Midterm

Management Case Study

MODULE I : The Environmental Management
Lesson One. The Environment and Corporate Culture

Overall environmental factors are considered when creating and operating a

business. Managers must consider both internal and external environments,
which are often intertwined.
These elements dictate how the manager will bring firmness, commodity, and
delight into harmony. The environment is tied to the creative culture.

The External Environment

The tremendous and far-reaching changes occurring in today's world can be
understood by defining and examining components of the external environment.

1. External organizational environment includes all elements existing outside

the organization's boundaries that have the potential to affect the organization.
The environment includes competitors, resources, technology, and economic
conditions that influence the organization.
2. The general environment is the outer layer that is widely dispersed and
affects organizations indirectly. It includes social, demographic, and
economic factors that influence all organizations about equally.
3. The task environment is closer to the organization and includes the sectors
that conduct day-to-day transactions with the organization and directly
influence its basic operations and performance. It is generally considered to
include competitors, suppliers, and customers.
4. The internal environment which includes the elements within the
organization's boundaries. The internal environment is composed of current
employees, management, and especially corporate culture, which defines
employee behavior in the internal environment and how well the
organizations will adapt to the external environment.

The general environment includes international, technological,

sociocultural, economic, and legal-political
1. International dimension - portion of the external environment that
represents events originating in foreign countries as well as opportunities for
U.S. companies in other countries.
2. Technological dimension - the dimension of the general environment that
includes scientific and technological advancements in the industry and society
at large.
3. Sociocultural dimension - the dimension of the general environment
representing demographic characteristics, norms, customs, and values of the
population within which the organization operates.
 4. Economic dimension - the dimension of the general environment
representing he overall economic health of the country or region in which the
organization operates.
5. Legal-political dimension - the dimension of the general environment that
includes federal, state, and local government regulations and political
activities designed to Influence company behavior.

The task environment includes those sectors that that have direct working
relationship with the organization, among them customers, competitors,
suppliers, and the labor market.

1. Customers people and organization in the environment who acquire goods

and services from the organization.
2. Competitors other organization in the same industry or type of business that
provide goods and services to the same set of customers.
3. Suppliers-people and organizations who provide the raw materials the
organization uses to produce its output.
4. Labor market-the people available for hire by the organization.

The internal environment includes corporate culture, production

technology, organization structure, and physical facilities. Most people don't
think about culture, it's just "how we do things around here" or "the way things
are here." A corporate culture is an important part of the internal organizational
environment and includes he key values, beliefs, understandings and norms that
organization members share. Managers can use symbols, stories, heroes, slogans
and cultural leadership to engage adaptable values that will help the company to
move fast in response to new opportunities.
Lesson Two. Ethics and Social Responsibility

Ethics is the code of moral principles and values that governs the behaviors
of a person or group with respect to what is right or wrong. Ethical dilemma a
situation that arises when all alternative choices or behaviors are deemed
undesirable because of potentially negative consequences, making it difficult to
distinguish right from wrong.

Criteria for ethical decision making. Most ethical dilemmas involve a

conflict between the needs of the part and the whole the individual versus the
organization or the organization versus society as a whole. Managers faced with
these kinds of tough ethical choices often benefit from a normative strategy one
based on norms and values to guide their decision making. Normative ethics uses
several approaches to describe values for guiding ethical decision making. Four
of these approaches that are relevant to managers are the utilitarian approach,
individualism approach, moral-rights approach, and justice approach.

1. Utilitarian approach the ethical concept that moral behaviors produce the
greatest good for the greatest number.
2. Individualism approach the ethical concept that acts are moral when they
promote the individual's best long-term interests, which ultimately leads to the
greater good.
3. Moral-rights approach the ethical concept that moral decisions are those
that best maintain the rights of those people affected by them.
4. Justice approach - the ethical concept that moral decision must be based on
standards of equity, fairness, and impartiality.

Factors affecting Ethical Choices.

