Module 1: https://quizlet.com/535703972/flash-cards/
Week 1- Why Organizations Exist
Drucker: Businesses exist to create a customer/ create a market
● Who is the customer? first and most crucial question to be asked in defining businesses
purpose & mission
○ Understand customers' needs and demands
○ Develop innovative solutions to satisfy the needs
● Customers seek satisfaction (Optimization > Maximization)
○ Customers value maximizing the utility that the product provides them
● 2 essential functions of business are Marketing and Innovation
● Besides economics and business managers MUST also study: Psychology, History, Ethics,
and Physical Sciences
● More likely to believe that – balancing a professional education with humanities/liberal
arts is critical
What business objectives should be:
● Objectives shouldn’t be abstractions. They should represent the fundamental strategy of
a business
● Objectives must be operational. They should be capable of being converted into specific
targets
● Objectives must make possible concentration of resources and efforts – must be
selective rather than encompass everything
● There must be multiple objectives
● Objectives are needed in all areas on which the survival of the business depends
○ They DO NOT determine the future of a business
● Marketing objectives – HR, physical, social responsibility
● Innovation objective – financial, productivity, profit requirements
Production & Innovation
● 3 types of production
○ Human resources, capital resources, physical resources
● 3 types of innovation
○ Product innovation, social innovation, managerial innovation
Walmart Case Study
● Strategy: “Everyday low prices”
○ 10 Leadership Principles at Walmart
■ Commit to your business
■ Share profits with all associates & treat them as partners
■ Motivate your partners
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Communicate everything you can with partners
Appreciate everything associates do for the business
Celebrate your success
Listen to everyone in your company
Exceed customer expectations
NOT TO lower customers’ expectations
Walmart x Drucker: Innovate + Understand customers’ needs + demands
Business Essentials
● Land, labor, capital, entrepreneurs, and knowledge
Types of Businesses
● Sole proprietorship
○ Low capital, high risk
○ All assets exposed
○ Most common
● Partnership
○ Moderate capital, Moderately high risk
● Corporation
○ High capital, Low risk
○ They can draw large amount of capital from many investors
Businesses in Each Form
Total Business Revenues in Each Form
Sole
Proprietorship
72%
6%
Partnership
8%
13%
Corporation
20%
81%
Triple Bottom Line
● People, Profit, Planet
Companies often make supply chain decisions based on – labor costs, labor regulations,
environmental standards, tax laws
●
Paradox of Progress
○ A society can’t reap the rewards of creative destruction without accepting that
some individuals might be worse off, not just in the short term, but perhaps forever
○ Innovation creates opportunities but also takes away from old ones
○ Horses → Cars
● Competition and absolutism
Hostile Takeovers: responsible for the sacrifice of long-range wealth-producing capacity to
short-term gains
Creative Destruction
● Joseph Schumpeter
○ Definition: dismantling of long-standing practices in order to make way for
innovation.
■ Can do harm to some individuals but preserving these practices can lead
to a decline in progress
■ Makes scarce resources more productive
■ Pays off on the long term
KEY QUESTION: Why do governments support limiting the liability of business?
● It is good for society to protect the personal assets of business investors. This is in order
to support : Entrepreneurship, Risk Taking, and Innovation
● In turn it fuels Growth and Wealth for the society
CENTRAL TENET OF THE CAPITALISTIC ECONOMIC MODEL
Why Successful Companies Usually Fail
● Management choices
○ creeping commitments – past decisions to which a company becomes hostage
and which sets them on a direction from which it is difficult to deviate.
○ Heuristic & cognitive framing
■ Heuristic – problem solving for immediate short term goals
■ Cognitive framing – past decisions that become precedent and difficult to
deviate from
● Organization adaptation
○ Management choices creates a structure that organizes process and business
models. If not managed the company will be dysfunctional.
○ Intense internal competition due to impossible-to-manage matrix structures
● Changing environment
Platform vs Pipeline
● Pipeline: linear with gatekeepers
○ a business that employs a step-by-step arrangement for creating and transferring
value
● Platform: eliminate gatekeepers
○ Allows customers greater freedom to select products that suit their needs
○ Ex: Airbnb, facebook, more variety
Purpose: to consummate matches among users and facilitate the exchange of
goods, services, social currency → enabling value creation for all participants
Differences
○ Platform allows customers greater freedom to select products that suit their needs
○ Platforms unlock new sources of value creation & supply
○ Sharing Economy- sharing access to goods and services that is often facilitated by
a community based online platform
○ Lower transaction costs and create new markets as new producers start
producing for the first time by providing default insurance contracts
○ Platform firms emphasize ecosystem governance more than product optimization
○
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Gig Economy
● labor characterized by the prevalence of short-term contracts/freelance work as opposed
to permanent jobs
● Gig workers have formal agreements with on-demand platform companies to provide
on-demand services to the company’s clients
● They use their skills, labor, and personal possessions to earn an income
Week 2- Business Sustainability and Social Enterprise
4 Components of CSR: Corporate Social Responsibility (Carroll Pyramid of Social Responsibility)
● Economic- maximize sales and minimize costs, pay suppliers the amounts promised in
supplier contracts
● Legal
● Ethical
● Philanthropic- give back to the community (money or donations)
○ Increase customer retention, company differentiation
● Can turn into greenwashing “fake news”
● Business activities are kept separate from social programs
● Shift from profit motive to CSR
Arguments Against CSR:
● Classical economics: traditional view → management has only 1 responsibility- maximize
shareholder wealth
● Business not equipped: managers are oriented towards finance & operations and don’t
have the necessary expertise (social skills) to make social decisions
● Dilutes business purpose
● Global competitiveness: business might be placed in a vulnerable position in terms of
global competition
Arguments in Support of CSR:
● Enlightened self interest: take action now to ensure long-term sustainability
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Warding off government regulations
Proactive better than reaction: less costly and more practical
The Business Case for CSR
● Win new customers and/or increase customer retention
● Enhance relationships with customers, suppliers, and networks
● Attract, retain, and maintain a satisfied workforce and be an Employer of Choice
● Save money on operating costs and energy, and manage risk
● Differentiate from one’s competitors
● Improve business’ reputation and standing
● Provide access to investment and funding opportunities
CSR cannot help a company in reducing employee benefits and overall labor costs
3 Imperatives for Social Programs
1. Protect & support local and global communities
2. Protect & renew the environment
3. Sustainable practices for businesses & planet’s future
● Polls show that the public thinks that these are all important issues businesses
should address
● But the public thinks that not all of these businesses are exactly doing a good job
of especially protecting the environment
CSV: Creating Shared Value
● Policies and operating practices that enhance the competitiveness of a company while
simultaneously advancing the economic and social conditions in the community
● Business activity and social programs overlap
● Developed by Michael Porter and Kramer
○ They believe that business and society can be brought together if businesses
redefine the basic purpose as created shared value.
○ Porter believes that generating economic value in a way that also produces value
for society by addressing its challenges
○ Creating economic value: They believe the key is making investments in
long-term competitiveness – avoid short termism and think long term impact
○ Creating social value: Prioritize investments that address social and environmental
objectives
○ Creating shared value: Long term investments that address social and
environmental objectives, and really bring together all the different parts of the
organization
● How to create shared value:
○ Redefining productivity in the value chain – improve resource efficiency and
reduce cost of operations and its impacts
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Recreating products & markets – grow revenue through new or improved
products and services to address social issues
Enable local cluster development – activate supply chain to enable growth and
productivity
SDG’s (17 total)
● 4 most important: gender equality, decent work and economic growth, responsible
consumption and production, climate action (Brunel’s favorite)
Sustainable business practices should produce results which are: viable, equitable, sustainable,
bearable
Why are SDGs important?
● About 100% of businesses are impacted by SDG’s
● Aim to redirect global public and private investment flow towards the challenges they
represent
● May strengthen the economic incentives for companies to use resources more efficiently
● Strengthen engagement of customers, employees, stakeholders
● Bring together partners to address the world’s most urgent societal challenges
According to the Forbes articles, the Business Round table’s recent affirmed – Maximizing social
impact is the purpose of a corporation
Global Reporting Initiative – GRI
● Organization that helps businesses communicate their impact on climate change, human
rights
● 74% of companies report to it
● Dow Jones Sustainability Index – DJSI
Unilever & CSV
● Unilever (w/ Marish Manwani) was the soap company
● Advocated for a program that provided soap for hand-washing
● Running businesses which are:
○ Profitable
○ Competitive
○ Consistent
○ RESPONSIBLE
● Creation of economic and social value
● Paradigm shift in leadership
○ Think globally
○ Act loyal
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Doing well and doing good
Value and purpose driver organization
From selling soap to saving lives
From selling soap to reducing greenhouse gas emissions
Contributing to the sustainable development of our planet
Statement on the Purpose of a Corporation
● Delivering value to customers by exceeding customer expectations
● Investing in employees
● Dealing fairly and ethically with suppliers
● Generating long-term value for shareholders who invest in companies allowing them to
grow and innovate
ESG: Environmental, Social, and Corporate Governance
● Environmental
○ Climate change
○ Natural resources
○ Pollution and waste
○ Biodiversity
● Social
○ Human rights
○ Supply chain standards
○ Labour management
○ Health and safety
○ Human capital development
● Governance
○ Corporate governance
○ Corruption and instability
○ Executive pay
○ Board diversity
○ Business ethics
● CCC & B= laggard
● BB & BBB & A = average
● AA & AAA = leader
● Companies that align their business activities with sustainable development goals will
thrive in the long term
Week 3- Stakeholder Perspectives
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Argues that the corporation exists not only for the benefit of shareholders but also for
that of employees, suppliers, customers, and to some extent, for the benefits of society.
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○ NOT based on creating different levels between stakeholders
Represents a move away from shareholder primacy
Move to include commitment to all stakeholders
Places shareholder interest on the same level as those of customers, employees,
suppliers and communities.
Stake- a person who has interest, right, or ownership position in something
Stakeholder- any individual or group who can affect or is affected by the actions, decisions,
policies, practices, or goals of the organization
Types of Stakes:
● Interest- when a person/group will be affected by a decision, it has an interest in that
decision
● Right- legal right, when a person/group has a legal claim to be treated in a certain
way/have a particular right protected
● Ownership- when a person/group has a legal title to asset/property
Production view of the firm- owners thought of stakeholders as only those individuals or groups
that supplied resources/bought products or services
Managerial view of the firm- in addition to suppliers of goods and users of goods, the owners
and employees were acknowledged as stakeholders
Stakeholder view of the firm- managers were required to undergo radical conceptual shift in
how they perceived the firm and its own multilateral relationships with stakeholders
● Example: the government stakeholder group: federal, state and local governments are
subgroups of stakeholders
● Example: employees: women, minorities, older workers, union members
Shareholders vs Stakeholders
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Milton Friedman vs. Edward Freeman
○ Milton Friedman (shareholder focus/profit motive)
■ The only group that has a moral claim on the corporation is the people
who own shares of the stock (shareholders)
● Profit motive gap
○ Edward Freeman (stakeholder focus)
■ Many groups have a moral claim on the corporation because the
corporation has the potential to harm or benefit them (Stakeholders)
Most/All companies are switching from Friedman to Freeman approach
Differences between both
○ Friedman: Maximize profit within the law and without violating social standards try
not to disturb society
○ Freeman: identify stakeholder groups and make decisions that take them into
account apply an ethical theory in making decisions
Who are Stakeholders?
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In Business there are 5 but there are subsections
○ Government: Federal, Local, State
○ Employees: Minorities, women, older employees, unions, activists
○ Owners: Private Citizens, Institutional groups, Board members
○ Consumers: Average Consumers, Product Liabilities, Social Activities
○ Community: General Public, Environmental Groups, Civic Groups
○ NOT Human Rights Groups
What makes a stakeholder?
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Play a vital role to the survival and success of the corporation
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Relationship with the corporation enables them to be benefited by the corporation’s
actions and operation
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This relationship could possibly harm them or violate their rights
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These 3 reasons are what makes a stakeholder important and considered.
