Business Strategy & Organizational Innovation: Long-Term Goals, Planning & Global Business, Study notes of Introduction to Business Management

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Review Chap 5 Planning- choosing a goal or developing a method S.M.A.R.T goals- specific, measurable, attainable, Realistic, Timely Goal Commitment- the determination to achieve a goal Action plan- lists the specific steps, how (steps), who (people), what (Resources), when (time) for accomplishing a goal Goals:  Proximal goals- short term goals or sub-goals  Distal goals- long-term or primary goals Option based planning: maintaining planning flexibility by making small, simultaneous investments in many alternative plans Slack resources- a cushion or resources, such as extra time, people, money, or production capacity Learning based planning- assumes that action plans need to be continually tested, changed, and improved as companies learn better ways of achieving goals Strategic plans- make clear how the company will serve its customers and position itself against competitors in the next 2 to 5 years Purpose Statement- statement of the company’s purpose or reason for existing Strategic objective- flows from the purpose, is a more specific goal that unifies company-wide efforts, stretches and challenges the organization and posses a finish line and time frame Management by Objective (MBO)- is a four step process in which managers and their employees

1. Discuss their possible goals
2. Collectively select goals that are challenging and obtainable
3. Jointly develop tactical plans

4. Meet regularly to review progress towards goals Tactical plans- specifies how a company will use its resources, budgets, and people to accomplish specific goals related to its strategic objective for the next 5 years Operational plans: day to day plans for producing or delivering products and services over a 30 day to 6 month period Single-Use Plans- deal with unique, one-time only events Standing Plans- plans used repeatedly to handle frequently recurring events  Policies- a standing plan, which indicates the general course of action that should be taken in response to a particular event or situation o Why exist, what outcome is expected  Procedures- standing plan, that indicates the specific steps that should be taken in response to a particular event o More specific  Rules and regulations-standing plan, plans that describe how a particular action should be preformed o MOST specific, What must happen or not happen Budgeting: quantitative planning through which managers decide how to allocate available money to best accomplishes company goals Decision making- is the process of choosing a solution from available alternatives Rational decision-making: a systematic process of defining problems, evaluating alternatives, and choosing optimal solutions
5. Define the Problem a. Problem- which exists when there is a gap between a desired state and an existing state
6. Identify decision criteria a. Decision criteria- the standards used to guide judgments and decisions
7. Weight the criteria

a. Absolute comparisons- which each decision criterion is compared to a standard or ranked on its own merits b. Relative comparisons- which each decision criterion is compared directly with every other criterion

4. Generate alternative courses of action
5. Evaluate each alternative
6. Compute the optimal decision Bounded rationality- restricted in the real world by limited resources, incomplete and imperfect information, and managers limited decision- making capabilities Pitfall Groupthink- when group members feel intense pressure to agree with each other so that the group can approve a proposed solution Conflict-  C-Type conflict- (cognitive conflict) focuses on the problem and issue-related differences of opinion  A-Type conflict- (affective conflict) refers to the emotional reaction that can occur when disagreements become personal rather than professional Devils Advocate- when a person in the C-Type conflict is assigned to play the role of the critic Dialectical inquiry- creates C-Type conflict by forcing decision makers to state the assumptions of a proposed solution and then generate a solution that is opposite Nominal Group Technique- decision making method that begins and ends by having group members quietly write down and evaluate ideas to be shared with the group Delphi Technique- members of a panel of experts respond to questions and to each other until reaching agreement on an issue Stepladder Technique- begins with discussion with two members who share their thoughts; ideas, and recommendations, Group members are then added to a discussion one at a time at each step. The existing group members take time to listen to and understand each new members thoughts and ideas, then the group shares the ideas and the ones they have already discussed and come to a decision

