Lecture1

Howwouldyoufinanceyourideas?

- Self,friends,family- R&Dgrantfunding- Businessangels:anaffluentindividualwhoprovidescapitalforabusinessstart-up(usuallyinexchangefor

convertibledebtorownershipequity).Acommonsecondroundoffinancingforhigh-growthstart-ups–bridgesthefundinggapbetweenselfandventurecapital.Personalinvestmentsàmoresignificantpersonalriskstakenwithinvestmentsthanthemanagersofventurecapitalfundsàtendtoinvestclosetohome+keepinvestmentactivitiesprivate,therefore,investinprivatelyheldbusinessventuresthathavenotbeenquotedpubliclyonthestockmarket

- Co-investmentfundsandearlystageVCfunds- Venturecapital:moneyprovidedtoseedearly-stage,emerginggrowthcompanies;venturecapitalfundsinvest

incompaniesinexchangeforequityinthecompaniestheyinvestin- ExitIPO/Tradesaleetc:exitoptionsforinvestors–seelinginvestment/seekingastockmarketlistinginorderto

realiseareturnontheirinvestment- Crowdfunding:fundingaprojectorventurebyraisingmonetarycontributionsfromalargenumberofpeople

(oftenperformedthroughinternet-mediatedregistries,mail-ordersubscriptions,eventsetc.)

Whatownershipformtochoose?• Affects:

o Taxliabletopayo Assetprotectiono Ongoingcostso Clients

Typeofownership Advantages DisadvantagesSoleTraders- Abusinessownedbya

singleperson

- Simplicity- Taxationatpersonal

rates- Privacy- Flexibilityand

control

- Unlimitedliability- Smallinscale- Indifferentiablefromowners,

thereforeimpermanent- Limitedincapacitytoraiseand

retaincapital- Limitedincapacitytomanagerisk

anddiversifyPartnerships- Twoormorepeoplecarry

onabusinessincommonwithaviewofprofit

- Simplicity- Taxationatpersonal

rates- Moreresources- Costsharing- Broaderskilland

experiencebase- Longevity

- Alldisadvantagesofsoletraders- Disputesbetweenpartnersabout

sharingprofitsandadministrationofthebusiness

- Partnerscanbeliablefordebtsincurredbyotherpartners

Resolvingtheproblems:Corporations- Alargecompanyorgroupofcompaniesauthorisedtoactasasingleentity

o Characteristics:- Cansueorbesuedintheirownnames- Enterintoandenforcecontracts- Holdtitletoandtransferproperty- Befoundliableforviolationsoflaw- Limitedliability- Perpetualsuccession- Transferabilityofshares

SeparatepropertyPrivateCompany- Businesscompanyowned

bynon-governmentalorganisationsorbyarelativelysmallnumberofshareholders

- Doesnotoffersharestogeneralpubliconthestockmarketexchanges

- Oftenfamilyowned

- Limitedliabilityforshareholderssopersonalassetsofshareholderswillnotbeatriskofbeingseized

- Continuityofexistence:businessnotaffectedbystatusofowner

- Paycorporationtaxandtendtobeexemptfromhigherpersonalincometaxrates

- Sharesinaprivatelimitedcompanycannotbesoldortransferredwithouttheagreementofshareholders

- Lackofpublicconfidencebecauseaffairsareunknown

-

- Initialpublicoffering–IPO

o Sellingsharesinacompanytothepublico Usuallyviaanexchangee.g.ASXo Expandsinvestorbaseo Createsgreatercomplianceandreportingburden

- Growthoptionso Scaleo Efficiency–importanceofinnovationo Resourceso Influenceo Returns

- OrganicGrowthPros Cons- Deeperclientbaserelationships- Harmony/opportunity- Internalinnovation- Lowercost

- Retentions- Vulnerability- Scale- speed

- NonOrganicGrowtho Mergersandacquisitions

§ Mergers:twocompaniesbecomingasingleentitye.g.ExxonandMobil

§ Acquisitions:onecompanybuyinganothercompany• Why?

Synergy:increaseinperformanceofthecombinedfirmoverwhatthetwofirmsarealreadyexpectedtoaccomplishasindependentfirms,e.g.:

• Increasedmarketpower• Controlofsupplier• Consolidationofexcesproductivecapacity• Keypeople/technologiesasthefocusofactivity• Keycustomeracquisition

§ Whatdrivespost-acquisitionperformance?

• Strategicreadiness• Relativesize• Methodofacquisition• Methodofpayment• Previousacquisitions

o Jointventures§ Separatelegalentitybetweenmultiplefirms§ ‘twoormorefirmsworkingtogethertoachievemutuallybeneficialobjective…usuallyinvolves

anelementofsharedownership’(Needle2010,p.546)o Strategicalliances

§ Longtermpartnershipbetweenfirmstodevelop,produceorsellproducts§ ‘twoormorecompaniesagreeingtocooperateonaspecificventure,ofteninvolvingshared

facilitiesorservices’(Needle2010,p.38)

Lecture2- Thebalancedscorecard

o Strategicplanningandmanagementsystemusedextensivelyinbusinesstoalignactivitiestothevisionandstrategyoftheorganisation,improveinternalandexternalcommunication,andmonitororganisationperformanceagainststrategicgoals.

- Strategicplanning

1. Definemission,visionandvalues2. PerformSWOTanalysis3. Developforecasts4. Analysethecompetition5. Establishgoalsandobjectives6. Developactionplans

- Visiono Clearstatementaboutthedirectioninwhichtheorganisationneedstomove

- Missiono Statementabouthowwegetthereandreasonsforchoosingthisroute

§ Howtheorganisationrelatestothepublicandcommunities§ Whatservicesitprovides§ Whobenefitsasaresultofitswork§ Howitimprovesthequalityoflife

(Anderson1998)

- Sustainablecompetitiveadvantageo Outperformingcompetitorsinthelongrun

- Strategyo Thedeterminationofthelongrungoalsandobjectivesofanenterpriseandtheadoptionofcoursesof

actionandtheallocationofresourcesnecessaryforcarryingoutthesegoals–AlfredD.Chandlero Helpssetgoalsandobjectiveso Allowstocontrolandmonitorperformance

o Helpsallocateresourcesinanoptimalwayo Integratesdifferentpartsoforganisationo Canbeaninternalchangedrivero Helpsdeveloptheworkforce

E.g.QantasGroupStrategy–2010- Safetyasfirstpriority,backedbyanunwaveringcommitmenttoworld’sbestsafetypractices- Rightaircraftontherightroutes,withfleetrenewaldeliveringoneoftheworld’smosteffectivefleetsflying

onanoptimalroutenetwork- Customerserviceexcellence- Operationalefficiencyandachievingsimplicityandfurtherproductivityacrossthebusiness- Strongcomplementarybrands:Jetstarasthebestpremiumandlowfarebrandsrespectively

- Viewsofstrategycreation

o Rationalapproach§ Analysisàformulationàimplementation

o Incremental[emergent]approach§ Addressesstrategyprocessasonethatcannotbeaccomplishedinarational,

straightforwardmanner§ Nobroadorganisationalfocus§ Operationalunitsthatareresponsibleformaintainingprogramsorperforming“enduring”

activitieshavedifficultyaligningtheiroperationstotheplan

- Businessstrategy:toolsforanalysiso Corecompetence

‘thoseactivitiesofanorganisationthatgiveitanadvantageoveritscompetitors’(Needle2010,p.274)

o Porter’s5forces

o SWOT

o Porter’sgenericstrategies

§ Costleadership:becomingthelowestcostorganisationinadomainofactivity

• Cost-leaderwithparity• Cost-leaderwithproximity

§ Differentiationstrategy:uniquenessthatissufficientlyvaluedbycustomerstoallowapricepremium

§ Focusstrategies:targetsanarrowsegmentofthedomainofactivityandtailorsitsproductsorservicestotheneedsofthatspecificsegmenttotheexclusionofothers.

o Means-endsanalysis§ Identifystrategicgoal§ Examineeachoptioninwhichthisgoalcanbeachieved§ Evaluatestrengthsandweaknessesofeachoption§ Implementthebestoption

