CHAPTER 1
coordinate the activities of operating
AN INTRODUCTION TO
MANAGEMENT
Organization - a group of people working
together in a structured and coordinated
fashion to achieve a set of goals; profit,
discovery of knowledge, national defense,
coordination of various local charities,
social satisfaction.
Management - a set of activities
(including planning, and decision making,
organizing, leading, and controlling)
directed at an organization’s resources
(human, financial, physical, and
information), with the aim of achieving
organizational goal in an efficient and
effective manner.
Manager - someone whose primary
responsibility is to carry out the
management process.
Efficient - using resources wisely in a
cost-effective way.
Effective - making the right decisions and
successfully implementing them.
Kinds of Managers
Top managers - make up the relatively
small group of executives who manage the
overall organization.
- make decisions about activities such as
acquiring other companies. Investing in
research and development, entering or
abandoning various markets, and building
new plants and office facilities.
Middle management - is probably the
largest group of managers in most
organizations.
Middle managers - are primarily
responsible for implementing the policies
and plans developed by top managers and
for supervising and coordinating the
activities of lower managers.
First-line managers - supervise and
employees.
Marketing managers - work in areas
related to the marketing function-getting
consumers and clients to buy the
organization’s products or service.
Financial managers - deal primarily with
an organization’s financial resources.
Operations managers - are concerned
with creating and managing the systems
that create an organization’s products and
services.
Human resources managers - are
responsible for hiring and developing for
hiring and developing employees,
Administrative/general managers - are
not associated with any particular
management specialty.
Public relations managers - deal with the
public and media for firms such as
Facebook and the Dow Chemical
Company to protect and enhance the
image of their organizations.
Research and development managers -
coordinate the activities of scientists and
engineers working on scientific projects in
organizations such as Google, Shell Oil,
and NASA.
Functions of management
Planning - setting an organization’s goals
and deciding how best achieving them.
Decision making - part of the planning
process that involves selecting a course of
action from a set of alternatives.
Planning and decision making - help
managers maintain their effectiveness by
serving as guides for their future activities.
Organizing - determining how activities
and resources are to be grouped.
Leading - set of processes used to get
members of the organization to work
together to further the interests of the
organization.
Controlling - monitoring organizational
progress toward goal attainment.
Fundamental management skills
Technical skills - the skills necessary to
accomplish or understand the specific kind
of work done in an organization.
Interpersonal skills - the ability to
communicate with, understand, and
motivate both individuals and groups.
Conceptual skills - the manager’s ability
to think in the abstract.
Diagnostic skills - the manager’s ability to
visualize the most appropriate response to
a situation.
Communication skills - the manager’s
abilities both to effectively convey ideas
and information to others and to
effectively receive ideas and information
from others.
Decision-making skills - the manager’s
ability to correctly recognize and define
problems and opportunities and to then
select an appropriate course of action to
solve problems and capitalize on
opportunities.
Time management skills - the manager’s
ability to prioritize work, to work
efficiently, and to delegate appropriately.
The science of management - many
management problems and issues relates
can be approached in ways that are rational,
logical, objective, and systematic.
The art of management - make decisions
and solve problems on the basis of
intuition, experience, instinct, and personal
insights.
The evolution of management
Theory - a conceptual framework for
organizing knowledge and providing a
blueprint for action.
History - awareness and understanding of
important historical developments are also
important to contemporary managers.
Management perspective - consists of
two distinct branches- scientific
management and administrative
management.
Scientific management - concerned with
improving the performance of individual
workers.
Soldiering - employees deliberately
working at slow pace.
Steps in scientific management
 Develop a science for each element
of the job to replace old rule-of-
thumb methods.
 Scientifically select employees and
then train them to do the job as
described in step 1.
 Supervise employees to make sure
they follow the prescribed methods
for performing their job.
 Continue to plan the work, but use
workers to get the work done.
Administrative management - focuses on
managing the total organization
The classical management perspective -
provides many management techniques
and approaches that are still relevant today.
Behavioral management perspective -
emphasizes individual attitudes and
behaviors and group processes.
Human relation movement - argued that
workers respond primarily to social
context of the workplace.
Theory X - a pessimistic and negative
view of workers consistent with the views
of scientific management.
Theory Y - a positive view of workers; it
represents the assumptions that human
relations advocates make.
Douglas McGregor - developed Theory X
and Theory Y.
Organizational behavior - contemporary
field focusing on behavioral perspectives
on management.
Quantitative management perspective -
applies quantitative techniques to
management.
Management science - focuses
specifically on the development of
mathematical models.
Operations management - concerned
with helping the organization more
efficiently produce its product or services.
The quantitative management
perspective today - has made important
contributions and has certain limitations. It
has provided managers with an abundance
of decision-making tools and techniques
and has increased understanding of overall
organizational processes.
Contemporary management
perspectives
Systems perspective - is one important
contemporary management perspective.
