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Monday, 8 August 2011

Introduction to Management - Notes

Evolution of Management Thought - Lecture 2 To be able to distinguish between the following major management theories: 1. Classical Management Approaches

Scientic Management Frederick W. Taylor Standard rules, processes, working conditions for every job one best way Selection of workers Training of workers Incentives for workers Support for workers Frank Gilbreth Lillian Gilbreth Time and motion studies Lillian pioneered industrial psychology Administrative Principles Henri Fayol Planning Organising Commanding Coordinating Controlling Mary Parker Follett Groups as mechanisms for combining individual talents for a greater good. Organisations as cooperating communities of managers and workers Employee ownership Private prots relative to public good Bureaucracy Max Weber Rational authority not personal/family/religious Rational authority based on structure and positions Therefore, rules and written records provide continuity Clear denitions of authority and responsibility Positions are organised hierarchically. Selection and promotion based on technical qualications Administrative acts and decisions are recorded Management is separate from ownership. Rules and procedures are uniformly applied to all employees. Disadvantages Excessive paperwork or red tape Slowness in handling problems

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Rigidity in the face of shifting needs Resistance to change Employee apathy 2. Behavioural Management Approaches

Hawthorne Studies Series of experiments Illumination Study Both control (no change) and experimental group (illumination change) increased productivity Relay Assembly Room Piece-work for 8 weeks Productivity went up Two ve-minute rest periods for 5 weeks Productivity went up Rest periods lengthened to 10 minutes Productivity went up Provided with a free hot meal at the rst break Productivity went up Dismissed at 4:30pm instead of 5:00pm Productivity/ output went up Dismissed at 4:00pm instead of 4:30pm Output remained the same Finally, all improvements removed 48 hour week, no piece-work Work Saturdays No extra breaks, no free meal Highest productivity ever lasted 12 weeks Reasons for productivity increase: Group Atmosphere Participative Supervision 3. Quantitative Management Approaches Management Science Application of mathematics, statistics and other quantitative techniques to managerial problems Also called Operations Research Techniques: Mathematical forecasting Inventory modelling Linear programming Queuing theory Network models Simulation

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4. Modern Management Approaches Systems theory System - Set of interrelated parts that function as a whole Subsystem - A smaller component of a larger system Open system - Interacts with the external environment Entropy organisation will die without fresh inputs from the environment Synergy whole is greater than the sum of its parts

Contingency theory Solving organisational problems depends on managers identifying key variables in the situation at hand Classical perspective = universalist Contingency view = each situation is unique (Eg industry, technology, the environment and international cultures) Ethical behavior and social responsibility - Lecture 4 - Text Chapter 13 To dene ethics and ethical behavior Ethics - The code of moral principles that sets standards of good or bad, or right or wrong, in a persons conduct and thereby guides the behaviour of that person or group Ethical behaviour - What is accepted as good and right, as opposed to bad or wrong, in the context of the governing moral code. To distinguish alternative views of ethical behavior

Utilitarian view of ethics greatest good to the greatest number of people. Individualism view of ethics primary commitment is to ones long-term selfinterests. Moral-rights view of ethics respects the fundamental rights of all people. Justice view of ethics fair and impartial treatment of people according to rules and standards. Includes Procedural, Distributive and Interactional Justice

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Cultural relativism - Ethical behaviour is always determined by cultural context. Ethical imperialism - Behaviour that is unacceptable in ones home environment should not be acceptable anywhere else. To understand how culture impacts on ethics To describe ethical dilemmas in the workplace and the factors that inuence ethical managerial ethical behavior An ethical dilemma is a situation that although offering potential benet or gain is also unethical. Unethical behaviour can be rationalised by convincing yourself that: The behaviour is not really illegal The behaviour is really in everyones best interests Nobody will ever nd out The organisation will protect you

To identify how high ethical standards can be maintained Ethics training Whistleblower protection Laws vs organisational barriers Ethical role models Codes of ethics Examples: Workforce diversity, bribes and kickbacks, honesty of books or records, condentiality of corporate information To dene Corporate Social Responsibility and the leadership beliefs underpinning it Ethics individual level of behaviour Corporate social responsibility - organisational level CSR is the obligation of an organisation to act in ways that serve both its own interests and the interests of its external stakeholders. Leadership beliefs that guide CSR: People do their best with a balance of work and family life. Organisations perform best in healthy communities. Organisations gain by respecting the natural environment. Organisations must be managed and led for long-term success. Organisations must protect their reputations. Triple Bottom Line: Corporate success should be measured not just by the traditional nancial bottom line, but also by its social/ethical and environmental performance. The overall fullment of obligations to communities, employees, customers, and suppliers should be measured, calculated, audited and reported. Arguments against social responsibility Reduced business prots Higher business costs Dilution of business purpose Too much social power for business