- Implementingstrategy:leadingandorganising

o Ensuringstrategybecomesarealityo Managingpeopleo Allocatingresources,selectingstructuresandmakingdecisions

- Whydoesimplementationfail?o Lackofclearcommunicationfromthetoptothefrontlineo Lackofclearplanningo Lackofmonitoringandcontrolo Lackofaccountabilityandreward

- Contingencyplanning:haveaplanBo Playoutpossiblescenariothatmightarisefollowingimplementationo Haveasecondandthirdbestoptioninmind

Lecture3- Theroleoffinancialmanagement

o Financialmanagement§ Planningforafirm’smoneyneedsandmanagingtheallocationandspendingoffunds

o Risk/returntrade-off§ Thebalanceofpotentialrisksagainstpotentialrewards

- Assets:futureeconomicbenefitscontrolledbytheentityasaresultofpasttransactionsorotherpastevents- Return:gainorlossonaninvestment- Risk:probabilityorlikelihoodoroccurrenceoflossesonaninvestment- Interestrate,costofcapital,expectedreturn- Timevalueofmoney:moneyavailableatthepresenttimeisworthmorethanthesameamountinthe

futureduetoitspotentialearningcapacity- Financing:acquiringfundsfromexternalsources,includingdebtfinancingandequityfinancing- Leverage:techniqueofincreasingtherateofreturnonaninvestmentbyfinancingitwithborrowedfunds- Capitalstructure:firm’smixofdebtandequityfinancing

- Financialmanagement:managementofafirm’sresourcesinordertoachieveitsobjectivesandmaximise

value

o Corporateobjective§ “maximisethevalueofthecompany”§ equivalentto“maximisingshareholderwealth”

o usingscarceresources(capitalandlabour)inthemostefficientmannerpossible- Financialmanagementdecisions

o Dividenddecisiono Investmentdecisiono Financingdecision

- Threefundamentalconceptsoffinancialmanagement:o Balancingshorttermandlongtermdemands

§ Readycashtopaysalaries,bills,taxes§ Financialcushion§ Mayneedmoneyforacquisitionsorotherextraordinaryexpenses§ Strategiclong-terminvestments

o Balancingpotentialrisksandpotentialrewards§ Everydecisioninvolvesarisk/rewardtradeoff§ Safestchoicesnotalwaysbestchoices

o Balancingleverageandflexibility§ Canusedebtstrategicallyandsometimesoutofnecessity§ Debtcanbeatool,butitcanalsobeatrap§ Highleveragedcompanieshavefarlessabilitytomanoeuvreandaremorevulnerableto

setbacks- Developingafinancialplan

o Financialplan§ Documentthatoutlinesfundsneededforacertainperiodoftime,alongwiththesources

andintendedusesoffunds§ Strategicplan,company’sfinancialstatements,externalfinancialenvironment§ Balancedscorecard

- FindingandallocatingfundsSourcesoffundsàstrategicplan(establishesgoals,objectives,priorities)[financialplan–identifiesamountsandtypesofcapitalneededtoaccomplishthosegoals]àusesoffunds

- Budgetingchallenge1. Everycompanyhasalimitedamountofmoneytospend

o Projectsanddepartmentsoftenincompetitionforresources2. Revenuesandcostsareoftendifficulttopredict

o Salesforecastsnevercertainparticularlyfornewproductsandnewmarketso Variablecostshardtopredict

3. It’snotalwaysclearhowmuchshouldbespento E.g.unclearhowmuchadvertisingisenougho Budgetingbasedonpastexpenditures,whichmightbeoutoflinewithcurrentstrategicneeds

- Typesofbudgetso Startupbudget

§ Identifiesthemoneyanewcompanywillneedtospendtolaunchoperationo Operatingbudget

§ Identifiesallsourcesofrevenueandcoordinatesthespendingofthosefundsthroughoutthecomingyear

§ A.K.Athemasterbudgeto Capitalbudget

§ Outlinesexpendituresforrealestate,newfacilities,majorequipmentandothercapitalinvestments

o Capitalinvestments§ Moneypaidtoacquiresomethingofpermanentvalueinabusiness

o Projectbudget§ Abudgetthatidentifiesthecostsneededtoaccomplishaparticularproject

- Financingalternatives:factorstoconsidero Debtfinancing

§ Arrangingfundingbyborrowingmoneyo Equityfinancing

§ Arrangingfundingbysellingownershipsharesinthecompany,publiclyorprivately

Characteristic Debtfinancing Equityfinancing

Maturity Specific–specifieddatebywhichdebtmustberepaid

Doesnotneedtoberepaid

Claimonincome Nondiscretionary,usuallyrecurringcostandisfixed.

DiscretionarycostIfcompanyisprofitable,shareholdersmayreceivedividendsafterpayingcreditors.Companynotrequiredtopaydividends.

Claimonassets Lendershavepriorclaimsonassets Residual:shareholdershaveclaimsonlyafterthefirmsatisfiesclaimsoflenders

Influenceovermanagement

Lenders–noinfluenceunlessdebitvehiclescomewithconditionsormanagementfailstomakepaymentsontime

Varies:shareholderscanvoteonsomeaspectsofcorporateoperations(onlylargeshareholdershavemuchinfluence)Privateequityholders(privateequity=equitysecuritiesanddebtinoperatingcompaniesthatarenotpubliclytradedonastockexchange)e.g.inventurecapitalists,canhaveconsiderableinfluence

Taxconsequences Lowerstaxobligatons- Debtpaymentsreducetaxable

income

Dividendpaymentsnottaxdeductible

Employeebenefitpotential

n/a-doesnotcreateanyopportunitiesforcompensationalternatives

Stockoptions:issuingcompanysharescreatestheopportunitytousestockoptionsasamotivationorretentiontool

FoundationsandBiasesinfinancialdecisionmakingExpectedutilitytheory

o Individualsshouldactwhenconfrontedwithdecision-makingunderuncertaintyinacertainway- Theorysetuptodealwithriskratherthanuncertainty

o Risk:whenyouknowwhattheoutcomescouldbe,andcanassignprobabilitieso Uncertaintyiswhenyoucan’tassignprobabilitiesorcan’tcomeupwithalistofpossibleoutcomes

- Expectedutilitycalculatedbytakingtheweightedaverageofallpossibleoutcomesassignedbyprobabilityàwillthenbestrepresenttheutilityatanygiventime

Prospecttheory- DevelopedbyKahnemanandTverskybasedonobservingactualbehaviour- Experimentalevidencesaysthatpeopleoftenbehavecontrarytoexpectedutilitytheory- Expectedutilitytheoryisnormative(whatpeopleshoulddo)whereasprospecttheoryispositive(what

peopledo) Gains LossesHighprobability(certaineffect) 95%towin$10000vs.100%to

win$9499- riskaverse- takeunfavourable

settlement

95%tolose$10000vs.100%tolose$9501

- riskseeking- rejectunfavourable

settlementLowprobability(probabilityeffect)

5%towin$10000vs.100%towin$501

- riskseeking- rejectfavourable

settlement

5%tolose$10000vs.100%tolose$499

- riskaverse- takeunfavourable

settlement

HeuristicsandBiasesinDecisionMaking- Mental/psychologicalaccounting

o Prospecttheoryandmentalaccounting§ Prospecttheorysetuptodealwithoneshotgambles§ Afterconsideringpriorgainsandlossesàtosegregate(gobackto0)orintegrate(move

alongcurves/trends)?

- Framingo Involvesselectionandsalience.Toframeistoselectsomeaspectsofperceivedrealityandmake

themmoresalientinthecommunicationtext,insuchawayastopromoteaparticularproblemdefinition,causalinterpretation,moralevaluationand/ortreatmentrecommendationfortheitemdescribed.

