CHAPTER SUMMARY – play interpersonal roles, decisional
roles, and decisional roles. (See Exhibit
CHAPTER 1
Who Are Managers?
 Explain how managers differ from
non-managerial employees.
 Describe how to classify managers
in organizations.
Managers coordinate and oversee the
work of other people so that
organizational goals can be
accomplished. Non-managerial
employees work directly on a job or task
and have no one reporting to them. In
traditionally-structured organizations,
managers can be first-line, middle, or top.
(See Exhibit 1-1.) In other more loosely
configured organizations, the managers
may not be as readily identifiable. But
someone must fulfill that role of
coordinating and overseeing the work of
others.
What Is Management?
 Define management.
 Explain why efficiency and
effectiveness are important to
management.
Management involves coordinating and
overseeing the efficient and effective
completion of others’ work activities.
Efficiency means doing things right;
effectiveness means doing the right
things. (See Exhibit 1-2.)
What Do Managers Do?
 Describe the four functions of
management.
 Explain Mintzberg’s managerial
roles.
 Describe Katz’s three managerial
skills and how the importance of
these skills changes depending on
managerial level.
 Discuss the changes that are
impacting manager’s jobs.
 Explain why customer service and
innovation are important to the
manager’s job.
According to the functions approach,
managers plan, organize, lead, and
control. (See Exhibit 1-3.) According to
the roles approach, managers engage in
specific categories of behavior as they
1-4.) According to the skills approach,
managers need technical, human, and
conceptual skills to perform the duties
and activities associated with being a
manager. (See Exhibit 1-5.) However,
because of changing technology
(digitization), increased security threats,
increased emphasis on ethics, and
increased competitiveness; the
manager’s job is changing. (See Exhibit
1-8.) Two key changes are the
increasing importance of both
customers and innovation.
What Is An Organization?
 Describe the characteristics of an
organization.
 Explain how the concept of an
organization is changing.
Without organizations, there would be
no need for managers. An organization
is a deliberate arrangement of people to
accomplish some specific purpose. (See
Exhibit 1-9.) The concept of
organizations is changing. (See Exhibit
1-10.) Many contemporary organizations
no longer have clearly identifiable
divisions, departments, and work units,
but instead may be more open, flexible,
and responsive to changes.
Why Study Management?
 Explain the universality of
management concept.
 Discuss why an understanding of
management is important.
 Describe the rewards and
challenges of being a manager.
There are three reasons why it’s
important to study management. First,
is the universality of management,
which means that managers are needed
in all types and sizes of organizations, at
all organizational levels and work areas,
and in all global locations. (See Exhibit
1-11.) The second is the reality of work
—that is, you will either manage or be
managed. And the third reason is that
there are significant rewards and
challenges in being a manager. (See
Exhibit 1-12.)
CHAPTER SUMMARY –
CHAPTER 2
Historical Background of
Management
 Explain why studying
management history is
important.
 Describe some early evidences
of management practice.
Studying management history is
important because it helps us understand
today’s management practices by seeing
their origins. History also helps us see
what did and did not work. Management
has been needed by organized endeavors
for thousands of years, and we can see
early examples of management practice
in the construction of the Egyptian
pyramids and in the Arsenal of Venice.
Scientific Management
 Describe the important
contributions made by Frederick W.
Taylor and Frank and Lillian
Gilbreth.
 Explain how today’s managers use
scientific management.
Frederick W. Taylor is known as the
“father” of scientific management as he
studied manual work using scientific
principles – that is, guidelines for
improving production efficiency. (See
Exhibit 2-2.) The Gilbreths’ primary
contribution was finding efficient hand-
and-body motions and designing/using
proper tools and equipment for optimizing
work performance. Today’s managers
continue to use the concepts of scientific
management when they analyze basic
work tasks to be performed, use time-
and-motion study to eliminate wasted
motions, hire the best qualified workers
for a job, and design incentive systems
based on output.
General Administrative Theory
 Discuss Fayol’s contributions to
management theory.
 Describe Max Weber’s contribution
to management theory.
 Explain how today’s managers use
general administrative theories of
management.
Henri Fayol believed that management
was common to all business endeavors
but also was distinct from other business
functions. He developed 14 principles of
management from which many current
management concepts have evolved.
(See Exhibit 2-3.) Weber described an
ideal type of organization he called a
bureaucracy, the characteristics of
which many of today’s large
organizations still exhibit. (See Exhibit
2-4.) Today’s managers still use
general administrative theories when
they perform the functions of
management and structure their
organizations so that resources are used
efficiently and effectively.
