MGMT 371 Exam #2

Chapter 5

Milton Friedman’s perspective one and only social responsibility is to use

resources and engage in activities designed to increase profits. Do

whatever it takes without deception or fraud. Expending resources on

social good unjustifiably costs businesses

Socioeconomic view of social responsibility: management’s social responsibility

goes beyond making profits to include protecting/improving society’s

welfare. Corporations aren’t independent and only accountable to

stakeholders, have a responsibility to do the right thing and be involved

socially/legally/politically

Social obligation, social responsiveness and social responsibility O: meet

economic and legal responsibilities and nothing more. R: when a firm

engages in social actions in response to some popular social need RB: A

business’ intention beyond legal/economic obligations to do the right

things and behave in a way that benefits society. Today’s external could

be tomorrow’s legal.

Carroll’s four responsibilities: economic (must do), legal (have to do) ethical

(should do) discretionary (might do)

Approaches to social responsibility obstructionist: managers decide not to act in

a socially responsible way and try to hide their behavior from others

Defensive: managers act within the law, doing only what the law requires

Accommodative: managers try to balance needs of different stakeholder

groups against one another

Proactive: companies go out of their way to learn the needs of different

stakeholder groups

1

Does social responsibility pay? Positive relationship between social involvement

and economic performance of firms. Hard to precisely define social

responsibility and economic performance, raises validity and causation

issues. Social actions don’t harm if not help.

Green management, how organizations go green: Legal (light green): firms

simply do what is legally required by obeying laws, rules, and regulations

willingly and without legal challenge.

Market: firms respond to the preferences of their customers for

environmentally friendly products

Stakeholder: firms work to meet environmental demands of multiple

stakeholders-employees, suppliers, community

Activist: firms look for ways to respect and preserve environment and be

actively socially responsible

How to evaluate green management: Become greener by: using sustainability

reporting guidelines to document “green actions”, adopting ISO 14000

stds. for envt. mgmt, being names one of the 100 most sustainable

corporations in the world.

Social entrepreneurs, corporate philanthropy, volunteering: social

entrepreneurs: businesses wanting to do something socially valuable.

Corporate: campaigns, donations, funding own foundations, ex. Ronald

McDonald. Employee volunteering efforts: team volunteering, individual

volunteering during work hours.

Ethics—principles, values, and beliefs that define what is right and wrong

behavior. Often defined by profession. Can be legal but not necessarily

ethical (fight club ex.)

Ethics of care vs. ethics of justice

2

Moral development (levels): 3 levels, each have 2 stages. At each successive

stage, individual’s moral judgment becomes less dependent on outside

sources and more internalized. Kohlberg.

1. Preconventional: choice based on personal consequences from

outside sources such as physical punishment, rewards, or exchange

of favors. Sticking to rules to avoid punishmentfollowing them

when it’s in your immediate interest

2. Conventional: ethical decisions rely on maintaining expected

standards and living up to the expectations of others. Living up to

what’s expected by people close to youmaintaining order by

fulfilling obligations you’ve agreed to.

3. Principled: individuals define moral values apart from the authority of

the groups to which they belong or society in general. Valuing rights

of others and upholding absolute rights regardless of majority’s

opinionfollowing self-chosen principles at any cost

Proceed through stages sequentially, most adults stuck at stage 4.

Not guaranteed to progress.

Moral relativism vs. pluralism (“Ethics Unwrapped video”) Morality is relative to

some personal, social or cultural standard and there is no method for

deciding whether one decision is better than another. Relativism is belief

that all it takes to make some potentially harmful act right the

individual/group’s claim that it is right. “Who am I to judge, I can’t tell

another person what’s right” Human beings judge by nature. VS.

Pluralism: may be more than one right way to do something that doesn’t

coexist. Let others live as they see fit if they aren’t causing harm

What influences ethical behavior? Family, peers, individual experiences, values

and morals. Moral development (measure of independence from outside

influences, Kohlberg’s 3), stages: individual characteristics, organization’s

culture, organization’s structural design, and intensity of ethical issue.

3

Affect Employee Ethics: values-basic convictions about what is right/wrong.

Personality-ego strength, strength of a person’s convictions. Locus:

internal-belief you control your destiny, external-what happens to you is

due to chance, less likely to take personal responsibility.

Organization Affect on Ethics: organizational characteristics and mechanisms

that guide and influence individual ethics: performance appraisal systems-

goal setting, reward allocation systems. Culture-behavior of managers.

Issue intensity-importance of the ethical issue. Determinants: consensus of

wrong, probability of harm, immediacy of consequences, proximity to

victims, greatness of harm, concentration of effect

How do ethics differ internationally? Standards aren’t universal, social and

cultural differences. Foreign Corrupt Practices Act-illegal to corrupt a

foreign official, “token” payments to officials are permissible when its an

accepted practice in that country. U.N. has to balance ethical practices

from all over the globe economically, legally, and politically.