- Gambler’sfallacyo Appliesifpeoplearefairlysureaboutnatureofpopulationo Theythinkthatevensmallsamplesshouldalwayslooklikethepopulation

- Anchoringandadjustmento Peopleanchoronastartingvalueandadjustfromthereo Expectationsinfluenceperceptions

- Overconfidenceo Whenyouhaveaninflatedsenseofyourabilitieso Manyofusfeelwearesmarterormoreskilledthanaverage.Evidencesuggeststhatpeoplepickthe

definitionoftaskthatsuitstheirpurpose.o Menmoreoverconfidento Highlyeducated,highincomepeoplearemoreoverconfidento Confirmationbiasmayalsocontribute

§ Confirmationbias:thetendencytosearchoutevidenceconsistentwithone’spriorbeliefsandtoignoreconflictingdata

o Impactsonfinancialdecisionmaking:§ Investmentsareundiversified§ Tooreadytoentermarkets§ Overinvest§ Allowcashflowstodictateinvestment§ Acquireothercompaniestooquickly§ Takeontoomuchdebt

- Moodo Undifferentiatedanduntargetedstatesofcontentmentordiscontentmento Moregeneral,oftenexperiencedcollectivelysolessaffectedbydifferencesinpersonalityand

predispositiono E.g.HirshleiferandShumwayfoundin2003thatdailystockreturnscorrelatepositivelywithhoursof

sunshineo Negative,pessimisticmoodwillleadtofinancialinstability,conservatisminfashionandconsumer

purchaseso Positivesocialmoodpolarity,peoplewillbeoptimisticandhopeful

ProcessofDebiasing

- Stepsthatmustbefollowedtoeliminatebias1. Awarenessofbias2. Motivationtoeliminatebias3. Directionandmagnitudeawarenessofbias4. Abilitytoeliminatebias

Lecture4- Valuechain:alltheelementsandprocessesthataddvalueasrawmaterialsaretransformedintothefinal

productsmadeavailabletotheultimatecustomer

- Firminfrastructure:organisation’sstructureanditsmanagement,planning,accounting,financeandquality-

controlmechanisms- Procurement:buyingthegoodsandservicesthatallowanoperationtofunction- Inbound/outboundlogistics:transport,storageanddeliveryofgoodscomingintoabusiness

- Outsourcing:contractingoutcertainbusinessfunctionsoroperationstoothercompanies- Offshoring:transferringapartorallofabusinessfunctiontoafacility(adifferentpartofthecompanyor

anothercompanyentirely)inanothercountry- Valueweb:thecombinationofextensiveglobalisationinmanyindustriesandelectronicnetworkingasmade

iteasyforcompaniestoconnectwithpartnersaroundtheworld.Insteadofthelinearvaluechain,somebusinessesnowthinkintermsofvaluewebs,multidimensionalnetworksofsuppliersandoutsourcingpartners

- Supplychain:asetofconnectedsystemsthatcoordinatestheflowofgoodsandmaterialsfromsuppliersallthewaythroughtofinalcustomers

o Managingrisks,relationships,trade-offso Promotingsustainability

- Horizontalintegrationconsistsofcompaniesthatacquireasimilarcompanyinthesameindustry,whileaverticalintegration(buyingoutsuppliersetc.)consistsofcompaniesthatacquireacompanythatoperateseitherbeforeoraftertheacquiringcompanyintheproductionprocess

o Purposeofverticalintegration:increasethefirm’spowerinthemarketplace,reducetransactioncostsandsecuresuppliesordistributionchannelsVerticalIntegrationBenefits Drawbacks

- Lowercostsinproduction- Improvedquality- Acquirecriticalresources- Greatermarketshare- Secureddistributionchannel- Newcompetencies

- Highercostsinmanagement- Lowercompetitionandquality- Increasedbureaucracyandreduced

flexibility- Newcompetenciesmayclashwithold

onesandleadtocompetitivedisadvantage

Thedifferencebetweenavaluechainandasupplychainisthatasupplychainistheprocessofallpartiesinvolvedinfulfillingacustomerrequest,whileavaluechainisasetofinterrelatedactivitiesacompanyusestocreateacompetitiveadvantage.TheideaofvaluechainwaspioneeredbyMichaelPorter.

HorizontalIntegrationBenefits Drawbacks

- Lowercosts- Increaseddifferentiation(moreproduct

orservicefeatures)- Increasedmarketpowerandreduced

competition- Accesstonewmarket

- Reducedflexibility(largerorganisationshardertomanage)

- Moreoften,mergersandacquisitionsfailanddestroythevalueofthecompaniesinvolvedinitbecauseexpectedsynergiesnevermaterialise

Productionandoperationsoperationsmanagement

- Overseeingalltheactivitiesinvolvedinproducinggoodsandserviceso Facilitieslocationanddesigno Forecastingandcapacityplanningo Schedulingo Leansystems(eliminatingwastewithinamanufacturingsystem)

- Productiono Massproductiono Masscustomisationo Customisedproduction

- Productandprocessqualityo Quality:thedegreetowhichaproductorprocessmeetsreasonableoragreed-uponexpectations

§ Price§ Expectation§ Standard

o Strategiesforensuringproductquality§ Continuousimprovement

• Anongoingefforttoimproveproducts,services,orprocesses

§ Statisticalprocesscontrol(SPC)

• Theuseofrandomsamplingandtoolssuchascontrolchartstomonitortheproductionprocess

§ Sixsigma• Arigorousqualitymanagementprogramthatstrivestoeliminatedeviations

betweentheactualanddesiredperformanceofabusinesssystem

§ ISO9000

• Agloballyrecognisedfamilyofstandardsforqualitymanagementsystemo Forbusiness

§ Costsavings§ Enhancedcustomersatisfaction§ Accesstonewmarket§ Increasedmarketshare

o Forsociety§ Consumerconfidence§ Productsafety§ Environmentalbenefits

Lecture5- Management:theprocessoplanning,organising,leadingandcontrollingtomeetorganisationalgoals- Managerialroles:behaviouralpatternsandactivitiesinvolvedincarryingoutthefunctionsofmanagement

(includesinterpersonal,informationalanddecisionmakingroles)Theplanningfunction

- Planning:establishingobjectivesandgoalsforanorganisationanddeterminingthebestwaystoaccomplishthem

- Strategicplans:plansthatestablishtheactionsandtheresourceallocationrequiredtoaccomplishstrategicgoals

- Usuallydefinedforperiodsof2-5yearsanddevelopedbytopmanagersTheplanningprocess

1. Definemissions,visionsandvalues

2. PerformSWOTanalysis

3. Developforecasts- Quantitativeforecasts

o Typicallybasedonhistoricaldataortestsandofteninvolvecomplexstatisticalcomputations- Qualitativeforecasts

o Basedonintuitivejudgments- Approachestoproductforecasting

1. Judgmentalapproacho Applyeyeballingtechniquestograph

2. Quantitativeapproach

o Trend:patternobservedbetweenyearso Seasonality:thepatternobservedwithinaspecifiedyearthatrepeatsfromoneyeartoanother

1) Determineaveragetrendforeachperiod2) Determineseasonalfactorforeachquarter3) Re-calculatetimeseriestoeliminateseasonality(justlastperiodwilldo)4) Addtrendcomponentfortherequiredforecasthorizons5) Addbacktheseasonalcomponent(bymultiplyingeachperiodbytheSF)

3. Integrationofquantitativeandjudgementalapproaches

4. Analysethecompetitiono Whoarethecompetition?o Howmightwedefinethecompetition?o Whataretheyupto?o Whatrelationshipdowehavewiththem?o Whatrelationshipdowehavewiththem?o Howcanwegetaheadofthecompetition?