Quantitative Approach
 Explain what the quantitative
approach has contributed to the
field of management.
 Discuss how today’s managers
use the quantitative approach.
The quantitative approach involves
applications of statistics, optimization
models, information models, and
computer simulations to management
activities. Today’s managers use the
quantitative approach especially when
making decisions as they plan and
control work activities such as allocating
resources, scheduling work, or
determining optimum inventory levels.
Toward Understanding
Organizational Behavior
 Describe the contributions of the
early advocates of OB.
 Explain the contributions of the
Hawthorne Studies to the field of
management.
 Discuss how today’s managers
use the behavioral approach.
The contributions of the early OB
advocates (Robert Owen, Hugo
Munsterberg, Mary Parker Follett, and
Chester Barnard) were varied and
distinct, but all believed that people
were the most important asset of the
organization and should be managed
accordingly. (See Exhibit 2-5.) The
Hawthorne Studies had a dramatic
impact on management beliefs about
the role of people in organizations,
which led to a new emphasis on the
human behavior factor in managing.
The behavioral approach has largely
shaped how today’s organizations are
managed. Many of our current theories
of motivation, leadership, group
behavior and development and other
behavioral issues can be traced to the
early OB advocates and the conclusions
from the Hawthorne Studies.
The Systems Approach
  Describe an organization using the 1), globalization, ethics, workforce
systems approach. diversity, entrepreneurship, e-business,
 Discuss how the systems approach and knowledge management and
helps us understand management. learning organizations.
CHAPTER SUMMARY –
Using the systems approach, an
organization takes in inputs (resources) CHAPTER 3
from the environment and transforms or
processes these resources into outputs The Manager: Omnipotent or
that are distributed into the environment. Symbolic
(See Exhibit 2-6.) The systems approach  Contrast the actions of managers
helps us understand management since according to the omnipotent and
managers must ensure that all the symbolic views.
interdependent units are working  Explain the parameters of
together so that the organization’s goals managerial discretion.
can be achieved. It also helps managers
realize that decisions and actions taken in According to the omnipotent view,
one organizational area will affect others managers are directly responsible for an
and vice versa. Finally, the systems organization’s success or failure.
approach helps managers recognize that However, the symbolic view argues that
organizations are not self-contained, but much of an organization’s success or
instead rely on their environment for failure is due to external forces outside
essential inputs and as outlets to absorb managers’ control.
their outputs. The parameters of managerial
The Contingency Approach discretion (see Exhibit 3-1) include the
 Explain how the contingency organization’s culture and the
approach differs from the early environment in which the organization
theories of management. exists. However, these parameters don’t
 Discuss how the contingency totally constrain a manager; managers
approach helps us understand can and do influence their culture and
management. environment.
The Organization’s Culture
Unlike early theories of management  Describe the seven dimensions of
which were generally assumed to be organizational culture.
universally applicable, the contingency  Discuss the impact of a strong
approach says that organizations are culture on organizations and
different, face different situations, and managers.
require different ways of managing. (See  Explain the source of an
Exhibit 2-8.) The contingency approach organization’s culture.
helps us understand management  Describe how culture is
because it stresses there are no simplistic transmitted to employees.
or universal rules for managers to follow.  Describe how culture affects
Instead, managers must look at their managers.
situation and determine that if this is the
way my situation is, then this is the best The seven dimensions (see Exhibit 3-2)
way for me to manage. are as follows: (1) attention to detail
Current Trends and Issues (degree to which employees are
 Explain why we need to look at the expected to exhibit precision, analysis,
current trends and issues facing and attention to detail); (2) outcome
managers. orientation (degree to which managers
 Describe the current trends and focus on results or outcomes rather
issues facing managers. than on how those outcomes are
achieved); (3) people orientation
The current trends and issues facing (degree to which management decisions
managers are changing the way take into account the effects on people
managers do their jobs. These current in the organization); (4) team
trends and issues include customer orientation (degree to which work is
service management and innovation organized around teams rather than
(both of which were introduced in Chapter individuals); (5) aggressiveness (degree
to which employees are aggressive and freedom, trust and openness, idea time,
competitive rather than cooperative); (6) playfulness/humor, conflict resolution,
stability (degree to which organizational debates, and risk-taking. A customer-
decisions and actions emphasize responsive culture has six
maintaining the status quo); and (7) characteristics: employees who are
innovation and risk taking (degree to outgoing and friendly; few rigid rules,
which employees are encouraged to be procedures, and regulations;
innovative and to take risks). widespread use of empowerment; clear
Research results are suggesting that in roles and expectations; and employees
organizations with strong cultures: who are conscientious in their desire to
employees tend to be more committed to please the customer.
