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Management Notes – 10th November 2009 – Midterm Exam The 3C's • Company • Customers • Competition Types of decisions: • Programmed decisions (Repetitive, Routine) • Non-programmed Decisions (Complex, New) Decision Making Process 1. Identify the problem • Deviation from past performances • Deviation from plan • Outside criticism//influences 2. Identify decision criteria • Certainty • Risk • Uncertainty 3. Weigh the criteria 4. Develop alternatives 5. Analyze alternatives 6. Select an alternative 7. Implement the alternative chosen 8. Evaluate decision effectiveness • "Good managers periodically measure results." Types of problems: • Opportunities • Crisis • Routine Individual Decision Making vs. Group Decision Making Creativity Techniques


• Affinity • Brainstorming • Delphi Technique • Panel of experts • Rounds of questions • Anonymous/Objective summaries of each round • Fishbone Diagram • Taking a problem or opportunity and branching it out into each possible cause, where you often group the causes by similarity. • Nominal Group Technique • Vote with a number, everyone at the same time. • Tree Diagram Global (MNC) Attitudes • Ethnocentric attitude “our way of doing things is better then theirs” • Polycentric attitude “believing that employees in host countries know the best way of running the business” • Geocentric attitude “World Oriented View” with employees from around the world MultiNational Company (MNC): • A company that operates in two or more countries Types of MNCs: • Export - Low commitment • Foreign activities - Medium commitment • Licensing contracts, strategic alliances or joint ventures • Direct investment or Foreign subsidiary - High commitment • Producing abroad without a host country investor Expansion into new countries – questions to be asked • When, Why etc... • What new approaches of business • Product differentiating based on culture and local preferences Interesting: • Each McDonalds has a different menu (countries/regions) • Go abroad when you have penetrated your local market. • There are businesses solely created for going abroad. e.g. Taking a locally produced product and introducing it into new countries.


Environmental Factors: • Economic • Income levels, inflation rates, types of economy (free or planned) etc... • Cultural • Attitudes • Hofstede's 5 Dimensions (see below) • GLOBE framework for assessing cultures • Assertiveness • Future Orientation • Gender differentiation • Uncertainty avoidance • Power distance • Individual/collectivism • In-group collectivism • Power orientation • Humane orientation • Political • Government attitudes, efficiency (e.g. judicial system), stability etc.. • Technological • Resources & Infrastructure available Hofstedeʼs 5 Dimensions of National Culture: • Low vs. High power distance • How much the less powerful members of institutions and organizations expect and accept that power is distributed unequally.

High Power Distance Japan, China, Korea, France, Mexico Germany Sweden, USA Low Power Distance • Individualism vs. Collectivism • How much members of the culture define themselves apart from their group memberships.

Individualistic USA, UK, Australia Japan, E.U. China, India, Mexico, Asian, Arabic Collectivistic


• Masculinity vs. Femininity • Male: Competitiveness, Assertiveness, Ambition, Accumulation of wealth, Materialism • Female: Relationships, Quality of Life Achievement USA, Mexico France, Sweden, Spain, Italy Nurturing • Low vs. High uncertainty/risk avoidance • How much members of a society attempt to cope with anxiety by minimizing uncertainty (following rules, structure etc..) High Uncertainty Avoidance (not risk takers) Mexico, France, Italy UK USA, Canada, Singapore Low Uncertainty Avoidance (high risk takers) • Long vs. Short term orientation Long term orientation Asia, Germany, Australia, UK (many monarchies), China, Taiwan, Japan USA Short term orientation Domestic versus Global settings - Differences are often a singular versus plural system (e.g. economic/political systems, currencies ) Different types of organizational structures for MNCʼs: • Product oriented (CEO -> Products -> Countries) • Geographical oriented (CEO -> Countries -> Products) • Functionally oriented (CEO -> Departments (finance, marketing, operations etc…) -> Countries) Controlling • Standards - To avoid intercultural conflicts • Information - Report against standards • Action - Managerial Important: • Communication is key! • Similar measurements across the organization so results can be compared globally


Local vs. Expats - Use common sense! Examples of trade agreements/unions: • • • •

EU NAFTA ASEAN MERCOSUR

Planning Why? Direction, min. uncertainty, min. waste & redundancy, create standards, coordination, adaption etc… Types of Plans: • • • • • •

Strategic plans - upper management Operational plans - lower management Specific plans - clear Directional plans - flexible Single-use plans - unique situations Standing plans - routine

Types of goal settings: • Traditional • Top-down • Broad • Management By Objectives (MBO) • Mutual agreements • Feedback • Employee participation • Clear time period Well Written Goals - Use common sense!! (consistency, time frames, measurability) Mission & Vision Statements - Common, you know this! (Mission is values, Vision is future goals) Measuring Objectives • Profitability • Profit margin • ROA (Return on Assets) • ROI (Return on Investment) • Marketing • Market share


• Sales volume • Rate of new product dev. • Productivity • Ratios of output to: labour costs, capital costs • Ratios of value added to: sales, profit • Physical and Financial • Current ratio - Whether or not a firm has enough resources to pay its debts over the next 12 months • Ratio of debt to equity • Accounts of receivable turnover • Inventory turnover Action plan: Forecasting (hunches, market surveys, time-series analysis (statistics), eco. models) Budgeting (Variable (projected revenue and expenditure based on various levels of production)) Strategic Management • Market conditions • Customer needs • Availability of resources SWOT - Is about a companies place in its industry not about just the company on its own • • • •

Strengths - Internal Weaknesses - Internal Opportunities - External Threats - External

PEST • • • •

Political Economical Social Technological

Corporate Strategies Growth Strategies - expanding number of markets served or products offered • Concentration - highly focused • Vertical integration • Backwards - becoming your own supplier • Forwards - becoming your own distributor • Horizontal integration • Joining of businesses (M&A - Mergers and Acquisitions)