System - an interrelated set of elements
functioning as a whole.
4 basic elements
Inputs
Transformation processes
Outputs
Feedback
Open systems - a system that interacts
with its environment.
Closed systems - a system that does not
interact with its environment.
Subsystems - a system within another
system.
Synergy - two or more subsystems
working together to produce more than the
total of what they might produce working
alone.
Entropy - a normal process leading to
system decline.
Universal perspective - an attempt to
identify the one best way to do something.
Contingency perspective - suggests that
appropriate managerial behavior in a given
situation depends on, or is contingent on
unique elements in given situation.
Contemporary management issues and
challenges
Globalization
Ethics and social responsibility and their
relationship to corporate governance\
Quality
Economic recession and slow recovery
Rapidly changing workplace
Management diversity
Creating an environment that will be
attractive to today’s worker
Providing new and different incentives to
keep people motivated and interested in
their work
Organization change
New technology
CHAPTER 2
THE ENVIRONMENTS OF
ORGANIZATIONS AND MANAGERS
Political-legal dimension - the
government regulation of business and the
relationship between business and
government.
TASK ENVIRONMENT
Competitors - an organization that
competes with other organizations for
resources.
Customers - whoever pays money to
acquire an organization’s products or
services.
Suppliers - an organization that provides
resources for other organizations.
Regulators - a body that has the potential
to control, legislate, or otherwise influence
the organization’s policies and practices.
Regulatory agency - an agency
created by the government to regulate
business activities.
Interest group - a group organized by
its members to attempt to influence
organizations.
Strategic partners/strategic ally - an
organization working together with one or
more other organizations in a joint venture
or similar arrangement.
THE INTERNAL ENVIRONMENT
Owners - whoever can claim property
rights to an organization.
Board of directors - governing body that
is elected by a corporation’s stockholders
and charged with overseeing the general
management of the firm to ensure that it is
being run in a way that best serves the
stockholders’ interests.\
Employees - an organization’s employees
are also a major element of its internal
environment. Of particular interest to
managers today is the changing nature of
the workforce, which is becoming
increasingly more diverse in terms of
gender, ethnicity, age, and other
dimensions.
Physical work environment - a final part
of the internal environment is the
organization’s actual physical environment
and the work that people do.
THE ETHICAL AND SOCIAL
ENVIRONMENT OF MANAGEMENT
Ethics - an individual’s personal beliefs
about whether a behavior, action, or
decision is right or wrong.
Ethical behavior - behavior that conforms
to generally accepted social norms.
Unethical behavior - behavior that does
not conforms to generally accepted social
norms.
Managerial ethics - standards of behavior
that guide individual managers in their
work.
 Conflict of interest - occurs when
an employee's decision potentially
benefits the individual to the
possible detriment of the
organization.
 Divulging company secrets -
selling information about company
plans to competitors
 Honesty - such as using company
asset for personal use, etc.
Primary agents of interest - customers,
competitors, stockholders, suppliers,
dealers, unions.
Code of ethics - a formal, written
statement of the values and ethical
standards that guide a firm's action.
EMERGING ETHICAL ISSUES
Ethical Leadership - leaders serves as
role models for others, their every action is
subject to scrutiny (careful examination).
 Sarbanes-Oxley Act of 2002 - law
that requires CEOs and CFOs to
vouch personally for the truthness
and fairness of their firms' financial
disclosure.
Corporate Governance - (example)
approving a loan even though there is a
little evidence that he/she could repay it.
Ethics and Information Technology -
individual rights to privacy and
individuals' potential abuse of information
technology.
Social Responsibilities - set of obligations
that an organization has to protect and
enhance the societal context in which it
functions.
 Arguments for: organizations
create many problems that need to
be addressed, such as air and water
pollution, organizations should
play. A major role in solving them.
 Arguments against: widening the
interpretation of social
responsibility will undermine the
US economy by detracting from
the basic mission of business: to
earn profits for owners. (Milton
Friedman)
Managing Social Responsibility -
organization should view social
responsibility as a major challenge that
requires careful planning, decision making,
consideration, and evaluation.
1. Formal organizational dimension-
planned activities on the part of the
organization.
 Legal compliance - extent to
which an organization complies
with local, state, federal, and
international laws.
 Ethical compliance - extent to
which an organization and
members follow basic ethical
standards of behavior.
 Philanthropic giving - awarding
funds or gifts to charities or other
worthy causes.
2. Informal organization dimension-
how organization responds to whistle-
blowers all help shape and define
people's perceptions of the
organization's stance on social
responsibility.
 Whistle-blowing - the disclosure,
by an employee, of illegal or
unethical conduct on the part of
others within the organization.
THE INTERNATIONAL
ENVIRONMENT OF MANAGEMENT
Levels of international business activity
1. Importing and exporting.
IMPORTING - bringing a good,
service, or capital into the home
country from abroad. EXPORTING -
making a product in the firm's
domestic marketplace and selling it in
other country.
 Adv.: small cash outlay, little risk,
no adaptation necessary.
 Disadv.: tariffs and taxes, high
transportation costs, government
restrictions.
2. Licensing - an arrangement whereby
one company allows another company
to use its brand name, trademark,
technology, patent, etc.
 Adv.: increased profitability,
extended profitability
 Disadv.: inflexibility, competition
3. Strategic alliances or joint venture -
a cooperative arrangement between
two or more firms for mutual gains
(strategic alliances); a special type of
strategic alliance in which the partners