their organizations; recruitment efforts Workplace spirituality is important for
and socialization practices are used to the following reasons: employees are
build employee commitment; and there is looking for ways to counterbalance the
higher organizational performance. The stresses and pressures of a turbulent
impact of a strong culture on managers is pace of life; people are looking for
that as the culture becomes stronger, it involvement and connection that they
has an increasing impact on what often don’t find in contemporary
managers do and constrains their lifestyles; aging baby boomers are
decision-making options as they plan, looking for something meaningful in
organize, lead, and control. their lives; and for some people,
An organization’s culture and general way organized religion hasn’t fulfilled their
of doing things are largely the result of needs.
what it has done before and how Spiritual organizations tend to have five
successful it has been doing things that characteristics: strong sense of purpose,
way. The original source of the culture focus on individual development, trust
usually reflects the vision or mission of and openness, employee
the organization’s founders. (See Exhibit empowerment, and toleration of
3-5.) employee expression.
Culture is transmitted to employees The Environment
through stories (narratives of significant  Describe the components of the
events or people); rituals (repetitive specific and general
sequences of activities); material symbols environments.
(objects, facilities, and other aspects of  Discuss the two dimensions of
the physical work environment); and environmental uncertainty.
language (special and unique terms,  Identify the most common
acronyms, and jargon). These elements organizational stakeholders.
help employees “learn” what values and  Explain the four steps in
behaviors are important as well as who managing external stakeholder
exemplifies those values. relationships.
Culture affects how managers plan,
organize, lead, and control. (See Exhibit The specific environment (those
3-6.) external forces that have a direct
Current Organizational Culture impact on manager’s decisions and
Issues Facing Managers actions and are directly relevant to an
 Describe the characteristics of an organization’s goals) includes
ethical culture, an innovative customers, suppliers, competitors, and
culture, and a customer-responsive pressure groups. The general
culture. environment (those broad external
 Explain why workplace spirituality forces that affect the organization)
seems to be an important concern. includes economic, political/legal,
 Describe the characteristics of a sociocultural, demographic,
spiritual organization. technological, and global conditions.
(See Exhibit 3-9.)
A culture that is most likely to shape high The two dimensions of environmental
ethical standards is high in risk tolerance, uncertainty include degree of change
low to moderate in aggressiveness, and (stable or dynamic) and degree of
focuses on means as well as outcomes. complexity (simple or complex). (See
An innovative culture is characterized by Exhibit 3-11.)
the following: challenge and involvement,
Stakeholders are any constituencies in
the organization’s environment that are
affected by the organization’s decisions
and actions. The most common ones are
customers, social and political action
groups, competitors, trade and industry
associations, governments, media,
suppliers, communities, shareholders,
unions, and employees. (See Exhibit 3-
12.)
The four steps in managing stakeholder
relationships are (1) identifying the
organization’s stakeholders; (2)
determining the interests or concerns
these stakeholders might have; (3)
deciding how critical each stakeholder is
to the organization’s decisions and
actions; and (4) determining how to
manage those stakeholders.
CHAPTER SUMMARY – conclusions could be made because of
CHAPTER 5
What Is Social Responsibility?
 Contrast classical and
socioeconomic views of social
responsibility.
 Discuss the role that stakeholders
play in the four stages of social
responsibility.
 Differentiate between social
obligation, social responsiveness,
and social responsibility.
The classical view says that
management’s only social responsibility is
to maximize profits. The socioeconomic
view says that management’s social
responsibility goes beyond making profits
to protecting and improving society’s
welfare. In the four-stage stakeholder
model of social responsibility, (see Exhibit
5-1), a stage 1 manager feels responsible
to only the stockholders. At stage 2,
managers expand their responsibility to
the employees. At stage 3, managers
expand their responsibilities to other
stakeholders in the specific environment,
primarily customers and suppliers. Finally,
at stage 4, managers feel they have a
responsibility to society as a whole. Social
obligation is when a firm engages in
social actions because of its obligation to
meet certain economic and legal
responsibilities. Social responsiveness is
when a firm engages in social actions in
response to some popular social need.