Attributes of stakeholders that determine whether managers pay attention to them
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Urgency, Legitimacy and Power
Primary stakeholders- have a direct stake in the organization and its success
Secondary stakeholders- have a public or special interest stake in the organization that is more
indirect, advocate for people
Social stakeholders- organizations involved in your business
Nonsocial stakeholders- entities such as animals, the environment and generations of who have
not yet been born
How Stakeholder Management can be put into Practice
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Five Key Questions in Stakeholder Management
○ Who are our stakeholders?
○ What are our stakeholders’ stakes?
○ What opportunities and challenges do they present to the firm?
○ What strategies or actions should the firm take to best address stakeholder
challenges and opportunities?
○ What economic, legal, ethical, and philanthropic responsibilities does the firm
have to them?
○ NOT Why do stakeholders want to be involved with the firm?
5 steps of stakeholder management
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Identify the stakeholders for the organization
■ Stakeholder mapping finding people who are affected and can affect the
market
Identify the stakes of the stakeholders
■ Can be an interest, right, or ownership
Identify the opportunities and challenges that stakeholders present
■ Potential for cooperation or potential for threat
■ High/low
■ Supportive stakeholder
● Low Threat and High potential for cooperation
○ Rely on these people
■ Marginal
● Low threat and low potential
○ Monitor but they do not really matter
■ Non-supportive
● High threat and low potential
○ Do not like you and you have to defend yourself
○ Supportive stakeholder usually take of them
■ Mixed Blessing
● High Threat and High potential
○ People you want to compromise with because they are very
risky but important to your success
High Threat
High Potential for
Cooperation
Type 4: Mixed blessing
Strategy: Collaborate
Low Threat
Type 1: Supportive
Strategy: Involve
Low Potential for
Cooperation
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Type 3: Non-supportive
Strategy: Defend
Type 2: Marginal
Strategy: Monitor
Identify the responsibilities the firm has towards its stakeholders
○ Economic
○ Legal
○ Ethical
○ Philanthropic
Identify strategies or actions that the firm should take to address the stake holder
○ Indirect or Direct engagement
○ Offensive vs. defense
○ Accommodate, negotiate, influence, or resist
○ Combination of strategies or a singular course
○ Alone or coalition (shared interest with social and nonsocial groups)
Etsy Case:
● Etsy achieved a formidable turnaround
● It reaffirms that a company can be focused on the triple bottom line (People, Planet,
Profit) and be successful on all three fronts
● However, this required discipline
● Illustrates that without strong revenues and profits, the and the planet goals might not be
realized
● Etsy has become an example of a CSV company
● Underscores a role of courageous leadership
● Platform Business
Starbucks Case:
● Recipe for long term shareholder value: strategy that balances performance and
profitability with having a social conscience
● Creating value for those who do the work first
● Burwell v. Hobby Lobby: requiring family-owned corporations to provide insurance
coverage for certain types of contraception
● Took part in politics → did the right thing for (strikes/petition)
● Support gay marriage
● Watched his dad struggle so decided to open a business
● Global business that embraces its social conscience (CSV)
● Value: creating culture of warmth and belongings
● Buying coffee from Costa Rica in order to establish sustainable farming
Coke and Pepsi Case:
● What did Coke do to strengthen bonds with India
○
Launched the 5-pillar strategy of People, Planet, Portfolio, Partners, and
Performance
Private vs Public & B-p
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Private vs Public
○ Public companies have to report annual earnings
○ Public companies stocks are publicly traded
○ Public companies have a lot to grow because of their responsibility to their
stakeholders
○ Private companies may issue stock and have shareholders
○ Private companies’ shares do not trade on public exchanges and are not issued
through an initial public offering
B-p Certification
○ Businesses that meet the highest standards of verified social and environmental
performance
Prof Freeman Ted Talk
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3 major flaws in Business
○ Money is the purpose
○ Business and Ethics contradiction
○ People are not simple beings of self-interest
Business is about working together to create value
○ Having passion about something and share among others
○ Creating purpose and keeping passion alive
○ Creating values for stakeholders and not just shareholders without tradeoffs (we
have to be creative)
How?
○ Get involved and create your purpose
■ Think about your stakeholders
■ Put ethics and values at the center or at the same level of profits
○ See conflict and challenges as important
■ Have your values challenged and push back
■ Challenge, conflict, critique
Week 4- Webinar
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A story of 3 S’s: Shareholders, Stakeholders, and Sustainability
Key theme that they all agreed on: ESG is well proven to contribute to greater firm profits
Extra information: Michael Sandel
● Called out moral unethicality
● You can't just buy a person
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Ex) (from test 2) You cannot create a platform where people pay you to wait in line for
groceries for them. Morally wrong
Module 2:
https://quizlet.com/542505864/sm131-module-2-study-guide-flash-cards/?funnelUUID=b7e3e
7b6-6036-4d1e-aa4e-6ff2d1dbef31
Week 5- Accounting and Financial Statements
Accounting cycle- 6 step procedure that results in the preparation and analysis of the major
financial statements
CYCLE STEPS:
1. Analyze source documents (sales slips, travel records, etc)
2. Record transactions in a journal
3. Transfer journal entries to ledger
4. Take a trial balance
5. Prepare financial statements
a. Balance sheet
b. Income statement
c. Statement of cash flow
6. Analyze financial statements
The profits realized by a firm become: Dividends and/or equity
Accounting can be described as an ‘information system’ that does all of the following
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Communicates results to decision makers
Supports efficient allocation of capital
Measures business activities
Processes data into financial statements
NOT mainly preoccupied with tax issues
On a Balance Sheet, Assets are things purchased by the company
● True
Balance sheet tells “where the company is” and Income statement tells “what happened”
● True
A software company will usually have a lot fewer current assets than long term assets
● False (online companies <<current assets)
Financial accountants do the following, EXCEPT:
● Assess risks and benefits of investments
● Review systems, process, controls, and the numbers
● Analyze new opportunities for the business
● Analyze financial statements
● Prepare financial statements
During an accounting audit, the auditors spends many hours look checking every financial
transaction in the company
● False
What does the cost of sales represent?
● The direct cost of goods provided to customers
Double-entry bookkeeping- the practice of writing every business transaction in 2 places
Ledger- specialized accounting book/computer in which information from journals in
accumulated into specific categories and posted so that managers can find all the information in 1
place
Trial balance- summary of all financial data in the account ledgers that ensures that figures are
correct and balanced
Financial statement- summary of all financial transactions that have occured over a particular
period
● Key financial statements:
○ Balance sheet- reports firm’s financial condition on a specific date
○ Income statement- summarizes revenues, costs of goods and expenses (including
taxes) for a specific period and highlights the total profit/loss the firm experienced
during that period
○ Statement of cash flows- summary of money coming into/out of the firm (tracks
receipts and payments)
Assets = liabilities + owner’s equity (ALOE)
assets=cash etc.
liabilities=debt
owner’s equity=what you own
Assets- economic resources owned by a firm
Liquidity- the ease at which an asset can be converted into cash
● Current assets (liquid)- items that can/will be converted into cash within 1 year (cash (most
liquid), accounts receivable, inventory)
● Fixed assets- long term, relatively permanent (land, buildings, equipment)
● Intangible assets- long term, no physical form but have value (patents, trademarks,
copyrights, goodwill)
Liabilities- what the business owes to others (debt)
● Account payable- current liabilities/bills the company owes others for
merchandise/services it purchased on credit but hasn’t paid for yet
● Notes payable- short/long term liabilities (loans) that a business promises to repay by a
certain date
● Bonds payable- long term liabilities; money lent to the firm that it must pay back
Owner’s equity- the amount of the business that belongs to the owners minus any liabilities
owed by the business
Retained earnings- accumulated earnings from a firm’s profitable operations that were
reinvested in the business and not paid out to the stockholders in dividends
Income statement- shows firm’s profit after costs, expenses and taxes; summarizes all resources
that have come into/out of the firm resulting in net income/loss
Net income/loss- revenue left/depleted after all costs and expenses are paid
Cost of goods sold/manufactured- measure of the cost of merchandise sold/cost of raw
materials and supplies used for producing for resale
Gross profit/margin- how much a firm earned by buying, making, and selling merchandise
● revenue-COGS/revenue
Operating expenses- costs involved in operating a business (rent, utilities, salaries)
Depreciation- the systematic write-off of the cost of a tangible asset over its estimated useful life
Accounting is an information system that:
● Measures business activities
● Processes data into reports and financial statements
● Communicates results to decision makers
Accounting turns DATA into INFORMATION
Who uses Accounting Information?
● Primary audience
○ For financial accounting information
■ Stockholders (investors in firm equity)
■ Potential stakeholders
■ Creditors
■
Potential creditors
Everyone uses the same rules to keep score (...theoretically)
● GAAP: Generally Accepted Accounting Principles
○ The rest of the world uses IFRS (about 85% the same)
Private Accountant vs Public Accountant
● Public: provides services for a fee to a variety of companies
● Private: works for a single company
● Private and public accountants do essentially the same things with the exception of
independent audits. Private accountants do perform internal audits, but only public
accountants supply independent audits.
Income Statement Accounts
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Net Sales/ Revenue
COGS
Sales Discounts
Selling and Administrative Expenses
Office Supplies Expenses
Promotion and Advertising Expense
Rent Expense
Other Expense
Tax Expense
Interest Expense
Dividends
Balance Sheet Accounts
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Assets: Cash, marketable securities,
prepaid expenses, accounts
receivable, inventory, and fixed assets,
Machinery, Equipment, Supplies
Liabilities: Accounts payable, Notes
Payable, accrued liabilities, customer
prepayments, taxes payable,
short-term debt, and long-term debt
Owner/Shareholders Equity: Stock,
additional paid-in capital, retained
earnings, and treasury stock
Annual Report- yearly statement of the financial condition, progress, and expectations of the firm
● Key things to watch and read:
○ Management’s discussion and analysis of operations
○ Balance sheet
○ Income statement
○ Statement of cash flows
○ Statement of owners’ equity or retained earnings
○ Auditor’s opinion
How do the numbers relate to each other?
● Vertical analysis
○ State numbers as a % of another
■ For example: as a % of revenue
○ Could be done on any basis and is applicable to balance sheet as well (for
example % of total assets)
Reason why we do this analysis
○ Easier to understand the relationship between items on a statement
○ Easier to compare with a benchmark company or industry averages
How do the numbers change over time?
● Horizontal Analysis
○ Looks at performance / financial health over time
○ Can be done year-to-year or quarter-to-quarter
○ Based on raw numbers or %
○ Applicable to balance sheet too
● Reasons to do this analysis:
○ Track impact of managerial decisions (before/after)
○ Is the business improving or not?
○ Connect business performance to macro-economic or competitive environment
changes
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7 Common Ratios to Analyze Financial Statements
Operating Margin= Operating Income/Net Revenues
For each dollar of sales, what percentage was profit
Inventory Turnover Ratio= Cost of Sales/Average Inventory for the Period
Number of time inventory turned over during a reporting period
Working Capital= Current Assets - Current Liabilities
The capital used for day-to-day operations. How much $$$ left if all current liabilities paid
Debt-to-Equity Ratio= Total Liabilities/Shareholders’ Equity
Debt-to-equity ratio compares a company’s total debt to shareholders’ equity
Debt Ratio= Total Liabilities/Total Assets
Proportion of assets financed by debt. Measures extent of a company’s leverage
Return on Equity (ROE)= Net Income/ Shareholders’ Equity
How effective is the company at using the shareholders’ money to generate profits
P/E Ratio= Price Per Share/ Net Income Per Share
The relationship between the earning per share and the price of a share
Gross Profit Margin, Operating Profit Margin, Net Profit Margin
Week 6- Marketing
Marketing's Four Eras:
○ 1. Production Era
■ Marketing was largely a distribution function. Emphasis was on producing
as many goods as possible and getting them to markets
○ 2. Selling (mass production)
■ Emphasis turned to selling and advertising to persuade customers to buy
the existing goods produced by mass production.