Brainstorming- in which group members build on others’ ideas, is a technique for generating a large number of alternative solutions  Electronic Brainstorming- in which group members use computers to communicate and generate alternative solutions, overcomes disadvantages with face to face brainstorming  Disadvantages of brainstorming o Blocking- when a group member must wait to share an idea because another group member is presenting an idea o Evaluation Apprehension- fears of what others will think of your idea Chapter 6 Competitive advantage- providing greater value for customers than competitors can Sustainable competitive advantages- when other companies cannot duplicate the value a firm is providing to its customers, and for the moment other companies have stopped trying to duplicate Resources- the assets, capabilities, processes, employee time, information and knowledge that an organization controls

1. Valuable resources- allow companies to improve their efficiency and effectiveness
2. Rare resources- resources that are not controlled or possessed by many competing firms which are necessary to sustain a competitive advantage
3. Imitable resources- resources that are impossible or extremely costly or difficult to duplicate
4. Nonsubstitutable resources- no other resource can replace them and produce similar value or competitive advantage Competitive Inertia- reluctance to change strategies or competitive practices that have been successful in the past Strategic dissonance- a discrepancy between a company’s intended strategy and the strategic actions managers take when actually implementing that strategy

SWOT analysis- strengths, weaknesses, opportunities, and threats. An assessment of the strengths and weaknesses in an organization internal environment and the opportunities and threats in an external environment  Internal environment- o Distinctive competence- something that a company can make, do, or perform better then its competitors o Core capabilities- internal decision making routines, problem solving process, and organizational cultures that determine how efficiently inputs can be turned into outputs  External Environment- o Environmental scanning- specific threats and opportunities that can harm a companies competitive advantage o Strategic groups - group of competitors within an industry which top managers use to compare, evaluate, and benchmark threats and opportunities  Core firms- are the central companies in a strategic group  Secondary firms- companies that use strategies similar but somewhat different from those of core firms  Transient Firms- firms in the strategic group whose strategies are changing from one strategic position to another Shadow-strategy task force - a committee within a company that analyzes the company’s own weaknesses to determine how competitors could exploit them for competitive advantage Strategic reference points- strategic targets used by managers to determine if the organization has developed the core competencies it needs to achieve a sustainable competitive advantage Corporate-level strategy- is the overall organizational strategy that addresses the question “What business or businesses are we in or should we be in?”

1. Portfolio strategy - a corporate level strategy that minimizes risk by diversifying investment among various businesses or product lines

a. Diversification- owning stocks in a variety of companies in different industries b. Related diversification- creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures c. Acquisition- purchase of one company by another d. Unrelated diversification- creating or acquiring companies in completely unrelated businesses e. BCG Matrix- managers use to categorize a corporations businesses by growth rate and relative market share, and helps managers decide how to invest corporate funds i. Star- large share of fast growing markets ii. Question marks- company with a small share of a fast- growing market iii. Cash Cows- a company with a large share of a slow- growing market iv. Dog- a company with a small share of a slow-growing market

2. Grand Strategy- broad strategic plan used to help an organization achieve its strategic goals a. Growth Strategy- focuses on increasing profits, revenues, market share, or the number of places in which the company does business b. Stability strategy- to continue what the company has been doing, but just to do it better c. Retrenchment strategy- to turn around very poor company performance by shrinking the size or scope of the business or, if a company is in multiple businesses, by closing or shutting down different lines of business d. Recovery- consists of the strategic actions that a company takes to return to a growth strategy Industry-level strategy- addresses the question “ how should we compete in this industry”? Five Industry forces-