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Lack of public accountability. Arguments in favour of social responsibility: Adds long-run prots Better public image Avoids more government regulation Businesses have resources and ethical obligation Better environment Public wants it. To distinguish between the different perspectives on the value of CSR Classical perspective Managements only responsibility is to maximise prots. Milton Friedman: Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate ofcials of a social responsibility other than to make as much money for their stockholders as possible (2002: 133) Socioeconomic perspective Management must be concerned for the broader social welfare, not just prots. Thomas Kochan observed that the root cause of the recent corporate scandals in the United States lies in this over-emphasis American corporations have been forced to give in recent years to maximizing shareholder value without regard for the effects of their actions on other stakeholders (2002:139) To distinguish between different strategies of CSR Strategies for pursuing social responsibility Obstructionist meets economic responsibilities Defensive meets economic and legal responsibilities Accommodative meets economic, legal and ethical responsibilities Proactive meets economic, legal, ethical and discretionary responsibilities

To understand the role of government on CSR Common areas of government regulation of business affairs Occupational safety and health Fair labour practices Consumer protection Environmental protection. How organisations inuence government Personal contacts and networks Public relations campaigns Lobbying Political action committees. Leading - Lecture 5 - Text Chapter 5

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To dene leadership Leadership: the process of inspiring others to accomplish important tasks. To distinguish between leaders and managers and to understand the impact of different sources of power on leadership Power : the ability to get someone else to do something you want or to make things happen the way you want.

What is the impact of power? Reward or legitimate power temporary compliance Coercive power temporary compliance plus resistance Expert or referent power commitment How is each source of power developed? Position power centrality, support, visibility Personal power expertise, likable personality ! The importance of personal power means the real leader in the workplace may not always be the manager that is, Leader and Manager are not equivalent terms Empowerment: the process through which managers enable others to gain power and achieve inuence within the organisation To distinguish between the three major historical approaches to the study of leadership Trait theory Traits that are important for leadership success: Drive Self-condence Creativity Cognitive ability Business knowledge Motivation Flexibility Honesty and integrity. But traits alone are not sufcient for successful leadership only a precondition. Researchers next looked at how leaders behave Behavioural theories Leadership style recurring patterns of behaviours exhibited by a leader Contingency approaches Contingency approaches try to understand the how the conditions for leadership success vary with the situation: Fiedlers contingency model Determining leadership style: Task-oriented leaders Relationship-oriented leaders Diagnosing situational control:

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Quality of leadermember relations (good or poor) Degree of task structure (high or low) Amount of position power (strong or weak). Hersey-Blanchard situational leadership model Leaders adjust their styles depending on the readiness of their followers to perform in a given situation.

Houses path-goal theory An effective leader claries paths through which followers can achieve both task-related and personal goals. Leadership style should contribute what is missing or is weak in the situation: Directive leadership Supportive leadership Achievement-oriented leadership Participative leadership Substitutes and neutralizers Substitutes for leadership ! A situational variable that makes a leadership style redundant or unnecessary. Eg Subordinate characteristics, Task characteristics, Organisational characteristics Neutralisers A situational variable that counteracts a leadership style. Eg. Being physically removed from employees To explain the various models which make up each of the major approaches what does each model say about effective leadership? Critique of Contingency Approaches Strengths: Moved beyond trait and behavioural approaches to consider the role of context or situation in leader effectiveness Weaknesses: List of possible contingencies is endless Research is yet to identify which are the most important contingencies that affect leader effectiveness Leaders can also control and change contingencies. That is, leaders are not passively subject to situational contingencies This has led researchers more recently to look at change theories To identify contemporary issues in leadership Charismatic leader Someone who develops special leaderfollower relationships and inspires others in extraordinary ways.

