SESSION 2-10 Developing a business mindset _session 2 Understanding what business do 1. What is a firm? A business, a profit-seeking organization that provides goods and services to satisfy customers’ needs, they generate value They have: • Business model= a description of how a company intends to generate revenue • Revenue= money a company brings in through the sale of goods and services • Profit= money left over after all the costs involved in doing business have been deducted from revenue (is an accounting term) About the market they operate in: • Competitive advantage: -= some aspect of a product of a company that makes it more appealing to the customers -this translate in a higher financial performance -it’s a low probability event, only the winning company has got it • Barrier to entry= any resource or capability a company must have before it can start to compete in a given market (usually higher for good-producing business) 2. Different kinds of firms: Goods-producing business= companies that create value by making “things” which can be either tangible (bread, bikes) or intangible (music and services) Service business= companies that create value by performing activities that deliver some benefit to customers Restaurants are both 3. The purpose of profit organizations which are not making profit is to reinvest it all so that they may grow and make more profit soon (most start-ups) 4. Non-for-profit organizations= organizations that provide goods and services without having a profit motive usually lead by the desire to have a strong impact on a social issue all the profit they make are being reinvested Making the leap from Buyer to Seller Businesses can either have: 1. A positive effect on society: Offering valuable goods and services Providing employment Paying taxes Contribution to national growth, stability and security 2. A negative effect on society: Generating pollution and creating waste Disrupting communities Causing financial instability (when managers are irresponsible) Recognizing the multiple environments of business 1. Social environment: = trends and forces in a society at large companies are affected by and have an impact themselves on the environment they operate in (ex: Covid-19) 2. Stake holders= internal and external groups affected by a company’s decisions and activities 3. Technological environment: = forces resulting from the practical application of science to innovations the life cycle of companies is becoming shorter due to these ground-breaking technologies that could often be disruptive 4. Economic environment= the conditions and the forces that affect the cost and availability of goods, services and thereby shape the behaviour of buyers and sellers 5. Legal and regulatory environment= laws and regulations at local, national, and even international levels 6. Market environment= a company’s target customers and competitors that market similar products to those customer Identifying the major functional areas in a business enterprise Every company, depending on the market they work in, may have different functional areas 1. Research and development create the goods and services of the company for the customers 2. Manufacturing (=production= operations) is the part of the firm that makes whatever services it performs 3. The marketing groups are responsible for identifying market opportunities, crafting promotional strategies and making sure customers are satisfied (they are responsible for customer’s engagement) 4. Finance (dealing with money, they tell the rest of the company how much money they need to cope with the close future) and accounting (dealing with numbers, they keep trace of everything) plan for the company’s financial needs, control spending and reports on financial matters. They include CEO, board of directors and CEO. 5. Human resources hire employees and supports them The “Pros”’s attitude 1. Be the best 2. Be dependable 3. Be a team player 4. Be respectful 5. Be clear 6. Be ethical Forms of ownership_ session 3 Sole proprietorships 1. = a business owned by a single person 2. Advantages: Simplicity: easy to establish, the only legal requirement is obtaining the necessary business licenses Single layer of taxation: the profits of the firm are the owner’s one, thus, they’re treated as personal income and taxed accordingly Privacy: sole proprietorships aren’t usually required to report anything to anyone Flexibility and control: as a sole proprietor you can make your own decisions Fewer limitations on personal income: as a sole proprietor you keep all the profits Personal satisfaction 3. Disadvantages: Financial liability: a legal condition under which any damages or debts incurred by a business are the owner’s personal responsibility Demands on the owner Limited managerial perspective Resource limitations: sole proprietorships usually have fewer financial resources No employee benefits for the owner Finite life span: in most cases the death or withdrawn of the owner is the end of the company Partnerships 1. = a company owned by two or more people There are 4 different kinds of partnerships: • General partnerships: all partners have joint authority to make decisions for the firm and share liability • Limited partnerships: one or more persons act as general partners who run the business and have the same unlimited liability as sole proprietors. The remaining owners are called limited partners and the maximum amount they are liable for is whatever amount each invested in the business: they have limited liability. • Master limited partnerships (MLP): a partnership that is allowed to raise money by selling units of ownerships to the general public • Limited liability partnership (LLP): a partnership in which each partner has unlimited liability only for his actions and at least some degree of limited liability for the partnership as a whole 2. Advantages: Simplicity: as easy as establishing a sole proprietorship Single layer of taxation: income tax is straightforward