1. Character of rivalry - a measure of the intensity of competitive behavior among companies in a industry
2. Threat of new entrants - measure of degree to which barriers to entry make it easy or difficult
3. Threat of substitute products or services- a measure of the ease with which customers can find substitute products or services, the competition will be greater and profits will be lower
4. Bargaining power of supplier- a measure of the influence that suppliers of parts, materials, and services to firms in a industry have on the prices of these inputs
5. Bargaining power of buyers- a measure of the influence that customers have on the firm’s prices Positioning strategies-
6. Cost leadership- produce an acceptable product or service at consistently lower production costs then competitors
7. Differentiation- providing a product or service so different from competitors that customers are willing to pay a premium
8. Focus strategy- using cost leadership or differentiation to produce a specialized product or service Adaptive strategies-
9. Defenders- seek moderate, steady growth by offering limited range or products and services to a will-defined set of customers
10. Prospectors- seek fast growth by searching for new market opportunities, takes risk, and being the first to bring innovative new products to market
11. Analyzers- half defender/prospector, they seek moderate, steady growth and limited opportunities for fast growth
12. Reactors- do not follow a consistent strategy Firm level strategy- addresses the question “How should we compete against a particular firm?”
13. Direct competition- rivalry between 2 companies offering similar products and services that acknowledge each other as rivals a. Strategic moves

i. Attack- a competitive move designed to reduce a rival’s market share ii. Response- competitive counter move, prompted by a rival’s attack to defend or improve a company’s market share or profit

2. Market commonality- degree to which companies have overlapping products, services, or customers in multiple markets
3. Resource similarity- the extent to which a competitor has similar amounts and kinds of resources Entrepreneurship- the process of entering new or establish markets with new goods or services Intrapreneurship - entrepreneurship within an existing organization Entrepreneurial orientation- the set of processes, practices, and decision-making activities that lead to new entry,  Characterized by five dimensions o Risk taking o Autonomy o Innovativeness o Proactiveness o Competitive aggressiveness CHAPTER 7 Organizational innovation - the successful implementation of creative ideas in organizations Organizational change- a difference in the form, quality, or condition of an organization over time Technology cycle- begins with the “birth” of new technology and ends when that technology reaches its limits and is replaced by newer and better technology S-Curve pattern of innovation- pattern of innovation characterized by slow initial progress then rapid progress, and then slow progress again as a technology matures and reaches its limits Innovation streams- patterns of innovation over time that can create sustainable competitive advantage

 Technological discontinuity- phase of the stream which a scientific advance or unique combination of existing technologies creates a significant breakthrough in performance or function  Discontinuous change- the phase characterized by technological substitution and design competition  Technological substitution- the purchase of new technologies to replace older ones  Design competition- competition between old and new technologies to establish a new technological standard or dominate design  Dominant design- a new technological design or process that becomes the accepted market standard  Technological lockout- occurs when a new dominant design prevents a company from competitively selling its products or makes it difficult to do so  Incremental change- a phase of technology cycle which the companies innovate by lowering costs and improving the functioning and performance of the dominate technological design Creative work environments- workplace culture which workers perceive that new ideas are welcomed, valued, and encouraged Flow- state of effortlessness, which you become completely absorbed in what you’re doing and time, passes quickly The experimental approach to innovation- assumes a highly uncertain environment and uses intuition, flexible options, and hands on experience to reduce uncertainty and accelerate learning and understanding

1. Design iteration- is a cycle of repetition in which a company tests prototype of a new product or service, improves the design, then tests and builds it
2. Testing- systematic comparison of different product designs or design iterations
3. Milestones- formal project review points used to assess progress and performance
4. Multifunctional teams- are work teams composed of people from different departments

Compression approach to innovation- assumes that incremental innovation can be planned using a series of steps and that compressing those steps can speed innovation Generational change- incremental improvements to dominate technological design Organizational decline - occurs when companies don’t anticipate or recognize the internal or external pressures that threaten their survival Managing change-  Change forces- lead to differences in form, quality, or condition of an organization over time  Resistance forces- support the existing state of conditions in organizations Resistance to change- is caused by self-interest, misunderstanding, and distrust, and a general intolerance for change  Unfreezing - getting people affected by change to believe that change is needed  Change intervention - process used to get workers and managers to change their behavior and work practices  Refreezing - supporting and reinforcing the new changes so that they stick  Coercion - the use of formal power and authority to force others to change Change tools and techniques Results driven change- change created quickly by focusing on the measurement and improvement of results General electric workout- three-day meeting in which managers and employees from different levels and parts of an organization quickly generate and act on solutions to specific business problems Transition management team (TMT)- a team of 8 to 12 people whose full-time job is to manage and coordinate a company’s change process Organizational development- a philosophy and collection of planned change interventions designed to improve an organizations long-term health and performance Change agent- the person formally in charge of guiding a change effort