 share in the ownership of an operation
on an equity basis.
 Adv.: quick market entry, access to
materials and technology.
 Disadv.: shared ownership (limits
control and profits)
4. Direct investment - when a firm
builds or purchases operating facilities
or subsidiaries in a different country
from the one where it has tis
headquarters.
 Adv.: enhanced control, existing
infrastructure.
 Disadv.: complexity, greater
economic and political risk, greater
uncertainty.
 Maquiladoras - light assemble
plants that are built in Northern
Mexico close to the US border and
are given special tax breaks by the
Mexican government.
CONTEXT OF INTERNATIONAL
BUSINESS
Cultural environment - includes all the
values, symbols, beliefs, and guide
behavior; often unspoken; may be taken
for granted by those who live in a
particular country.
Controls on international trade
 Tariff - a tax collected on goods
shipped across national boundaries.
 Quota - a limit on the number or
value of goods that can be traded.
 Export restraint agreement -
accords reached by governments in
which countries voluntarily limit
the volume or value of goods they
export to or import from one
another.
 "Buy national" law - gives
preference to domestic producers
through content or price
restrictions.
Economic communities - a set of
countries that agree to markedly reduce or
eliminate trade barriers among member
nations (a formalized market system)
 European Union (EU) - the first
and most important international
market system; can be traced to
1957 wen Belgium, France,
Luxembourg, Germany, Italy and
the Netherlands signed the Treaty
of Rome to promote economic
integration.
 North American Free Trade
Agreement (NAFTA) - an
agreement among US, Canada, and
Mexico to promote trade with one
another.
Role of the GAAT and WTO
General Agreement on Tariffs and
Trade (GAAT) - a trade agreement
intended to promote international trade by
reducing trade barriers and making it
easier for all nations to compete in
international markets.
 1948: 23 countries; 1994: 117
countries
 Most favored nation (MFN)
principle - stipulates that if a
country extends preferential
treatment to any other nation that
has signed the agreement, then the
preferential treatment must be
extended to all signatories to the
agreement.
World Trade Organization (WTO) - an
organization which currently included 140
member nations and 32 observer countries
that requires members to open their
markets to international trade and to
follow WTO rules.
 Replaced GAAT and absorbed its
mission.
 January 1, 1995
 Headquartered in Geneva,
Switzerland.
  3 basic goals: to promote trade
flows by encouraging nations to
adopt nondiscriminatory and
predictable trade policies; to reduce
remaining trade barriers through
multilateral negotiations; to
establish impartial procedures for
resolving trade disputes among its
members.
Organizational Culture - the set of
values, beliefs, behaviors, customs, and
attitudes that helps the organization's
members understand what it stands for,
how it does things, and what it considers
important.
Determinants of Organizational Culture
 Organization's founder
 Corporate success
 Shared experience
Managing Organizational Culture
 Understand the current culture
 Decide whether it should be
maintained or changed
 Rewarding and promoting people
 Walk a fine line between
maintaining a culture (still works
effectively) and changing a culture
(dysfunctional).
CHAPTER 3
PLANNING AND STRATEGIC
MANAGEMENT
Planning process - genetic activity; all
planning occurs within an environmental
context;
First step in planning:
understanding the environment
Strategic goals and plans:
primary inputs for developing
tactical goals.
Tactical goals and original
strategic plans: help shape tactical
plans.
Tactical plans: combine with
tactical goals to shape operational
goals.
Goals and plans: at each level can
be used as inputs for future
activities at all levels.
Goals - critical to organizational
effectiveness, and they serve a number of
purpose.
Purposes of Goals:
1. They provide guidance and a
unified direction for people in the
organization.
2. Goals-setting practices strongly
affect other aspects of planning.
3. Goals can serve as a source of
motivation for an organization's
employees. Goals that are specific
and moderately difficult can
motivate people to work harder,
especially if attaining the goal is
likely to result in rewards.
4. Goals provide an effective
mechanism for evaluation and
control.
Kind of Goals:
1. Mission - a statement of an
organization's fundamental purpose
2. Strategic Goal - a goal set by and
for an organization's top
management.
3. Tactical Goal - a goal set by and
for organization's middle managers.
4. Operational Goal - a goal set by
and for an organization's lower-
level managers.
Kinds of Organizational Plans:
 1. Strategic Plan - a general plan
outlining decisions about the
resource allocation, priorities, and
action steps necessary to reach
strategic goals.
2. Tactical Plans - aimed at
achieving tactical goals, is
developed to implement specific
parts of a strategic plan; typically
involve upper and middle
management; have shorter time
horizon and a more specific and
concrete focus.
3. Operational Plan - a plan that
focuses on carrying out tactical
plans to achieve operational goals.
Nature of Strategic Management
1. Strategy - a comprehensive plan
for accomplishing an organization's
goals
2. Strategic Management - a
comprehensive and ongoing
management process aimed at
formulating and implementing
effective strategies; a way of
approaching business opportunities
and challenges.
3. Effective Strategy - a strategy that
promotes a superior alignment
between the organization and its
environment and the achievement
of strategic goals.
Components of Strategy
1. Distinctive Strategy - something
the organization does exceptionally
well; an organizational strength
possessed by only a small number
of competing firms.
2. Scope (of a strategy) - specifies
the range of markets in which an
organization will compete.
3. Resource Deployment - how an
organization distributes its
resources across the areas in which
it competes.
Types of Strategic Alternative:
1. Business level strategy - set of
strategic alternatives from which
an organization chooses as it
conducts business in a particular
industry or market.
2. Corporate level strategy - set of
strategic alternatives from which
an organization chooses as it