○ 3. Marketing Concept Era
■ Realized the need to be responsive to customers needs
■ A three part business philosophy: Marketing Concept
● 1. A customer orientation (satisfy consumers wants and needs)
● 2. A service orientation (everyone's objective: customer
satisfaction)
● 3. A profit orientation (focus on earning the most profit)
○ 4. Customer Relationship Era
■ Focusing on enhancing customer satisfaction and stimulating long-term
customer loyalty
■ Customer Relationship Management (CRM)
● The process of learning as much as possible about customers and
doing everything you can to satisfy them- or even exceed their
expectations- with goods and services
Four P’s of Marketing
● Product
○ Core Product: Basic features and benefits
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○ Actual Product: Brand, quality, style, packaging, design
○ Augmented Product: Extra service, delivery, installation, csr, warranties, etc.
Price
○ Price has nothing to do with cost, it’s what people are willing to pay
Place
○ Channels: reduce transaction costs
Promotion
○ Integrated Marketing Communication (IMC): 3 Basic Objectives
■ Inform
■ Persuade
■ Remind
Design a product people want, price it competitively, place it where consumers can find it
easily, and promote it so consumers know it exists
The Marketing Research Process:
● 1. Defining the question (the problem or opportunity) and determining the present
situation
● 2. Collecting research data
○ Primary Data: Data that you gather yourself (not from secondary sources such as
books and magazines)
○ Secondary Data: Information that has already been compiled by others and
published in journals and books or made available online
○ Focus Group: A small group of people who meet under the direction of a
discussion leader to communicate their opinions about an organization, its
products, or other given issues
● 3. Analyzing the research data
● 4. Choosing the best solution and implementing it
The Marketing Environment:
● Environmental Scanning
○ The process of identifying the factors that can affect marketing success. Marketers
pay attention to all the environmental factors that create opportunities and threats
● Global Factors
○ Trade agreements, Competition, Trends, Opportunities, Internet
● Technological Factors: growth of the internet and mobile marketing
○ Computers, Telecommunications, Bar Codes, Data Interchange, Internet Changes
● Sociocultural Factors: maintain close relationships with customers
○ Population Shifts, Values, Attitudes, Trends
● Competitive Factors
○ Speed, Service, Price, Selection
● Economic
○
GDP, Disposable Income, Competition, Unemployment
Two Different Markets: Consumer and Business-To-Business
● Consumer Market: all the individuals or households that want goods and services for
personal consumption or use
● Business-To-Business (B2B) Market: all the individuals and organizations that want goods
and services to use in producing other goods and services or to sell, rent, or supply
goods to others
The Consumer Market
● Market Segmentation: the process of dividing the total market into groups whose
members have similar characteristics
○ Geographic Segmentation: Dividing a market by cities, counties, states, or
religions
○ Demographic Segmentation: Dividing the market by age, income, and education
level
○ Psychographic Segmentation: Dividing the market using groups’ values, attitudes,
and interests
○ Benefit Segmentation: Dividing the market by determining which benefits of the
product to talk about
○ Volume (or usage or behavioral?) segmentation: Dividing the market by usage
(volume of use)
○ Niche Marketing: The process of finding small but profitable market segments
and designing or finding products for them
The Business-to-Business Market
● Factors that make B2B marketing different:
○ Customers in the B2B market are few large construction firms or mining
operations
○ Business customers are relatively large
○ B2B markets tend to be geographically concentrated, can concentrate their efforts
on a particular area and minimize distribution problems by location warehouses
near industrial centers
○ Business Buyers are generally more rational and less emotional than ultimate
consumers; choose more carefully based on quality, price, and service
○ B2B sales tend to be direct, but not always
○ Consumer promotions are based more on advertising, B2B sales are based on
personal selling
Segway Case Study:
● Great engineering ≠ good product
● Segway focused on engineering without an understanding of the market
● What was the problem with Segway?
○ A shared economic model (rental) vs. ownership
○ No customer fixed cost, no worries about storing, etc
○ No real purpose
○ A much better customer value
Lessons from Segway
● Marketing is central to innovation and bringing solutions to markets because
○ Innovation is too important to be left to scientists and engineers
○ Innovation solves needs or relieves a pain point (better than competing
alternatives)
○ Customers must be willing to pay for it (for the benefits it creates)
○ A need can be solved by many types of products or services; marketing figures
out which type is most likely to succeed
○ Innovation success is predicted on the right product/service design, the right
business model, and the right go-to-market strategy
Marketing and Customers
● People buy benefits, not features
● Benefits are the basic ingredient in perceived value
● Features: Because our product has…
● Reasons: Because our product can…
● Emotions: Our product makes people feel…
● Values: Our audience stands for…
Benadryl Brand Ladder Case Study:
● Features: contains camphor; has no toxic/dangerous chemical; is in a gel formulation
● Reasons: can be used with kids >2 yo; reduces symptoms; acts quickly
● Emotions: stops children crying, reduces parental anxiety; no more fear of the outdoors
● Values: good parenting, family values, freedom, love of nature
Customer Value = Total Benefits - Total Costs
● Benefits
○ Functional
○ Social
○ Personal
○ Experiential
● Costs
○ Monetary
○ Temporal
○ Psychological
○ Behavioral
Marketing Analysis (5C’s)
● Customers
● Company
● Competitors
● Collaborators
● Context
●
Beats Case Study: Strategy
○ Product focused
○ Celebrity focused
○ Link sport to product (“getting in zone”)
○ Leverage celebrity for their professional stance
●
Nike Case Study: Strategy
○ Value focused (no product)
○ “Ordinary” people focused
○ Celebrating achievements of “ordinary” people
○ Puts celebrities and “ordinary” people on equal level
○ Takes a strong societal value stand
Determine how you can compete
● Two fundamental ways to compete in any industry
○ Cost leadership (lower cost)
■ Example: Kia Soul, Walmart
○ Differentiation (premium price)
■ Example: Audi, Target
Why Walmart is effective in Supply Chain Management:
- Trailblazers in supply chain coordination
- Sharing of demand data
- Leader in logistics and supply chain technology
- Point of use delivery
- Vendor managed inventory
- The Delivery dot
Tips for Targeting and Segmentation:
- Trying to be everything often ends up being nothing
- Stuck in the middle usually doesn’t work well
- You need to be best at something that resonates with customers in order to have a
competitive advantage
-
Sometimes you can be more than one thing, but it has to make sense and have a market
for it
10 Most Valuable Brands of 2020
● Amazon ($220 B)
● Google ($160 B)
● Apple ($140 B)
● Microsoft ($117 B)
● Samsung ($94 B)
● ICBC ($80 B)
● Facebook ($79 B)
● Walmart ($77 B)
● Pingan ($69 B)
● Huawei ($65 B)
The Pricing Paradox
● Price is arguably the easiest, fastest, and least costly adjustment that one can make to the
marketing mix
● Small changes in price can have very large effects on the bottom line (net income)
● Price has nothing to do with cost (!), it is what people are willing to pay
Product differentiation- the creation of real/perceived product differences
● Convenience goods & services
○ Purchase frequently and with minimal effort
■ Candy, gum, milk, gas, snacks, banking services
● 7 eleven
● Shopping goods & services
○ Buy only after comparing value, quality, price, style
● Target
● Specialty goods & services
○ Consumer products with unique characteristics and brand identity
■ Fine watches, expensive wine, fur coats, jewelry, imported chocolates,
medical services/
● Unsought goods & services
○ Products consumers are unaware of
■ Emergency car-towing services, burial services, insurance
Product Life Cycle:
PRICING OBJECTIVES:
1. Achieving a target return on investment/profit
2. Building traffic
3. Achieving greater market share
4. Creating an image
5. Furthering social objectives
Break-even analysis- the process used to determine profitability at various levels of sales
Break-even point (BEP)= total fixed costs (FC) / price of 1 unit (P) - variable cost (VC) of 1 unit
Skimming price strategy- a new product is priced high to make optimum profit while there’s little
competition
Penetration strategy- a product is priced low to attract many customers and discourage
competition
Everyday low pricing (EDLP)- setting prices lower than competitors and not having sales
High-low pricing strategy- setting prices that are higher than EDLP but having many sales
Psychological pricing- pricing at price point that makes product appear less expensive than it is
gooWeek 7- Operations Management
Four Process Activities
● Creating a process flow diagram
● Analyzing the operating unit structure
● Analyzing the work flow
● Evaluating the overall process
Setup time is independent of number of items in the batch
● Time spent preparing for the job and clean up time
Capacity: ability to process units of work per unit of time and can be expressed in either units of
output or units of time
Capacity can be machine constrained or labor constrained
Throughput time (or elapsed time): time required for a unit of output to pass through an
operating unit- includes waiting time between operations
● ex) car wash includes 4 work centers: pay, wash, rinse, dry all together is throughput time
● Throughput time varies based on waiting time
Cycle Time: interval between completion of successive units in a process
Process Flow Diagram Symbols:
The Process Analysis Concepts
● Task time: time transforming input to output
Run time + setup time
● Queue time: time customer waits
● Throughput time: start to finish for 1 unit
Task time + Queue time
● Bottleneck: work center with least capacity (longest cycle time)
● Cycle time: time between completion of successive units
Task time / # of servers
● Capacity: number of units produced (or customers served) per unit of time
Capacity = Time / Cycle time (bottleneck)
Capacity Utilization
● The percentage of capacity used
CU = capacity required / capacity available
CU = demand / capacity
What is the right capacity utilization for a process?
● As high as you can make it (100% is the limit) and still meet customers’ requirements -- like
quality, fast and/or reliable, or customization
● Capacity utilization is an efficiency measure that relates directly to cost and inversely to
customer service
● Queue times rise exponentially as capacity utilization passes 80% and approaches
100%
4 P’s of Operations: people, place, processes, partnerships
● People at a Place have Processes and Partnerships
Vertical integration: could mean that everything is done within its own company
Supply Chain: To Make or not to Make?
● To Make
○ More control
○ Easier integration across functions
○ Fewer transportation issues
○ Rapid response to customer
○ Avoid safety/environmental blidnspots
○ Fewer trade/tariff issues (The Age of Trump?)
● Not to Make
○ Lower wages
○ Lower fixed costs
○ Fewer regulations
○ no/less investment required
○ IT enables global coordination
○ Globalization expands markets
* Competition is becoming less about company vs. company and more about supply chain vs.
supply chain*
* Companies may have to take ethical responsibility for the actions and errors of their supply
chain*
Cost of good quality = Appraisal Costs + Prevention Costs
Cost of bad quality = Internal Failure + External Failure
Total Cost of quality = Appraisal Costs + Prevention Costs + Internal Failure + External Failure
●
Prevention Cost & Appraisal Cost (investment)
●
○ Prevention: process control, quality planning, information, reporting
○ Appraisal: inspections
Internal & External Failures (expenses)
○ Internal: scrap, defective materials
○ External: customer complaint, returns
*nominal or target value*
*GOOD STUFF CHEAP*
Good:
● Effectiveness
○
The extent to which the product and its delivery satisfy the customers’ wants and
needs
Stuff:
● Goods
● Services
Cheap:
● Efficiency
○ The extent to which products are produced using the fewest resources necessary
Formula Sheet
Capacity Utilization= Capacity required/ Capacity available
Task Time = Run time + Setup time
Throughput Time = Queue time + Task Time
Capacity in units = Time Available / Cycle Time
Final Yield = Yield 1 (in decimals) x Yield 2 (in decimals)
Variable Cost (if yields are 100%) = VC Step 1 + VC added in Step 2 + VC added in Step 3…
Variable Cost (at current yields OR effective cost per unit) = (Total VC step 1 / yield in decimals)
+ (Total VC after step 2 / yield in decimals) + (Total VC after step 3 / yield in decimals).... *make
sure to add before dividing again*
Cost per Unit of Poor/Bad Quality = (VC with current quality) - (VC with perfect 100% yield)
Ratio of Variable Cost per unit at 100% yields to variable cost per unit at current yields= (VC
with 100% yield) / (VC with current yields)
Contribution at 100% yields= (price x # units) - (VC x # units)
Contribution at current yields= (price x # units x yield in decimals) - (VC x (# units x yield in
decimals))
Ratio of the contribution at current yields to the contribution at 100% yields= (contribution of
current
Week 8- Managing People
Can you manage effectively and achieve these goals in this changing world?