5. Establishgoalsandobjectives

o Goal:abroad,long-rangetargetoraimo Objective:aspecific,short-rangetargetoraim

- Specific,measurable,attainable,relevant,timelimited6. Developactionplans

Theorganisingfunction

- Organising:theprocessofarrangingresourcestocarryouttheorganisation’splans- Managementpyramid:anorganisationalstructuredividedintotop,middleandfirstlinemanagement

alayerofmanagement(thebusinessunits)wasremovedtoflattentheorganisationàreducescost,speedscommunicationanddecisionmaking.HOWEVERincreasedspanofmanagementforgroupmanagersandlossofknowledgeandrelationshipsbroughtinbythebusinessunitmanagers

- Centralisation:concentrationofdecisionmakingauthorityatthetopofanorganisation- Decentralisation:delegationofdecision-makingauthoritytoemployeesinlower-levelpositions

Organisingtheworkforce- Departmentalisation:groupingpeoplewithinanorganisationaccordingtofunction,division,matrixor

networko Functionalstructure:groupingworkersaccordingtothesimilarityintheirskills,resourceuseand

expertiseo Divisionalstructure:groupingdepartmentsaccordingtosimilaritiesinproduct,process,customeror

geographyo Matrixstructure:astructureinwhichemployeesareassignedtobothafunctionalgroupanda

projectteam(usingfunctionalanddivisionalpatternssimultaneously

- TheLeadingFunction

- Stylesofleadingo Autocraticleadership:managerissuesdirectiveso Democraticleadership:managersharesdecisionmakingauthorityo Laissez-faireleadership:subordinatesmakedecisions,withadvicefromleader

TheControllingFunction- Controlling:theprocessofmeasuringprogressagainstgoalsandobjectivesandcorrectingdeviationsif

resultsarenotasexpected- Thecontrolcycle:

Establishingperformancestandards

- Standards:criteriaagainstwhichperformanceismeasured- Benchmarking:collectingandcomparingprocessandperformancedatafromothercompanies

Organisinginteams- Team:aunitoftwoormorepeoplewhoshareamissionandcollectiveresponsibilityastheyworktogether

toachieveagoal- Typesofteams:

o Problem-solvingteam:ateamthatmeetstofindwaysofimprovingquality,efficiency,andtheworkenvironment

o Self-managedteam:ateaminwhichmembersareresponsibleforanentireprocessoroperationo Functionalteam:ateamwhosememberscomefromasinglefunctionaldepartmentwhichisbased

ontheorganisation’sverticalstructureo Cross-functionalteam:ateamthatdrawstogetheremployeesfromdifferentfunctionalareaso Virtualteam:ateamthatusescommunicationtechnologytobringtogethergeographicallydistant

employeestoachievegoalso Socialnetworkandvirtualcommunity:anetworkthatlinksemployeesandotherswithsimilar

interests

- Forecasterror=|(Forecast–Actual)|/Actual- Inforecasting,groupsofpeopleinteamscanreduceforecasterror.- TOREDUCEERROR:statisticalaverageofforecastscanbebeneficial- Modifiedconsensusisbeneficial

Lecture6Marketingdefined- Anactivity,setofinstitutionsandprocessesforcreating,communicating,deliveringandexchangingofferings

thathavevalueforcustomers,clients,partnersandsocietyatlarge(AmericanMarketingAssociation).- Hasbeenappliedtovariousothercontextse.g.services,events,politicalelections,places,socialcausesandnon-

profitinstitutions(Kotler&Levy1969)- Market:thesetofallactualandpotentialbuyersofaproduct.

o Shareaparticularneedorwantthatcanbesatisfiedthroughexchangeo Marketing:managingmarketstobringaboutexchangesforthepurposeofsatisfyinghumanneedsand

wantsThingsamarketrequires:o Abuyero Sellero Exchangeo Informationandknowledgeo Somethingwhichisexchangedo Potentialformutualbenefit

- Searchingforbuyers- Identifyingtheirneeds- Designingproductsandservices- Settingprices- Promotingthem- Deliveringthem

- Marketingstrategy:thewaymarketingactivitiesareputtogethertoachievetheorganisation’saimsfor

thebrand- Marketingmix:asetofmanageableelementsinamarketingplan,adjustedtoimplementthemarketing

strategy

Atotalproduct

- ‘totalproduct’of3levels1. coreproduct:whatistheproductreallybuying?2. Actualproduct:considersaspectssuchasqualitylevel,features,styling,abrandnameand

packaging3. Augmentedproduct:additionalconsumerservicesandbenefitsbuiltaroundthecoreandactual

productsAproduct:anythingofferedtoamarketforattention,acquisition,useorconsumptionthatmightsatisfyaneedorawantPhysicalgoods Biscuits,laptop,furniture,booksServices Banking,transport,educationExperiences Holidays,concerts,sports,movies

Otherproducts:events,person,political,cause-related,not-for-profit,experiences

Threecompetitivemarketstrategies:1) Buildabetterproductatthemarketprice2) Buildthesameproductatalowerprice3) Createamonopolythroughcustomerfranchise

Productdifferentiation

- Tocreateamonopolyoverthatsegmentofthemarketrepresentedbytheirloyalcustomers,competingattheindividualproductlevel

- Differentiateby:o Product:quality,features,attribute,customisation,assortmento Services:anytimedelivery,customerservice,supportandaftersalesserviceo Personnel–charmanduniquenessoftheorganisation’s‘face’andpeopleo Channel–location,availability,accessibilityo Astrongbrandname/imageo Gainingspeedandfirstmoveradvantage

Typesofconsumerproducts- Convenience

o Frequentpurchase,littleplanning,comparisonorshoppingeffort,lowcustomerinvolvement,habitualorvariety–seekingbuyingbehaviour

o Lowpriceo Widespreaddistribution,convenientlocationso Masspromotionbytheproducero E.g.toothpaste,magazines,laundrydetergent

- Shoppingo Lessfrequentpurchase,muchplanningandshoppingeffort,comparisonofbrandsonprice,

quality,style,dissonance-reducingorcomplexbuyingbehaviouro Higherpriceo Selectivedistributioninfeweroutletso Advertisingandpersonalsellingbybothproducerandresellerso E.g.majorappliances,televisions,furniture,clothing

- Specialtyo Strongbrandpreferenceandloyalty,specialpurchaseeffort,littlecomparisonofbrands,low

pricesensitivity,complexbuyingbehaviouro Highpriceo Exclusivedistributioninonlyoneorfewoutletspermarketareao Morecarefullytargetedpromotionbybothproducerandresellerso Luxurygoodse.g.Rolexwatches

- Unsoughtgoodso Customerbuyingbehaviour:littleproductawareness,knowledgeorifawarelittleoreven

negativeinteresto Price:varieso Distribution:varieso Promotion:aggressiveadvertisingandpersonalsellingo E.g.Lifeinsurance,RedCrossblooddonations

ProductlineandProductMix- Productline:groupofrelatedproductsofferedbyafirm

o e.g.Canon’sprinterrange- Productmix:entireproductrangeofferedbyafirm

o e.g.Canonsellsprinters,ink,cameras,photocopiersandsoonWhatisabrand?

- Abrandisanameterm,sign,symbolordesign,oracombinationofthese,intendedtoidentifythegoodsorservicesofonesellerandtodifferentiatethemfromthoseofcompetitors1. Attributes:productattributes2. Benefits:functionalandemotionalbenefitsderivedfromtheproductattributes3. Values:reflectingbuyer’svalues4. Personality:

a. Brandname:verbalpartofthebrand

b. Brandmark:uniquesymbolthatidentifieswiththebrandc. Logo:abrandnamewritteninadistinctivewayd. Trademark:legallyprotectedbrandnameorbrandmark

Brandequity- Brandequityisthevalueofthebrandbasedonextenttowhichithashighbrandloyalty,nameawareness,

perceivedquality,strongbrandassociations,associatedgoodwill,andotherassetse.g.patents,trademarksetc./differentialeffectthatknowingthebrandnamehasoncustomerresponsetotheproductanditsmarketing

o Somebrandslargelyunknown,whereasothershaveafairlyhighdegreeofconsumerbrandawareness.However,someenjoybrandpreference(buyersselectthemovertheothers),andsomecommandahighdegreeofbrandloyalty

Typesofbrands- Manufacturerornationalbrands

o Brandownedbythemaker;intentistocreatecustomerloyaltytowardtheproductsofaparticularmanufacturer

- Distributororprivatebrandso Abrandownedbyretailersorotherintermediaries,intendedtobuildloyaltytothefirm

- Genericbrando Carriesneitheramanufacturernoradistributorbrand.A‘noname’brand.