• Diversification - new products Stability Strategies - No change, no growth but doesn't fall behind Renewal Strategies - Used when performance is declining • Retrenchment strategy - reduce the size or diversity of an organization's operations • Turnaround strategy - e.g. Management change, Business Restructuring etc... Competitive Advantages - What sets you apart from your competition Value Chain - All the activities an organisation needs to undertake in order to create or add value to its products or services. It includes design, production, marketing, delivery, and customer support. Main activities (as listed on the slides): Inbound Logistics->Operations->Outbound Logistics->Marketing & Sales->Service Support activities: Procurement, Technology, HR, Firm Infrastructure BCG Matrix Stars Cash cows

Question marks Cash traps

Michael Porter's 5 Forces • • • • •

Bargaining power of Consumers Bargaining power of Suppliers Competitive rivalry within an industry Threat of substitute products Threat of new entrants

Competitive strategies • Cost leadership strategy • High efficiency to get economies of scale and other benefits • Differentiation strategy • Unique product • Focus strategy (Niche strategy) • Focusing on a select (few) specialized markets • E-Business strategy • Customer service strategy • Innovations strategy Functional strategies - there to support to the competitive strategy - Functionally oriented (Finance, Marketing, HR, Operations)


Finance Corporate Finance - inside the business; finding investments, allocating money, dividends etc... Market Finance - outside the business; money markets, capital markets, etc... Did you know that? • Long term debts is obtained through money markets • Current Liabilities are less then 1 year Example of an Organizational Chart • • • • •

BoD CEO COO CFO Treasurer & Controller • Treasurer • Cash flows • Financial plans • Capital-expenditure decisions • Controller • Accounting functions (taxes, cost accounting, financial accounting, financial systems)

Balance sheet A = L-OE Left side: Current Assets Fixed Assets Right side: Current liabilities Long-term Debt Shareholders Equity Capital Structure: Creditors (pay up, you owe them money) & Shareholders (they're betting money) Income Statement Net Income = Revenue - Expenses Profitability Ratios • Current Ratio - indication of the solvency of a company • Total Current Assets/Total Current Liabilities • Return on Assets - measures relationship between profits and assets used to generate said profits


• Net Income Before Taxes/Total Assets * 100 • Net Sales to Working Capital Ratio - shows how capital is supporting sales • Net Sales/Net Working Capital Funding stages: • • • • • •

F.F.F - Seed Angels - Series "A" VC's - Series "B" Banks - Line of Credit Private Equity - Series "C" Capital Markets - IPO

Product Life Cycle • • • •

Introduction Growth Maturity Decline

Marketing Plan Situation Analysis • Customer Analysis • Competitor Analysis • Macro Environmental (PEST + SWOT) Market Segmentation • • • •

Description % of sales Customer wants Customer usage of the product • e.g. In Mexico they used the ... crème for mosquito bites • Support requirements • Customer reach • Price sensitivity Selected Marketing Strategies and Marketing Mix • Product • Price • Place (Distribution)


• Promotion Consumer Market • • • •

Geographic Demographic Psychographic Behavioural

Business Market • Geographic • Customer Types • Buyer Behaviour The 4P's of Marketing • • • •

Product Place Price Promotion

Axels of Rivalry [(Use Common Sense re: effects!)] • • • • • •

Price Promotion Distribution Innovation Service Quality

Price/Selling Effort Strategies • Premium • Classic Penetration Strategy - sets a low initial price for a product in order to gain quick acceptance in a broad portion of the market • Classic Skimming Pricing - setting initial price high, and then lowering it due to the competitors prices • Economy • Geographic • Value Pricing - eg: perceived value (of brands) Distribution Channels - Ways of delivery of merchandise to customers


• Direct vs. Indirect • Single vs. Multiple • Intermediaries • Acts as a conduit e.g.: internet, retailers, agents, wholesalers

Inter-channel conflicts - be sure to define clearly who your intermediates are. Shorts/Long Term Projection • Revenue and expense forecast • Break even analysis Profitability Market Share Managing Human Resources • • • •

Line management responsibility & staff function Competitive advantage Organizational strategy People matter!

Environmental Factors • • • • •

Employee worker unions Governmental laws Changing demographics Technology changes and new skills Increasing international competition and multinational relationships

Personnel • • • • •

Employment Wage and Salary Labor Relations Training & Development Employee Benefits and Services

([Use Common Sense!! For Recruitment, Training and Development, Salary Management and Benefits & Services]) Conflict Resolution • Stroke • Lockout


• Work slowdown Contemporary Issues in HRM • • • • •

Downsizing Workforce diversity Sexual Harassment Work-life balance Controlling HR Cost

Growth Strategies Maximizing Shareholder Value Considerations before Growth Strategies • Risk consideration • Resources & Capabilities • Management Expertise The 4 Strategies • • • •

Market penetration - Low Risk Product development - Higher Risk Market development - Higher Risk Diversification - Highest Risk • Related • Vertical or • Unrelated or conglomerate

Related and Unrelated Diversification • Related • Vertical Integration • Horizontal Integration • Unrelated • When a company moves into a totally unrelated industry eg: McDonald's producing shoes MnA - Mergers & Acquisitions • • • •

Speed Market Entry Rapid access to resources etc...


Increasing Shareholder Value • Attractiveness • Cost of Entry • Competitive advantage Other Routes to Growth • Internal development/organic growth • Company uses its own resources to develop capabilities • Joint ventures • Strategic alliances Selecting Strategic Options • Suitability • Feasibility • Acceptability

Management Midterm Exam Notes  

These are the notes prepared on November 9th/10th for the Management midterm exam.

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