● Getting (a large and diverse set of) people onboard and (with little control over most of
them) accomplishing something together is hard
● People have to manage without direct control over people
● If we shape the organization in the right way, there will be...
○ Incentives
○ Power
○ Communication
○ And culture!
Management Failure We experience at Work
● My team doesn’t care enough to do this
●
●
●
I cannot persuade my colleagues
Our voices are not heard
We don’t know what they want
About 70% of leaders rate themselves as inspiring and motivating-- much in the same way as we
all rate ourselves as great drivers
A 2016 Gallup engagement survey found that 82% of employees see their leaders as
fundamentally uninspiring
A survey published by Forbes found that 65% of employees would forego a pay raise if it meant
seeing their leader fired
3 Key Elements for Managing People:
● Incentive structure
○ How to motivate people? → money can demotivate people
○ How to measure and reward performance?
● Power structure
○ To what extent we can influence others and influence the final decision making
○ How is your power or authority distributed within your group?
○ How can you influence your group without authority?
○ Power can also be determined by your informal position in a company
● Communication structure
○ Whose voice is heard?
○ How do we provide/seek feedback?
○ How do we handle tough conversations?
○ Radical transparency
Organizational Culture & Diversity
● The values, assumptions shared within an organization
● Provide direction toward the “right way” of doing things
● Company’s DNA: invisible, yet powerful template for employee behavior
● An ideology that helps edit people’s everyday experience
● Shared standard of relevance as to the critical aspects of the work that is being
accomplished
Elements of Organizational Culture
● Surface artifacts of organizational culture
○ Physical structure (element 1)
■ Design, colors, art (what kind), office setup
○ Language (element 2)
■ Words or slogans, marketing materials, motto (creative or sharing trust?)
○ Rituals and ceremonies (element 3)
■ What are the things that everyone would expect?
■ Fitness studios: SoulCycle
■ Is there something special? First time customer/employee
■ Employee of the month → how they celebrate their employees
○ Stories and legends (element 4)
■ What are the narratives that organizations have about what came before
you
■ How did they start
● Deeper elements of organizational culture
○ Shared values (element 5)
■ Conscious beliefs
■ Evaluate what is good or bad, right or wrong
● Less explicit, less visible
● Guidance about what to privilege
○ Shared assumptions (element 6)
■ Unconscious, taken-for-granted beliefs
■ Implicit metal models, ideal prototypes of behavior
● Learn by working, experiencing yourself
● Never written down anywhere
Netflix’s culture
● Big risk takers
● Trust to make the right decision in the best interest of Netflix
●
●
●
Freedom and Responsibility
Colorful pillows, couches → environment was cool
freedom→ trust
Culture: from a managerial perspective
● Strong organizational cultures offer 3 key benefits for managers:
○ A degree of social control over how employees work and interact
○ A social glue that connects employees together
○ Helps employees make sense of organizational events
Culture: from a employee perspective
● Strong organizational cultures offer 3 key benefits for employees:
○ Understand what is expected of them and what their priorities should be
○ Establishes a common language that all employees “speak”
○ Experience social belonging and feel comfortable enough to thrive
Being Similar vs. Being Different
● SIMILAR
○ Easier to communicate at first
○ More satisfied
○ Less potential conflict
○ Less creative
○ Drawing from similar knowledge base
○ Faster fitting process
● DIFFERENT
○ Harder to communicate at first
○ Less satisfied
○ More potential conflict
○ More creative
○ Drawing from a broader knowledge base
○ Slower fitting process
● *Often treated as representatives of their category, as symbols rather than individuals*
Managing People: People Analytics in a Data-Driven World
● First-Line Management
○ Foremen, supervisors, office managers
● Middle management
○ Plant managers, division managers, department managers
● Top Management
○ President, CEO, executive vice presidents
*As you move up the corporate hierarchy, success will be due to effective managerial and
interpersonal skills rather than technical expertise alone
Managerial Responsibilities
● Recruiting
● Training
● Motivating
● Compensating
● Retention
Where does data to analyze come from?
● Data from HR Information System
○ Headcount, tenure, performance ratings, salary, turnover, demographics
● Data from Company Operations
○ Revenue, assets, net income, operating expenses, ROA
● Data from Company Surveys
○ Commitment, job satisfaction, psychological safety, team effectiveness
● Data from Communication Platform
○ Chat, email, text, messaging, Slack
*People Analytics can help us leverage data to evaluate whether new work practices are
effective
3 Critical Competencies for Managing People
● Analytical thinking
○ Extracting insight from data
● Interpersonal skills
○ Understanding how employees think and make sense of insight
● Strategic insights
○ Using insights to align organizational structures with strategic business goals
Contemporary Questions on Managers’ Minds
1. Recruiting: how can we recruit diverse top talent?
2. Training: what training should we invest in for our employees?
3. Motivating: what incentives motivate high-level performance in our work teams?
4. Compensating: how (and how much) should we pay people?
5. Retention: how can we prevent our best employees from leaving the company?
Quality- the ability of a product or service to consistently meet or exceed customer expectations
Quality Costs
●
●
●
●
●
Conceptual framework
Not always totally quantifiable
Useful for attention getting
Requires consistency of measurement
Useful as a mechanism for keeping score
Mastering Talent Analytics
● Data
○ Has to be sufficient to understand trends that matter
● Enterprise
○ Important statistical relationship between employee satisfaction and company
performance
● Leadership
○ Leaders’ commitment to this approach is the single most important factor in
whether it succeeds or not
● Targets
○ What managers should concentrate on
● Analysts
○ Analytical theory must be converted into practice
○ This requires experts not only in quantitative analysis but also in psychometrics,
human resource management systems and processes, and employment law
○ The best analysts can persuade managers to adopt analytical decision making
4 Generally Accepted Attributes:
● Shared
○ Group phenomenon (can’t coexist solely within a single person)
○ Shared behaviors, values, and assumptions
○ Experienced through the norms and expectations of a group (unwritten rules)
● Pervasive
○ Permeates multiple levels and applies very broadly in an organization
○ Mindsets, motivations, unspoken assumptions, “action logics”
● Enduring
○ Can direct the thoughts and actions of group members over the long term
○ Develops through critical events in the collective life
○
Attraction-selection-attrition model: people are drawn to organizations with
characteristics similar to their own
Implicit
○ Despite its subliminal nature, people are effectively hardwired to recognize and
respond to it instinctively
8 Distinct Culture Styles:
●
Key Takeaways:
● Managing people is not “common sense”, it takes hard work to do well, especially in this
changing world
● Leaders can balance and achieve multiple goals by designing optimal organization
structures: motivate people well, influence colleagues, and communicate with each
other effectively
● Organizational culture has many elements, which shape how employees do their work
and how they interact with each other
● Creating diverse and inclusive workplaces requires organizational cultures that celebrate
differences, rather than amplify them
●
Modern managers need more than interpersonal skills; they need strategic thinking and
data analytics skills.
F- Strategy and Innovation
What is the goal of Strategy?
● Strategy exists as a field of research and practice:
○ In practice, the goal is to enable organizations (typically firms) to achieve the
greatest possible organizational performance (GREATEST AMOUNT OF PROFITS)
■ E.g., strategy consultants
■ E.g., corporate strategy offices (CEOs)
○ In research, the goal is to understand what are the determinants of long-term
organizational performance (with the hope of informing practice)
Value Creation & Capture: The Tale of Dr. Lonnie Johnson & the Super Soaker
● Dr. Lonnie Johnson
○ Nuclear engineer, inventor @ Jet Propulsion Lab, Pasadena CA
● Super Soaker
○ Developed heat pump based on H2O not freon
○ Realized it would make a great water gun
○ Introduced in 1990; initially sold by Larami, now by Hasbro (Nerf)
● Sales > $1 billion
● Greater value to customers than it actually cost them: Good Marketing
Goal of Strategy: develop and implement approaches to ensure that organizations achieve the
highest possible rate of success (profitability), particularly relative to rivals
● It is a field of research and practice
○ Practice: enable orgs to achieve the greatest possible organizational performance
○ Research: what determines long-term organizational performance
● Value creation and capture
○ Dr. Lonnie Johnson (nuclear engineer, but invented toy guns)
○ Created "super soaker" toy
○ Sales of $1 billion, but only kept
○ Difference between price and costs (profit) is the value you create.
Strategy- brain that coordinates firm functions
● Strategy helps coordinate all internal firm activities by giving guidelines to each function
within the firm
○ E.g., should firms invest more than rivals in R&D?
■ If we’re making the world’s best razor blade then yes!
■ If we are making private labels then no!
Without overall strategy to guide such decisions, they may be uncoordinated, duplicative,
and work at cross purposes
● Strategy is a broad theme that drives organizational choices and policies
○ It’s not a 100 page detailed plan of management and tactics
○ It’s more likely a page (or even 3 sentences) overview
○ A well-designed strategy should be understood by all in the organization from the
CEO to the newest employees
○ Some examples:
■ Walmart: always low prices
■ Kodak: you press the button, we do all the rest
Strategy is based on Rivalry
● Strategy requires undertaking actions while anticipating their potential effect on rivals’
and rivals’ likely responses to those actions
● This means thinking ahead to understand your rival
● Because rivals respond, individual functions alone will rarely → long-term advantage
○ Intersects with Fact #2 about Strategy as coordination
● Strategy needs to design unique, difficult-to-imitate advantages that generate superior
returns over the long-term
●
●
Profits vary across industry and within industry
●
To develop a thoughtful and effective Strategy, organizations must make tradeoffs
What is strategy? What are its key features?
1. goal = max value create & capture
2. Strategy = brains of business
3. Rivals (and others) respond
4. Both external and internal environment
5. Strategy requires trade offs
Most basic analytic tools
1. SWOT
a. Most basic tool
b. Simple overview of strategic issues
2. 5 Forces
a. Goal = analyze expected industry average profits
b. Like applied microeconomics
3. Competitive Positioning
a. Goal = understand firm strategy choices (tradeoffs!)
b. Helps understand how firms in same industry make different choices & explain
firm-level profits
SWOT Analysis
● Strength = internal & positive
● Weaknesses = internal & negative
● Opportunities = external & positive
● Threats = external & negative
SWOT analysis considers both internal & external environment
● Step 1: identify factors internal & external positives and negatives that may affect future
firm profits
● Step 2: categorize these appropriately
● Step 3: use these as inputs to direct future strategic action of the firm
Positives of SWOT analysis
● Quick, easy to do, easy to understand, widely recognized
● They help strategists organize their thoughts
Negatives of SWOT analysis
● Strengths can also be weaknesses
● Sensible, thoughtful, well-informed people can draw completely different SWOT analysis
● SWOT doesn’t tell us much about external drivers of profits
● SWOT doesn’t tell us much about internal drivers of profits
Porter’s 5 Forces:
Five forces analysis allows us to determine whether a firm is more likely to become like an
oligopoly or perfect competition; allows us to see what external factors drive profitability in a
firm
● We want to see if any of the forces can push down prices or push up costs to limit the
average profits for the firms within the industry
● Two dimensions of the Five Forces:
○
○
●
●
●
Horizontal dimensions: determine who gets the profits that the industry could
potentially generate
Vertical dimensions: determine whether the industry value chain could generate
any profits at all
The strength of the five forces determines the average profit potential of the industry
○ Weak forces means high industry profits
The power of Buyers, Suppliers, and Industry Rivalry determines who gets the profits that
the industry could potentially generate
The Threat of Entry and Threat of Substitutes determine whether the industry value chain
can generate any profits at all
Example of Perfect Competition: House Cleaning Services (because they don't have
differentiated services?)
Threat of Entry
● List potential entrants
● Identify factors making it easy or hard to enter the industry
● Overall: is the threat of firms entering the industry low/medium/high?
Power of Suppliers
● List key suppliers
● Identify factors affecting Suppliers’ ability to squeeze profits
● Overall: do Suppliers have low/medium/high ability to squeeze profits?