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Charismatic Leaders unify and motivate people around grand visions of an idealized future. They inspire people toward change. Transformational leader Someone who is truly inspirational as a leader and who arouses others to seek extraordinary performance accomplishments. Transformational Leaders are agents of change. They are the ideal managers to have during major organizational change because they have the visionary component of the charismatic leader but also have the staying power and energy to see change through to completion. Transactional leader Someone who is methodical as a leader and keeps others focused on progressing towards goal accomplishment. Transactional Leadership is effectively what good management is all about: Its the paperwork, the budgeting, the scheduling with a bit of psychological support of employees thrown in for good measure. Some argue that transactional leadership is not enough to effectively lead organizations in contemporary competitive climates External Environment and Organisational Culture - Lecture 6 - Chapter 7 To explain the environment of an organisation and its importance within an open systems view

To distinguish between the external and internal environment of an organisation External environment Everything outside the boundaries of the organisation that have the potential to affect it Internal environment Conditions and forces within an organisation To distinguish between the general and specic environment as the two layers of the external environment General environment The set of broad background conditions in an organisations surroundings that provides the general context for management decision making Specic environment The people and groups with whom an organisation interacts on a day-to-day basis and which directly inuence its basic operations and performance To identify and analyse the conditions that make up the general environment of an organisation


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Economic conditions The overall health of the economic system of the country (countries) and regions in which the organisation operates Sociocultural conditions: The customs, social values, educational trends and demographic characteristics of the society in which the organisation functions Legal-political conditions The prevailing philosophy of the political system and party or parties running government as well as the general relationship between business and government, including government regulation of business in general Technological conditions The development and availability of technology in the industry and society at large, including advances in the methods available for converting resources into products and services Natural environment conditions The general state of the natural environment, including levels of public concern expressed through environmentalism International conditions Events originating in foreign countries, as well as opportunities for local organisations in other countries To identify and analyse the conditions that make up the specic environment of an organisation Customers Consumer or client groups, individuals and organisations that purchase the organisations goods and/or services Suppliers Provide the human, information and nancial resources and raw materials that the organisation uses to produce its output Competitors Other organisations in the same industry or type of business that offer the same or similar goods and services to the same consumer or client groups Regulators Specic government agencies and representatives that enforce laws and regulations affecting the organisations operations To understand organisational culture as a major factor in the internal environment of an organisation, including both observable culture and core culture The internal environment comprises factors inside the boundaries of the organisation Internal environments are important because they affect what people think, feel and do at work A key component of the internal environment is organisational culture, which is the system of shared beliefs and values that develops within an organisation and guides the behaviour of its members Observable culture! What can be observed directly in the daily life of an organisation Seen = Surface level

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Symbolic artifacts such as dress codes and ofce layout Heard = Expressed values and beliefs What people say How decisions are made and explained Through observable culture, new members learn the organisations culture and all members share and reinforce its special aspects over time Core culture Deeper level of culture that is the foundation of observable culture Determines why things are the way they are Core values and underlying beliefs and assumptions that inuence behaviour and give rise to observable culture Unwritten but shared understandings of the way things are done in the organisation eg the customer is always right, dont dob in your mates, its us versus them

To explain the relationship between organizational culture and external environment Strong organisational cultures are those where the core values are uniformly held by organisational members Strong culture organisations operate with a small but enduring set of organisational values Highly successful organisations typically emphasise values of quality, performance excellence, innovation, social responsibility, integrity, worker involvement, customer service, and teamwork These core values make it more likely the organisation will identify opportunities and threats in the external environment and be able to adapt and respond to them in appropriate ways Leaders in the organisation should establish and maintain core values that are: Relevant core values should support key performance objectives Pervasive be known by all members of the organisation Strong be accepted by everyone involved! Leaders can use the observable culture to establish and maintain a desired culture eg stories, symbols etc. Leaders can inuence culture by: What they pay attention to and notice Their reactions to problems and crises Role modelling, coaching and mentoring Criteria for reward, promotion, punishment Organisational sub-cultures can develop as different groups form different interpretations and feelings about the imposed culture based on shared work responsibilities and/or personal characteristics. Examples of common subcultures include:

