distinguish between the four strategies that organisations can adopt for their international operations and to understand when each strategy is appropriate • To identify the modes of entry into foreign markets and to evaluate when each mode is appropriate • To explain how the sociocultural environment, economic environment, and legal-political environment impacts on the management of international operations International Management and Strategy International management involves managing operations in more than one country This arises because organisations develop and implement strategies in more than one country Emerging borderless world Step 1: Reasons for Expanding Internationality Increase market size Build on competitive advantage in the domestic market by transferring competencies to international markets where local competitors lack such skills Improve return on investment Particularly in R & D intensive industries eg. Biotechnology, Pharmaceuticals Protect innovation as patent protection requires a global perspective Economies of scale and learning Increase in efficiency of production as the number of goods being produced increases. . Economies of scale result from expanding the size and/or scope of markets Develop learning and experience curve Realise location advantage Economies that arise from performing a value creation activity in the optimal location for that activity (Beefeater BBQs in China) Lower cost effects: raw materials and labour Differentiation effects: access to key suppliers Step 2: Choose a Strategy for International Operations Four Strategies (Textbook 255-258) 1. Export Strategy 2. Multidomestic Strategy 3. Globalisation Strategy 4. Transnational Strategy Export Strategy Centralisation of management and product development at home Strong home country, head office control over foreign operations Very limited local customisation of product, if any Multidomestic Strategy Strategy and operating decisions are decentralised to strategic business units (SBU) in each country Business units in each country are independent of each other (hence low on coordination & global integration) Products and services are tailored to local markets (high on national responsiveness) Focus on competition in each market (need for advertising modification) Assumes markets differ by country or regions Prominent strategy among European firms due to broad variety of cultures and markets in Europe Globalisation Strategy Decisions regarding product design & advertising are centralized in the home office (hence high on global integration) Requires resource sharing and coordination across borders Product design and advertising strategies are standardised across national markets (low on national responsiveness) Assumption is that a single world market exists for the product and therefore focus on the need for global efficiency Standardising products leads to global efficiency through economies of scale Transnational Strategy Seeks to achieve both global integration and national responsiveness World-oriented view focusing on using the best approaches and people from around the world Attain efficiency with flexibility to meet specific needs in various countries Difficult to achieve because of simultaneous requirement for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Step 3: Choosing an Entry Mode Exporting: Organisation maintains its production facilities within its home country and transfers its products for sale in foreign markets Common way to enter new international markets No need to establish operations in other countries Establish distribution channels through contractual relationships May have high transportation costs and encounter high import tariffs and other trade barriers Less control over marketing and distribution Difficult to customise products Countertrade may be used in less developed countries Licensing Company (licensor) in one country makes certain resources available to companies in another country (licensee) eg technology, managerial skills, patent Licensing firm is paid a royalty on each unit produced and sold Relatively low cost way to enter a foreign market Relatively low profit potential Licensing firm loses control over product quality and distribution A significant risk if the licensee learns technology and competes when license expires Franchising: A form of licensing in which an organisation provides its foreign franchisees with a complete assortment of materials and services eg equipment, standardised operating system, managerial advice Joint Venture Most joint ventures (JVs) involve a foreign company with a new product or technology and a host company with access to distribution or knowledge of local customs, norms or politics Enable firms to share costs, risks and resources to expand into international ventures May be the fastest, cheapest and least risky way to go global if choose right partner May not understand the strategic intent of partners or may experience divergent goals Acquisitions Purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets Enable firms to make most rapid international expansion Can gain quick increase in market share or access to promising new technologies Can be very costly Legal and regulatory requirements may present barriers to foreign ownership Potential to gain synergies in production but may also have to combine potentially disparate corporate cultures Greenfield Venture The most risky type of direct investment in which a company builds a subsidiary from scratch in a foreign country Most costly and complex of entry alternatives Potentially most profitable, if successful Maintain greatest degree of control over production, technology, marketing and distribution May need to acquire expertise and knowledge that is relevant to host country e.g. local managers have heightened awareness of economic, political & cultural conditions Could require hiring host country nationals or consultants at high cost Step 4: Assess Management Issues and Risks National culture includes the shared knowledge, beliefs and values, as well as the common modes of behaviour and ways of thinking, among members of societ When choosing a country in which to operate consider