Ch 7 Decision Making, Learning, Creativity, and Entrepreneurship

- Decision Making
o The process by which managers respond to opportunities and threats
- Problem Solving Strategies
o Understand the problem
o Understand the cause of the problem
o Start to use possible solutions as starting points to solve problems
o Determine the best solution
Benefit/cost analysis
o Implement, test, adjust
- Thoroughly understand:
o Programmed
Routine, virtually automatic
Decisions have been made so many times in the past that
managers have developed rules or guidelines to be applied
when certain situations inevitably occur
o Nonprogrammed
Occurs in responses to unusual, unpredictable opportunities and
threats
Rules do not exist because the situation is unexpected or
uncertain and managers lack the information they would need to
develop rules to cover it
o Group think
Pattern of faulty and biased decision making that occurs in
groups whose members strive for agreement among themselves
at the expense of accurately assessing information relevant to a
decision
o Intuition
Feelings, beliefs, and hunches that come readily to mind, require
little effort and information gathering and result in on-the-spot
decisions
o Reasoned Judgement
Decisions that take time and effort to make and result from
careful information, gathering, generation of alternatives, and
evaluation of alternatives
- The steps in the decision making process
o Recognize the need for a decision
o Generate Alternatives
o Assess Alternatives
o Choose Among Alternatives
o Implement the chosen alternative
o Learn from feedback
- What are the challenges with decision making and how do they relate to the
process
- What are the different decision making models
o Classical Model
Prescriptive model of decision making that assumes the decision
maker can identify and evaluate all possible alternatives and

their consquences and rationally choose the most appropriate

course of action
Steps
List all the alternative courses of action possible and the
consequences of the different alternatives
Rank each alternative from least preferred to most
preferred according to personal preferences
Select the alternative that leads to desired future
consequences
o Administrative Model
An approach to decision making that explains why decision
making is inherently uncertain and risky and why managers
usually make satisfactory rather than optimum decisions
Bounded Rationality
Cognitive limitations that constrain ones ability to
interpret, process, and act on information
Incomplete Information
Because of risk and uncertainty, ambiguity, and time
constraints
Ambiguous Information
Information that can be interpreted in multiple and often
conflicting ways
Time Constraints and Information costs
Managers neither have the time nor money to search for
all possible alternatives and evaluate potential
consequences
Satisficing
Searching for and choosing and acceptable or satisfactory
response to problems and opportunities, rather than
trying to make the best decision
Myths and characteristics of Entrepreneurs
o Myths
Entrepreneurs are born, not made
It is necessary to have access to money to become an
entrepreneur
An entrepreneur takes a large or irrational risk in starting a
business
Most successful entrepreneurs start with a breakthrough
invention
Entrepreneurs become successful on their first venture
o Characteristics
Open to experience original thinkers and take risks
Internal locus of control they take responsibility for their own
actions
High self-esteem they feel competent and capable
High need for achievement they set high goals and enjoy
working towards them
Rational vs Creative problem solving

Ch 8 The Manager as a Planner and Strategist

- Be able to distinguish between the various levels of planning
o Corporative Level Plan
Goal corporate mission and goals
Strategy formualation corporate level strategy
Strategy implementation design of corporate structure control
o Business Level Plan
Goal divisional goals
Strategy formualation business level strategy
Strategy implementation design of business-unit structure
control
o Functional Level Plan
Goal functional goals
Strategy formualation functional level strategy
Strategy implementation design of functional structure control
- What are
o SWOT
Strengths, Weaknesses, Opportunities, Threats
External Environment
Components
o Scanning
o Monitoring
o Forecasting
o Assessing
Scope
o General environment
o Industrial environment
o Strategic groups
o Direct competitors
Internal Environment
Resource Types
o Tangible
o Intangible
Firm Capabilities
o Functional
o Value chain
o benchmarking
o Business plans
o Mission Statement
A broad declaration of an organizations purpose that identifies
the organizations products and customers and distinguishes the
organization from its competitors
o Five Forces Model
Level of rivalry in an industry
Potential for new entrants
Power of large suppliers