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Occupational Functional Ethnic Racial Generational Gender. The presence of subcultures which have values that do not support the core values of the organization may make it more difcult to respond in appropriate ways to the external environment Strategic Management - Lecture 7 - Text Chapter 8 To dene strategy and the importance of competitive advantage Strategy A comprehensive action plan providing long-term direction and guiding resource utilisation to accomplish organisational goals to create and sustain a competitive advantage Competitive advantage Means operating in a successful way that is difcult for competitors to imitate. Sustainable Competitive Advantage Consistently dealing with market and environmental forces better than competitors eg cost, quality, knowledge, speed Strategic management The process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage. Strategy formulation Process of creating strategy Strategy implementation Process of allocating resources and putting strategies into action To describe the process of strategic management

Step 1. Analysis of Current Organisation Mission statement (covered in lecture 3) organisations reason for being Core values (covered in lecture 6on org culture) Objectives (covered in lecture 3) eg protability, market share, cost efciency, product quality, innovation etc Step 2: Analysis of Environment & Industry Analysis of environment Assessing Strengths and Weaknesses in the internal environment of the organisation along with Opportunities and Threats in the external environment Objective is to identify core competencies - special strengths that give an organisation a competitive advantage because they are rare, difcult for competitors to imitate and are strategically valuable or important

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Examples of core competencies special knowledge or expertise or superior technologies

Analysis of the Industry - Porters Five Forces Model Michael Porters Five Forces model helps an organisation determine the attractiveness of the industry in which it is competing or plans to compete.

Step 3: Choices for levels of strategy Levels of strategy Corporate strategy sets long-term direction for the total enterprise. Business strategy identies how a division or strategic business unit will compete in its product or service domain. Functional strategies guide use of organizational resources to implement business strategy in a functional area of operations.

Corporate-level strategies Growth Strategies = Expansion of organisations current operations Concentration Growth in same business area Diversication Growth in new or different business areas Vertical Integration

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Acquiring suppliers or distributors Retrenchment Strategies = Reducing scale of current operations Liquidation Restructuring or downsizing for efciency Divestment Sell of parts of organisation to refocus Co-operative Strategies = Strategic alliances to partner with other organisation(s) for mutual benet Eg outsourcing, supplier and distribution alliances E-business Strategies Using Internet to gain competitive advantage Business-level strategies Porters Generic Strategies Cost leadership strategy Seek to operate with lower costs than competitors Differentiation strategy Offer products that are unique and different from competitors Focus strategies Focused cost leadership Low cost operations in special market segment Focused differentiation Unique product to special market segment Step 4: Implementation Challenges and Problems in Implementing Strategy Failures of substance Inadequate attention to major strategic planning elements Failures of process Poor handling of strategy implementation Lack of participation error Not including key people Goal displacement error Planning becomes an end in itself Emergent strategy Not all strategies are systematically and deliberately formulated prior to implementation Strategies emerge over time as managers learn from experience Issues of Corporate Governance System of control and performance monitoring of top management Leadership How to get people to engage in the continuous change, renement and implementation of strategy To explain the steps in the strategic management process To analyse the environment and industry in formulating strategy To distinguish between corporate and business levels of strategy To distinguish different corporate strategies and understand when each is appropriate To distinguish the generic types of competitive strategies at the business level and understand when each is appropriate To explain the challenges in strategic implementation

Organisational Design - Lecture 8 - Text Chapter 9 and 10 To understand the basic concepts of organising as a management function Organising

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The process of assigning tasks, allocating resources, creating operational systems, and arranging activities to implement plans Organisational structure The system of tasks, workows, reporting relationships and communication channels that link together diverse individuals and groups. Formal structure The ofcial structure of the organisation Expressed in an organisation chart Positions, job titles and the lines of authority and communication between them Informal structure Lies behind the formal structure Unofcial working relationships between members Interpersonal networks of support Departmentalization The process of grouping together people and jobs into work units Traditional organisation structures which achieve departmentalisation are: Functional structures Divisional structures Matrix structures Newer organisation structures are: Team structures Network structures Boundaryless organisations To distinguish between different types of organisational structures and to evaluate their usefulness (functional, divisional, matrix, team, network and boundaryless structures) Functional Structures People with similar skills and performing similar tasks are grouped together into work units Works well for small organisations producing few products or services

Advantages Economies of scale and efcient resource use Task assignment consistent with expertise and training In-depth training and skill development within functions Clear career paths within functions High quality technical problem solving Disadvantages Poor communication and coordination across functions functional chimneys problem Slow response to external changes Decisions concentrated at top leading to delay Responsibility for problems difcult to pinpoint Limited view of organisational goals by employees Limited general management training for employees Divisional Structures

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Group together people who work on the same product or process, serve similar customers and/or are located in the same area or geographical region Common in complex organisations Avoid problems associated with functional structures.