Threat of Substitutes
● List potential substitutes
● Identify factors affecting their ability to squeeze profits
● Overall: do substitutes have low/medium/high ability to squeeze profits?
Power of Rivalry
● List key rivals
● Identify factors affecting intensity of rivalry (high rivalry squeezes profits)
● Overall: do Rivals have low/medium/high ability to squeeze profits?
Power of Buyers
● List key buyers
● Identify factors affecting Buyers’ ability to squeeze profits
● Overall: do Buyers have low/medium/high ability to squeeze profits?
Which of the following is NOT an example of factors to consider in assessing the External
Environment in a strategic analysis:
● Regulatory factors
● Demographic factors
● Market share
● Competitors actions
Competitive Positioning
● A firm has a Competitive Advantage if it achieves a higher profitability than its industry
average
● Organizations attempting to achieve competitive advantage (through Strategy) should
choose between:
○ Achieving low costs (cost leadership) or high prices (differentiation) &
○ Serving all segments of a market (broad) or just a few segments (narrow)
● The firm will achieve economies of scale -a proportionate saving in costs gained by an
increased level of production- in the industry and will need to invest in assets to lower
operating expense (broad/cost leadership)
Discount (low costs) is Cost Leadership
Lecture Reading
“The Five Competititve Forces that Shape Strategy”
The job of strategist is to understand and cope with competitors
Competitive forces: rivals, customers, suppliers, potential entrants, substitute products
○ Defines industry’s structure and shapes the nature of competitive interaction
within an industry
Factors that Shape Competition
● The strongest competitive force determines the profitability of an industry
● Threat of entry
○ Puts a cap on the profit potential of an industry
○ When the threat is high, incumbents must hold down their prices/ boost
investment to deter new competitors
○ Depends on the height of entry barriers that are present and on the reaction
entrants can expect from incumbents
● Barriers to entry- advantages that incumbents have related to new entrants
● Expected retaliation- how potential entrants believe incumbents may react will also
influence their decision to enter/stay out of an industry
● Return on investment capital (ROIC)- appropriate measure of profitability for strategy
formulation
Operational Effectiveness: performing these activities better- that is, faster, or with fewer inputs
and defects- than rivals
● Problem: best practices are easily copied or imitated
Productivity Frontier: the maximum value a company can deliver in a given cost, given the best
available technology, skills, and management techniques- shifts outward, lowering costs, and
improving value at the same time.
● Produces absolute effectiveness, but relative improvement for no one
Competitive Convergence: the more indistinguishable companies are from one another the
more convergence you have.
● More competitiveness can also be generated with more benchmarking
Strategic Positioning: attempts to achieve sustainable competitive advantage by preserving
what is distinctive about a company
● Performing different activities from rivals, or performing similar activities in different ways
○ Emerges from 3 sources
■ Serving few needs of many customers
■ Serving broad needs of few customers
■ Serving broad needs of many customers in a narrow market
Three key principles underlie Strategic Positioning
1. Strategy is the creation of a unique and valuable position, involving a different set or
activities
2. Strategy requires you to make trade-offs in competing- to choose what NOT to do
3. Strategy involves creating “fit” among a company’s activities
a. Fit drives both competitive advantage and sustainability
Employees need guidance about how to deepen a strategic position rather than broaden or
compromise it.
● How to extend the company’s uniqueness while strengthening the fit among its activities
● Requires discipline, the ability to set limits, and forthright communication
*Strategy and Leadership are directly linked*
Knowledge Checks:
What is the goal of strategy in practice?
A. to achieve long-term environmental sustainability
B. to achieve the largest market share relative to competitors
C. to enable the organization to devote most its capital to shareholder-maximizing activities
D. to enable organizations to achieve the greatest possible profit
E. to achieve operational efficiencies that minimize waste
Strategy requires you to choose what not to do
True
False
What are the three possible mechanisms to ensure long-term profitability of the firm?
A. Increase prices, increase quantity, or lower costs
B. Corner the market, decrease number of competitors, or retain more customers
C. Increase quantity, improve quality, or lower costs
D. Lower costs, increase market share, or decrease defective products
E. Increase profits, lower prices, or improve quality
What is strategy from an organizational perspective?
A. The activities that coordinates all the firm’s functions
B. The course of actions that the shareholders want implemented
C. The collective vision of the board and executive team
D. The agreed upon approach for employees to best achieve short-term goals
E. The discipline that analyzes the drivers of profit
Which is true about strategy?
A. The best internal decisions are based on external factors only
B. Internal factors must be weighed against rivals before setting prices
C. External environments are always unpredictable
D. Both external environments & internal environments affect profits
E. Profitability is based on a firm’s ability to make its rivals look “bad”
The point of industry analysis is to understand the underpinnings of competition and the root
cause for profitability
True
False
What is arguably the most basic/simple strategy tool?
A. Cost-Benefit analysis
B. Five Forces analysis
C. Scenario planning
D. SWOT analysis
E. Competitive positioning analysis
According to Porter’s economic model of industry profit, which industry is an example of
“perfect competition”?
A. Supermarket retailing
B. Mobile telecom industry
C. Airlines industry
D. House cleaning services
E. IT consultancy
All of the following are correct limitations of the SWOT analysis EXCEPT:
A. SWOT is not widely used in strategy analysis
B. SWOT does not tell us much about internal drivers of profits
C. strengths can also be weaknesses
D. sensible, thoughtful, well-informed people can draw completely different SWOT analysis
E. SWOT does not tell us much about external drivers of profits
Which one is NOT one the basic competitive strategies identified in Porter’s competitive
positioning framework?
A. Cost leadership
B. Differentiation
C. Price leadership
D. Focused differentiation
E. All four are competitive strategies identified in Porter’s framework
Which company is an example of Focused Cost Leadership according to the Competitive
Positioning framework?
A. Kia, a popular Korean automaker competing on price and design
B. Greyhound, the leader in intercity bus transportation in the US
C. Starbucks Reserve, 12 new Starbucks locations, serving only the rarest, most extraordinary
coffees
D. Ikea the largest furnishing retailer, inspired by Swedish design
E. A discount, business-class only airline that operates between London and New York only
What is the main goal of the Porter’s 5-Forces Analysis?
A. To analyze the impact of company, customers, competitors, collaborators and context on profit
B. To analyze supply chain forces’ contribution to profit
C. To analyze expected industry profitability
D. To determine how product, people, place, processes and strategic processes impact profit
E. To determine the intensity of one’s rivals and its impact on profit
When a firm attempts to achieve a sustainable competitive advantage by preserving what is
distinctive about the firm (selecting the customers it will serve, deciding what different
activities to perform), which of the strategy frameworks would be most helpful?
A. 5-C analysis
B. Segmentation analysis
C. Competitive Positioning Analysis
D. A SWOT Analysis
E. Five Forces Analysis
Operational effectiveness can be a source of competitive advantage via improvement in the
following activities, EXCEPT:
A. Delivery processes
B. Selling processes
C. Communication processes
D. Creation processes
E. Production processes
Module 3:
https://quizlet.com/555396992/module-3-flash-cards/?funnelUUID=118ee3c8-3972-41a1-bd36
-0d0bb6f1989a
Week 10- Ethical Frameworks
Lecture Slides
What are Ethics?
● Unwritten rules we have developed for our interactions with one another
● Standards of conduct generally accepted that govern society
● Virtues in action such as honestly, fairness, and justice
● How you behave when nobody is looking
What are unethical decisions?
● Decisions that are dishonest, unfair, an unjust and costly for you, your community and
your business
The building blocks of an ethical framework are Purpose, Integrity, and Principles
*ethical dilemmas are fairly rare in everyday life. They are critical issues, but thankfully rare*
Edward Freeman- Many groups have a moral claim on the corporation because the corporation
has the potential to harm or benefit them
We must ask:
1. Why do good people make unethical choices?
2. Why do smart people make bad decisions?
So, what’s the big deal?
● It’s hard to integrate lots of data
● It’s hard to optimize against multiple goals
● There can be many contextual factors that interfere (time pressure, fatigue, stress etc.)
● There can be too many solutions/options
3 Main Sets of Issues:
1. Bounded ethicality: The idea that even when we try to behave ethically, it’s difficult due to
a variety of organizational pressures and psychological tendencies
2. Biases: prejudice in favor of or against one thing, person, or group compared with
another, usually a way considered to be unfair
Blind Spots: Areas in which one fails to exercise judgement or discrimination
3. Giving Voice to Values: You don’t improvise ethics in the moment. You need to rehearse
and train yourself on how to react if certain situations were to happen
Our Reason for Being:
Our north star- it gives life to our values and principles
What’s good- the things we strive and care for, desire and seek to protect
What’s right- the lines we will never cross; outlines how we may or may not achieve our values
How to articulate a company ethical framework?
● Framework must meet 4 standards
○ Stable
○ Make sense
○ Be practical- can be applied in practice and with consistency
○ Be authentic- ring true
● If no ethical framework
○ Desires, moods, unconscious mind, group dynamics, social norms take over
○ Decisions become expedient & reactive (System 1), instead of deliberate &
proactive (System 2)
■ Quick instead of well thought through
○ The decisions you make are NOT based on the true you
○ The big 4 evil of decision making may take over: Greed, Speed, Haziness, and
Laziness
The ethical framework must be baked in the company's DNA
A strong ethical framework will unite the organization’s workforce under a Common Vision,
creating a better workplace culture in the process
The ethical framework must be codified, communicated and lived by
In the end: find the right organization for you
● Know yourself
● Know your organization
● Make choices that:
○ Reflect what is good and right
○ You are proud off
○ Are yours
● Work for the right company (value match)
Making Ethical Decisions 5 Steps:
RECOGNIZE AN ETHICAL ISSUE
1. Could this decision or situation be damaging to someone or to some group? Does this
decision involve a voice between a good and bad alternative, or perhaps between 2
“goods” or between 2 “bads”?
2. Is this issue about more than what is legal or what is most efficient? If so, how?
GET THE FACTS
3. What are the relevant facts of the case? What facts are not known? Can I learn more
about the situation? Do I know enough to make a decision?
4. What individuals and groups have an important stake in the outcome? Are some concerns
more important? Why?
5. What are the options for acting? Have all the relevant persons and groups been
consulted? Have I identified creative options?
EVALUATE ALTERNATIVE ACTIONS
6. Evaluate the options by asking the following questions:
● Which option will produce the most good and do the least harm? (The Utilitarian
Approach) (Jeremy Bentham)
○ Simplified: Bringing the greatest amount of good to the greatest amount
of people
○ A principle that expresses morality from the point of the individual. It says
that people have both moral (life, liberty, pursuit of happiness) and legal
(found in constitution or federal, state or local law) rights that should be
honored and respected
○ The Goal: create the most benefit over harm for the most stakeholders
● Which option best respects the rights of all who have a stake? (The Rights
Approach) (John Locke)
○ Simplified: rights to life, liberty, and the pursuit of happiness
○ A principle that expresses morality from the point of the individual. It says
that people have both moral (life, liberty, pursuit of happiness) and legal
(found in constitution or federal, state or local law) rights that should be
honored and respected
○ The Goal: take the action that does not infringe on others rights
● Which option treats people equally or proportionally? (The Justice Approach)
(Rawls)
○ Simplified: Fairness, equity, and justice
○ Concept of fair and just relationship between individuals. Has implications
for social justice and is very relevant with issues such as: distribution of
wealth, life opportunities, and social privileges
○ Linked with political and ethical ideas of social justice (lucky ones should
help the unlucky ones)
○ Might be the most widely used ethical lens in Western civilization
The Goal: are all stakeholders being affected fairly vis-a-vis the relevant
factors?
● Which option best serves the community as a whole, not just some members?
(The Common Good Approach) (Rousseau)
○ Simplified: Good attainable by the community as a whole
○ Society needs individuals to have interests in common. Actions that are
taken should benefit the society as a whole. It is seen as the best decision
that will bring positive and beneficial results
○ The Goal: by benefiting society, did I help others progress as well as
myself?
● Which option leads me to act as the sort of person I want to be? (The Virtue
Approach) (Aristotle)
○ Simplified: What type of person should I be/become?