Social responsibility is a business’s
intention, beyond its economic and legal
obligations, to pursue long-term goals
that are good for society. (See Exhibit 5-
3.)
Social Responsibility and Economic
Performance
 Explain what research studies
have shown about the
relationship between an
organization’s social involvement
and its economic performance.
 Explain what conclusion can be
reached regarding social
responsibility and economic
performance.
Although the majority of the research
studies have shown a positive
relationship between social involvement
and economic performance, it was
thought that no generalizable
methodological and definitional
concerns. And one study showed that
social involvement had a neutral
impact, while another study found that
social activities not related to the
organization’s primary stakeholders had
a negative impact on shareholder value.
However, a recent re-analysis of these
studies concluded that managers can
afford to be socially responsible.
Considering these studies and the
performance of socially responsible
mutual stock funds, the most
meaningful conclusion we can reach is
that there is little evidence to say that a
company’s social actions hurt its long-
term economic performance.
The Greening of Management
 Describe how organizations can
go green.
 Relate the approaches to being
green to the concepts of social
obligation, social responsiveness,
and social responsibility.
Organizations can “go green” by using
different approaches. (See Exhibit 5-5.)
The light green approach is simply
doing what is required legally, or the
social obligation approach. Using the
market approach, organizations respond
to the environmental preferences of
their customers. Using the stakeholder
approach, organizations respond to the
environmental demands of multiple
stakeholders. Both the market and
stakeholder approaches can be viewed
as social responsiveness. The activist or
dark green approach involves an
organization looking for ways to respect A code of ethics is a formal
and preserve the earth and its natural statement of an organization’s primary
resources, which can be viewed as social values and the ethical rules it expects
responsibility. employees to follow. Managers can
Values-Based Management improve their effectiveness by
 Discuss what purposes shared recognizing the role that the
values serve. organization’s leaders play in setting
 Describe the relationship of values- the ethical tone, by continually
based management to ethics. reaffirming the importance of the ethics
Shared values serve four purposes (see code, by publicly reprimanding rule
Exhibit 5-6): to guide managerial breakers, by considering the important
decisions and actions; to shape employee critical stakeholders when developing or
behavior and communicate what the changing the ethics code, by
organization expects of its members; to communicating and regularly
influence marketing efforts; and to build reinforcing the code to employees, and
team spirit. An organization’s values have by using decision rules in guiding
a big influence on whether employees act managers as they handle ethical
ethically. dilemmas (see Exhibit 5-13).
Managerial Ethics Managers play an important
 Discuss the factors that affect ethical leadership role in many ways:
ethical and unethical behavior. through whom and what are rewarded
 Discuss the six determinants of with pay increases and promotions; by
issue intensity. punishing ethical offenders and
publicizing the outcome; through
 Explain what codes of ethics are
establishing performance appraisal
and how their effectiveness can be
systems that focus on means as well as
improved.
ends; by providing ethics training; by
 Describe the important roles
using independent social audits;
managers play in encouraging
through establishing formal protective
ethical behavior.
mechanisms; and most importantly, by
setting a good example.
The factors that affect ethical and
Social Responsibility and Ethics
unethical behavior (see Exhibit 5-8)
Issues in Today’s World
include: an individual’s level of moral
 Explain why ethical leadership is
development (preconventional,
important.
conventional, or principled – see Exhibit
5-9); individual characteristics (values  Discuss how managers and
and two personality variables – ego organizations can protect
strength and locus of control); structural employees who raise ethical
variables (structural design, use of goals, issues or concerns.
performance appraisal systems, and  Explain what role social
reward allocation procedures); entrepreneurs play.
organizational culture (content and  Describe social impact
strength); and issue intensity which management.
includes six elements including greatness
of harm, consensus of wrong, probability Ethical leadership is important because
of harm, immediacy of consequences, the example set by managers has a
proximity to victims, and concentration of strong influence on whether employees
effect (see Exhibit 5-10). The more behave ethically. Ethical leaders also
intense an issue is (the larger number of are honest, share their values, stress
people harmed, the more agreement that important shared values, and use the
the action is wrong, the greater the reward system appropriately. Managers
likelihood the action will cause harm, the can protect whistleblowers (employees
more immediately the consequences will who raise ethical issues or concerns) by
be felt, the closer the person feels to the encouraging whistleblowers to come
victims, and the more concentrated the forward; by setting up toll-free ethics
effect of the action on the victims), the hotlines; and by establishing a culture
more we should expect employees to where employees can complain and get
behave ethically. heard without fear of reprisal, against
which the Sarbanes-Oxley Act offers
some legal protection.
