Transcript Chapter 01
Chapter 6 Decision Making BUSINESS the art of making irrevocable decisions based on insufficient knowledge Managerial Decision Making Decision Decision Making Choice from available alternatives The process through which managers identify and resolve problems and capitalize on opportunities. Characteristics of management decision making: Programmability Decision Scope Conflict Uncertainty Risk Types of Decisions Programmed Decisions Sick leave Involve situations that have occurred often and decision rules can be developed and applied Managers formulate decision rules so subordinates can make decisions freeing managers for other tasks. Nonprogrammed Decisions Decisions required for unique and complex management problems. Poorly defined Largely unstructured Important consequences Uncertainty is great Routine decision rules for solving the problem do not exist. Certainty, Risk Uncertainty and Ambiguity All the information Low Organizational Problem Know Objectives Don’t Know Probabilities Possibility of Failure Certainty Risk Uncertainty Ambiguity Programmed Decisions Clear-cut objectives Know the probabilities High Nonprogrammed Decisions Problem Solution Objectives Unclear Outcomes Unclear Steps in the Decision-Making Process Recognize Identifying problems and opportunities Ignore Diagnosis and fact gathering Symptoms Change WHO Revise Revise Establishing specific goals and objectives and Generating Alternatives Revise Revise Revise Evaluation Alternatives Selecting the best Alternative Implementing the Decision SUG Consistency Specific, Measurable, Attainable Quantity BrainstormingDon’t evaluate Establish criteria Goals Action Plan Revise Monitoring & Evaluating the Decision Did It Work? Follow up Plan Who What Where When Verify Decision Process Factors that limit rational decision making: Organization Politics Emotions and Personal Preferences Illusion of Control The tendency to increase commitment to a previously selected course of action. Behavioral Influence on Decision Making • Perception: A person's view of the world – Stereotyping - projecting characteristics of a small number of people as characteristics of the entire group – Halo Effect - one characteristic overshadows all other characteristics or aspects of the decision • Subjective Rationality - Thinking logically but within one's own framework • Bounded Rationality - personal, environmental, time, and organizational constraints which place limits on decisions Behavioral Influence on Decision Making • Recency - tendency to ascribe more importance to things that happened most recently • Satisficing - tendency to accept "adequate" decision instead of the best • Values • Personality • Propensity For Risk The Garbage Can Model of Decision-Making Streams of events Organized Anarchy Compose of problems, solutions, participants, choices Problems Solutions When they connect a decision gets made Middle Management Causes & Participants Problems Participants Solutions Choice Goals unclear Opportunities Participants Cause and effect undefined Choice Opportunities Choice Opportunities Department A Solutions Department B High turnover Problems Solutions Choice Opportunities Participants Solutions Problems Participants Choice Opportunities Problems Participants Problems Solutions Choice Opportunities Participants Problems Solutions Participants Probable Relationship Between Quality of Decision and Method Utilized Quality of Decision More Less Individual Average individual Minority control Majority control Consensus Group Considerations in Decision Making Group decision making is becoming more common as organizations focus on improving customer service and push decision making to lower levels. Advantages and Disadvantages of Group Decision Making: Advantages Disadvantages Increased acceptance Greater pool of knowledge Different perspectives Greater comprehension Training ground More time Social pressure Minority domination Logrolling Goal displacement “Groupthink Groupthink An agreement-at-any-cost mentality that results in ineffective group decision making. Groupthink • Characteristics of Groupthink – – – – – – Illusions of invulnerability Collective rationalization Belief in the morality of group decisions Self-censorship Illusion of unanimity in decision making Pressure on members who express arguments Techniques for Quality in Group Decision Making • • • • • • • Brainstorming • A technique used to enhance Freewheeling is encouraged. creativity that encourages group Group members will not criticize ideas as they members to generate as many are being generated. novel ideas as possible on a given Piggyback on previously stated ideas. topic without evaluating them. No ideas are evaluated until after all alternatives are generated. The wilder the ideas the better. Quality is encouraged. Techniques for Quality in Group Decision Making • Brainstorming • Nominal Group Technique • A structured process designed to stimulate creative group decision making where agreement