- Co-brandingo Theuseof2individualbrandsonasingleproducte.g.Telstravisacard

- Licensingo Alegalagreementallowinganorganisationtousethetrademarkofanotherorganisation

Newproductdevelopmentstrategy- Rapidchangesinconsumertastes,technologyandcompetition,acompanycannotrelysolelyonitsexisting

products- Customerswantandexpectthenewandimprovedproductsthatcompetitionwilldoitsbesttoprovide- Acompanycanobtainnewproductsthrough:

o Acquisitiono Internalnew-productdevelopmentprocess

1. Ideasgeneration

- Thesystematicsearchfornewproductideas,e.g.through:o Internalsourceso Customerso Competitorso Distributorso Othersources

2. Ideasscreening

- Everystagefromhereispurposedtoreducethenumberofideasgenerated- Purposeofscreening:spotgoodideasanddroppooronesassoonaspossible

3. Productanalysis

- Areviewofthesales,costs,andprofitprojectionstofinoutwhethertheysatisfythecompany’sobjectives.Iftheydo,theyproductcanmovetotheproduct-developmentstage.4. Productdevelopment

- R&Dorengineeringdevelopstheproductconceptintoaphysicalproductor‘prototype’.Beforethisstage,theproducthasexistedonlyasaworddescription,adrawingorperhapsacrudemock-up

- Alargejumpininvestmentisneededforthisstage.Itwillshowwhethertheproductideacanbeturnedintoaworkableproduct5. Concepttesting

- Takingaproductideatoconsumerstotesttheirreactions6. Commercialisation

- Thedecisiontolaunchfull-scaleproductionanddistributionofanewproduct

Introduction:Aperiodofslowsalesgrowthastheproductisbeingintroducedtothemarket

- Why?o Newtomarket,notusedatallo Littleretailerinteresto littlefundsforpromotion/awareness

- Whattodo?o Buildawareness(media/net)o Getfirst-timetrialo Getsomeretailers

Growth:Periodofrapidmarketacceptanceandsalesgrowth- Why?

o Consumer’swordofmoutho Someretailerswanttosello Competitorsenter

- Whattodo?o Grabmarketshareo Grabretailers(exclusivedeals)o Buildbrandbyfightingcompetitors

Maturity:Aperiodofslowdowninsalesgrowthastheproductgainedacceptancebymostofbuyers- Why?

o Normal:everyoneusesito Reachesmarketpotential

- Whattodo?o Makegoodmoneyo Keepcustomerloyalo Productvarietyandinnovationo Lineextensions

Decline:Periodofdropinsalesandprofitsascustomersswitchtonewproducts- Why?

o Changingconsumerlifestyleo Newtechnology

- Whattodo?o Cutcosts–maximiseprofitso Newmarkets?Newuses?

4P’sofmarketing

- Price:amountofmoneychargedforaproductorservice.o Theonlyelementofthemarketingmixthatproducesrevenue,allothersrepresentcosto Acompanydoesnotusuallysetasinglepricebutratherapricingstructurethatcoversdifferent

itemsinitsproductlineo Adjustsproductpricestoreflectchangingcostsanddemandandtoaccountforvariationsinbuyers

andsituationso Roleofpriceinthemarketingmix:

§ Providesprofitlevel§ Coverscosts§ Helpscommunicatepositioning/strategy

o WhencombinedwithotherP’s,priceinfluencesconsumerperceptionsofvalueo Factorsaffectingprice:

o o Pricinggoals

§ Strategiesmayaimatattractingnewcustomersortoprofitablyretainexistingones§ Lowprices:preventcompetitionfromenteringthemarket,orsetpricesatcompetitors’

levelstostabilisethemarket§ Maybepricedtohelpsalesofotherproductsinthecompany’sline§ Objectivesinclude:

• Simplesurvival• Maximiseshorttermprofit• Growmarketshare• Blockcompetition• Price/qualityleadership(image)

o Priceelasticity:responsiveness/sensitivitytoprice§ Elastic:somepeoplebuymore/lessofaproductasthepricechanges

• Promotionaldealsformoreimpact• Careforpricechanges

§ Inelastic:demandforsomeproductsisunaffectedaspriceschange• Trytoedgeuptheprice• Lessconcernwithpricechanges

o Costs

§ Setthefloorforthecompany’sprice§ Pricemustcoverallcostsforproducing,distributing,deliveringandsellingtheproductand

alsodeliverafairrateofreturnforitseffortandrisk§ Itisarguedthatmanycompaniespursuethefollowingcycle:lowpriceàincreaseinsalesà

increasedlevelsofproductiontosatisfydemandàincreasedproductiondecreasescostàsetfurtherlowerprices

o Pricingstrategies:

§ Costbased:settingpricesbasedonthecostsforproducing,distributingandsellingtheproduct+afairrateofreturnforitseffortandrisk

• Addingstandardmark-uptocost§ Demandbased:designingaproductsothatitsatisfiescustomersandmeetstheprofit

marginsdesiredbythefirm• Breakevenanalysis:thecompanytriestodeterminethepriceatwhichitwillbreak

evenormakethetargetprofititseeksusingabreak-evenchart(showstotalcostandtotalrevenueexpectedatdifferentsalesvolumelevels)

o costs=revenuesatbreak-evenpoint.Themoneycominginequalsthemoneygoingout.

§ Customervalue-based:settingthepricebasedonbuyer’sperceptionsofvalue,ratherthanonseller’scost

• Usesbuyers’perceptionsofvaluetopriceàpricesettomatchvalue• Companyusesthenon-pricevariablesinthemarketingmixtobuildupperceived

valueinthebuyers’minds.§ Competition-based:settingpricesbasedoncompetitor’sstrategies,costs,pricesandmarket

offerings• Maychargeaboutthesame/above/belowbasedonpositioning• Whatvaluedoestheproductofferrelativetocompetitors?

o Marketskimming§ Pricewellabovethemarket§ Designedtomaximiseprofits§ Idealforhighlysoughtafterproducts

o Marketpenetration§ Pricewellbelowthemarket§ Designedtomaximisesales§ Usewithunknownorsubstituteproducts

o Everydaylowpricing(EDLP)§ Settingpriceslowerthancompetitorsandnothavinganyspecialsales

o Segmentedpricing§ Settingdifferentpricesfordifferentclients,productformsplacesortimes

o Psychologicalpricing§ Pricinggoodsandservicesatpricepointsthatmaketheproductappearlessexpensivethan

itis

Lecture7PromotionIMC:integratedmarketingcommunication+thefirm’sPromotionalmix

- Usingavarietyofcommunicationtoolstodeliveraconsistentdeliberatemessagetothemarket(consumersandpublics)

- Blendedmixofcommunicationtoolsnecessarytomeetthegoalsofthefirm- Appropriatebalanceofpush/pullemphasisneeded- Budgetofthefirm(mayruleoutsometools)needstobeconsidered- ResponsivenessofthetargetmarkettodifferentIMCtoolsneedstobeconsidered

Promotionalmixelements:

- Advertisingo Non-personalcommunicationofinformationusuallypaidforandpersuasiveinnatureabout

productsorideasbyanidentifiedsponsorthroughvariousmediaAdvantages Disadvantages

- Manymediachoices- Goodforintroducingnewproducts- Goodatgettingattention- Canreachlargeaudience- Goodforbrandbuilding

Quiteexpensive

o Objectives:§ Toinform

• Tellingthemarketaboutanewproduct• Pricechange• Explaininghowproductswork• Correctingfalseimpressionsandbuildingcompanyimage

§ Topersuade• Buildingbrandpreference• Encouragingswitchingtoyourbrand• Persuadingbuyerstopurchasenow

§ Toremind• Remindingbuyersthattheproductmaybeneededinthefuture• Remindingbuyerswheretobuytheproduct• Keepingtheproductinthebuyer'smindsduringoffseason