for partnerships More resources because there are more owners Broader skills and experience base Longevity 3. Disadvantages: Unlimited liability Potential for conflict Expansion, succession and termination issues: to prevent disagreements, it is useful to write a partnership agreement Corporations 1. = a legal entity, that has the power to own property and conduct business Shareholders = investors who purchase shares of stock in a corporation 2 kinds of corporations: • Private= all stocks are owned by a few individuals or companies and are not available to the public • Public= stocks are sold to anyone who has the means to buy them 3 types of corporations: • S corporation= combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnerships • Limited liability company (LLC)= combines limited liability with the pass-through taxation benefits of a partnership • Benefit corporation= a profit seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit 2. Advantages: Ability to raise capital Liquidity: the stock of publicly traded companies has a high degree of liquidity (the investors can turn the stock into cash quickly) Longevity Limited liability faced by type shareholders (their maximum potential loss is only as great as the amount they’ve invested in) 3. Disadvantages: Cost and Complexity: making a company public can be very time-consuming and expensive for upper managers Reporting requirements by the Possible loss of control, if public: outside investors can acquire a lot of power Double taxation: both the corporation and the shareholders have to pay taxes Corporate Governance 1. Definition= involves all the policies and relationships to oversee the successful and legal operation of the enterprise. More narrowly it refers to the responsibilities and performance of the board of directors 2. Shareholders own the business and elect the boards of directors, who approve overall strategy and hire corporate officers (highest one is the CEO) who run the company and hire employees 3. Proxy= a document that authorizes someone to vote on the behalf of a shareholder Mergers and Acquisitions 1. Business can combine permanently through mergers or acquisitions: Merger * can be: - vertical (if a company is larger than the other one) -horizontal (the firms have the same size) * = an action taken by two companies to become a single entity * advantages: -increase buying power -increase revenue by combining cross-selling products to each other customers *disadvantages: difficulty of agreeing on the merger’s procedures Acquisition: • =an action taken by one company to acquire another firm by buying a large part of their shares • 2 kinds of acquisition: - hostile takeover= acquisition of another company against the wishes of the management. This can be a tender offer (=where the buyer offers to buy the stocks at a very high price, and then changes the management) or a proxy fight (=where the raider launches a public relations fight for shareholders votes) -leveraged buyout: acquisition of a company publicly traded stocks with the intent of using some of the assets acquired to pay back the loans used to acquire the company 2. The obstacles for these operations are multiple: coming up with the money deciding which manager will be in charge reconciling information systems meshing different corporate cultures Strategic Alliances and Join Ventures 1. Strategic alliances: = a long-term partnership between companies to develop produce or sell products together can accomplish similar goals of the merger part but with less risk 2. Joint venture= a separated legal entity established by 2 or more companies to pursue shared business objectives Understanding basic economics_session 4 What is economy? 1. Economy= the total of all the economic activity within a given region 2. Economics: = the study of how society uses its scarce resources to produce goods and services Microeconomics= the study of how consumers and businesses determine the quantity of goods and services demanded and supplied at different prices Macroeconomics= the study of “big-picture” issues in an economy (competitive behavior among firms, the effect of government policies and overall resource allocation issues) 3. Every good or service is produced from a combination of the 5 factors of production: Knowledge= the collective experience of an organization Human resources= people who work in an organization Capital= factories, tools, machinery, systems, and money Natural resources Entrepreneurship= innovation and willingness to take risks 4. What shapes the market? Scarcity: • is crucial as it creates competition (connection risk-reward) • Scarcity= a condition of any productive resource that has finite supply Trade off: • = balancing opportunities • Opportunity cost= the value of the most appealing alternative not chosen Economic systems 1. Economic systems are categorized as free- markets or as planned systems, though every country combines aspects of both approaches: Economic systems= the policies that define a society’s economic structure Free- markets: • =economic systems in which decisions about production are made by buyers and sellers • Ex= Capitalism= economic system based on economic freedom and competition Planned systems: • = economic systems in which the government controls production and regulates the allocation • Ex= Socialism= economic system characterized by public ownership combined with private ownership (between capitalism and communism) 2. Government can change the structure of the economy by: Nationalizing= a government’s takeover of selected companies or industries Privatizing= turning over government’s services to private businesses The forces of demand and supply At the heart of every business transaction is an exchange between a buyer and a seller 1. Demand: =buyer’s willingness to purchase products at various price points Demand curve: 2. • = a graph of the quantities of a product that buyers will purchase at various prices • Usually slope downward: as