is lacking or the members have incomplete knowledge concerning the nature of the problem. Techniques for Quality in Group Decision Making • Brainstorming • Nominal Group Technique • Delphi Technique • Uses experts to make predictions and forecasts about future events without meeting face-to-face. Techniques for Quality in Group Decision Making • • • • Brainstorming Nominal Group Technique Delphi Technique Devil’s Advocacy Approach –An individual or subgroup appointed to critique a proposed course of action and identify problems to consider before the decision is final. Techniques for Quality in Group Decision Making • • • • • Brainstorming Nominal Group Technique Delphi Technique Devil’s Advocacy Approach Dialectical Inquiry –Approaches a decision from two opposite points and structures a debate between conflicting views. Techniques for Quality in Group Decision Making • • • • • • Brainstorming Nominal Group Technique Delphi Technique Devil’s Advocacy Approach Dialectical Inquiry Story Boarding A variation of Brainstorming using cards that can be viewed and rearranged Chapter 7 Strategic Management STRATEGY Insight into how to create value STRATEGY Insight into how to create value The Strategic Management Process • Strategic management involves the major decisions, business choices, and actions that chart the course of the entire enterprise. The Strategic Management Process • Strategic management involves both long-range thinking and adaptation to changing conditions. • A strategy is successful if it provides the firm with sustainable competitive advantage. – Competitors will be unable to duplicate what the firm has done or will find it too difficult or expensive. Components of the Strategic Management Process: Analyze internal and external environment Define strategic intent and mission Formulate strategies Implement strategies Assess strategic outcomes Scan External Environment Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Opportunities •Threats Define New: •Mission •Goals Identify Strategic Factors: •Strengths •Weaknesses Formulate Strategy: •Corporate •Business •Functional Implement Strategy via Changes in: •Leadership •Culture •Human Resources •Information and Control Systems •Scan External •Environment Evaluate Current: •Mission •Goals •Strategies External Environmental Analysis A continuous process which includes Scanning: Identifying early signals of environmental changes and trends Monitoring: Detecting meaning through ongoing observations of environmental changes and trends Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends Assessing: Determining the timing and importance of environmental changes and trends for firms’ strategies and their management Societal E nvironm ent The layer of the external environment that affects the organization indirectly. Societal E nvironm ent S o c io c u ltu ra l P olitical-L egal T a sk /In d u stry E n v iro n m e n t E c on om ic The layer of the external environment that directly influences the organization’s operations and performance. T e ch n ologica l Societal E nvironm ent T a sk /In d u stry E n v iro n m e n t S o c io c u ltu ra l Sha re holde rs G ove rnm en ts Spe c ial Intere st G roups E c on om ic Supplie rs In tern a l E n v ir o n m e n t E m ploye es / La bor U nions S truc tu re C om pe titors C ultu re C ustom e rs P olitical-L egal R esou rces T ra de A ssoc ia tions C re ditors C om m unitie s T e ch n ologica l •Scan External •Environment Identify Strategic Factors: •Opportunities •Threats Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Strengths •Weaknesses Societal & Task Environment SWOT Analysis Internal Environment SWOT ANALYSIS STRENGTHS WEAKNESSES are within the organization itself and not usually within the short run control of management SWOT ANALYSIS STRENGTHS WEAKNESSES are within the organization itself and not usually within the short run control of management SWOT ANALYSIS STRENGTHS WEAKNESSES are within the organization itself and not usually within the short run control of management OPPROTUNITIES THREATS are outside the organization, general factors and trends in the societal environmental and specific factors in the task/industry environment SWOT ANALYSIS STRENGTHS WEAKNESSES are within the organization itself and not usually within the short run control of management OPPROTUNITIES THREATS are outside the organization, general factors and trends in the societal environmental and specific factors in the task/industry environment Remember, Opportunities are presented by the External Environment, not company actions Scan External Environment Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Opportunities •Threats Define New: •Mission •Goals Identify Strategic Factors: •Strengths •Weaknesses Formulate Strategy: •Corporate •Business •Functional External Environment What the Firm Might Do Sustainable Competitive Advantage Internal Environment What the Firm Can Do Matching Opportunities to Strengths Strategy Formulation Strategy Formulation The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses Composed of Mission Objectives Strategies Policies Mission Mission The purpose or reason for the corporation’s existence. It may be narrow or broad in scope. Narrow Railroad Insurance Broad Transportation Financial Services Levels of Strategy What business should we Corporate be in? Corporation’s overall direction and the management of its businesses Business How will we compete? Emphasizes improving the competitive position of a corporation’s products or units Formulating Corporate Strategy What Business Should We Be IN? Key Questions in Corporate Strategy 1. What businesses should the corporation be in? 2. How should the corporate office manage the array of business units? Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts GENERIC CORPORATE STRATEGIES GROWTH STABILITY RETRENCHMENT GENERIC CORPORATE STRATEGIES GROWTH Vertical Integration Geographic locations Horizontal Integration Increasing Range of products Concentric Diversification Related industries Conglomerate Diversification Unrelated GENERIC CORPORATE STRATEGIES STABILITY Pause/ Proceed with Caution No Change RETRENCHMENT Turnaround Divestment Liquidation Formulating Business Strategy How Will We Compete? Business-Level Strategy an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets Porter's Competitive Strategies Unique/different • Differentiation Components of value chain • Cost Leadership • Focus Competitive/market segment TASK/INDUSTRY ANALYSIS F O R C E S D R IV IN G IN D U S T R Y P o rt e r POTENTIAL ENTRANTS Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost independent of size Government policy RIVALRY Number of competitors Rate of industry growth Product characteristics Amount of fixed costs Capacity Height of exit barriers Diversity of rivals SUBSTITUTES BUYERS STAKEHOLDERS SUPPLIERS Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Inbound Logistics Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Operations Inbound Logistics Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Outbound Logistics Operations Inbound Logistics Support Activities Primary Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Primary Activities Marketing & Sales Outbound Logistics Operations Inbound Logistics Support Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Primary Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Support Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Support Activities Primary Activities Service Marketing & Sales Outbound Logistics Operations Inbound Logistics Procurement Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Technological Development Primary Activities Service Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Human Resource Management Technological Development Primary Activities Service Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Firm Infrastructure Human Resource Management Technological Development Primary Activities Service Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Value Chain Analysis Identifying Resources and Capabilities That Can Add Value Firm Infrastructure Human Resource Management Technological Development Primary Activities Service Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Outsourcing Strategic Choice to Purchase Some Activities From Outside Suppliers Firm Infrastructure Human Resource Management Technological Development Primary Activities Service Marketing & Sales Outbound Logistics Operations Procurement Inbound Logistics Support Activities Scan External Environment Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Opportunities •Threats Define New: •Mission •Goals Identify Strategic Factors: •Strengths •Weaknesses Formulate Strategy: •Corporate •Business •Functional Implement Strategy via Changes in: •Leadership •Culture •Human Resources •Information and Control Systems Benchmarking involves four stages: • • • • Identifying activities or functions that are weak and need improvement. Identifying firms that are known to be at the leading edge of these activities or functions. Studying the leading-edge firms by visiting them, talking to managers and employees, and reading trade publications. Using the information gathered to redefine goals, modify processes, and acquire new resources to improve the firm’s functions. STRATEGY Insight into how to create value Scan External Environment Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Opportunities •Threats Define New: •Mission •Goals Identify Strategic Factors: •Strengths •Weaknesses Formulate Strategy: •Corporate •Business •Functional Implement Strategy via Changes in: •Leadership •Culture •Human Resources •Information and Control Systems Societal E nvironm ent S o c io c u ltu ra l P olitical-L egal T a sk /In d u stry E n v iro n m e n t E c on om ic T e ch n ologica l Societal E nvironm ent T a sk /In d u stry E n v iro n m e n t S o c io c u ltu ra l Sha re holde rs G ove rnm en ts Spe c ial Intere st G roups E c on om ic Supplie rs In tern a l E n v