1. The Manager - managers bring specific personality and behavioral traits to the
job. Personal needs, family influence, and religious background all shape a
manager's value system. Specific personality characteristics, such as ego
strength, self-confidence, and a strong sense of independence, may enable
managers to make ethical decisions.
2. The Organization - the values adopted within the organization are highly
important, especially when we understand that most people are at the level-two
stage of moral development, which means they believe their duty is to fulfill
obligations and expectation of others. It's a reminder that all of our ethical
decisions are made within the context of interactions with other people. The
social networks within an organization play an important role in guiding people's
actions. In organizations, the norms and values of the team, department, or
organization as a whole have a profound influence on ethical behavior.
What is social Responsibility?
Corporate social responsibility the obligation of organization management
to make decisions and take actions that will enhance the welfare and interests of
society as well as the organization.
Stakeholder is any group within or outside the organization that has a stake in the
organization's performance.

Evaluating Corporate Social Responsibility

1. Economic its responsibility is to produce the goods and services that society
wants and to maximize profits for its owners and shareholders.
2. Legal defines what the society deems as important with respect to appropriate
corporate behavior.
3. Ethical - includes behaviors that are not necessarily codified into law and may
not serve the corporation's direct economic interests.
4. Discretionary is purely voluntary and is guided by a company's desire to
make social contributions not mandated by economics, law, or ethics.

Managing Company Ethics and Social Responsibility

1. Ethical individuals - these individuals possess honesty and integrity, which is
reflected in their behavior and decisions.
2. Ethical leadership - these leaders articulate the desired ethical values and help
others embody and reflect those values.
3. Organizational structures and systems
a. Code of ethics is a formal statement of the organization's values
regarding ethics and social issues.
b. Ethical structures represent the various systems, positions, and
programs a company can undertake to implement ethical behavior.
c. Whistle-blowing the disclosure by an employee of illegal, immoral, or
illegitimate practices by the organization.

Ethical challenges in turbulent times

The business case for ethics and social responsibility
As scandals rocked the corporate world, they prompted new demands from
government legislators, stockholders, management experts, and the general
public.
 Beyond maintaining high ethical standards, top managers at a growing
number of companies recognize how to target their social responsibility
efforts in ways that also benefit the business.
 These efforts make good business sense at the same time they build the image
of these companies as good corporate citizens.
 Economic performance
 One concern of managers ins whether good citizenship will hurt
performance-after all, ethics programs and social responsibility cost money. A
number of studies, undertaken to determine whether heightened ethical and
social responsiveness increases or decreases financial performance, provided
varying results but generally found a small positive relationship between
social responsibility and financial performance.
Lesson Three. Managing Small Business Start-Ups

Many people dream of starting their own business. Some, decide to start a
business because they're inspired by a great idea or want the flexibility that
comes from being self-employed. Others decide to into business from themselves
after they get laid off or find their opportunities limited in big companies. Interest
in entrepreneurship and small business is at all-time high. Entrepreneurs have
access to business incubators, support networks, and online training courses.
Today, the fastest growing segment of small business is in one-owner operations,
or sole proprietorships.

Entrepreneurship is the process of initiating a business venture, organizing

the necessary resources, and assuming the associated risks and rewards.
Entrepreneur is someone who recognizes a viable idea for a business product or
service and carries it out.
Small business is considered to be "one that is independently owned and
operated and which is not dominant in its field of operation."

Characteristics of personality traits such as:

 Internal locus control - is the belief by individuals that their future is within
their control and that external forces have little influence. External locus of
control - is the belief by individuals that their future is not within their control
but rather is Influenced by external forces.
 High energy level - they persist and work incredibly hard despite traumas and
obstacles.
 Need to achieve - is a human quality linked to entrepreneurship in which
people are motivated to excel and pick situations in which success is likely.
 Self-confidence - they need confidence about their ability to master the day-
to-day tasks of the business.
 Awareness of passing time - they want things to progress as if there is no
tomorrow.
 Tolerance for ambiguity - is the psychological characteristic that allows a
person to be untroubled by disorder and uncertainty.

Tactics for becoming a Business Owner

a. Start a new business - this approach is exciting because the entrepreneur sees
a need for a product or service that has not been filled before and the sees the
idea or dream become a reality.
b. Buy and existing business - this direction offers the advantage of a shorter
time to get started and an existing track record.
c. Buy a Franchise is perhaps the most rapidly growing path to
entrepreneurship.
d. Participate in a business incubator - an innovation that provides shared office
space, management support services, and management advice to
entrepreneurs.