Advantages Fast response, exible in uncertain environment Expertise focused on specic customers, products or regions Improved coordination across functional departments Easy to pinpoint responsibility for product problems Develops general management skills Disadvantages Duplication of resources across divisions Less technical depth and specialisation Poor coordination across divisions Less top management control Competition between divisions for corporate resources Emphasis on division goals to detriment of organisation as a whole Matrix Structures Combines functional and divisional structures to gain advantages and minimise disadvantages of each


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Advantages Better interfunctional cooperation Increased exibility Better customer service Better performance accountability Improved strategic management Improved decision making at the team level Develop generalists and specialists Disadvantages Frustration and confusion for matrix members from dual chain of command Power struggles between functional supervisors and team leaders Many meetings, more discussion than action Team loyalties may cause loss of focus on organisational goals Increased cost of adding team leaders to the matrix structure Team Structures Cross-functional teams to solve problems and complete special projects may be permanent or temporary Advantages Reduced barriers among departments Quicker decisions Improved morale due to cross-functional interaction Disadvantages Conicting loyalties Time and resources spent on meetings


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Network Structures A central core that is linked through networks of relationships with contractors and outside suppliers of essential services Advantages Organisations can work with fewer full-time employees and less complex internal systems Reduced operating costs and increased efciency Disadvantages Control and coordination problems may arise from network complexity Potential loss of control over outsourced activities May lack cohesive corporate culture

Boundaryless Organisations Eliminates internal boundaries among parts and external boundaries with the external environment Combination of team and network structures Internally Teamwork and intense communication take the place of formal lines of authority Externally Shifting mix of outsourcing contracts and operating alliances that form and disband with changing circumstances

To describe organisational design and distinguish the two major choices in organisational design (mechanistic vs adaptive designs) Organisational design Choosing and implementing structures that best arrange resources to serve the organisations mission and objectives Chandler argued structure should follow strategy Two broad choices:

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Mechanistic design (bureaucratic organisation) Organic design (adaptive organisation)

Good organisational design uses contingency thinking Does the design t well with the major problems and opportunities of the external environment? Does the design support implementation of strategies and the accomplishment of key operating objectives? Does the design support core technologies and allow them to be used to best advantage? Can the design handle changes in organisational size and different stages in the organisational life cycle? Does the design support and empower workers and allow their talents to be used to best advantage?


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To explain the contingency factors that inuence the choice of organisational design To identify contemporary organising trends Shorter chains of command Less unity of command Wider spans of control More delegation and empowerment Decentralisation with centralisation Reduced use of staff

Human Resource Management - Lecture 9 - Text Chapter 12 To explain the process of Human Resources Management and how it ts with strategy Involves attracting, developing and maintaining a talented and energetic workforce to support the organisations mission, objectives and strategies HRM matters because: People are key to organisational success or failure Diversity can be a source of competitive advantage ie broadens the talent pool and brings different perspectives to problem solving and strategy formulation. HRM is a strategic process To distinguish between attracting, developing and maintaining a quality workforce Attracting involves: HR Planning

Consider key factors eg emerging new technologies; volume of business, staff turnover Job analysis: study what is done, when, where, how, why and by whom in existing or potential new jobs

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Job description: written statement of job duties and responsibilities Job specication: qualications required Job analysis Job description Job specication Recruiting Activities designed to attract a qualied pool of job applicants to an organisation Steps in the recruitment process: Advertisement of a job vacancy Preliminary contact with potential job candidates Initial screening to create a pool of qualied applicants. Recruitment methods Internal and External recruitment Realistic Job Previews New approaches eg Internet Legal considerations Afrmative Action Equal Employment Opportunity Selecting Choosing from a pool of the best-qualied job applicants Examples of selection devices: Application forms Interviews and/or site visits Employment tests Reference and background checks Selection devices must be valid and reliable Reliable Device measures consistently over repeated uses Valid Device has a demonstrated link with future job performance To understand what is involved in attracting a quality workforce and why this is important to management To understand what is involved in developing an effective workforce and why this is important to management Employee Orientation Set of activities designed to familiarise new employees with their jobs, coworkers and key aspects of the organisation. Eg mission, policies and procedures etc Begins the process of socialising newcomers ie inuences the expectations, behaviour and attitudes of a new employee in a way considered desirable by the organisation Training and Development Training Teaching low-level or technical employees how to do their present jobs Development Teaching managers and professionals the skills needed for both present and future jobs On-the-job training Job rotation Coaching Mentoring Modelling