○ What sort of person do I want to be or become> It focuses on the
individual acquiring certain virtues like honestly, fairness, truthfulness,
trustworthiness, benevolence, respect and non-malfeasance
○ The Goal: Can I live with my decision and the effect it has? Does it
represent me?
MAKE A DECISION AND TEST IT
7. Considering all these approaches, which option best addresses the situation?
8. If I told someone I respect--or told a television audience--which option I have chosen,
what would they say?
ACT AND REFLECT ON THE OUTCOME
9. How can my decision be implemented with the greatest care and attention to the
concerns of all stakeholders?
10. How did my decision turn out and what have I learned from this specific situation?
○
Factors that affect a Business/Organization’s Moral Climate
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Behavior of superiors – the number one influence on moral climate.​
Behavior of one’s peers – the second influence; people do pay attention to what their
peers in the firm are doing.​
Industry or professional ethical practices – ranked in the upper half; these context
factors are influential.​
Personal financial need – ranked last.​
Lecture Reading
Personal Level Ethical Challenges
● Situations we face in our personal lives that are generally outside the context of
employment but may have implications for our jobs
○ Should I cheat on my income tax return by overinflating my charitable
contributions?
○ Should I tell my professor I need this course to graduate this semester when I
really don’t?
○ Should I download music from the Internet although I realize it’s someone else’s
intellectual property?
○ Should I connect this TV cable in my new apartment and not tell the cable
company?
Managerial and Organizational Levels
● Many of these issues are similar to those we face personally
● Carry consequences for an individual’s status in the organization, for the company’s
reputation and success in the community, and also for the kind of ethical environment or
culture that will prevail on a day-to-day basis at the office
○ Should I set high performance goals for my work team to benefit the organization,
even though I know it may cause them to cut corners to achieve such goals?
○ Should I over report the actual time I worked on this project, hoping to get
overtime pay or additional recognition?
○ Should I authorize a subordinate to sidestep company policy so that we can close
the deal and be rewarded by month's end?
○ Should I misrepresent the warranty time on some product I’m selling in order to
get the sale?
● Abusive or intimidating behavior toward employees (23%)
● Misreporting actual time or hours worked (20%)
● Lying to employees, customers, vendors, or the public (19%)
● Withholding needed information from employees, customers, vendors, or the public (18%)
● Discriminating on the basis of race, color, gender, age,or similar categories (13%)
● Stealing, theft, or related fraud (12%)
Industry or Profession Level
●
●
The industry might be stock brokerage, real estate, insurance, manufactured homes,
financial services, telemarketing, electronics, or a host of others
Related to the industry might be profession (accounting, engineering, pharmacy,
medicine)
○ Is this safety standard we electrical engineers have passed really adequate for
protecting the consumer in this age of do-it-yourselfers?
○ Is this standard contract we realtors have adopted really in keeping with the
financial disclosure laws that have been recently strengthened?
○ Is it ethical for telemarketers to make cold calls to prospective clients during the
dinner hour when we suspect they will be at home?
○ Is it ethical for accountants to allow a restatement of earnings that can cause
investors to lose money and confidence in the market?
Societal and Global Levels
● It becomes difficult for the individual manager to have direct effect on business ethics
● The manager’s greatest impact can be felt through what he or she does personally or as a
member of the management team
Managerial Ethics- entails making decisions which have ethical implications or consequences
● Conflict of Interest- usually present when the individual has to choose between her or his
interests and the interests of someone else of some other group
Principles Approach to Ethics- based on the idea that employees and managers desire to
anchor their decisions and actions on a more solid foundation than that provided with the
conventional approach
What is an Ethics Principle?
● Ethical concept, guideline, or rule that, if applied when you are faced with an ethical
decision or practice, will assist you in taking the ethical course of action
Types of Ethical Principles or Theories
● Teleological Theories focus on the consequences or results of the action they produce
○ Utilitarianism is the major principle in this category
● Deontological Theories focus on duties
○ It could be argued that managers have a duty to tell the truth when they are doing
business
● Aretaic Theories stand for virtue
○ Aristotle saw the individual as essentially a member of a social unit and a moral
virtue as a behavioral habit, a character trait that is both socially and morally
valued
Kant’s Categorical Imperative
● Duty based principle of ethics, deontological principle
●
●
A duty is an obligation→ refers both to the obligatory nature of particular actions and to a
way of reasoning about what is right and what is wrong
A person should act only on rules that you would be willing to see everyone follow
Principle of Utilitarianism: It is consequentialist/ teleological
Principle of rights: a person's moral and legal rights should be honored and respected
Moral rights: important, justifiable claims or entitlements
Legal rights: rights that some governing authority has formalized as rights
Positive right: the right to something
Negative right: the right to be left alone
Competing Rights
● The situation is not a clear “right vs. wrong” but is more nearly “right vs. right”
○ It’s right to tell the truth but it is also right to be kind and considerate of people’s
feelings
○ It’s right to apply rules and procedures without favoritism, but it is also right to give
special consideration to hard working, dependable employees
The Factors to Identify Whether Process Fairness Has Been Achieved:
● Have people’s (employees, customers) input been included in the decision process?
● Do people believe the decisions were made and implemented in an appropriate manner?
● People watch managers’ behavior. Do they provide explanations when asked? Do they
treat others respectfully? Do they actively listen to comments being made?
Servant Leadership- an approach to ethical leadership and decision making based on the moral
principle of serving others first
The Golden Rule- “Do unto others as you would have them do unto you”
● Also known as ethic of reciprocity, if you want to be treated fairly, treat others
fairly
Ethical Tests Approach to Decision Making
● Ethical Tests- more practical or hands-on in orientation and don’t require the depth of
moral thinking that the principles do
● Test of Common Sense
○ Does the action I am getting ready to take really make sense?
● Test of One’s Best Self
○ Is this action or decision I’m getting ready to take compatible with my concept of
myself at my best?
○ Naturally, this test wouldn’t be of much value to those who don’t hold themselves
in high esteem
● Test of Making Something Public (Disclosure Rule)
One of the most powerful tests
How would I feel if others knew I was doing this? How would I feel if I knew that
my decisions or actions were going to be featured on the national evening news
tonight for the entire world to see?
○ Addresses the issue of whether your action or decision can withstand public
disclosure and scrutiny
Test of Ventilation
○ To “expose” your proposed action to others and get their thoughts before acting
○ Works best if you get opinions from people who you know might not see things
your way
Test of Purified Idea
○ An idea or action might be thought to be “purified” or clean and acceptable, when
a person with authority says or implies it is appropriate
○ “Am I thinking this is right just because someone with appropriate or higher
authority or knowledge says it’s right?
Test of the Big Four
○ Greed, speed, laziness, and haziness
○ Greed is the drive to acquire more and more in your own self-interest. Speed
refers to the tendency to rush things and cut corners because you’re under the
pressure of time. Laziness may lead to taking the easy course of action that
requires the least amount of effort. Haziness may lead you to acting or reacting
without a clear idea of what’s going on
Gag Test
○ A manager’s clearest signal that a dubious decision or action is going too far is
when you simply “gag” at the prospect of carrying it out
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○
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Improving the Organization's Ethical Culture
Strong ethical cultures were ones in which managements and supervisors:
● Communicated ethics as a priority
● Set a good example of ethical conduct
● Kept commitments
● Provided information as to what was going on
● Supported following organizations standards
Ongoing Discussion: whether a compliance orientation or an ethics orientation should prevail
in companies’ ethics programs
● A pure compliance focus could undermine the ways of thinking or habits of mind that are
needed in ethical thinking. Ethics thinking is more principles based, while compliance
thinking is more rule bound and legalistic
● Compliance can squeeze out ethics. An organization can become so focused on following
the law that ethics considerations no longer get into discussions
● The issue of “false consciousness” has been raised. This means that managers may
become accustomed to addressing issues in a mechanistic, rule-based way
● Ethics thinking more principles based
● Compliance thinking is more rule based and legalistic
● They are both essential and need to be balanced, neither can be truly eliminated
Key Elements that Must Exist
1. The continuous presence of ethical leadership reflected by the board of directors, senior
executives and managers
2. The existence of a set of core ethical values infused throughout the organization by way
of policies, processes, and practices
3. A formal ethics program that includes a code of ethics, ethics training and ethics officer
and ethics training
Two Pillars of Leadership
● Being both a moral person and a moral manager
● Moral person: traits, behaviors, and decision making
○ Traits: integrity, honesty, trustworthiness
○ Behaviors: doing the right thing, showing concern for people, being open, and
being personally ethical
○ Decision making: reflect a solid set of ethical values and principles. Hold to values,
be objective/fair, demonstrate concern for society, follow ethical decision rules
● Moral manager: recognize the importance of proactively putting ethics at the forefront of
their ethical agenda
○ Communicates about ethics and values
○ Use rewards and discipline effectively
In short, ethics is more about leadership than about programs
Effective communication of ethical messages
Candor, fidelity, and confidentiality are three very important communication principles
Ethics and Compliance Programs and Officers
These programs typically include the following of these features
● Written standards of ethical workplace conduct
● Ethics training on the standards
● A set of guiding values and principles
These programs have been increasing in number and they do make a difference
7 key elements companies should have in their ethics and compliance programs
1) Structure
2) Oversight
3) Due diligence
4) Communication
5) Monitoring
6) Promotion and enforcement
7) Response
These programs help gauge where people are in the process of developing a strong program
Ethics Screen
● Conventional Approach
○ Personal, Organizational, Societal, and International Standards and Norms
● Principles Approach
○ Justice, Rights, Utilitarian, Golden Rule, Virtue, Caring
● Ethical Tests Approach
○ Common Sense, One’s Best Self, Public, Disclosure, Ventilation, Purified Idea, Gag
Test
Ethics Check
1. Is it legal? Will I be violating either civil law or company policy?
2. Is it balanced? Is it fair to all concerned in the short term as well as the long term? Does it
promote win-win relationships?
3. How will it make me feel about myself? Will it make me proud? Would I feel good if my
family knew about it?
Behavioral Ethics
Framing- people’s ethical judgements are affected by how a question or issue is posed
Incrementalism- predisposition towards the slippery slope. There is a tendency toward making a
series of minor ethical misjudgements that can lead to major ethical mistakes
Role morality- tendency some people have to use different ethical standards as they move
through different roles in life
Moral equilibrium- penchant for people to keep an ethical scoreboard in their heads and use
this information when making future decisions
Ill-conceived goals- poorly set goals that encourage negative behaviors such as sales goals
emphasized too much or set too high
Motivated blindness- the process of overlooking the questionable actions of others when it is
one’s own best interest
Indirect blindness- occurs when one holds others less accountable for unethical behaviors when
they are carried out through third parties
Overcoming values- the act of letting questionable behaviors pass if the outcome is good
It is helpful to identify what ethics is NOT
● Ethics is not the same as feelings
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Ethics is not religion
Ethics is not following the law: law can actually become ethically corrupt
Ethics is not following culturally accepted norms: A lot of cultures are corrupt or blind to
certain ethical aspects
Ethics is not science: science does not provide us the answer of what we ought to do
Why Identifying Ethical Standards is Hard:
There are two problems in identifying the ethical standards we are to follow
1) On what do we base our ethical standards?
2) How do those standards get applied to specific situations we face?
Our ethical standards are based on those 5 philosophical approaches
Discussion #1: Case/ Reading: The Parable of the Sadhu by Bowen M McCoy, Harvard
Business Review
Questions to ask about the case study:
● What happened?
● Did they make the right choice?
● What were the ethical issues?
● What ethical perspectives were applicable?
Lessons Learned
● Every person did their bit for the Sadhu
● However, no one ensured the ultimate well being of the Sadhu
● No one person was willing to assume ultimate responsibility for the sadhu, everyone just
passed the buck to someone else and took off
● Where does the ethical responsibility of the individual end?
● Is there something called collective or institutional responsibility?
● Each did their bit as long as it was convenient, then passed on the “buck” to others
● Ponders about how different the action would have been… “had the person been a well
dressed Asian or a Western woman”
● Greed, Speed, Laziness, and Haziness. All of these four factors represent temptation that
is succumbed to, might lead to unethical behavior.
