POM Unit II updated Useful for MBAs.ppt

Editor's Notes

• #30: .
• #32: First, management must identify the mission, objectives, and strategies of the organization. A mission statement defines an organization’s purpose and provides guidance to managers and employees. A clear mission statement forces management to identify the scope of its products or services carefully It answers questions such as the following: What business are we in? What are we trying to accomplish? All organizations have strengths and weaknesses.
• #33: To plan strategy, managers must complete steps three, four, and five by assessing the organization’s strengths, weaknesses, opportunities, and threats within its operating environment. To do so, they conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) which compares the organization’s resources against opportunities in the environment. Environmental scanning reveals opportunities (positive external factors) for the organization to exploit and threats (negative external factors) that the organization must face. How an organization defines opportunities or threats depends on its resources. The figure above illustrates the objective of SWOT analysis. A successful analysis identifies a niche in which the organization’s products or services can have some competitive advantage. The area in which the opportunities in the environment overlap with the organization’s resources represents the niche wherein the organization’s opportunities lie.
• #34: Management analyzes the internal resources of the organization, such as capital, skills of workers, or patents. These resources are the strengths of the organization. The strengths that represent unique skills or resources are called the organization’s distinctive competence. In contrast, weaknesses are resources that are lacking in the organization. Based on the results of the SWOT analysis, management must complete step six by assessing the opportunities that are available, reevaluating its missions and objectives, and making necessary changes.
• #37: Step eight requires leadership from top management and commitment from middle or lower-level managers. In step nine, management must evaluate the results obtained from the strategic management process.
• #49: In the seventh step, management must set strategies for all organizational levels. Four grand strategies are available: growth, stability, retrenchment, and combination.
• #50: A direct expansion strategy involves increasing a company’s size, revenues, operation, or workforce. A merger occurs when two companies (of similar size) combine resources to form a new company. An acquisition occurs when a larger company “buys” a smaller one and absorbs its operations.
• #51: An organizational unit must translate the grand strategy into a set of strategies that gives it a competitive advantage. Using Michael Porter’s framework, management can select a strategy that gives its organization a competitive advantage. Porter named three strategies from which management may choose: cost-leadership, differentiation, and focus. When an organization aims to be the low-cost producer, it is following a cost-leadership strategy. The firm that seeks to be unique in ways that are widely valued by buyers is following a differentiation strategy. The focus strategy aims at a cost advantage or differentiation advantage in a narrow segment. If an organization cannot use any one of these three strategies to develop a competitive advantage, then it is stuck in the middle unless it is competing in a highly favorable market or all of its competitors are also stuck in the middle.
• #57: To sustain a competitive advantage, managers create barriers to competition through patents, copyrights, or trademarks; using economies of scale to reduce price to boost volume; locking up suppliers with exclusive contracts and lobbying for government policies to limit foreign competition.
• #82: When a manager makes a decision, it is assumed that the manager is able to do so with knowing all the information. But this is a perfect world that rarely exists for managers today. Remember that the assumptions of rationality often do not hold true because the level of certainty that the rational model demands rarely exists. Most managers then try to determine the amount of risk and make their decisions under a condition of uncertainty.
• #85: When confronted by a complex problem, most people will reduce the problem to its simplest level and satisfice by seeking solutions that are satisfactory and sufficient. Eschewing full rationality, they operate within bounded rationality and construct simplified models to extract the essential features of the problem and then behave rationally within the limits of the simple model. Here is how the bounded rationality typically operates: Once a problem is identified, the search for criteria and alternatives usually results in a limited list of choices that are easy to find or highly visible—familiar criteria and tried-and-true solutions. Once this limited set of alternatives is identified, the decision maker will begin reviewing them. The review will not be comprehensive—not all alternatives will be evaluated carefully. Instead, the decision maker will begin with alternatives that differ only to a small degree from the choice currently in effect. Following along familiar and well-worn paths, the decision maker will review alternatives only until one that is “good enough” (that meets acceptable levels of performance) can be found. The first alternative that meets the “good enough” criterion ends the search. So the final solution represents a satisficing choice rather than an optimizing one.
• #87: A guide for making programmed decisions is a policy. In contrast to rules and procedures, policies establish parameters for the decision maker rather than specifically stating how or what should or should not be done. A procedure is a series of interrelated sequential steps that a manager can use for responding to a well-structured problem. The only real challenge is to identify the problem. Once the problem is clear, so is the procedure. A rule is an explicit statement of limitations that tells a manager what he or she ought or ought not to do. Rules are simple to follow and promote consistency.
• #88: The four organizational levels are top, middle, and first-line managers and operative employees. At which of these levels should decisions be made? Recurring or routine decisions, programmed decisions, should be made by lower levels of management: middle-level managers make coordinating decisions with short-term implications and first-line managers make localized decisions about what needs to be done. Nonrecurring or unique decisions, nonprogrammed decisions, are made by top management. Operative employees make job-related decisions to determine how a job should be done. Decisions are seldom fully programmed or fully nonprogrammed. Few programmed decisions can eliminate individual judgment completely; unusual decision-making situations can be helped by considering programmed routines. If possible, management decisions should be programmed. At the top of the organization, the programmed approach is not realistic. Most problems that top management confront are nonrecurring. There are strong economic incentives for top management to create policies, standard operating procedures, and rules to cut costs by minimizing the need for managers to exercise discretion guide other managers, The more nonprogrammed the decision, the greater the judgment required to make it.
• #96: Group decision making can be improved by using the following techniques: brainstorming, nominal groups, and electronic meetings. To overcome conformity pressures that can stifle creative problem solving, managers can use brainstorming: an idea-generating process that specifically encourages all alternatives by withholding any criticism of those alternatives. The nominal group technique requires that group members must be present during the meeting, but they must operate independently. This technique obtains input from all group members but it does not restrict independent thinking. An electronic meeting is a type of nominal group technique in which participants are linked by computer. Electronic meetings have several advantages: anonymity, honesty, and speed. But, several drawbacks also exist: those who type well outshine those who are eloquent but lack keyboarding skills; those with the best ideas do not get credit for them; and the process lacks the informational richness of face-to-face communication. But, this technology is in its infancy. For example, real-time video conferencing is reinventing electronic meetings.