Chapter 8 Global business the buying and selling of goods and services by people from different countries Multinational corporations- corporations that own businesses in two or more countries Direct foreign Investment- occurs when a company builds a new business or buys and existing business in a foreign country Trade barriers- government-imposed regulations that increase the cost and restrict the number of imported goods Protectionism- a government’s use of trade barriers to shield domestic companies and their workers from foreign competition Tariff- a direct tax on imported goods Nontariff barriers- is nontax methods of increasing the cost or reducing the volume of imported goods  Quotas- limit on the number or volume imported  Voluntary export restraints- limit the amount of product that can be imported annually  Government import standards- standards to protect the health and safety of citizens but, in reality, often used to restrict imports  Subsidies- government loans, grants, and tax deferments given to domestic companies to protect them from foreign competition  Customs classification- assigned to imported products by government officials that affects the sixe of the tariff and imposition of import quotas Trade agreements- General agreement on tariffs and trade (GATT)- a worldwide trade agreement that reduced and eliminated tariffs, limited government subsidies, and established protections for intellectual property

World Trade Organization (WTO)- successor to GATT, the only international organization dealing with the global rules of trade between nations Regional trading zones- areas in which tariff and nontariff barriers on trade between countries are reduced or eliminated  Maastricht Treaty of Europe- a regional trade agreement between most European countries  North American Free Trade Agreement- a regional trade agreement between Canada, Mexico and the United States  Central America Free Trade Agreement- regional trade agreement between Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States  Association of Southeast Asian Nations  Asia-Pacific Economic Cooperation How to go global? Global Consistency- when a multinational company has offices, plants in different nations they run them all using the same rules and policies Local adaptation- modifying rules, guidelines, and procedures to adapt to differences in foreign customers, governments, etc Forms of global business

1. Exporting- selling domestically produced products to customers in foreign countries
2. Cooperative contact- an agreement in which a foreign business owner pays a company fee for the right to conduct that business in his or her country a. Licensing- an agreement in which a domestic company, the licensor, receives royalty payments for allowing another company, the licensee to produce the licensor’s product, sell its service or use its brand name in a foreign market b. Franchise- a collection of networked firms in which the manufacturer or marketer of a product or service, the franchisor, licenses the entire business to another person or organization, the franchisee
3. Strategic alliances-an agreement in which companies combine key resources, costs, risk, technology, and people

a. Joint Venture- when two existing companies collaborate to form a third company

4. Wholly owned affiliates- foreign offices, facilities and manufacturing plants that are 100 percent owned by the parent company
5. Global new ventures- new companies that are founded with an active global strategy and have sales, employees, and financing in different companies Finding the best business climate Growing markets Purchasing power- the relative cost of a standard set of goods and services in different countries Choosing an office/manufacturing location
6. Qualitative factors- a. Work for quality b. Company strategy
7. Quantitative factors- a. Kind of facility b. Tariff/nontariff barriers c. Exchange rates d. Transportation/labor costs Minimizing political risk  Political uncertainty- risks of major change in political regimes that can result in war, revolution, death of political leaders, or social unrest  Policy uncertainty- risk associated with the changes in law and government polices that directly affect the way foreign companies conduct business Cultural Differences National culture- set of shared values and beliefs that affect the perceptions, decisions, and behavior of the people from a particular country Cultural dimensions (Hofstede)-  Power distance

 Uncertainty avoidance  Masculinity and femininity  Individualism  Long/short term orientation Expatriate- person who lives/works outside his or her native country