● But maybe the sadhu did not want help. Maybe he was on a personal last journey and
wanted to go in peace. (think about the ethics for this)
Case study: “The Vulnerability Disclosure Debate”, Markkula Center for Applied Ethics
● In 2015, google revealed a microsoft windows vulnerability along with exploit code (a
code that takes advantage of a software vulnerability or security flaw) two days before the
patch (patches are software and operating system updates that address security
vulnerabilities within a program or product). Once patches are released, people who
haven’t updated are vulnerable.
Company Vs. Company Disclosure Debate (2015)
● After finding the vulnerability, Google adheres to a strict 90 day policy, which means that
a public disclosure is released 90 days after the vulnerability is found, regardless of
whether the bug has been addressed
● Microsoft asked for an extension of the 90 days but Google said no, so Microsoft argued
and reiterated their support for “Coordinated Vulnerability Disclosure”.
● Google says their 90 day policy is good because it prevents developers from sweeping
vulnerabilities under the rug, and it should strike a balance between the public’s right to
know and providing the developer a chance to fix the problem.
● Coordinated Vulnerability Disclosure is the process of gathering information from
vulnerability finders, coordinating/sharing that information, and disclosing the existence of
software vulnerabilities
○ Vulnerability collaboration between researchers and vendors is about limiting the
field of opportunity so customers and their data are better protected against
cyberattacks
● STANCE THAT MICROSOFT DISAGREES WITH: People in favor of full public disclosure:
believe that this method pushes software vendors to fix vulnerabilities more quickly and
make customers take action to protect themselves
○ This reading disagrees because releasing info like this pressures an already
complicated technical environment. It is important to try to issue a “fix” before it is
disclosed to the public
● Microsoft is salty that google don't let them release their fix a few days later on patch
tuesday
● Microsoft urges google to make protection of customers their collective primary goal
● Microsoft argues that cybercriminals can use the public announced info if a company
releases it so early and can hack
Should the government be buying flaws and keeping them undisclosed?
● When the US government couldn't force Apple to give access to an iphone, they
reportedly paid $1 million for a secret software vulnerability
○ The US government is an avid user of these undiscovered software bugs. What
they don't do is disclose those vulnerabilities to the companies that make the
products
Week 11- Biases and Blindspots
Perception
● How our senses process information
● Can be fooled
We learned from the Stroop Test that
People are bad at ignoring information in front of them
We have to recognize that it is possible for us to be strooped
We process information even if it is irrelevant, misleading or even wrong- it is automatic
○ This is one of the reasons why fake news works so well
● Ex) Word and Color association test
Strategies to Improve
● Self-awareness that we can be “strooped”
● Reduce information/squint
● Implication for diversity, equity, and inclusion
● Make your judgements free from the influence of others
● Focus on what matters
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●
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Our Buggy Moral Code by Dan Ariely:
● He is a burn patient
● We got a lot of people cheating but just a little bit
● People only cheat as much as will allow them to still feel good about themselves
● When cheating was a part of their group, then cheating went up, but when the cheaters
were not part of the group, then cheating went down
● When we remind people about their morality, then cheating goes down
● When we get bigger distance from cheating, people cheat more
● Behavioral economics: we have so many institutions and many of them are wrong
● Can nudge people with framing:
○ Towards good
■ In-group/ out-group example
○ Away from good
■ Remove the choice from hard cash to some token or stock certificate
● People don't like to test their intuitions (nurse’s bandage technique)
Dan Ariely discusses a series of biases and blindspots- most of the time we are not aware
We know what good decision-making looks like in everyday decisions
1. Identify the problem
2. Establish decision criteria
3. Weigh decision criteria
4. Generate alternatives
5. Evaluate the alternatives
6. Choose the best alternatives
7. Implement the decision
8. Evaluate the decision
However, reality is quite different, “Why is it so tough to make good decisions?” for example:
● Limited ability to calculate
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Importance of social networks
Emotion overtakes logic
Altruism v pure Self Interest
○ Selflessness vs Selfishness
Desire for instant rewards
People stick to default choices
Two Common Causes of Decision-Making Breakdowns
● Bias
○ Prejudice in favor of or against one thing, person, or group compared with
another, usually in a way considered to be unfair
● Blind-spot
○ An area in which one fails to exercise judgement or discrimination
● By leaving bias and blind-spots unchecked, we succumb to this notion of Ethical Fading
○ When we no longer see the ethical implications of our business decisions
20 Cognitive Biases that mess up your decision-making
1. Anchoring bias
a. People are over-reliant on the first piece of information they hear. In a salary
negotiation, whoever makes the first offer establishes a range of reasonable
possibilities in each person’s mind
2. Availability heuristic
a. People overestimate the importance of information that is available to them. A
person might argue that smoking is not unhealthy because they know someone
who lived to 100 and smoked three packs a day
3. Bandwagon effect
a. The probability of one person adopting a belief increases based on the number
of people who hold that belief. This is a powerful form of groupthink and is the
reason why meetings are often unproductive
4. Blind-spot bias
a. Failing to recognize your own cognitive biases is a bias in itself. People notice
cognitive and motivational biases much more in others than in themselves
5. Choice-supportive bias
a. When you choose something, you tend to feel positive about it, even if that choice
has flaws. Like how you think your dog is awesome- even if it bites people every
once in a while
6. Clustering illusion
a. This is the tendency to see patterns in random events. It is key to various
gambling fallacies, like the idea that red is more or less likely to turn up on a
roulette table after a string of reds
7. Confirmation bias
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
a. We tend to listen only to information that confirms our preconceptions- one of
the reasons it's so hard to have an intelligent conversation about climate change
Conservatism bias
a. Where few people favor prior evidence over new evidence or information that
has emerged. People were slow to accept that the Earth was round because they
maintained their earlier understanding that the planet was flat.
Information bias
a. The tendency to seek information when it does not affect action. More
information is not always better. With less information, people can often make
more accurate predictions
Ostrich effect
a. The decision to ignore dangerous or negative information by “burying” one’s
head in the sand, like an ostrich. Research suggests that investors check the value
of their holdings significantly less often during bad markets.
Outcome bias
a. Judging a decision based on the outcome- NOT on how exactly the decision was
made in the moment. Just because you won a lot in Vegas doesn’t mean gambling
your money was a smart decision.
Overconfidence
a. Some of us are too confident about our abilities, and this causes us to take
greater risks in our daily lives. Experts are more prone to this bias than laypeople,
since they are more convinced that they are right
Placebo effect
a. When simply believing something will have a certain effect on you causes it to
have that effect. In medicine, people given fake pills often experience the same
psychological effects as people given
Pro-innovation
a. When a proponent of an innovation tends to overvalue its usefulness and
undervalue its limitations. Sound familiar, Silicon Valley? New iphones
Recency
a. The tendency to weigh the latest information more heavily than older data.
Investors often think the market will always look the way it looks today and make
unwise decisions
Salience
a. Our tendency to focus on the most easily recognizable features of a person or
concept. When you think about dying, you might worry about being mauled by a
lion, as opposed to what is statistically more likely, like dying in a car accident.
Selective perception
a. Allowing our expectations to influence how we perceive the world. An
experiment involving a football game between students from two universities
showed that one team saw the opposing team commit more infractions.
PRESENTATION GRADES!!!!!!!!!!!!!!!!
18. Stereotyping
a. Expecting a group or person to have certain qualities WITHOUT having real
information about the person. It allows us to quickly identify strangers as friends
or enemies, but people tend to overuse and abuse it
19. Survivorship bias
a. An error that comes from focusing only on surviving examples, causing us to
misjudge a situation. For instance, we might think that being an entrepreneur is
easy because we haven’t heard of all those who failed
20. Zero-risk bias
a. Sociologists have found that we love certainty- even if it’s counterproductive.
Eliminating risk entirely means there is no chance of harm being caused.
Please remember
● This list is far from being exhaustive
● Researchers have identified over 100+ types of biases and blind-spots such as the ones
we just discussed
Intuitive vs Deliberate Decision Making
● System 1 (Intuition and Instinct)
○ 95% of our decisions
■ Everyday decisions
○ Unconscious
○ Fast
○ Associative
○ Automatic pilot
○ Error prone
● System 2 (Rational Thinking)
○ 5% of our decisions
■ Complex decisions
○ Takes effort
○ Slow
○ Logical
○ Indecisive
○ Conscious
○ reliable
Automatic vs Deliberate decision-making
● System 1 thinking:
○ Based on intuition or emotion; quick and effortless
○ Grounded in evolution: automatic fight or flight responses
○ System 1 is not faulty per se. It is efficient and helpful sometimes
○ However it is also the source of many of the perception distortions, blind-spots
and biases that we have identified today
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System 2 thinking:
○ Its slower
○ It is conscious and effortful
■ You need to be willing, able and capable to engage
○ It is based in logic and critical thinking
Daniel Kahneman- Nobel Prize Winner who wrote about thinking fast thinking slow
(System 1 and 2)
●
Wrap Up
● You learned how perception plays a role in distorting our view of the world around us and
how these errors can have impacts in everyday activities, and in business life
● You learned strategies to combat blind-spots and the biases caused by perceptual errors.
Some of them include
○ Self-awareness
○ Slowing down
○ Using only the relevant information at hand
○ Shielding ourselves from clouding social influences
○ Relying more on thoughts than emotions
● System 1 will remain the dominant path for all decisions
○ Most oftenly used
○ It is okay! It is efficient and usually effective
○ We just need to make sure that it is the dominant path when there is not a lot at
stake, or when we truly need a reflex (automatic) response
○ Otherwise, we must slow down and be more mindful
Lecture Readings
Reading #1: “Thinking Fast, Thinking Slow” by Daniel Kahneman Ch. 1
Kahneman’s work is system 1 and system 2
● The system 1 and 2 terms were originally proposed by psychologists Keith Stanovich and
Richard West
● System 1 has to do with evolution because we are born to perceive the world around us.
System 1 also has learned associations between ideas. It also includes learned skills like
reading.
● The highly diverse operations of system 2 have one feature in common: they require
attention and are disrupted when attention is drawn away.
● You can multitask a lot of system 1 things together, but when it comes to trying to multitask
system 2 things it can become dangerous. This is because intense focusing on a task can
make people effectively blind, even to stimuli that normally attract attention.
● System 1 has biases. It has systematic errors that it is prone to make in specified
circumstances. This is the error prone part of system 1.
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It sometimes answers easier questions than the one it was asked, and it has little
understanding of logic and statistics
System 1 cannot be turned off, we usually just process the information that is right in front
of us
System 2 is in charge of self control. One of the tasks of system 2 is to overcome the
impulses of system 1.
It is easier to recognize other people's mistakes than our own
Reading #2: “A New Model for Ethical Leadership” by Max H. Bazerman, Harvard Business
Review
● Create more value for society
● The challenge: systematic cognitive barriers can blind us to our own unethical behaviors
and decisions, hampering our ability to maximize the value we create in the world
● The solution: we have both an intuitive system for ethical decision making and a more
deliberative one. The more intuitive system leads to less ethical choices and the
deliberative system needs to be consciously engaged.
● In practice: to make more ethical decisions, we must compare options rather than
evaluate them singly, disregard how decisions will affect you personally, make tradeoffs
that create more value for ALL parties, and allocate time wisely.
● Bounded Rationality- managers want to be rational but are influenced by biases and
other cognitive limitations that get in the way
● Motivated blindness: If we behave unethically out of self interest, we’re often unaware
that we are doing so.
○ Executives will unconsciously overlook serious wrongdoings in their company if
it benefits them or the organization.
○ People often think they contribute more than they do
● Overcoming barriers
○ Our ethical thinking has limitations. Improving ethical decision making requires
deliberately making rational decisions that maximizes value rather than just going
with one's gut.
● Joshua Greene has developed a two system view of ethical decision making:
○ The first one is intuitive system
○ The second one is a more deliberative system
■ This one leads to more ethical behavior. 2 strategies for engaging it are:
1) Make your decisions by COMPARING options, not by
looking at them one by one.