- Salespromotiono Shorttermincentivesofgiftsormoneythatfacilitatethemovementofproductsfromproducerto

endusero Coverarangeofincentivesthatareusedwithproductspromotedviaeithermassmediaadvertising

orbydirectanddigitalmethodso Salespromotionobjectivesarevaried(consumerpromotionstoincreaseshorttermsalesortohelp

buildlong-termmarketshare)§ Shorttermincentivethatshouldn’tbeoverused§ Designedtoincreasesalesquickly§ Alsohelpsrewardloyalcustomers§ Targetsswitchers§ Targetsnon-usersorusersofotherbrands

• e.g.freesamples,discounts,extraloyaltypoints,coupons,discountonotherproduct,specialin-storedisplays,cash-backoffer,freegift,competitions

- Publicrelationso Consistsofactivitiesthatinfluencepublicopinionandcreategoodwillfortheorganisation

§ Obtainingfavourablepolicy§ Buildingupagoodcorporateimage§ Handlingunfavourablerumours§ Storiesandevents

o Crisismanagement:PReffortaimedatdisseminatinginformationduringanemergencyo Publicrelationsandcorporatecommunications:

§ Mediareleases§ Newsletters,brochures,annualreports§ Sponsorships§ Lobbying§ Conferences,seminars,events§ PRconsultants

o Tradepromotions:marketingactivitiestargetedatthe‘trade’–primarilyretailersandwholesalers- Personalselling

o Adirectface-to-faceinteractionwithpotentialbuyerso Oneway,non-personalcommunicationwithtargetgroupsVSpersonalsellinginvolvestwoway,

personalcommunicationbetweensalespeopleandindividualcustomers§ Facetoface§ Telephone§ Videoconferences/othermeans

o Moreeffectivethanadvertisingincomplexsellingsituationso Roleofthesalesforce:

§ Finalisethesale§ Managecustomerrelationships§ Findcustomers§ Two-waycommunicationoftenbacktofirm

- Continuousinteractionratherthanepisodicone-waycommunicationandpurchaseactivityo AdvertisingandPRsetsthescene.Salespromotionprovidesvalue-addingincentivestobuy.Trade

promotionensurestheproductisisdisplayedadvantageouslyinstores.Directanddigitalmarketingaimstogainsubscribers,ortoopendialogueanddevelopanongoingrelationshipwithpotentialcustomersthatwillbringaboutasaleoraseriesofsalestransactionssoonerratherthanlater.

o Brokers:facilitatetransactionsbetweenbuyersandsellerso Agents:manufacturingorpurchasingagentsdependingonwhotheyareworkingfor

- Utilitiescreatedbyintermediarieso Formutility:changingrawmaterialsintousefulproductso Timeutility:makingproductsavailablewhenconsumersneedthemo Placeutility:placingproductswhereconsumerswantthemo Possessionutility:doingwhatevernecessarytotransferownershipo Informationutility:addingvaluetoproductsbyopeningtwowayflowsofinformationbetween

participantso Serviceutility:addingvaluebyprovidingserviceduringandpost-sale

Place- Tomaketheproductaccessibletothetargetmarket- Logistics,marketinglogistics,supply-chainmanagement,physicaldistribution,retailing,channelselection- Thelogisticsnetworksmaybeunderstoodasthematerialflowsbetweenspecificpoints,rangingfromthe

supplyoftherawmaterialtothedeliveryofthefinalproductstoconsumersinanoptimisedfashion

- Marketingchannels:networkofinterdependentorganisations–intermediaries–involvedintheprocessofmakingaproductorserviceavailableforuseorconsumptionbytheconsumerorbusinessuser

- Advantagesofusingintermediaries:o Manysupplierslackfinancialresourcestocarryoutdirectmarketingo Customersmaywantpersonalinteractionbeforebuyinglargeticketitems

o Producerswhocanaffordtosetuptheirownchannelscanoftenearnagreaterreturnbyincreasinginvestmentinmainbusiness

o Throughtheircontacts,experience,specialisationandscaleofoperation,intermediariesusuallyofferaproducerorsuppliermorethanitcanachieveonitsown

- Typesofintermediarieso Wholesales:buyproductfrommanufacturerandreselltoretailer

§ Neitherproducesnorconsumesthefinishedproduct§ Merchantwholesales,rackrobbers,cash-n-carrywholesalers

o Retailers:buyproductfromthewholesalerandthensellitdirectlytoconsumers§ Alltheactivitiesassociatedwiththesaleofgoodsorservicesdirectlytofinalconsumersfor

theirpersonal,non-businessuse§ Canbedoneinstoresoroutofastore(nonstoreretailing)e.g.

• Directmail• Catalogues• Telephone• Homeshoppingshows• Internet

- Multi-channelretailing

- Channelchoices

A–Directo Wellsuitedtoservicefirms(banks,universities,airlines,tradesmen)o Givesfullcontroltomanufacturero Muchmorecomplexbusinessoperations

B–o Commonwithlargerretailchainsormajormanufacturingo Givesmostcontroltoretailero Manufacturerneedsstrongsalesteam

C–o Commonwithsmallerfirmso Hasaspecialistineachstageofchaino Controlvaries,mayleadtoconflicto Worksbestasapartnershipapproach

- Channels(retailer/wholesaler)mustbewillingtowanttotakeonyourproduct- Youneedtodeliveronlogistics,branding,advertisingsupportetc

ABC

Lecture81. Asystemsviewofbusiness- System:asetofinteractingcomponentsthatformanintegratedwhole

o Boundaryofsystemdefinesitsscopeo Systemscanformahierarchy(asapartofalargersystem)o Systemshavestructure(relatingparts)o Systemshaveprocesses

§ Inputàthroughputàoutput- ABusinessProcess(BP)isastructurednetworkofactivitiessupportedbyinteractionofresources(human

andnon-human)andinformationthatinteracttoachievesomebusinessgoal.o Businessprocesses=businesssystemso Allbusinessprocessesofanorganisationareknowncollectivelyasitsactivitysystem

- Well-designedbusinessprocessesare:o Complete

§ Includesallactivitiesnecessarytoachievethebusinessgoalo Minimal

§ Donotincludeunnecessaryactivities§ Costefficient

o Well-structured§ Logicalsequenceofactivities

o Embedded§ ConnectandinteractwithotherBPsintheorganisationeffectivelyandefficiently

- Outcomesofawelldesignedbusinessprocessis:o Increasedeffectiveness(valueforcustomer)o Increasedefficiency(lesscostforcompany)

- Whatisaninformationsystem?InformationTechnology(IT)

Hardware Software Data Procedures PeopleInformationSystems

1. Buildingthevaluesystem- ActivitySystem(BusinessProcesses)+InformationSystem=valuesystem

o ProcessesalmostalwaysinvolvesomeISo ISonlycreatevaluewhenusedinprocesses

- Operationalfoundationofthebusinesso Daytodayvaluecreationanddeliveryo Wheremoneyismadeandlost

- Afunctionalviewcomplementedbyaprocessview

- Crossfunctionalprocesses:orderfulfilment

- BusinessProcessManagement(BPM)

- Businessprocessimprovementlogic:(small)improvementxhighrepetitionrate=bigcostsavings- EnterpriseSystemsareprocess-basedsystems

- ProcessModelling

o Representsbusinessprocessestoanalyseandimprovethemo OfteninvolvedesigningandimplementingITo Performedbybusinessanalystsandmanagerswhoseektoimproveprocessefficiencyandquality

2. Asocialsystemsview

- Socialnetworking

o Microbloggingcharacteristicse.g.twitter§ Shortmessages§ Everyonecanpublish,oneclickpublicationprinciple,simple§ Tagging,directmessages,referringtootherusers§ Followotherusers,topics,lists

o Enterprisemicroblogginge.g.yammer§ Distributionofshortconversationmessages§ Accessibletoonlymembersoftheorganisation§ Followpeople,communicateinclosedgroupsforteamwork

3. Digitalbusinessdisruption- Digitaldisruptionisthechangethatoccurswhennewdigitaltechnologiesandbusinessmodelsaffectthe

valueproposition(statementthatidentifieswhatbenefitsacustomerwillreceivethroughapurchaseofaproductofservice)ofexistinggoodsandservices

e.g.Starbucks- Concernoverthetasteofanewcoffee

product- SocialMediaSentimentAnalysishas

revealedtastefinebutpricetoohigh

Lecture9MOTIVATIONANDCULTURETheperformanceprocess:Abilityxmotivationxenvironmentalconditions=performanceMotivationàmotivationtheoriesEnvironmentalconditionsàpayandincentives/culture

MOTIVATION–needstheoriesMaslow’sHierarchyofneeds

Herzberg’stheory

Motivation–cognitiveissues

EquitytheoryEquitytheoryisbasedintheideathatindividualsaremotivatedbyfairness,andiftheyidentifyinequitiesintheinputoroutputratiosofthemselvesandtheirreferentgroup,theywillseektoadjusttheirinputtoreachtheirperceivedequity.