manages its operations
simultaneously across several
industries and several markets.
3. Strategy formulation - set of
processes involved in creating or
determining an organization's
strategies; it focuses on the content
of strategies.
4. Strategy implementation - the
methods by which strategies are
operationalized or executed within
the organization; it focuses on the
processes through which strategies
are achieved.
Using SWOT analysis to formulate
strategy
SWOT analysis - a careful evaluation of
an organization's internal strengths and
weaknesses as well as its environmental
opportunities and threats; one the most
important steps in formulating strategy.
Best strategies accomplish an org's
mission by:
 Exploiting an organization's
opportunities and strengths
while
 Neutralizing its threats and
 Avoiding (or correcting) its
weaknesses.
Organizational strengths - skills and
capabilities that enable an organization to
create and implement its strategies.
Strengths - include things like a deep pool
of managerial talent, surplus capital, a
unique reputation and/or brand name, and
well-established distribution channels.
Distinctive competence - a strength
possessed by only a small number of
competing firms
Organizational weaknesses - skills and
capabilities that do not enable an
organization to choose and implement
strategies that support its mission.
2 ways of addressing weaknesses:
 Make investment to strengths
required to implement strategies
that support its mission.
 Modify its mission so that it can be
accomplished with the skills and
capabilities that the organization
already possesses.
Organizational opportunities - areas that
may generate higher performance.
Organization threats - areas that increase
the difficulty of an organization
performing at a high level.
Formulating business-level strategies
Michael Porter's Generic Strategies
 Differentiation strategy - seeks to
distinguish itself from competitors
through the quality of its product or
services.
 Overall cost leadership strategy -
attempts to gain a competitive
advantage by reducing its costs
costs of competing firms.
 Focus strategy - concentrates on a
specific regional market, product
line, or group of buyers.
 Product life cycle - a model that
portrays how sales volume for
products changes over the life of
products.
Product Life Cycle
 Introduction stage: managers
need to focus their efforts on
"getting product out the door"
without sacrificing quality.
 Growth stage: more firms begin
producing the product and sales
continue to grow.
 Maturity stage: overall demand
growth for a product begins to slow
down, and the number of new firms
producing the product begins to
decline.
 Decline stage: demand for the
product or technology decreases,
the number of organizations
producing the product drops, and
total sales drop.
Formulating corporate-level strategies
Strategic business unit (SBU) - each
business or set of businesses within such
na organization.
Diversification - number of different
businesses that na organization is engaged
in and the extent to which these businesses
are related to one another.
Single-product strategy - a strategy in
which an organization manufactures just
one product or service and sells it in a
single geographic market.
Related diversification - a strategy in
which an organization operates in several
businesses that are somehow linked with
one another.
Adv.:
 Reduces an organization's
dependence on any one of its
business activities and thus reduces
economic risks.
 Managing several businesses at the
same time, an organization can
reduce the overhead costs
associated with managing any one
business.
  Allows an organization to exploit
its strengths and capabilities in
more than one business.
Unrelated diversification - a strategy in
which an organization operates multiple
businesses that are not logically associated
with one another.
Adv.:
 A business that uses this strategy
should be able to achieve stable
performance over time.
 Unrelated diversification is also
thought to have resource allocation
advantages.
Disadv.:
 Corporate-level managers usually
do not know enough about the
unrelated business to provide
helpful strategic guidance or to
allocate capital appropriately.
 Because org's that implement
unrelated diversification fail to
exploit important synergies, they
are at a competitive disadvantage
compared to org's that use related
diversification.
Portfolio Management Technique -
methods that diversified organizations use
to determine in which businesses to
engage and how to manage these
businesses to maximize corporate
performance.
1. BCG Matrix - a framework for
evaluating businesses relative to the
growth rate of their market and the
org's share of the market.
 It helps managers develop a better
understanding of how different
strategic business units contribute
to the overall organization.
 It suggests that organizations either
should not invest in them or should
consider selling them as soon as
possible.
2. GE Business Screen - a method of
evaluating businesses along two
dimensions: (1) industry attractiveness
and (2) competitive position; in general,
the more attractive the industry and the
more competitive the position, the
more an organization should invest in a
business.
 A more sophisticated approach to
managing diversifies business units.
Tactical Planning
Tactical plans - a plan aimed at achieving
tactical goals and developed to implement
parts of a strategic plan; an organized
sequence of steps designed to execute
strategic plans.
Developing tactical plans
1. The manager needs to recognize
the tactical planning must address a
number of tactical goals derived
from a broader strategic goal.
2. Strategies are often stated in
general terms, tactics must specify
resources and time frames.
3. Tactical planning requires the use
of human resources.
Executing Tactical Plans
1. The manager needs to evaluate
every possible course of action in
light of the goal it is intended to
reach.
2. He/she needs to make sure that on
maker has the information and
resources necessary to get the job
done.
3. Manager must monitor ongoing
activities derived from the plan to
make sure they are achieving the
desired results.
Operational Planning
  Critical element in effective 3. Action point 3. Specify indicators
organizational planning is the for the contingency events and
development and implementation develop contingency plans for each
of operational plans. possible event.