 Social entrepreneurs play an
important role in solving social problems
by seeking out opportunities to improve
society by using practical, innovative, and
sustainable approaches. Social
entrepreneurs want to make the world a
better place and have a driving passion to
make that happen.
Social impact management
attempts to get managers to understand
the interdependency between business
needs and wider social concerns. Thus, as
managers plan, organize, lead, and
control, they would ask how their
decisions would work in the societal
context within which they’re operating.
CHAPTER SUMMARY – decision makers accept solutions that
CHAPTER 6
The Decision-Making Process
 Define decision and decision-
making process.
 Describe the eight steps in the
decision-making process.
A decision is a choice. The decision-
making process consists of eight steps
that begin with (1) and (2) identifying a
problem and decision criteria and (3)
allocating weights to those criteria; move
to (4) developing, (5) analyzing, and (6)
selecting an alternative that can resolve
the problem; (7) implementing the
alternative; and concludes with (8)
evaluating the decision’s effectiveness.
(See Exhibit 6-1.)
The Manager as Decision Maker
 Discuss the assumptions of rational
decision making.
 Describe the concepts of bounded
rationality, satisficing, and
escalation of commitment.
 Explain intuitive decision making.
 Contrast programmed and
nonprogrammed decisions.
 Contrast the three decision-making
conditions.
 Explain maximax, maximin, and
minimax decision choice
approaches.
 Describe the four decision-making
styles.
 Discuss the twelve decision-making
biases managers may exhibit.
 Describe how managers can deal
with the negative effects of
decision errors and biases.
 Explain the managerial decision-
making model.
The assumptions of rationality (see
Exhibit 6-6) are as follows: the problem
is clear and unambiguous; a single, well-
defined goal is to be achieved; all
alternatives and consequences are
known; preferences are clear, constant,
and stable; no time or cost constraints
exist; and the final choice will maximize
the payoff.
Bounded rationality says that managers
make rational decisions but are
bounded (limited) by their ability to
process information. Satisficing is when
are good enough. Escalation of
commitment is when managers increase
commitment to a decision even when
they have evidence it may have been a
wrong decision.
Intuitive decision making is making
decisions on the basis of experience,
feelings, and accumulated judgment.
(See Exhibit 6-7.)
Programmed decisions are repetitive
decisions that can be handled by a
routine approach and are used when
the problem being resolved is
straightforward, familiar, and easily
defined (structured). Nonprogrammed
decisions are unique decisions that
require a custom-made solution and are
used when the problems are new or
unusual and for which information is
ambiguous or incomplete. (See Exhibit
6-8.)
Certainty is a situation when a manager
can make accurate decisions because
all outcomes are known. Risk is a
situation when a manager can estimate
the likelihood of certain outcomes.
Uncertainty is a situation where a
manager is not certain about the
outcomes and can’t even make
reasonable probability estimates.
When decision makers face uncertainty,
their psychological orientation will
determine whether they follow a
maximax choice (maximizing the
maximum possible payoff); a maximin
choice (maximizing the minimum
possible payoff); or a minimax choice
(minimizing the maximum regret—
amount of money that could have been
made if a different decision had been
made).
There are four decision-making styles.
The directive style has a low tolerance
for ambiguity and a rational way of acknowledges both subjective and
thinking. The analytic style has a high objective thinking and blends both
tolerance for ambiguity and a rational analytical and intuitive approaches; (4)
way of thinking. The conceptual style has it requires only “enough” information as
a high tolerance for ambiguity and an is necessary to resolve a problem; (5) it
intuitive way of thinking. The behavioral encourages and guides gathering
style has a low tolerance for ambiguity relevant information and informed
and an intuitive way of thinking. (See opinions; and (6) it’s straightforward,
Exhibit 6-12.) reliable, easy to use, and flexible.
The 12 common decision-making errors The five habits of highly reliable
and biases including: overconfidence, organizations are (1) not being tricked
immediate gratification, anchoring, by their successes; (2) deferring to
selective perception, confirmation, experts on the front line; (3) letting
framing, availability, representation, unexpected circumstances provide the
randomness, sunk costs, self-serving bias, solution; (4) embracing complexity and;
and hindsight. (See Exhibit 6-13.) (5) anticipating, but also anticipating
Managers can avoid the negative effects limits.
of such errors and biases by being aware CHAPTER SUMMARY –
of them and then not doing them. They
should also pay attention to how they do CHAPTER 7
make decisions and the heuristics (rules
of thumb) they actually use. Finally, What Is Planning and Why Do
managers might want to ask those Managers Plan?
around them to help identify weaknesses  Define planning.
in their decision-making style and try to  Differentiate between formal and
improve on them. informal planning.