Incentivesandperformance- Typicallycashpaymentslinkedtospecificgoalsforindividual,grouporcompanywideperformance.- Successoftendependsonhowcloselyincentivesarelinkedtoactionswithinemployee’scontrol- E.g.:

o Bonus:additionalpaymenttoregularwageorsalaryo Commissionsareaformofcompensationthatpaysemployeesbasedonsalesmadeo Profitsharing:employeesreceiveaportionofthecompany’sprofitso Gainsharing:tiesrewardstoprofitsachievedbymeetingspecificgoalssuchasqualityand

productivityimprovemento Payforperformance:lowerbasepaybutrewardswithbonuses,commissionsorstockoptionso Knowledgebasedpaytiedtoemployee’sknowledgeandabilitiesratherthantotheirjob

Culture‘thecollectiveprogrammingoftheminddistinguishingthemembersofonegrouporcategoryofpeoplefromothers’

Powerdistance:extenttowhichthelesspowerfulmembersofinstitutionsandorganisationswithinacountryexpectandacceptthatpowerisdistributedunequally

Individualismandcollectivism

- Individualism:tiesbetweenindividualsareloose:everyoneisexpectedtolookafterthemselvesandimmediatefamily

- Collectivism:peopleintegratedintostrong,cohesivegroupswhichcontinuetoprotecttheminexchangeforloyalty

MasculinityandFemininity

- Masculinesocietiesoccurswhenemotionalgenderrolesareclearlydistinct:men–assertive,toughandfocusedonmaterialsuccess,whereaswomenaresupposedtobemoremodest,tenderandconcernedwiththequalityoflife

- Femininesocietiesoccurwhenemotionalgenderrolesoverlap

Uncertaintyavoidance- Extenttowhichthemembersofaculturefeelthreatenedbyambiguousorunknownsituations

Longandshorttermorientation

- Longtermorientation:fosteringvirtuesorientedtowardfuturereward(perseveranceandthrift)- Shorttermorientation:fosteringofvirtuesrelatedtothepastandpresent

Practicalapplicationsrelatingtoculturaldifferences

- Culturalintelligence- Internationalcommunicationandnegotiation- Internationalmanagementandleadership- Multicultural/ethnicmarketing

Lecture11IndustrialrelationsandHRmanagementHRM:

- Assumesthatallpersonnelactivitiesareintegratedwitheachotherandstrategicallywithorganisationalobjectives

- Anapproachtothepracticeandstudyoftheemploymentrelationshipthatfocusesontheorleofmanagementinelicitingeffortandvaluefromemployees

IR(employmentrelations)- ‘Thestudyoftheformalandinformalruleswhichregulatetheemploymentrelationshipandthesocial

processeswhichcreateandenforcetheserules’

- Theemploymentrelationshipisaneconomicexchangeinthelabourmarket- However:

o Labourisnotnecessarilyacommodityinthesamewayasothercommoditieso Employeesbringtheir‘labourpower’orcapacitytoworkinreturnforwages

§ Employershirecapacitytoworkratherthanactualworkefforto Themanagementprocessiscrucialtoturning‘labourpower’intolaboureffortandproductivity–or

commitment,effortandcomplianceo Employmentisapowerrelationship–employeesubmitstoauthority

- ‘Contractsofemployment’regulatetheemploymentrelationshipandsomeofthemanyissuesthatariseinthatrelationshipe.g.recruitment,pay,performance

o Socialcontract§ Contextualfactors(society,economy,ideas)§ Institutions(organisationsthemselves,employerassociations,governments,courts,unions

etc)o Legalcontractbetweenemployeeandemployero Psychologicalcontract

§ ‘theperceptionsofbothpartiestotheemploymentrelationship,organisationandindividual,ofthereciprocalpromisesandobligationsimpliedinthatrelationship’

1) Recruitmentandselection- Recruitment=attraction- Selection=discrimination- Waysofapproach:

o Fromanorganisational/HRperspective:§ Interestinqualityandquantityofapplicants§ Searchfor‘ideal’worker

o Fromtheindividualperspective§ ‘exchangeperspective’alsorecognisesindividualneeds

o Fromthesocial/criticalperspective:§ Recognisesexternalinfluencese.g.stateoflabourmarketaswellaspartiese.g.union,

markets,thelawandsocialnorms- Internalsources

o Existingemployees(transfer/relocationorpromotion)o Existingemployees(friends,relatives,contactsinthecommunity)o Formeremployees(e.g.recallfromlayoff)

- Externalsourceso Externallabourmarket–local,regional,internationaletc

2) Selectionprocess

o Securingdata;understandingcriteria(qualifications,workexperience,abilitytoperformgiventasks),excludedcriteria:race,sex,age,religion,familyresponsibilitiesetc.,attemptingtohavevalidandreliablepredictorsandutility

- Themainaimofallselectiontechniquesistopredictfuturejobperformanceor‘organisationfit’- Meta-analysisofliteratureonpersonnelselectionmethodsinclude

o Worksampletestso Generalmentalabilitytestso Employmentinterviewo Peerratingso Jobknowledgetests

- Thetopthreepairsofpredictorsare:o Generalmentalabilitytest+integritytest(.65)o Generalmentalabilitytest+worksampletest(.63)o Generalmentalabilitytest+structuredinterview(.63)

- Thefivepoorestpredictors:o Assigningpointstotrainingandexperience(.11)o Yearsofeducation(.10)o Interests(.10)o Graphology(.02)o Age(-.01)

- Discrimination

Theemploymentrelationship- Anemploymentrelationshipis:

o Betweenemployersandemployees(differentpartiesoractors)o Eachwithinterestandrightso Conflictandcooperationo Ongoing,continuouso Openended,anexchange–abargainedrelationship

Settingrules:1. Managerialprerogative- E.g.‘take-it-or-leave-it’contract;companypolicies/HRMpolicies2. Individual‘contracting’or‘bargaining’- Jointdecisionsofmanagementandanemployee3. Collective(orenterprise)bargaining- Jointdecisionsofmanagementandmorethanoneemployee–oftenrepresentedbyaunion

4. Decisionbythirdparties- E.g.NES,modernawards

3) Performancemanagement- Discretionaryeffort

o Effortthatemployeesvolunteerovertheminimumamountrequiredtokeeptheirjob- Effortbargain(orwage-effortbargain)

o Anyadjustmentinworkeffortbyworkershavingregardtotheirviewsregardingtheadequacyoftheirlevelofpay

o Ifworkersperceivethatthebalancebetweenwhattheyarerequiredtodoandwhattheyarepaidtodoisunfair,theymaydeliberatelyreducetheireffort.

o Employersmayperceivethatemployeesdonotexpendenougheffortsinreturnfortheirpay- Performancemanagement:processthroughwhichmanagersensurethatemployee’sactivitiesandoutputs

arecongruentwiththeorganisation’sgoals- Performanceappraisal:process/techniquethatmonitorsorassessestheprogresstowardsachievingdesired

goalsorotherperformancestandard- 5mainaspectsofaperformancemanagementsystem

o definingperformance§ withaspectsofperformancearerelevanttotheorganisation

o facilitatingperformance§ removingobstaclesthatlimitperformance

o encouragingperformance§ providingsufficientrewardsthatarevaluedbyemployees

o measuringperformance§ measuringthoseaspectsofperformanceimportantforachievingcompetitiveadvantageand

organisationalstrategye.g.performanceappraisalo feedingbackperformanceinformation