prices drop, more people are willing to buy Supply: = quantity of a product that the seller is willing to provide at various prices Supply curve: • = a graph of the quantities of a product that sellers will offer for sale at various prices • Usually slope upward: as prices rise, the quantity that sellers are willing to supply also rises 3. Equilibrium point: = the point at which quantity supplied equals quantity demanded intersection of the two curves The macro view: understanding how an economy operates 1. Competition= rivalry among businesses for the same customers 2. Different forms of competitions: Pure competition= when so many buyers and sellers exist that nobody individually influence market prices (buyer’s choices: extensive) Monopoly= when one company dominates a market so much that it sets prices (buyer’s choices: none) Monopolistic competition= when many sellers differentiate their products from those of the competitors somehow (buyer’s choices: extensive) Oligopoly= when a small number of suppliers, provide the same product (buyer’s choices: limited) 3. Business cycles: = fluctuations in the rate of growth that an economy experiences over a certain period example= recession= when national income, employment, and production all fall (at least for 6 months) Government’s role in a free-market system 1. The debate for government’s role is a question of regulation vs. deregulation: Regulation= relying more on laws and policies than on market forces to govern economic activity Deregulation= removing regulations to allow the market to prevent excesses and correct itself over time 2. To balance the interests of stake holders and protect those who might be adversely affected by businesses, governments has regulatory agencies and polices: through these they can encourage specific kinds of economic activity they also have 2 tools to stabilize or to stimulate national economy: • Monetary police= government’s policies to regulate the nation’s money and supply (such as taxes) • Fiscal policy= use of government revenue to influence the business cycles Economic measures and monitors 1. Economic activity is monitored through the economic indicators (=statistics), some examples are the leading indicators (= changes that may happen to the economy in the future) or the lagging (= confirmation that something has happened) 2. The main indicators are: Price indexes: • Consumer price index (CPI)= a monthly statistic that measures changes in prices of a bunch of consumer goods and services • Producer price index (PPI)= a statistical measure of price trends for the seller to produce Gross domestic product (GDP)= the value of all the final products of national businesses; excludes outputs from overseas operations Unemployment rate= the portion of labor force currently without one Inflation= an economic condition in which prices rise steadily through economy Deflation= an economic condition in which prices fall steadily throughout the economy The global marketplace & The money supply and banking systems_ session 5 Fundamentals of international trade 1. A result of international commerce is economic globalization= the integration and interdependence of national economies around the world 2. Six reasons for a company to trade internationally: Focusing on relative strengths= comparative advantage (a company’s better at doing something than other countries) Expanding markets Pursuing economies of scale (less production costs) Keeping up with the competitors (they need to expand because they’re competitors are doing so) 3. There are 2 measures of a nation level of international trade: Balance of trade: • = total value of the products a nation exports minus the total value of the products it imports, over a set period of time • Trade surplus= when a country exports more than it imports • Trade deficit= when a country imports more than it exports Balance of payment= the sum of all the payments one nation receives from other nations minus the sum of all payments it makes to other nation, over a set period of time 4. In international trade: companies exchange currencies= foreign trade exchange rate= the rate at which the money of one country is traded for the money of another Conflicts in international trade 1. Free trade: = international trade unencumbered by restrictive measures Pros: best way to ensure prosperity for everyone Cons: unfair too many people and threatens the middle class 2. A government can enforce protectionism (=policies aimed at shielding a country’s industries from foreign competition) by: tariffs= taxing products quotas: limit the quantity of an imported good embargo: complete ban on export or import of a particular good restrictive import standards (requiring certain licenses and so on) export subsidies: a form of financial assistance where producers will receive enough money from the government to allow them to lower their prices antidumping measures= to prevent selling products to a price that is under the price of production sanctions= International trade organizations 1. Organizations facilitating international trade: The world trade organization (=WTO): mediates trade disputes among its 160 members The international monetary fund (=IMF): fosters financial cooperation and increases the stability of the international economy The world bank: UN agency whose primary goals is having an impact on social and environmental issues European Central bank (=ECB), controls the amount of money available on the market 2. Trading blocs (=organizations of nations that remove barriers to trade among their members): North American Free Trade Agreement The European Union The Asia-Pacific Economic Cooperation The Trans- Pacific Partnership The global business environment 1. Understanding cultural and legal differences is an essential step to trade internationally 2. About culture: = a shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior stereotyping= assigning a wide range of superficial attributes to an individual