The managerial decision making model  Describe the purposes of
(see Exhibit 6-14) helps explain how the planning.
decision-making process is used to  Discuss the conclusions from
choose the best alternative(s) either studies of the relationship
through maximizing or satisficing and between planning and
then implement and evaluate the performance.
alternative. It also helps explain what
factors affect the decision-making Planning involves defining the
process including the decision-making organization’s goals, establishing an
approach (rationality, bounded rationality, overall strategy for achieving those
intuition); the types of problems and goals, and developing plans for
decisions (well-structured and organizational work activities.
programmed or unstructured and Formal planning has three
nonprogrammed); the decision-making characteristics: (1) specific goals cover
conditions (certainty, risk, uncertainty); a defined period of years, (2) these
and the decision maker’s style (directive, goals are written and shared with
analytic, conceptual, behavioral). organizational members, and (3)
Decision Making for Today’s World specific action plans exist for achieving
 Explain how managers can make these goals. Informal planning is
effective decisions in today’s world. general and lacks continuity. Also,
 List the six characteristics of an nothing is written down and there is
effective decision-making process. little or no sharing of goals.
 Describe the five habits of highly The four purposes of planning include:
reliable organizations. provides direction, reduces uncertainty,
minimizes waste and redundancy, and
Managers can make effective decisions establishes the goals or standards used
by understanding cultural differences in in controlling.
decision making; knowing when it’s time Conclusions from studies of the
to call it quits; and by using an effective planning-performance relationship
decision-making process. include the following: for the most part,
The six characteristics of an effective formal planning is associated with
decision-making process include (1) it positive financial performance; it’s more
focuses on what’s important; (2) it’s important to do a good job of planning
logical and consistent; (3) it and implementing the plans than having
more and extensive planning done; the
external environment is usually the
reason why companies don’t achieve high
levels of performance even when
planning; and the planning/performance
relationship seems to be influenced by
the planning time frame.
How Do Managers Plan?
 Define goals and plans.
 Describe the types of goals
organizations might have.
 Explain why it’s important to know
an organization’s stated and real
goals.
 Describe each of the different
types of plans.
Goals are desired outcomes. Plans are
documents that outline how goals are
going to be met.
Organizations do have multiple goals.
These goals might be strategic or
financial and they might be stated or real.
It’s important to know the stated and real
goals to help understand what might
appear to be management
inconsistencies.
Strategic plans apply to the entire
organization while operational plans
specify how the overall goals are going to
be achieved. Long-term plans are those
with a time frame beyond three years.
Short-term plans are those covering one
year or less. Specific plans are clearly
defined and leave no room for
interpretation. Directional plans are
flexible and set out general guidelines. A
single-use plan is a one-time plan
designed to meet the needs of a unique
situation. Standing plans are ongoing
plans that provide guidance for activities
performed repeatedly. (See Exhibit 7-2.)
Establishing Goals and Developing
Plans
 Discuss how traditional goal setting
works.
 Explain the concept of the means-
end chain.
 Describe the management by
objectives (MBO) approach.
 Describe the characteristics of well-
designed goals.
 Explain the steps in setting goals.
 Discuss the contingency factors
that affect planning.
 Describe the approaches to
planning.
In traditional goal setting, goals are set
at the top of the organization and then
broken into subgoals for each
organizational level. (See Exhibit 7-4.)
The means-end chain is an integrated
network of goals, which means that
higher-level goals (or ends) are linked to
lower-level goals, which serve as the
means for their accomplishment.
MBO (management by objectives) is a
process of setting mutually-agreed upon
goals and using those goals to evaluate
employee performance. (See Exhibit 7-
5.)
Well-designed goals have six
characteristics: (1) written in terms of
outcomes, (2) measurable and
quantifiable, (3) clear as to time frame,
(4) challenging but attainable, (5)
written down, and (6) communicated to
all organizational members who need to
know them. (See Exhibit 7-6.)
To set goals, follow these steps: review
the organization’s mission; evaluate
available resources; determine the
goals individually or with input from
others; write down the goals and
communicate them to all who need to
know them; and review results and
change goals as needed.