How to encourage ethical behavior-hire individuals with high ethical standards,

establish codes of ethics and decision rules, lead by example, set realistic

goals and ethical appraisals, give ethics training, conduct independent

social audits, provide support/protection for employees with ethical

dilemmas, be an ethical leader: set a good example with honesty,

transparency, admitting mistakes, communicating, stressing shared

values, using reward system for accountability.

“Ethics Unwrapped” videos on ethical leadership: many adults look for outside

guidance, leaders guide actions of firms, unethical actions copied more

often than ethical, avoiding toxic cultures, if successful in medical,

philanthropy fields etc. thought they made up for being unethical in other

ways. Legislating from on high, entitlement, Yes-man, think they’re right

because they’ve been right

4

5

Chapter 6

What is a decision? A choice among two or more alternatives

Steps in the decision-making process: 1.) Identify a problem-discrepancy

between reality and desired state of affairs, becomes an issue when

manager becomes aware of it, pressure to solve; manager needs

resources and authority to solve. 2.) Identify decision criteria-factors like

costs that could be incurred, potential risks, desired outcomes that are

relevant to resolution. 3.) Allocate weights to criteria (not all = important,

assign weight after placing in order of priority. 4.) Develop alternatives-

identify viable options. 5.) Analyze alternatives-appraise strengths and

weaknesses, based on ability to solve problem. 6.) Select alternative that

can resolve issue-alternative with highest total weight is chosen. 7.)

Implement selected alternative-conveying decision and gaining

commitment from people carrying out decision. 8.) Evaluate decision’s

effectiveness

6

Rationality, bounded rationality, satisficing, and escalation of commitment:

1. Rationality: managers make consistent, value-maximizing choices with

specified constraints. Assumptions: rational, fully objective, logical,

defined problem and alternatives, clear/specific goals, maximizes

organization’s interest not personal interest.

2. Bounded Rationality: managers make decisions rationally, but are limited

(bounded) by ability to process info. Will not seek out/have all info on

alternatives, will satisfice: choose first alternative encountered that solves

problem, escalation of commitment

Intuitive decision-making: making decisions on basis of experience, affect

(feeling or emotions), cognition (skills, knowledge, training), subconscious

mental processing, ethical values or culture.

Evidence based management: opposite of intuitive, systematic use of best

available evidence

Decision Making Styles linear: preference for using external data and facts,

processing info through rational, logical thinking. Nonlinear: preference for

internal sources of info, processing info with internal insights, feelings, and

hunches.

Types of problems and decisions (structured/unstructured, programmed/non-

programmed) Structured: clear goals, familiar (have occurred before),

easily and completely defined, info about problem is available and

complete. Unstructured: new/unusual issue with ambiguous/incomplete

info. Custom solution.

Programmed: repetitive decision handled by routine approach.

Nonprogrammed: unique, nonreoccurring, custom-made solutions

7

Procedure, rule, policy: Types of programmed decisions. Procedure-series of

interrelated steps a manager can use to respond (applying a policy) to a

structured problem. Rule-explicit statement limiting what

manager/employee can/cant do. Policy-general guideline for making a

decision about a structured problem.

Decision-making conditions-certainty: situation in which a manager can make

an accurate decision because the outcome of every alternative choice is

known. Then risk and uncertainty.

Risk and uncertainty Risk: situation in which manager is able to estimate

probability of outcomes that result from the choice of particular

alternatives. Uncertainty: limited info prevents estimation of outcome

probabilities for alternatives associated with the issue and may force

manager to rely on intuition, hunches, gut feeling.

Maximax, maximin, and minimax decision choice Uncertainty. Maximax:

optimistic manager’s choice to maximize maximum payoff. Maximin:

pessimistic manager’s choice to maximize minimum payoff. Minimax:

managers choice to minimize maximum regret

Decision-making biases—framing (especially gain/loss and others from the

exercise), overconfidence, etc.

8

Modern Decision making: understand cultural differences, know when to call it

quit, use effective decision-making process. Highly Reliable Organizations:

defer to experts on front line, don’t get comfortable, embrace complexity,

anticipate but guess at their limits, let unexpected situations provide solution

Characteristics of an effective decision making process-focuses on what’s

important, logical/consistent, blends subjective and objective and

analytical and intuitive thinking, only needs as much info and analysis as

necessary to resolve problem, encourages gathering relevant info and

informed opinion, straightforward easy to use reliable and flexible.

“Ethics Unwrapped” videos on decision-making: framing, overconfidence, loss

aversion, self-serving bias, bounded ethicality

9

Chapter 8

What is planning? What is formal planning? Planning is defining the

organization’s goals, establishing strategies for achieving these goals,

developing plans for organizational work activities. Formal planning-

specific goals, written and shared, associated with positive financial

results.