the culture’s social values and similarity/difference to home culture Dimensions of Hofstede’s Values Power distance • Acceptance of inequality in power among institutions, organisations and people. Uncertainty avoidance • Intolerance for uncertainty and ambiguity. Individualism and collectivism • Individualism : refers to a loosely knit social framework that values independence • Collectivism : refers to a tightly knit social framework where individuals look after one another Masculinity and femininity • Masculinity : focus on achievement, heroism, assertiveness, work centrality and material success • Femininity cooperation, group decision making and quality of life Time orientation • Long-term : concern for future, thrift & perseverance • Short term (concern with past & present, tradition & social obligations) Sociocultural Environment: Management theories are not universal – most theories in this course are framed from a North American and Western European perspective Cross-cultural differences mean management practices cannot always be transferred successfully from one national culture to another Economic Environment Economic conditions in the country where the organisation operates internationally Legal-Political Environment Political systems and government supervision and regulations in the country where the organisation operates internationally When choosing a country in which to operate evaluate: Political risk – risk of loss of assets, earning power or managerial control due to politically based actions or events by host governments Political instability – riots, revolutions, civil disorders, frequent changes of government Laws and regulations eg consumer protection, information and labeling, intellectual property rights, employment and safety Lecture 11 To explain the Human Resources Management and how it fits with strategy To distinguish between attracting, developing and maintaining a quality workforce To describe what is involved in attracting a quality workforce and explain why this is important to management To describe what is involved in developing an effective workforce and explain why this is important to management To describe what is involved in maintaining an effective workforce and explain why this is important to management To identify contemporary issues in human resource management Human Resource Management HRM is activities undertaken to attract, develop and maintain an effective workforce within an organisation Organisations should take a strategic approach to HRM: 1. All managers are HR managers. 2. Employees are assets. 3. HRM is a matching process. HRM Process Involves: 1. Attracting an effective workforce 2. Developing an effective workforce 3. Maintaining an effective workforce Attracting an Effective Workforce Attracting individuals who show signs of becoming valued, productive, and satisfied employees Attracting is underpinned by a matching model: the organisation and the applicant attempt to match each other’s needs, interests and values Attracting involves: 1. HR Planning 2. Recruiting 3. Selecting HR Planning • Human resource planning – The forecasting of HR needs and the projected matching of individuals with expected job vacancies. • Consider key questions eg emerging new technologies; volume of business, staff turnover Recruiting • Recruiting is … • Activities or practices that define the desired characteristics of applicants for specific jobs. • Recruiting requires assessing organisational needs • Job analysis – The systematic process of gathering and interpreting information about the essential duties, tasks and responsibilities of a job. • Job description – A concise summary of the specific tasks and responsibilities of a particular job. • Job specification – An outline of the knowledge skills, education and physical abilities needed to adequately perform a job. Selecting The process of determining the skills, abilities and other attributes a person needs to perform a particular job. Choosing from the pool of recruited applicants Developing an Effective Workforce I. Employee Orientation II. Training III. Performance Appraisal Orientation Set of activities designed to familiarise new employees with their jobs, coworkers and key aspects of the organisation. Eg mission, policies and procedures Training • Training and development is… – Planned effort by an organisation to facilitate employees’ learning of job-related skills and behaviours • Types of training activities: – On-the-job training (most common) – Mentoring and coaching – Classroom training – Self-directed learning – Computer-based training Performance Appraisal • The process of observing and evaluating an employee’s performance, recording the assessment and providing feedback. Assessing performance – – – – Multidimensional ratings 360-degree feedback Performance review ranking systems Behaviourally anchored scale Making an Effective Workforce Maintaining a quality workforce, especially in dynamic environments, requires consideration of: i. Career development ii. Work-life balance iii. Compensation and benefits iv. Retention and turnover Career Development A sequence of jobs that constitute what a person does for a living • Career path • Career planning • Career plateau Work-life Balance • How people balance career demands with personal and family needs • Contemporary work-life balance issues: – Single parents – Dual-career couples – Family-friendliness as screening criterion used by candidates. Compensation and Benefits Monetary payments and non-monetary goods and commodities (benefits, vacations) used to reward employees • Wage and salary systems: – Job-based vs Skill-based (or Competency-based) – Compensation equity – Pay-for-performance • Benefits: non-monetary forms of compensation – Some are required by law eg Superannuation, holiday leave loading, worker’s compensation – Some optional eg health insurance, company car, onsite fitness centres, subsidised child care Retention and Turnover • • Replacement is the management of promotions, transfers, terminations, layoffs and retirements. Replacement decisions relate to: – Transferring or promoting people between positions within the organisation – Retirement – Voluntary Turnover – Involuntary turnover (eg mergers, cutbacks, poor performance) Contemporary Issues in HRM • Focus on building human capital to drive performance (Human capital = The economic value of the knowledge, experience, skills and capabilities of employees) • Globalisation adds complexity to HRM • Information technology – Human resource information system – integrated computer system designed to provide data and information used in HR planning and decision making • Innovations in HRM: – Becoming an employer of choice – Teams and projects – Temporary and part-time employees – Technology – Promoting work/life balance – Rightsizing the organisation Lecture 12 • To describe effective management and explain the importance of innovation an change management • To distinguish between invention and innovation and different types of innovation • To explain the forces driving innovation • To describe the innovation process, including the roles in the innovations process • To explain the importance of internal and external collaboration for innovation management • To distinguish change management involving people and culture • To explain organisation development as a type of change management • To describe how resistance to change impacts the implementation of innovation and change management and identify tactics for overcoming resistance Human Resource Management • Fundamental practices common to effective organisations - Leadership practices - People management practices - Customer focus practices - Quality and process management practices - Innovation management practices - Knowledge management practices Innovation Management • Invention is the act of discovery of a new idea • Innovation occurs when that invention is developed and commercialised for a market … it is the act of converting new ideas into usable applications that ideally have positive economic or social consequences Innovation = Invention + Commercial Exploitation Types of Innovation • Product Innovation – a change in the organisation’s product or service outputs ie. Results in new products or services • Technology Innovation – a change that pertains to the organisation’s production process ie. Results in better ways of doing things • Incremental Innovations – new products or process that modify existing ones • Radical Innovations – breakthrough products that are new-to-the-world and offer significant performance solutions to a consumer problem Forces Driving Innovation • The need to stay competitive • Potential to lower costs of production • Possibility of first-mover advantages – customers may be willing to pay a higher price because the product/service is the first-of-its-kind and offers them unique benefits Innovation Management: The Process Four steps of innovation process 1. Idea creation - Discovering potential product or way to modify an existing one 2. Initial experimentation - Sharing the idea with others and testing it in prototype form 3. Feasibility determination - Testing the practicality and financial viability of the new product 4. Final application - Commercialising the product or sale to customers or clients Roles in the Innovation Process 1. Inventor - Develops technical aspects of idea but does not know how to win support or turn into business 2. Idea Champion - Believes in idea, obtains financial and political support 3. Sponsor - High-level manager who approves & protects idea & removes organisational barriers 4. Critic - provides reality test against rigorous business criteria Cooperation • Internal coordination - Idea incubators - inside the organisation can provide safe harbour for development of ideas - Horizontal linkages – shared development of innovations among several departments • External coordination - Open innovation – extending search for and commercialisation of ideas beyond the boundaries of the organisation Cooperation Companies that successfully innovate have: 1. People in marketing with good understanding of customer needs 2. Technical specialists aware of recent developments 3. Members from key departments cooperating in the development of new products 4. Formal strategic partnerships such as alliances and joint ventures 5. Mechanisms to promote open innovation Change Management: People and Culture • People change - Changing the attitudes and behaviours of a few employees • Culture change - A major shifts in the norms, values, attitudes and mindset of the organisation • Training and development - Most frequently used approach to change • Organisation development - Planned, systematic process of change that uses behavioural science techniques to improve an organisation’s health and effectiveness through - Ability to cope with environmental changes Improvement of internal relationships Increased problem-solving capabilities OD is useful for mergers and acquisitions, organisational decline and revitalisation and conflict management Steps in Organisation Development: 1. Unfreezing - Diagnosis stage in which people in organisation become aware of problems and become willing to change - Problem = discrepancies between desired state and current state - Problem may be diagnosed by a change agent 2. Changing - Intervention stage in which individuals experiment with new workplace behaviour/skills 3. Refreezing - Reinforcement stage in which individuals acquire a desired new skill or attitude and are rewarded for it by the organisation Implementing Innovation and Change Management • Resistance to change (due to) - Self-interest - Lack of understanding and trust - Uncertainty - Different assessments and goals • Implementation tactics - Communication and education - Participation - Negotiation - Coercion - Top management support Putting it all together… Effective Management • Principles common to world’s best organisations - Agreed purpose and direction throughout the organisation - Empowered staff with decisions made at the right level - Execution excellence - Diligence, focus and discipline - Learning as a key principle of the organisation - Integrity, values and ethical high road - Distinctive capabilities and position Lecture 13 – ABOUT THE EXAM
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