 Operational plans are derived from 4. Action point 4. Successfully

tactical plans and are aimed at complete plan or contingency plan.
achieving goals.
 It is becoming increasingly
 Operational plans tend to be important for most organizations,
narrowly focus, have relatively especially for those operating in
short time horizons, and involve particularly complex or dynamic
lower-level managers. environments.

Single-Use Plans - developed to carry out  It is a useful technique for helping

a course of action that is not likely to be managers cope with uncertainty
repeated in the future. and change.

 Programs - single-use plan for a

large set of activities.
Crisis Management - set of procedures
 Project - single-use plan of less the organization uses in the event of a
scope and complexity than a disaster or other unexpected calamity.
programs.
 It is more difficult to anticipate.
Standing plans - developed for activities
that recur regularly over a period of time.

 Policy - standing plan specifying

the organization's general response
to a designated problem or
situation.

 Standard Operating Procedures

(SOP) - more specific than policy;
it outlines the steps to be followed
in particular circumstances.

 Rules and Regulations - describe

exactly how specific activities are
to be carried out.

 Rules and regulations and SOPs are

similar in many ways. They both
relatively narrow in scope.

Contingency Planning - the

determination of alternative courses of
action to be taken if an intended plan of
action is unexpectedly disrupted or
rendered inappropriate.

1. Action point 1. Develop plan,

considering contingency events.

2. Action point 2. Implement plan

and formally identify contingency
events.