Why do managers plan? Provides direction, reduces uncertainty, minimizes

waste and redundancy, sets the

standards for controlling.

Planning and performance generally positive relationship between planning and

performance. Formal planning associated with good financial results,

typically doing a good job making and implementing plans is more

important than how long you spend planning. If plans don’t work, it’s from

external environment factors constraining managers (govt, unions).

Influenced by time-planning frame, need at least 4 years of formal

planning before it starts affecting performance

Goals vs. plans goals are objectives-desired outcomes, provide direction and

performance criteria. Plans are documents that outline how goals are to

be accomplished, describe how resources are to be allocated and

establish activity schedules.

Types of goals Financial, Strategic, Stated vs. Real.

Stated goals vs. real goals broadly worded official statements of the

organization intended for public consumption that may be irrelevant to its

real goals (what actually goes on inside company). “Follies”

10

Types of plans—strategic, operational, standing, directional, etc.: long-term

(time frames over 3 years) vs. Short-term: time frames one year or less.

Time between is an intermediate plan.

1. Specific plans: clearly defined and leave no room for

interpretation. Stated clearly with no room for misunderstanding

or ambiguity.

2. Directional: flexible plans that set out general guidelines/provide

focus, yet allow discretion in implementation

3. Strategic: apply to entire company, establish its overall goals

4. Operational: encompass a particular operational area of the

organization

5. Single use: a one time plan specifically designed to meet needs

of unique situation

6. Standing: ongoing plans that provide guidance for activities

performed repeatedly

Traditional goal setting-goals set by top managers flow down through the

organization and become sub-goals for each organizational area. Turning

broad strategic goals into lower-level goals can be hard. Ambiguity

specificity

11

MBO (management by objectives):Specific performance goals jointly

determined by employees + managers. Progress towards accomplishing goals

is periodically reviewed. Rewards allocated on basis of progress.

Key elements: goal specificity, participative decision making, explicit

performance/evaluation period, feedback. Employees must be

competent enough to achieve goals.

Well-written, SMART goals: written in terms of outcomes not actions,

measurable and quantifiable, clear as to time frame, challenging yet

attainable, written down, communicated to all necessary company

members. SMART:

Contingency Factors: affect plan as the following vary: manager’s level in the

organization, degree of environmental uncertainty (more uncertainty, more

flexible), length of future commitments (commitment concept current plans

affecting future commitment must be sufficiently long term to meet these

commitments)

Organizational Plans: strategic (upper mgmt), tactical (middle mgmt.),

operational (lower-level mgmt)

Planning time frames: long range: strategic, 5 yrs. or more. Intermediate range:

tactical, 1-5 yrs. Short-range (operational) action and reaction plans of 1

yr. or less.

What is a planning department? A group of specialists who help managers write

organizational plans. Involving organizational members in process: plans

developed by members of units at various levels then coordinated with

other units across organization. Technology helps (MS Planner, Project)

Kerr’s “Folly” article: coaches speak of teamwork and one for all spirit, but

scholarships and NFL positions are given out based on individual

performance. Goal of war is to win, goal of soldiers is to go home. WWII-

soldiers left when war was done, Vietnam-had specified tours

12

Chapter 9

Strategies & business models-strategies: plans for how organization will do

what its in the business to do, how it competes successfully, how it

attracts/satisfies customers to achieve its goals. BM: how a company is

going to make $, whether customers value what company is providing, if

they can make $ doing that. Tactics lower level, strategy higher level.

Competitive advantage & core competencies competitive advantage determined

by a corporation’s resources & core competencies-what sets company

apart, distinctive edge. Core competencies are the major value-creating

capabilities of the organization-the skills & abilities it has to

effectively/profitably do its work.

The strategic management process: companies that plan do better than

companies that don’t.

1. ID organization’s current mission/goal/strategy. Mission is statement of

purpose, goal is foundation for further planning

2. SWOT Analysis (external O&T, internal S&W): envt. scanning of specific

and general envts., focusing on identifying O & T in external environment.

Want to analyze specific industry, identify potential threats. Buyers are

customers: if there are a lot of options, they have bargaining power.

Substitutes accomplish same ends even if product is different.

Ex. Ole Miss: economy is a threat/opportunity depending on

condition. Enrollment can rise

if its bad as it can fill in resume gap/retrain. Hurts schools with high

tuition, budget cuts. Compete with online schools, threat to

traditional campus. Advantage: history, beauty, reasonable price,

sports-leveling out S&W.

13

Internal Analysis: assess organizational resources,

capabilities, and activities. Strengths create value for customer and

strengthen competitive position of firm-core competencies &

distinctive competencies. Weaknesses put firm at disadvantage.