Power of large customers

Threat of substitute products
Thoroughly understand:
o Differentiation strategy
Distinguishing an organizations products from those of the
competitors on one or more important dimensions
o Low-cost strategy
Driving the organizations total costs down below the total costs
of rivals
Ex- manufacturing at lower costs, reducing waste
Can sell for less and still be profitable
Difficult to do both differentiation and low cost
o Vertical integration
Involves a company expanding its business operations either
backward into a new industry that produces inputs or forward
into a new industry that uses, distributes, or sells the companys
products
o Unrelated diversification
Firms establish divisions or buy companies in new industries that
are not linked to their current business or industry
o Related diversification
Strategy of entering a new industry and establishing a new
business divions that is linked to a companys existing divisions
because they share resources that will improve the competitive
position
Synergy
Obtained when the value created by two divisions
cooperating is greater than the value that would be
created if the two divisions operated separately and
independently
o Concentration
Organization uses its functional skills to develop new kinds of
products or expand its locations
Appropriate when managers see the need to reduce the size of
their organizations to increase performance
o Global strategy
Undertaking very little customization to suit the specific needs
of customers in different countries
o Multi-domestic
Customizing products and marketing strategies to specific
national conditions
Helps gain local market share and raises production costs
What are the characteristics of:
o Policy
o standard operating procedure
o standing plan
o scenario planning
the ge

neration of multiple forecasts of future conditions followed by an

analysis of how to respond effectively to each of those
conditions

Ch. 9 Value-Chain Management: Functional Strategies for Competitive

Advantage
- Understand the various categories of innovation.
o Quantum product innovation
The development of new, often radically different, kinds of goods
and services because of fundamental shifts in technology
brought about by pioneering discoveries
o Incremental Product Innovation
The gradual improvement and refinement of existing products
that occur over time as existing technologies are perfected
- Understand the Four ways to create a competitive advantage
o Improving quality
o Improving responsiveness to customers
o Improving efficiency
o Improving innovation
o Result in a competitive advantage from low costs and differentiation
- Understand the various functional strategies and activities of value chain
management.
o Functional Level Strategy
Plan of action to improve the ability of each of an organizations
departments to performs its task-specific activities in ways that
add value to an organizations goods and services
Value Chain
The coordinated series or sequence of functional activities
necessary to transform inputs such as new product
concepts, raw materials, component parts, or professional
skills into the finished goods or services customers value
and want to buy
Production Function
Responsible for the creation, assembly, or provision of a
good or service, for transforming inputs into outputs
Pros
o aligns individual action, group norms, goal
attainment with reward system
o Dont solve problems, but eliminate them through
new designs
o Total quality management
o Adaptive and responsive
Cons
o Companies unwilling to build a fear-free work
culture
o Employees in constant change
o Global marketplace
o US political naivet

Customer relationship management

Technique that uses IT to develop an ongoing relationship with
customers to maximize the value an organization can deliver to
them over time
How does this relate to Improving Responsiveness, Customers and
productivity?
o What do customers want
Lower price
High quality products
Quick service and good after-sales service
Products with many useful or valuable features
Products that are customized or tailored to their unique needs
Thoroughly understand:
o Six Sigma
A technique used to improve quality by systematically improving
how value chain activities are performed and then using
statistical methods to measure the improvement
Their approach is to create teams of expert change agents,
known as green belts and black belts to take control of the
problem-finding and problem-solving process and then to train
other employees in implementing solutions
o TQM total quality management
Focuses on improving the quality of an organizations products
and stresses that all of an organizations value-chain activities
should be directed toward this goal
Steps
Identify what customers want from the good or service
that the company provides
Identify what the company actually provides to customers
Identify the gap that exists between what the customers
want and what they get
Formulate a plan for closing the quality gap
Steps to Successful TQM Implementation
Build organizational commitment to quality
Focus on the customer
Find ways to measure quality
Set goals and create incentives
Solicit input from employees
Identify defects and trace to source
Introduce just-in-time inventory systems
Work closely with suppliers
Design for ease of production
Break down barriers between functions
o Star-gate development funnel
o