ir o n m e n t E m ploye es / La bor U nions S truc tu re C om pe titors C ultu re C ustom e rs P olitical-L egal R esou rces T ra de A ssoc ia tions C re ditors C om m unitie s T e ch n ologica l •Scan External •Environment Identify Strategic Factors: •Opportunities •Threats Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Strengths •Weaknesses Societal & Task Environment SWOT Analysis Internal Environment GENERIC CORPORATE STRATEGIES GROWTH STABILITY RETRENCHMENT Porter's Competitive Strategies • Differentiation • Cost Leadership • Focus Scan External Environment Evaluate Current: •Mission •Goals •Strategies Scan Internal Environment Identify Strategic Factors: •Opportunities •Threats Define New: •Mission •Goals Identify Strategic Factors: •Strengths •Weaknesses Formulate Strategy: •Corporate •Business •Functional Implement Strategy via Changes in: •Leadership •Culture •Human Resources •Information and Control Systems Task That’s it for today Chapter 9 Managing the Structure and Design of Organizations Organizing Defined The process of determining the tasks to be done, who will do them, and how those tasks will be managed and coordinated. The deployment of organizational resources to achieve strategic goals. Coordination Integration Authority • Formal and legitimate right of a manager to make decisions, issue orders, and allocate resources • Vested in organizational positions, not people Line & Staff • Line employees: directly involved in fulfillment of the primary operations mission of the organization sales • Staff employees: provide specialized service to support line efforts HR Chain of Command An unbroken line of authority that links all persons in an organization and shows who reports to whom. President CEO Human Resources Manufacturing Accounting Unity of Command A principle that each employee in the Organization is accountable to one, and only one, supervisor. The Vertical Dimension of Organization Structure: • Responsibility –the manager’s duty to perform an assigned task. • Accountability –the manager (or other employee) with authority and responsibility must be able to justify results to a manager at a higher level in the organizational hierarchy. Delegation • Process to transfer authority and responsibility to positions below • Delegate authority to the lowest possible level. But manager ultimately responsible Span of Control Narrow Span of Control Manager Wide Span of Control Manager Number of employees reporting to a supervisor Tradition has recommended a span of management of four to seven The Vertical Dimension of Organization Structure: • Centralization – the location of decision authority at the top of the organization hierarchy. • Decentralization – the location of decision authority at lower levels in the organization. • Formalization – the degree of written documentation that is used to direct and control employees. Organization Design • The selection of an organization structure that best fits the strategic goals of the business. • Basic organization designs: – Mechanistic – Organic – Boundaryless • These designs incorporate vertical and horizontal structural elements. Mechanistic Organic Boundaryless Rigid hierarchical relationships Collaboration (both vertical &horizontal) Collaboration (vertical, horizontal, customers, suppliers, competitors) High formalization Low formalization Low formalization Top-down communication Informal communication Informal communication Centralized decision authority Decentralized decision authority Decentralized decision authority Narrowly defined specialized jobs Broadly defined flexible jobs Broadly defined flexible jobs Emphasis on individuals working independently Emphasis on teams Emphasis on teams that also may cross organization boundaries Departmentation The fundamental principle by which individuals are grouped into departments and departments into the organization Approaches To Structural Design Functional + Departments Deep expertise based on similar skills and resource use. Human Resources - President CEO Manufacturing Lack of communication Efficiency Accounting Lack of innovation Divisional Encourages decentralization Self contained Division 1 HR Man Acct President CEO Product Program Geography Focus Speed Division 2 HR Man Generalists Redundancy Competition Acct One employee reports to 2 bosses at same time Matrix Cross functional Teams Human Resources President CEO Manufacturing Innovative Creative Accounting Product 1 Product 2 Time Conflicting demands Team interacting closely Cross shared commitment functional Creativity True team = mutual accountability Faster response to change High Maintenance Time Subcontracts many functions to other companies Network Designer Best of the Breed Human Resources Virtual organization Hub Give up control Manufacturing Changed quickly Marketing Coordination Mechanisms Meetings Organizationwide Reward Systems Task Forces and Teams Liaison Roles Organizational Culture Integrating Managers GOOD LUCK GETTING READY FOR THE TEST