§ providingfeedbacksotheycanadjustperformance

4) TerminationHowtoterminate?1. Givingnoticeundercontract2. Byagreement3. Repudiation4. Frustration/impossibility5. Wrongfuldismissal

- Equityvefficiency- Harsh,unjustorunreasonable(FairWorkAct)

o Harsh:disproportionatetotheactions/misconduct/performanceoftheemployeeo Unjust:notguiltyofallegedconducto Unreasonable:decidedoninadequateinformation

Lecture12:Sampleexamquestion:Usingtheprinciplesofethicalpositionandissueintensity,discusstheethicalimplicationsoftheHealthyPotioninitiatives.BALANCESCORECARD:

- Correctfinancialstatements- Adequatecontrolsexisttoencourageethicalbehaviour- Learningandgrowth:caringforemployeesandrespectingtherightsofemployees- Customer:e.g.aftersalesprocessesactuallycaterforwhatcustomersneedandwant

1.Whataresomeethicaldilemmaswecommonlyfaceinbusiness?2.Whatfactorsseemstoaffectjudgementsaboutsituationsthatinvolveethicalaspects?3.Howdowedetermineaperson’sethicalposition?4.Whatistherelationshipbetweenethicalpositionandtheintensityofanethicaldilemma?5.Whataresomeofthedrivingfactorsforanexampleofanethicalissue?Ethics:

- Branchofphilosophyconcernedwithprinciples,valuesandbeliefsthatdefinerightandwrongbehaviour- Subjective- May/maynotbecoveredbylaws

Factorsaffectingethicalbehaviour

- Moralfoundationstheoryo Allmoralorethicaldilemmasinvolveatleastoneofthefollowing:

§ Care/harm§ Fairness(equity)/cheating§ Liberty/oppression§ Loyalty/betrayal§ Authority/subversion§ Sanctity/degradation

- Individualcharacteristicso Ethicalposition(basicconvictionsaboutwhatisrightandwrong)o Egostrength(apersonalitymeasureofthestrengthofaperson’sconvictions-strongegogenerally

leadstomaintainingethicalstance)- Issueintensity:importance,meaningfulness/trivialnessofanissue

o Extenttowhichanethicalissueisrelevantandimportanttoanindividual

- Organisationalculture:leadersactingethicallyencourageethicalbehaviourfromemployees

o Sharedbeliefs,valuesandnormsheldbytheentitieswithinanorganisationo Values–basedmanagements:anapproachtomanaginginwhichmanagersestablishandupholdan

organisation’ssharedvalues- Structuralvariables:statementsofethicalpositionthatgovernbehaviourofpeople

o Organisationalcharacteristicsandmechanismsthatguideindividualethicso E.g.performanceappraisalsystems,rewardallocationsystems,ethicalbehaviourofmanagers

Ethicalpositioncanbedeterminedbytwobasicfactors:

1. Theextenttowhichapersonmightrejectuniversalmoralrulesinfavourofrelativism- Absolutismvsrelativism

o Absolutism:absoluterules(stealingpencil,stealinglaptopbothethicallywrong)- Evolutionarypsychology2. Theextenttowhichapersonisidealisticinhis/hermoralattitudes–highidealismvslowidealism- Idealism:high–thereisalwaysacorrectanswer

Actioncharacteristicdependonculturalbackgroundàsituationcharacteristicsàpersoncharacter

- One’sethicalpositiondeterminesone’sattitudetoethicalscenarios- Moralintensityisapredictorofagreementaboutscenarios

o Highertheintensity,lowertheagreementwithaction- Someinteractionbetweenmoralintensityandethicalposition- Gendereffectsforidealism

ANEXAMPLEETHICALISSUEcheating+lying

- Self-perceptionofbeinghonourablevs.enjoyingthebenefitsofcheating

individualandsituationaleffectsonethicalbehaviourIndividual Situational

- Age- Religion- Egostrength- Ethicalposition- Income- Gender- Locusofcontrol- Machiavellianism- Culture

- Economicconditions- Managerialinfluence- Organisationalpolicy- Peers- Referentother- Reinforcement- Responsibilityforconsequences- Scarcityofresources

Week13–courseoverviewandexaminformationCustomer:leadindicatorFinancials:lagindicatorCasestudy:

- Thisisafictitiouscasetoillustratethecourseandbusinessconceptso Marcusdevelopsacreamthathasahighprobabilityofalleviatingbaldnessinmen.o Ingredient:liquorice,ginger,sorboleneo Factory–10people

§ Orderingredients§ Manageproductionprocess§ Managecashposition§ Managestock§ Payemployees§ Doaccountsreceivable§ Doaccountspayable§ Generalledger

- Examquestion:outlinethevariousorganisationalformsthatareappropriateateachstageoftheorganisationallifecycle

o Marcusandhiswife:SoleshareholdersofBaldPeoplePtyLtdo www.baldpeople.com.au

Market FactoryinVietnam FactoryinAustraliaEurope Tick CrossUSA Tick TickAustralia Maybe Tick

o MYoBnolongerappropriatebecausecan’ttakethegrowingvolumeàSAPo Evelynàchemotherapytraumao Kaiyingàalopeciao $150million–IPO(initialpublicoffering)àSWOTanalysis

o competitiors

§ acquirecompany/beacquired§ merge

o soletradero partnershipo incorporation–privateo publiccompanyo franchiseo merger/acquisition

- HowcouldyouassessthestrategichealthofHP- HowwouldyouapplythatstrategicanalysistoHP

o S:§ Uniqueproduct§ Profitable§ Nocompetitor§ StrongIP

o W:§ FounderCEO/IP

• Wholepersonalityoforganisation–whathappenstotheorganisationifthispersondiesunexpectedly

§ Singleproducto O:

§ Developmentofcream

MYoBBusinessProcesses

§ R&Do T:

§ Espionage§ Competitiveplayingstrategicgames§ Luxurygood

- Production/supplychainissueso MRPissues:

§ Managingingredients§ Problemsofsourcingwithoffshoreproduction§ Importanceofsales/activityforecasts

• FORECASTING:akeyingredientforcash,HR,----planningo A:processo B:additionalinformationrelevanttotaskathande.g.marketingplans,

strategicinformationofowncompanyandcompetitorso Offshoringo Qualitycontrol

§ Continuousimprovement§ Statisticalprocesscontrol§ Sixsigma§ ISO9000

- Marketingstrategyo Product:

§ Productline/productmix(traumacream,alopeciacreamàbothnonluxurygoods,baldnesscream–luxurygood)

§ Marketsegmentation§ Packaging(luxurygood–luxurypackaging)§ Branding

o Pricing:§ Typesofpricing

• Marketbased:whateverthemarketwillpay,wewillcharge§ Priceskimming§ Priceelasticity

o Place§ Distributionchannels

• Initiallymanufactureràcustomer§ Intermediaries§ Intermediaries§ Logistics

o Promotions§ Advertising

• Cancertraumaproduct:E.g.Askanoncologisttoputabrochureintheirwaitingrooms

• Baldnesscream:magazines,sportsshows§ Sellingavenues

o Organisationalstructures§ Keydecisionstomake…

• Centralised/decentralised• Basicphilosophy• Spanofcontrol:numberofpeopleunderneathaparticularpersone.g.Marcusas

CEO§ Types…

• Functionalo CEOàmarketing,manufacturing,finance

• Geographicalo CEOàEurope,OZ,USA

• Product

o CEOàMens,Trauma,Alopecia• Matrix

• Virtual

- MotivationandBehaviouro Managingtasksandmanagingpeopleo Managingpeople:

§ Needsofpeople• E.g.Factoryworkersmotivatedbypay

§ Expectationsofpeople§ Feedbackandreinforcementofpeople§ Managingincentives§ Managingculturaldiversity

o Maslowo Hofstede

- HRandIR1. Hiring,SelectionandAppointment2. PayandReward3. PerformanceManagement4. Termination

- Ethics

o