The contingency factors that affect
planning include a manager’s level in
the organization; the degree of
environmental uncertainty; and the
length of future commitments. (See
Exhibit 7-7.)
The two main approaches to planning
include the traditional approach, which
uses a formal planning department and
has plans developed by top managers
that flow down through other
organizational levels. The other
approach is to involve more
organizational members in the planning
process.
Contemporary Issues in Planning
 Explain the criticisms of planning
and whether they’re valid.
 Describe how managers can
effectively plan in today’s
dynamic environment.
The main criticisms of planning are: (1)
planning may create rigidity; (2) plans
can’t be developed for a dynamic
environment; (3) formal plans can’t
replace intuition and creativity; (4)
planning focuses managers’ attention
on today’s competition, not tomorrow’s;
(5) formal planning reinforces success,
which may lead to failure; and (6) just (6) evaluate strategies. (See Exhibit 8-
planning isn’t enough. These criticisms 1.)
are valid if planning is rigid and inflexible. During an internal analysis, managers
Managers can effectively plan in today’s assess the organization’s resources
dynamic environment using plans that (assets) and capabilities (how work is
are specific but flexible. It’s also done). The major value-creating skills
important to “shove” responsibility for and capabilities are the organization’s
establishing goals and developing plans core competencies. Any activities the
to lower organizational levels. organization does well or any unique
CHAPTER SUMMARY – resources it has are its strengths.
Activities the organization doesn’t do
CHAPTER 8 well or resources it needs but doesn’t
have are its weaknesses. During an
The Importance of Strategic external analysis, managers assess the
Management specific and general environments to
 Define strategic management, determine opportunities (positive
strategy, and business model. trends) and threats (negative trends).
 Explain why strategic management Types of Organizational Strategies
is important.  Describe the three major types of
corporate strategies.
Strategic management is what managers  Discuss the BCG matrix and how
do to develop the organization’s it’s used.
strategies. Strategies are the decisions  Describe the role of competitive
and actions that determine the long-run advantage in business strategies.
performance of the organization. A  Explain Porter’s five forces model.
business model is a strategic design for  Describe Porter’s three generic
how a company intends to profit from its competitive strategies and the
strategies, work processes, and work rule of three.
activities.
Strategic management is important for The three major types of corporate
four reasons. First, it makes a difference strategies are growth, stability, and
in how well organizations perform. renewal. (See Exhibit 8-4.) A growth
Second, it’s important for helping strategy is used when an organization
managers cope with continually changing wants to grow its business and does so
situations. Third, strategic management by expanding the number of products
helps coordinate diverse divisions, offered or markets served. The types of
departments, functions, and work growth strategies include concentration,
activities, and keeps all focused on vertical integration (backward and
achieving the organization’s goals. forward), horizontal integration, and
Finally, it’s important because it’s diversification (related and unrelated). A
involved in many of the decisions that stability strategy is when an
managers make. organization stays as it is; that is, it
The Strategic Management Process makes no significant change in what it’s
 List the six steps in the strategic doing. Renewal strategies address
management process. organizational weaknesses that are
 Describe what managers do during leading to performance declines. The
external and internal analyses. two types of renewal strategies are
 Explain the role of resources, retrenchment and turnaround.
capabilities, and core The BCG matrix is a way to analyze a
competencies. company’s portfolio of businesses. The
 Define strengths, weaknesses, analysis is based on a business’s market
opportunities, and threats. share and its industry’s anticipated
growth rate. The four categories of the
The six steps in the strategic BCG matrix are cash cows, stars,
management process are: (1) identify the question marks, and dogs. (See Exhibit
current mission, goals, and strategies; (2) 8-5.)
do an external analysis; (3) do an internal An organization’s competitive
analysis – steps 2 and 3 collectively are advantage is what sets it apart, its
known as SWOT analysis; (4) formulate distinctive edge. A company’s
strategies; (5) implement strategies; and competitive advantage becomes the
basis for choosing an appropriate include deciding their organization’s
business or competitive strategy. innovation emphasis (basic scientific
Porter’s five forces model assesses the research, product development, or
five competitive forces that dictate the process development) and its
rules of competition in an industry. These innovation timing (first mover or
five forces are threat of new entrants, follower). (See Exhibit 8-8.)
threat of substitutes, bargaining power of CHAPTER SUMMARY –
buyers, bargaining power of suppliers,
and current rivalry. (See Exhibit 8-6.) CHAPTER 9
Porter’s three generic competitive
strategies are as follows: cost leadership Techniques for Assessing the
(organization competes on the basis of Environment
having the lowest costs in the industry);  List the different approaches to
differentiation (organization competes on assess the environment.