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Off-the-job training Management development Performance Management Systems Sets standards, assesses results and plans for performance improvements Important component of Performance Management System is Performance Appraisal: Process of formally evaluating performance and providing feedback to the job holder Evaluation purpose Manager acts in judgmental role Development purpose Manager acts in counseling role Performance Appraisal methods: Graphic rating scales Behaviourally anchored rating scale Critical-incident technique Multiperson comparisons New approaches eg peer appraisal, upward appraisal, 360 feedback

To understand what is involved in maintaining an effective workforce and why this is important to management Maintaining a quality workforce, especially in dynamic environments, requires consideration of: Career development Work-life balance Compensation and benets Retention and turnover Career Development Career A sequence of jobs that constitute what a person does for a living Career path Career planning Career plateau Work-life Balance How people balance career demands with personal and family needs Contemporary work-life balance issues: Single parents Dual-career couples Family-friendliness as screening criterion used by candidates.

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Compensation and benets Base compensation - monetary Wages, salaries May be: Skill-based Competency-based Job-based Fringe benets: non-monetary forms of compensation Some are required by law eg Superannuation, holiday leave loading, workers compensation Others can be provided by the organisation eg health insurance, company car, onsite tness centres, subsidised child care Flexible benets allow employee to choose from a range of options Retention and Turnover Replacement is the management of promotions, transfers, terminations, layoffs and retirements. Replacement decisions relate to: Transferring or promoting people between positions within the organisation Retirement Voluntary Turnover Involuntary turnover eg mergers, cutbacks, poor performance To identify contemporary issues in human resource management Discrimination in employment Equal employment opportunity Afrmative action Diversity management Occupational health and safety Industrial relations International HRM International Strategic Management - Lecture 10 - Text Chapter 11 To understand the process of international strategic management International management involves managing operations in more than one country This arises because organisations develop and implement strategies in more than one country To explain the reasons why organisations expand internationally Increased market size Build on competitive advantage in the domestic market by transferring competencies to international markets where local competitors lack such skills (eg. Yellowtail wines) Improve return on investment Particularly in R & D intensive industries (eg. Biotechnology, Pharmaceuticals) Protect innovation as patent protection requires a global perspective Economies of scale and learning Economies of scale result from expanding the size and/or scope of markets Develop learning and experience curve Realise location advantage Economies that arise from performing a value creation activity in the optimal location for that activity (Beefeater BBQs in China) Lower cost effects: raw materials and labour Differentiation effects: access to key suppliers

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To distinguish between the corporate-level strategies that organisations can adopt for their international operations and to understand when each strategy is appropriate Type of corporate strategy selected will have an impact on the selection and implementation of the business-level strategies (low cost or differentiation) Four Corporate-Level Strategies for International Operations International Strategy Transfer core competencies to foreign markets lacking these Centralise product development at home Establish manufacturing facilities and marketing function in host countries Very limited local customisation, if any Strong home country, head ofce control over foreign operations Multidomestic Strategy Strategy and operating decisions are decentralised to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European rms due to broad variety of cultures and markets in Europe Global Strategy Products are standardised across national markets Decisions regarding business-level strategies are centralised in the home ofce Strategic business units (SBU) are assumed to be interdependent Emphasises economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difcult to manage) Transnational Strategy Seeks to achieve both global efciency and local responsiveness Difcult to achieve because of simultaneous requirement for strong central control and coordination to achieve efciency and local exibility and decentralisation to achieve local market responsiveness Must pursue organisational learning to achieve competitive advantage