Ch. 10 Managing Organizational Structure and Culture

- Know the various organizational structures and their individual characteristics

o
o

Types
o

Factors affecting organizational structure

Organizational environment
Strategy
Technology
Human resources
Functional Department Structure
President engineering, finance, marketing, production
Advantages
Encourages learning from others doing similar jobs
Easy for managers to monitor and evaluate workers
Allows managers to create the set of functions they need
in order to scan and monitor the competitive environment
Disadvantages
Difficult for departments to communicate with others
Preoccupation with own department and losing sight of
organizational goals
Divisional Organization Structure
President computer division, software division, consulting
source division production, marketing, finance
Advantages
Coordination among different business functions
Improved and speedier service
Accountability for performance
Development of general manager and executive skills
Disadvantages
Duplication of resources by two or more departments
Reduced specialization in occupational skills
Competition among divisions
Matrix structure
Product team managers and functional managers
Two boss employees
Product Team Structure
CEO engineering, sales, product design, research and
development manufacturing units
Tall organizations
Flat organizations
Fewer levels and wide spans of control
Quick communication but overworked managers
of cultures and their characteristics
Organizational culture
The shared set of beliefs, expectations, values, and norms that
influence how members of an organization relate to one another
and cooperate to achieve organizational goals
Organizational ethics
The moral values, beliefs, and rules that establish the
appropriate way for an organization and its members to deal
with each other and with people outside the organization

Know
o
o

o
o

o
o
o
o

Adaptive Cultures
Values and norms help an organization to build momentum and
to grow and change as needed to achieve its goals and be
effective
Inert Cultures
Those that lead to values and norms that faul to motivate or
inspire employees
Lead to stagnation and often failure over time
the definitions and when to use:
Job simplification
The process of reducing the tasks each worker performs
Job enrichment
Increasing the number of different tasks in a given job by
changing the division of labor
Job enlargement
Increasing the degree of responsibility a worker has over a job
Job design
The process by which managers decide how to divide tasks into
specific jobs
The appropriate division of labor results in an effective and
efficient workforce
Span of control
The number of subordinates who report directly to a manager
Centralizing authority
Chain of Command
specifying the relative authority of each manager
Decentralizing Authority
Giving lower level managers and non-managerial employees the
right to make important decisions about how to use
organizational resources
Innovation

Ch 11. Organizational Control and Change

- What are the characteristics of control?
- What are the various forms of control and when to use them.
o Output controls know the details
Financial measures of performance
Organizational goals
Operating budgets
Problems
Managers must create output standards that motivate at
all levels
Should not cause managers to behave in inappropriate
ways to achieve organizational goals
o Behavior controls know the details
Direct supervision
Managers who actively monitor and observe the behavior
of their subordinates

Teach subordinates appropriate behaviors

Intervene to take corrective action
Most immediate and potent form of behavioral control
Can be an effective way of motivating employees
Management by objectives
Rules and standard operating procedures
Problems
Very expensive because a manager can personally
manage only a relatively small number of subordinates
effectively
Can demotivate subordinates if they feel that they are
under such close scrutiny that they are not free to make
their own decisions
Clan controls know the details
The control exerted on individuals and groups in an organization
by shared values, norms, standards of behavior, and
expectations
Values
Norms
Socialization
Bureaucratic Control
Control through a system of rules and standard operating
procedures that shakes and regulates the behavior of divisions,
functions, and individuals
Process
Establishing standards
Performance measurement
Identifying gaps
Corrective action
Problems
Rules easier to make than discarding them leading to
bureaucratic red tape and slowing organizational
reaction times to problems
People might become so used to automatically following
rules that they stop thinking for themselves