Managing a growing business. Stages of growth such as:

a. Start-up - producing the product or service and obtaining customers
b. Survival - business demonstrates that it is a workable business entity
c. Success - the company is solidly based and profitable.
d. Takeoff - key problem is how to grow rapidly and finance that growth.
e. Resource maturity - the company's substantial financial gains may come at the
cost of losing its advantages of small size.
Lesson Four. Strategy Formulation and Implementation

Every company is concerned with strategy. Top managers are analyzing the
situation and considering strategies that can ignite growth and revive the
company.

Strategic management - is a set of decisions and actions used to formulate and

implement strategies that will provide a competitively superior fit between the
organization and its environment so as to achieve organizational goals.

Grand strategy - is the general plan of major action by which a firm intends to
achieve its long-term goals. Three categories:
1. Growth can be promoted internally by investing in expansion or externally by
acquiring additional business divisions.
2. Stability sometimes called a pause strategy, means that the organization wants
to remain the same size or grow slowly and in controlled fashion.
3. Retrenchment - means that the organization goes through a period of forced
decline by either shrinking current business units or selling off or liquidating
entire businesses.

Globalization is the standardization of product design and advertising strategies

throughout the world.

Multidomestic strategy is the modification of product design and advertising

strategies to suit the specific needs of individual countries.

Transnational strategy - a strategy that combines global coordination to attain

efficiency with flexibility to meet specific needs in various countries.

Strategy is the plan of action that prescribes resource allocation and other
activities for dealing with the environment, achieving a competitive advantage,
and attaining organizational goals.

Competitive advantage - what sets the organization apart from others and
provides it with a distinctive edge in the marketplace.

Core competence - a business activity that an organization does particularly well

in comparison to competitors.
Synergy is the condition that exists when the organization's parts interact to
produce a joint effect that is greater than the sum of the parts acting alone.
Corporate level strategy is the level of strategy concerned with the question
"What business are we in?" Pertains to the organization as a whole and the
combination of business units and product lines that make it up.

Business level strategy - is the level of strategy concerned with the question
"How do we compete?" Pertains to each business unit or product line within the
organization.

Functional level strategy is the level of strategy concerned with the question
"How do we support the business-level strategy?" Pertains to all of the
organization's major departments.

Strategy formulation - the stage of strategic management that involves the

planning and decision making that lead to the establishment of the organization's
goals and of a specific strategic plan.

Strategy implementation - the stage of strategic management that involves the

use of managerial and organizational tools to direct resources toward achieving
strategic outcomes.

Situation Analysis - analysis of the strengths, weaknesses, opportunities, and

threats (SWOT) that affect organizational performance.

 strengths-are positive internal characteristics that the organization can exploit

to achieve its strategic performance goals.

 Weaknesses are internal characteristics that might inhibit or restrict the

organization's performance.

 Threats are characteristics of the external environment that may prevent the
organization from achieving its strategic goals.

 Opportunities - are characteristics of the external environment that have the

potential to help the organization achieve or exceed its strategic goals.

Formulating Corporate-level strategy.

Strategic business unit (SBU) - a division of the organization that has a unique
business mission, product line, competitors, and markets relative to other SBUs
in the same operation.
Portfolio strategy - the organization's mix of strategic business units and product
lines that fit together in such a way as to provide the corporation with synergy
and competitive advantage.

BCG matrix - a concept developed by the Boston Consulting Group that

evaluates strategic business units with respect to the dimensions of business
growth rate and market share.

 Stars-rapid growth and expansion

 Questions marks - new ventures. Risky a few become stars, others are
divested.
 Cash cows - milk to finance question marks and start.
 Dogs - No investment. Keep if some profit. Consider divestment.

Formulating business-level strategy

Porter's competitive forces and strategies
1. Potential new entrants - capital requirements and economies of scale are
examples 1
2. Bargaining power of buyers - informed customers become empowered
customers.
3. Bargaining power of suppliers - the concentration of suppliers and the
availability of substitute suppliers are significant factors in determining
supplier power.
4. Threat of substitute products maybe affected changes in cost or in trends such
as increased health consciousness that will deflect buyer loyalty.
5. Rivalry among competitors - rivalry among competitors is influenced by the
preceding forces.

Competitive strategies.
1. Differentiation - distinguish the firm's product or service
2. Cost leadership - right cost controls to produce products more efficiently than
competitors.
3. Focus - the organization concentrates on a specific regional market or buyer
group.