Fairly easy to look at financial/physical assets, but assessing

intangible assets: employee’s skills, culture, corporate reputation,

etc. is hard.

3. Formulate strategies: develop and evaluate strategic alternatives, select

appropriate strategies for all levels in organization that provide relative

advantage over competitors, match strengths to envt. opportunities,

correct weaknesses and guard against threats. S/O, W/O, S/T, W/T

4. Implement strategies-implementation is effectively fitting organizational

structure/activities to its envt. Effective strategy implementation requires

an organizational structure matched to requirements.

5. Evaluate results-how effective were the strategies, what adjustments are

necessary (if any)?

Similar to planning process: situational (SWOT) analysis general

alternatives (formulate strategies)goal & plan evaluationgoal & plan

selectionimplementation (implementation strategies)monitor & control

14

corporateBUimplement

Porter’s 5 forces model: threat of new entrants, threat of substitutes, bargaining

power of buyers, bargaining power of suppliers, current rivalry. Created to

explain how to create a sustainable competitive advantage, dictate rules

of competition and determine industry attractiveness and profitability.

Corporate, competitive (business), and functional strategies, and levels of

management:

1. Corporate strategy: one that determines what businesses a

company is in or wants to be in and what it wants to do with those

businesses. Growth, stability, renewal strategies.

2. Competitive strategy: how corporation will compete in its business in

primary or main mkt. In organizations with multiple businesses, each

business has its own specified competitive strategy

3. Functional strategy: used by organization’s various functional depts.

to support its competitive strategy.

Levels: top manager (CEO) works with top management team

including executive members COO (chief operating officer), CFO (chief

financial officer), CIO (chief info officer), and others CEO’s are the

chief strategist, structural architect, developer of info/control systems,

key decision maker, visionary leader, political actor, monitor &

interpreter of envt. changes, etc.

15

Types of growth, stability, and renewal strategies: 1.) Growth Strategy: seek to

increase organization’s business by expansion into new products and

markets. Concentration: increases products or mkts. served in primary

business), Horizontal integration (combine w/ competition or enter new

geographic region, Vertical integration (backward or forward on value

chain), Diversification (related or unrelated industries ex. related airline

merges with cab to have synergism in service).

2.)Stability Strategy: seeks to maintain status quo: to deal w/ uncertainty

of dynamic envt., when industry is experiencing slow or no-growth

conditions, if owners of firm elect not to grow for personal reasons.

3.)Renewal Strategy: developing strategies to counter organization

weaknesses leading to performance declines. Retrenchment: focus on

eliminating non-critical weaknesses and restoring strengths to

overcome current performance pblms. Turnaround: address critical

long-term performance pblms through use of strong cost elimination

measures and large-scale organizational restructuring solutions.

Turnaround: selling BU’s, perhaps declaring bankruptcy, total exit

strategy

Value chain: Backward Integration: raw materialsprimary

manufacturingfabricationForward Integration product

producerdistributorretailer

BCG matrix (categories), and GE Business Screen: Managing diversification:

organization structure, portfolio mgmt. techniques.

BCG Matrix: cash cows low growth rate, high mkt. share. Stars high

growth rate, high mkt. share. Question marks: high growth rate, low mkt.

share. Dog low growth rate, low mkt. share.

16

Put $ into ? to get stars.

GE business screen: high to low on side Industry Attractiveness, good to

poor on bottom Competitive Position. Colors and placements or BU

indicate whether to invest, sell, etc. Winner, ?, avg. business, loser, profit

producer. CP: mkt. share, tech know-how, product quality, service

network, price competitiveness, operation costs. IA: mkt. growth, mkt.

size, capital requirements, competitive intensity

Types of competitive strategies: strategy focused on how organization will

compete in each of its SBU’s (strategic business units). Competitive

advantage-comes from core competencies. Ex. some want to be a low

cost leader (Walmart)

1.)Cost Leadership: seeking to attain lowest total overall costs

relative to other industry competitors.

2.)Differentiation: attempting to create a unique and distinctive

product or service for which customers will pay a premium.

3.) Focus: using a cost or differentiation advantage in a particular

mkt. segment rather than a larger mkt.

Can deal with broad to narrow niche market.

Ex. Book Industry: cost leadership ex. is amazon. Differentiation:

(atmosphere + café) Barnes & noble. Cost focus: used

paperback bookstore. Differentiation focus: square books, café

with recommendations.

17

First mover, advantages and disadvantages: first mover: organization that’s first

to bring a product innovation to the mkt. or use a new process innovation.

Advantages: reputation for being innovative and industry leader,

cost & learning benefits, control over scarce resources and keeping

competitors from gaining access, chance to begin building customer

relationships and customer loyalty

Disadvantages: uncertainty over exact direction technology & mkt.

will go, risk of competitors imitating innovations, financial and strategic

risks, high development costs.

18