because of its origins tips on communicating with people from another country: • Be alert of the other person’s custom • Deal with the individual • Adapt your style to the other person’s 3. Difference on legal systems: Common law= tradition customs and judicial interpretation play an important role Civil law= legal parameters are specified in detailed legal codes Theocratic law= law based on religious principles 4. Tax heaven= a country whose favorable banking laws and low tax rates makes it appealing for firms to deposit their money there Forms of international business activity There are 5 main forms of international business: 1. Importing and exporting= buying and selling goods across the borders 2. International licensing= licensing intellectual property 3. International franchising= selling the rights to use an entire business system including the brand name and international processes 4. International strategic alliances and join ventures= forming a long-term business partnership with a local company in a new 5. Foreign direct investment= buying an established company or launching a new company in another country Strategic approaches to international markets 1. The considerations before going global can bring to: Multidomestic strategy= a decentralized approach to international expansion in which a company creates highly independent operating units in each new country Global strategy= a highly centralized approach to international expansion, with headquarters in the home country making all major decisions Transnational strategy= hybrid approach that attempts to reap the benefits of international scale while being responsible to global markets dynamics 2. The most important decisions involve: products customer support promotion pricing staffing The money supply 1. Money= anything accepted as a means of paying for goods and services 2. 4 financial functions. Unit of accounting Medium of exchange Store of value Deferred payment 3. The value consists of 2 key properties: liquidity and trust 4. Money supply= the amount of money in circulation at any given point in time The federal reserve and other federal financial institutions 1. The federal reserve= the central banking system of the US, is responsible for regulating banks and implementing monetary policy 2. His work is divided into 3 main categories: serving as a bank for the federal government and several commercial banks supervising and regulating many financial institutions managing and implementing monetary policy 3. Fed’s influence is exerted through the federal funds rate (= the interest rate that member banks charge each other to borrow money overnight from the funds they keep in the federal reserve accounts) 4. To acquire a certain target (=interest rate) he pushes the federal funds rate as close to it as possible by: buying and selling treasury bills (this inject money into the economy) adjusting reserve requirements (all deposit institutions are required to hold a portion of those deposit in reserve) lending through the discount window (is a process for making short-term loans to depositary institutions when they are unable to get funds) 5. Discount rate= the interest rate that member banks pay when they borrow funds from Prime rate= the interest rate a bank charges its best loan customers Investment banking 1. Investment banks= firms that offer a variety of services related to initial public stock offerings, mergers and acquisitions, and other investments matters 2. 3 major types of investment banks: Global= full palette of services with global reach Regional=full service but with limited geographic area Boutique= specializing in specific industries or functions Commercial banking and other financial services 1. Commercial banks: = banks that accept deposits, offer various checking and savings accounts and provide loans major types: • Retail banks= banks that accept deposits and provide loans • Merchants banks= banks that provide financial services to businesses • Thrift banks (=thrifts= saving and loans association) = banking institutions that offer deposit accounts and focus on offering home mortgage loans • Credit unions= not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses • Private banking= banking services for wealthy individuals and families 2. Other than commercial banks, other types of firms provide essential financial services to consumers and businesses: Independent mortgage companies= nonbank companies that use their own funds to offer mortgages Mortgage companies= nonbank companies that initiate loans on behalf of a mortgage lender in exchange for a fee Finance companies= nonbank institutions that lend money to consumers and businesses Credit rating agencies= companies that offer opinions about the creditworthiness of borrowers and of specific investments Banking’s role in the great recession 1. Banks and other financial companies: provide vital resources for consumers, businesses and governments because of their persuasive presence that problems in the financial sector can spread across the economy 2. Bubble: = a market situation in which frenzied demand for an asset pushes the price of that asset far beyond its true economic value Important definitions: • Subprime mortgages= home loans for borrowers with low credit scores • Loan-to-value (LTV)= the percentage of an asset’s market value that a lender is willing to finance when offering a loan; the rest of the purchase price has to be paid by the buyer as a down payment • Adjustable rate mortgage (ARM)= a mortgage that features variable interests’ rates over the life of the loan • Securitization= a process in which debts are pooled together and transformed into investments • Mortgage-backed securities (MBSs)= credit derivatives based on home mortgages • Defaults= when borrowers stop paying their loans • Foreclosures= when lenders take possession of homes after borrowers default on their mortgage payments • Liquidity crisis= a severe shortage of liquidity • Credit freeze= when