the basis of having unique products that  Explain what competitor
are widely valued by customers); and intelligence is and ways that
focus (organization competes in a narrow managers can do it legally and
segment with either a cost advantage or ethically.
a differentiation advantage). The rule of  Describe how managers can
three concept explains how, in many improve the effectiveness of
industries, three major players (highly- forecasting.
efficient, full-line generalists) emerge to  Explain the steps in the
dominate the market. An industry also benchmarking process.
has the highly-focused super-niche
players. Any firm that doesn’t fit into one There are three techniques to assess
of these categories is “in the ditch.” the environment including
Strategic Management in Today’s environmental scanning, forecasting,
World and benchmarking.
 Explain why strategic flexibility is Competitor intelligence is a process by
important. which organizations gather information
 Describe e-business strategies. about their competitors. Managers can
 Explain what strategies do it legally and ethically by using such
organizations might use to become methods as scanning advertisements,
more customer oriented and to be promotional materials, press releases,
more innovative. government reports, annual reports,
want ads, newspaper reports; by
Strategic flexibility—that is, the ability to attending trade shows; and by
recognize major external environmental debriefing the company’s sales force.
changes, to quickly commit resources, Managers can improve the effectiveness
and to recognize when a strategic of forecasting in various ways including
decision isn’t working—is important understanding that forecasts are most
because managers oftentimes face highly accurate when the environment is not
uncertain and changing environments. rapidly changing; using simple
(See Exhibit 8-7.) forecasts; involving more people in the
Managers can use e-business strategies process; comparing every forecast with
to reduce costs, to differentiate their a “no change” forecast; using rolling
firm’s products and services, or to target forecasts; using more than one type of
(focus on) specific customer groups or to forecast; and remembering that
lower costs by standardizing certain office forecasting is a skill that can be
functions. Another important e-business practiced and improved. (See Exhibit 9-
strategy is the clicks-and-bricks strategy, 1.)
which combines online and traditional The four steps in the benchmarking
stand-alone locations. process include forming a
Strategies managers can use to become benchmarking planning team to
more customer-oriented include giving determine what needs to be
customers what they want, benchmarked, comparative
communicating effectively with them, and organizations, and data collection
having a culture that emphasizes methods; gathering internal and
customer service. Strategies managers external data; analyzing data to identify
can use to become more innovative performance gaps; and preparing and
implementing an action plan. (See Exhibit Project management is the task of
9-2.) getting a project’s activities done on
Techniques for Allocating Resources time, within budget, and according to
 List the four techniques for specifications. The steps in the project
allocating resources. planning process include defining
 Describe the different types of objectives; identifying activities and
budgets. resources; establishing sequences;
 Explain what a Gantt chart and a estimating time for activities;
load chart do. determining project completion date;
 Describe how PERT network comparing with objectives; and
analysis works. determining additional resource
requirements. (See Exhibit 9-13.)
 Understand how to compute a
Scenario planning is important because
breakeven point.
managers can use it to play out
 Describe how managers can use
potential situations under different
linear programming.
environmental conditions.
The four techniques for allocating
resources include budgeting, scheduling,
breakeven analysis, and linear
programming.
Budgets can either be variable or fixed.
Also, managers might use cash, revenue,
expense, or profit budgets. (See Exhibit 9-
4.)
A Gantt chart is a scheduling chart that
shows actual and planned output over a
period of time. A load chart is a modified
Gantt chart that schedules capacity by
entire departments or specific resources.
(See Exhibit 9-5 and 9-6.)
PERT network analysis is useful for large,
complex projects because it depicts the
sequence of activities needed to
complete the project and the time or cost
associated with each. (See Exhibits 9-7,
9-8, and 9-9.)
The breakeven point is calculated by
dividing total fixed costs by the price per
unit minus the variable cost per unit. (See
Exhibit 9-10.)
Managers can use linear programming to
help solve resource allocation problems
as it shows the optimum way to combine
resources to produce a certain number of
outputs. (See Exhibits 9-11 and 9-12.)
Contemporary Planning Techniques
 Explain why flexibility is so
important to today’s planning
techniques.
 Describe project management.
 List the steps in the project
planning process.
 Discuss why scenario planning is
an important planning tool.

Flexibility is important to today’s planning

techniques because the environment can
be both dynamic and complex.