Need for Global Integration: Cost Pressures


Low High

Need for Local Market Responsiveness


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To identify the modes of entry into foreign markets and to understand when each mode is appropriate Exporting Common way to enter new international markets No need to establish operations in other countries Establish distribution channels through contractual relationships May have high transportation costs May encounter high import tariffs and other trade barriers May have less control over marketing and distribution Difcult to customise products Licensing Firm authorises another rm to manufacture and sell its products Licensing rm is paid a royalty on each unit produced and sold Licensee takes risks in manufacturing investments Least risky way to enter a foreign market Licensing rm loses control over product quality and distribution Relatively low prot potential A signicant risk if the licensor learns technology and competes when license expires Strategic Alliances Enable rms to shares risks and resources to expand into international ventures Most joint ventures (JVs) involve a foreign company with a new product or technology and a host company with access to distribution or knowledge of local customs, norms or politics May experience difculties in merging disparate cultures May not understand the strategic intent of partners or experience divergent goals Acquisitions Enable rms to make most rapid international expansion Can be very costly Legal and regulatory requirements may present barriers to foreign ownership Usually require complex and costly negotiations Potentially disparate corporate cultures New Wholly-Owned Subsidiary Most costly and complex of entry alternatives Achieves greatest degree of control Potentially most protable, if successful Maintain control over technology, marketing and distribution May need to acquire expertise and knowledge that is relevant to host country Could require hiring host country nationals or consultants at high cost

To explain how national culture impacts on the management of international operations Differences in National Cultures Culture is the shared set of beliefs, values and patterns of behaviour common to a group of people. Dimensions on which national cultures vary include:

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Language low-context vs high-context Time monochronic vs polychronic Values Hofstedes model

Management theories are not universal most theories in this course are framed from a North American and Western European perspective Cross-cultural differences mean management practices cannot always be transferred successfully from one national culture to another To describe how political risk, economic risk and ethics affect the management of international operations Political risk Possible loss of investment or control over a foreign asset because of political changes in the host country Economic risk Exchange rate uctuations and differences in ination rates may affect ability to compete Ethics Corruption, sweatshops, child labour, sustainable development Innovation and Change - Lecture 11 - Text Chapter 6 To understand the difference between innovation and invention and their importance to management Invention The act of discovery of a new idea Innovation


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Occurs when that invention is developed and commercialised for a market It is the act of converting new ideas into usable applications that ideally have positive economic or social consequences Innovation = Invention + Commercial Exploitation To distinguish between different types of innovation Process innovation Involves new or improved ways of manufacturing the product or service (ie results in better ways of doing things) Product innovation The use of new or improved design principles or technologies for incorporation in products or services (ie results in new products or services) Incremental innovations New products or processes that modify existing ones Radical Breakthrough products that are new-to-the-world and offer signicant performance solutions to a consumer problem To understand the forces driving innovation The need to stay competitive: Schumpeter (1942) described innovation as a process of creative destruction Radical innovations may destroy the competitive advantage of existing rms so rms have to be open to new opportunities and possibilities to survive Potential to lower costs of production Possibility of rst-mover advantages: That is, Customers may be willing to pay a higher price because the product/ service is the rst-of-its-kind and offers them unique benets

BUTresearch shows that being rst-to-market is not always best. Often its the fast second or third follower who goes on to be the market leader. Why? Fast followers learn from the costly mistakes of the pioneer in product development and can watch how the market responds Also, the 2nd mover usually does not suffer from public backlash because they are not in the limelight. For example, Adidas versus Nike, Burger King versus McDonalds

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To explain the innovation process, including the roles and uncertainties within that process

Roles for managers and staff in the innovation process: Idea generators Create new insights from internal discovery or external awareness Information gatekeepers Serve as links between the organisation and external sources Product champions Advocate for innovation and change generally and for adoption of specic product or process ideas in particular Project managers Perform technical functions needed to keep project on track with resource support Innovation leaders Encourage, sponsor and coach others to keep innovation values and goals in place Uncertainties in the innovation process: Market Will customers actually buy the product/service? Competitive How will competitors respond? Technological Will the concept actually work? Organizational Can we get product development/service delivery to work in an organizational setting? Production Is it cost-effective to produce/deliver? Financial Will the product/service create the required return? Managing the uncertainties in the innovation process requires: External collaborations (eg industry clusters or learning regions) Change leadership In which management supports innovation and change ie expect innovation, accept failure, and be willing to take risks


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Change agent A person or group who takes leadership responsibility for changing the existing pattern of behaviour of another person or social system. Change leadership Forward-looking Proactive Embraces new ideas. Managing Change Resistance to change Causes: Eg: Fear of the unknown, disrupted habits, loss of control, poor timing, work overload Methods for dealing with resistance: Eg: Education and communication, participation, facilitation and support, implicit or explicit coercion To understand the connection between innovation and organisational change