credit has become so scarce that it is virtually unavailable Efforts to regulate and reform the banking industry The most significant piece of legislation to date is the Dodd-Frank Act of 2010, whose major provisions where: 1. Monitoring for systemic risk in the financial sector 2. Protecting consumers from unfair banking practices 3. Providing closer scrutiny of the derivates market 4. Ending taxpayer bailouts of companies deemed “too big to fail” 5. Enacting tougher regulation of credit rating agencies Management role, functions and skills_ session 6 The roles of management 1. Management= the process of planning, organizing, leading, and controlling to meet organizational goals 2. The main managerial roles are: Interpersonal= interacting with people Informational= receiving and sharing information Decisional= making decisions The planning functions 1. Planning= establishing objectives for an organization and determining how to accomplish them 2. Strategic plans: = plans that establish the actions to accomplish goals consist of 6 steps: • Define mission, vision and values (those principles are articulated into 3 statement): - Mission statement= what does the organization aim to accomplish for customers, investors and stakeholders? - Vison statement= what does the company aspires to be? - Values statement= articulation of the principles that guide the company’s decisions and behaviors • Perform SWOT analysis: - Strengths= positive internal factors that contribute to the firm’s success - Weaknesses= negative internal factors that inhibit to the firm’s success - Opportunities= new possibilities to generate revenue - Threats= forces that prevent the firm from reaching its objectives • Develop forecasts, these are divided into: - Quantitative forecasts= based on historical data or tests - Qualitative forecasts= based or intuitive judgments • Analyze the competition: check the competitor’s situation in relation to my firm • Establish goals (=a broad and long-range target) and objectives (=short-range targets) in a smart way (Specific, Measurable, Attainable, Relevant, Time limited) • Develop action plans to reach the goals and objectives previously established The organizing function 1. Organizing= arranging resources to carry out the firm’s plan 2. Management pyramid (= organizational structure): Top managers: responsible for setting strategic goals, and have the most power and responsibility in the organization Middle managers: they develop plans to implement the goals of top managers and coordinate the work of first-line managers, they’re managers or functional areas, of divisions First-line management: they supervise the operating employees and implement the plans set at the highest management levels The leading function 1. Good leaders must possess: Cognitive intelligence= involves rational skills Emotional intelligence= awareness of and ability to manage the emotions Social intelligence= understanding the dynamics of social situations and of the emotions of other people 2. There are 3 main leadership styles: Autocratic leadership= the leader does not involve others in decision making Democratic leadership (=participative management)= the leader delegate authority Laissez-faire leadership= the leader leaves most decisions to the employees (employee empowerment) 3. Coaching= helping employees reach their maximum potential 4. Mentoring= experienced leaders guiding less-experienced leaders (close relationship) 5. Managing change: Identify everything that needs to change Identify the forces acting for and against change Choose the best approach to enforce those changes The controlling function 1. = measuring process and correcting with deviations 2. Control cycle: establish performance standards based on the strategic plan measuring performance compering performance to standards (way to measure the road done, to set them is useful to benchmark= check for other companies’ data) responding as needed 3. Crisis management= ability to respond to crisis Essential management skills- decision making skills 1. Recognize and define the situation 2. Options: Identify them Analyze them Select the best one 3. Implement the decision 4. Monitor and evaluate the results Business and corporate strategy_ session 7 Growth strategies 1. Market penetration: increase market share in the existing markets using you existing products Low risk as it relies on the organization existing resources 2. Market development: entering new markets (new segments or new geographical areas) with existing products 3. Product development: developing new products to sell in your existing markets high risk and expensive as there’s no guarantee the consumers will adopt the new product 4. Diversification: developing new products to serve new markets high risk but necessary when the company’s experiencing low growths 2 kinds: • Related diversification: - = refers to entering a related industry in which there is still some link with the organization’s value chain - can be separated into: Vertical integration: + = when an organization moves towards the input or toward the consumer + The organization needs to ask whether the value derives from owning the asset or from outsourcing its use Horizontal integration= when a firm takes over a competitor or offer complementary products - transaction cost analysis provides a rational for firms to understand whether to integrate vertically or not (when transaction costs >> administrative costs) • Unrelated diversification: - when a company moves into a totally unrelated industry - good idea when current markets are saturated or declining or to diversify the risk (not having all eggs in a basket) Implementing Growth strategies 1. Forms of union among company: merger= When 2 organizations join together to share their combined resources acquisition • = occurs when an organization seeks to acquire a smaller firm • 3 criteria to increase shareholder value: - attractiveness - cost of entry -competitive advantage or better off= a firm should consider organization only if synergy can be achieved Join venture= when 2 organizations form a separate independent company in which they own shares equally Strategic alliances= when 2 or more separate organizations share some of their resources and capabilities to stop short of forming a separate organization 2. Portfolio analysis: =the different business units a organization posses allows the organization to assess the competitive position and identifying the rate of return it is receiving from various business units SBUS: • Question marks: high growth- high share • Dogs: low growth- low share • Cash cows: low growth- high share • Stars: high growth- low share Power point presentation tips Watch out for: size correlation for letters titles spread information evenly on all the parts of the slide back up information with data, tabs and charts to add credibility underline words, use bold and italics to highlight concepts know everything about your presentation do not write long texts, give short and clear pieces of information make sure to organize the information in the slide (top left to top right to bottom left to top right) Organization and Teamwork_ session 7 Designing an effective organization structure 1. Generals: organization structure= framework that enables managers to divide responsibilities, ensure employee accountability, and distribute decision-making authority organization chart • = diagram that shows how employees and tasks are grouped and the lines of authority • 2 kinds of organization: - Formal organization= achieving goals - Informal organization= network of interactions on a personal level among workers agile organization: a company whose structure, policies and capabilities allow employees to respond quickly to customer needs and changes in the business environment 2. Identifying core competencies: companies need to identify which business functions they should focus on and which they should outsource core competencies: company’ activities vital to its business 3. Identifying job responsibilities: after identifying its competencies, each firm decides how to deliver them work specialization= division of labor= specialization in on or responsibility for some portion of an organization’s overall work tasks 4. Defining the chain of command: chain of command= pathway for the flow of authority from one management level to the next all employees have: • Responsibility: the obligation to performing their duties • Accountability their obligation to report the results of • Authority: manager’s tool to ensure goals are achieved • Delegation: assignment of tasks line organization: a chain of command that establishes a clear line of authority flowing from the top down span of management= span of control= the number of people under one’s manager control to improve the timing of decisions, some companies are flattening their structure and pushing responsibility to the lower levels centralization: concentration of decision-making authority at the top of an organization (decentralization is the opposite) Organizing the workforce 1. Departmentalization= grouping people within an organization according to the function, division 2. Functional structure= grouping workers according to their skills and expertise 3. Divisional structure= groping departments according to similarities in product, process, customer or geography 4. Matrix structure= when employees are assigned to both a functional group and a project team (thus using functional and divisional patterns simultaneously) 5. Network structure= a structure in which individual companies are connected electronically to perform task for a small headquarter organization Organizing in teams 1. Team= unit of people share a mission and collective responsibility as their work together to achieve a goal 2. Types of teams: problem solving team aims to improving quality, efficiency and the work environment self-managed team is responsible for an entire operation cross-functional team’s members come from a single functional department and that is based on the organization’s structure task force= a team of people from several departments that is cohesively working on the same issue committee may become a permanent part of the organization and that’s design t deal regularly with recurring tasks virtual team uses technology to improve communication Ensuring team productivity 1. Advantages of teamwork: higher-quality decision increased diversity of views increased commitment to solution and changes lower level of stress and internal competition improved flexibility and responsiveness 2. Disadvantages of teamwork: inefficiency groupthink diminished individual motivation structural disruption (when trying try to compete with the chain of command) excessive workloads 3. Characteristics of effective teams: clear sense of purpose open and honest communication empathy and mutual understanding creative thinking accountability decision by consensus Fostering teamwork 1. The five stages of team development: forming= period of orientation and ice-breaking storming= members get to know each other and show their personality Norming= conflicts are resolved, and team harmony develops performing= members are committed and solve problems in the interest of the task accomplishment adjourning= complete the task 2. Two important changes after this process: cohesiveness= measure of how committed team members are to their team’s goals norms= informal standards of conduct that guide behavior 3. Solutions to conflict can be: proactive attention communication openness research flexibility fair play alliance Managing an unstructured organization 1. Unstructured organization: when a firm doesn’t rely on conventional structures but instead assembles independent contracts or companies for specific tasks 2. The potential benefits are: lower fixed costs and increased agility for the company more performance-based evaluation for the workers Watch: Building high performance team