2) John Rawls ( justice approach guy) says to adapt the veil of
ignorance. If you live life without knowing your status in it,
you make more fair and just decisions.
● Using time wisely to increase collective value or utility is the very definition of ethical
action
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“I Just Can’t Say No” Club: females professors helped one another think more carefully
about where their time would create the most value
We can design the “architecture” surrounding choices to prompt people to make
value-creating decisions
The most common type of nudge involves changing the default choice that
decision-makers face
○ Specific questions nudge people to greater honesty than ambiguous questions do
Summary of Bazerman’s suggestions:
● Consciously engage in system 2 thinking
● Underscore the need to use time wisely
● Compare multiple options instead of evaluating each one individually
● Use Rawls ( justice approach guy) Veil of Ignorance
● Make tradeoffs in negotiations that make the pie bigger for all
● Change the environment to nudge people to be ethical
○ Insurance company example
Discussion Readings
Psychology of Fraud: Why Good People Do Bad Things
● We think about bad behavior: tied to character BUT researchers say it’s inadequate
● First unethical act is usually insignificant → can’t stop (slippery slope)
● We’re frequently blind to the ethics of a situation
● “Bounded ethicality”- the notion that cognitively, our ability to behave ethically is
seriously limited because we don’t always see the ethics of a situation
● The way the decision is presented changes the way we view it
● “If you’re thinking about a business decision, you’re significantly more likely to lie than if
you were thinking from an ethical frame”
○ Business frame activates 1 set of goals: what might I gain? How will it affect the
future?
○ Ethics frame triggers other goals: is this fair? Will people be hurt?
● Human beings commit fraud because human beings like helping each other
● Most people don’t see harm, they see it as empathy (helping to commit a fraud)
○ Future abstract consequences, or help out a real person in front of them
Discussion #2: Why Smart People Make Bad Choices
Carter Racings Part A and B by Jack Brittain and Sim Sitkin
Part A:
● Fred Carter and John Carter own this company and they are debating on whether or not
they should race
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Paul Edwards was the engine mechanic and he was guessing that the engine problem
was related to the ambient air temperature.
Tom Burns is the chief mechanic and he doesn't agree with Paul. He was saying temp was
not an issue because the gasket failures occurred over the entire temperature range.
John and Fred had gotten a favorable response from Goodstone’s Racing Program
Director last week when they presented their plans for next season, but it was clear that
his support depended on the visibility they generated in this race
There was a lot of pressure when it came to making a decision of wanting to race or not
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Part B:
● The goodstone deal is what they are trying to find
For the challenger disaster, they failed at engaging in system 1 because of: in group pressures
Decision making can deteriorate because of bandwagon and group influences
NASA ex. They had a judgment failure
● Dilution of responsibility
● The pressure to perform was too high
● The culture did not support pulling the plug
● The time pressure precluded analysis
● These big decisions must be examined in advance
● Too many emotions, not enough reasoning
Week 12- Giving Voice to Values
Lecture Slides
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What is GVV?
○ After you find what the right thing to do is, you effectively act on it
○ Awareness -> Analysis -> Action
○ But how do you take action?
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Purpose + Values + Principles = Ethical Frameworks
Steps to do the right thing
○ Recognize an ethical issue
○ Get the Facts
○ Evaluate Alternative Actions
○ Make a Decision and Test It
○ Act and Reflect on the Outcome
7 Pillars of GVV
○ Values, Purpose, Choice, Normalization, Self-Knowledge and Alignment, Voice,
Reasons and Rationalizations
Awareness and Analysis (Values, Purpose, Choice)
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○ What are the facts?
○ What are the critical issues?
○ What are the alternatives?
○ What are the consequences of each alternative/
○ Make a Decision
Acting on your Values (Normalization, Self-Knowledge and Alignment, Voice)
○ Requires strategy
○ Acting on your values is possible
○ Doesn’t require poking holes in others successes
○ Not so much about persuading others
Pillar 7 action (Reasons and Rationalizations)
○ What is at stake for each key party?
■ Internal Stakeholders: Employees, Manager, Owners
■ External Stakeholders: Suppliers, Society, Government, Creditors,
Shareholders, Customers
○ What are the main arguments that they are trying to counter?
○ What arguments or levers can you use to influence those who disagree with you?
○ What is your plan of action?
Anticipation, Rehearsing, Prescribing are all key activities in GVV
Potential Levers:
○ Think in the long run as well as the short run
○ Consider the firms wider purpose
○ Consider competitive advantage
○ Position yourself as an agent of continuous improvement (NOT conservative)
○ Provide actionable alternatives
○ Consider an ally
○ Consider the costs of each affected party
○ Assume the audience is pragmatic
○ Share good examples
Instead of asking “what is the right thing to do”, figure this out and then ask: How do I get
it done?
Figure out Enablers and Disablers
Ethical Decisions cannot be made in the moment
Key activities:
○ Find allies, mentors, coaches
○ Practice with them
○ Find your voice
○ Play to your strengths
Favor system 2 and reduce system 1’s impact
GVV is rational and practical ethics
Lecture Readings
Reading #1: “A Moral Compass for Business” (2017): 425 business, By Margo Grenman
● This article is in the perspective of Jerry Goodstein - wash u state biz prof
● Business ethics are important to help companies and organizations define their core
values-- businesses are getting better at this with time
● Businesses are shifting from a reactive approach to a proactive approach- with a strategic
emphasis and corporate social responsibility
○ This shift might have to do with pressure from stakeholders and constituencies on
the part of the businesses to be more responsive and to be thinking ahead
○ Companies also realize that there is a lot to lose when they are reactive
● Business ethics aren’t just for CEOS- they are for all parties
● Goodstein says that GVV is “what that approach does is to sort of turn business ethics in
some sense around. It's about, ‘I know what the right thing to do is,now how do I put forth
these values”
● All employees should have a say and give their voice to values, but employees lower on
the hierarchy have difficulty with this
○ There's a really big challenge with authority and power in the workplace
● When people feel empowered to speak their mind, that's one of the ways you create an
ethical culture.
● You get situations like fraud cases when you create an ethical culture where people are
not getting to voice their values
● It's important to establish a clear mission early on. In this way the organization grows and
it will be easier to come back to the original mission and values that coincide with it.
Reading #2: “Giving Voice to Values: Brief Introduction” By Marie Gentile
The focus here is POST- decision making. It’s not about deciding what the right thing is, rather
how to execute something
Distinctive features on giving voice to values curriculum:
● A focus on positive examples of times when folks have found ways to voice, and thereby
implement, their values in the workplace
● An emphasis on the importance of finding an alignment between one’s individual sense
of purpose and that of the organization (which involves self-assessment and focus on
individual strengths)
● The opportunity to construct and practice responses to the most frequently heard
reasons and rationalizations for not acting on one’s values
● The opportunity to build commitment by providing repeated opportunities for participants
to practice delivering their responses and to learn to provide peer feedback and
coaching to enhance effectiveness
There are many ways to voice our values, but the pivotal moment is deciding to speak.
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Things we can do to make sure we actually voice our values: pre scripting, practice, and
coaching
When trying to make people understand what you are saying, you must consider the
needs and desires and emotional investments of the individuals to whom we are
speaking, as opposed to focusing exclusively on our own
Reframing “voice” as “dialogue”, which includes a goodly dollop of “listening” is another
important piece of the recipe
It's important to use the communication style with which we are most skilled and
comfortable
Reasons and Rationalizations
● When we encounter values conflicts in the workplace, we often face barriers that appear
in the form of “reasons and rationalizations” for pursuing a particular course of action
that can be used to fulfill our own purpose.
○ Reasons and rationalizations are the objections you hear from your colleagues
when you try to point out an ethical problem
○ Sometimes you don't even hear these reasons and rationalizations because they
are unspoken assumptions
● This curriculum is about creating and time and space to be in the majority- because being
in the minority makes it hard to voice your opinions
○ In order to develop the ability to do this, we must ask the following questions:
■ What are the main arguments you are trying to counter? What are the
reasons and rationalizations you need to address?
■ What is at stake for the key parties? (including those who disagree with
you)
■ What is your most powerful and persuasive response to the reasons and
rationalizations you need to address? To whom should the argument be
made? When and in what context?
These questions just help us understand the reasons and motivations that guide the behavior
and choices of those with whom we want to communicate.
● A few of the familiar categories of values conflicts and categories of rationalization or
argument, Rushworth Kidder suggests that most ethical dilemmas fall into four
categories or patterns:
○ Truth vs Loyalty
○ Individual vs Community
○ Short term vs Long Term
○ Justice vs Mercy
○ NOT Money vs People
Here he is talking about conflicting values
● We can also consider the kinds of arguments or rationalization that we often encounter in
values conflicts. Some of the most common arguments include:
Expected or standard practice
Materiality
Locus of responsibility
Locus of loyalty: “I know this isn't quite fair for the company but I don’t want to hurt
my reports/team/boss/company”
● Identify patterns of reasoning and levers that can be useful to understand in our efforts to
voice our values
○ Thinking in the long run as well as the short run
○ Considering the situation in terms of the group and the firms wider purpose, rather
than in terms of the immediate transaction alone
○ Considering the assumed definition of “competitive advantage”
○ Positioning oneself as an agent of “continuous improvement” as opposed to the
source of the complaint
○ Positioning oneself as a source of actionable alternatives rather than “thou shall
not”
○ Pointing out addictive cycles that can cause greater and greater pressures and
risks, leading to larger and larger values conflicts
○ Considering who we need and can attract as an ally in our efforts
○ Considering the costs to each affected party and looking for ways to recognize
and mitigate these in order to make our arguments more appealing
○ Assuming our audiences are pragmatists (as opposed to idealists or opportunists)
and looking for ways to make it “feasible” to do the right thing
○ Assuming that our audience members are pragmatists, we will need to counter the
commonly held assumption of unethical behavior
The point of identifying all of these is to help recognize and practice responding to them
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Week 14: Course Wrap and Key Take-a-ways
Lecture Reading
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Sallie Krawcheck, Chair of Ellevate Network and Elevate Asset Management
○ Case with Walmart employees (lost the money they didn’t know could be lost)
○ “Know what your indicator is. My indicator has always been my stomach. When my
stomach starts to hurt, I know something is wrong.”
Binta Niambi Brown, CEO and Cofounder of Fermata Entertainment LTD. and Lawyer
○ Had a choice to make: either tell her client and risk losing the deal, or keep quiet
until papers were signed”
○ Chose to tell the client
○ “Sometimes the things we think could really hurt us or embarrass us end up being
the things that become our shining, most glorious moments.”
Scott Gerber, CEO of The gerber Group
Fired an employee because he was late, but he came back with his father who
worked and they took him back
○ “Loyalty and longevity still matter at some companies.”
Laurie Peterson, Founder of Build & Imagine Toys
○ Boys vs. girls toys
○ “You need to be the change you want to see.”
Kathryn Minshew, CEO and Cofounder of the Muse
○ Fired a company they had signed on to do business with
○ “I think backing your team in situations like that is really important, but it’s not
always easy. Especially when you're at an early stage.”
Anthony Soohoo, Cofounder and CEO of DOT & BO
○ Make a decision on whether or not to hold off bringing the product from the
market bc a small sample size was flawed and could be harmful
○ “Trust your gut to do the right thing for the customers. When there is a difficult
decision to make, make it based on what would create long-term value instead of
gaining the short-term win. That lesson has remained with me throughout my
career.”
Trae Bodge, Spokeswoman and Senior Editor of Retailmenot.com
○ Makeup for darker women
○ “If you’re looking at your bottom line as a company, part of that equation should
be, am I catering to all consumers? And yes, certain shades will be more profitable
and certain shades will be less profitable, but there’s middle ground there. It’s a
mistake from a PR and customer service perspective not to cater all consumers.”
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Lesson 1: Business is too important to be left to business people
○ Stakeholders and society have a compelling interest in shaping the trajectory and
impact of business choices
○ Regulation is not a dirty word
○ Embrace the long view and support sustainability for all
Lesson 2: The more business things change, the more they stay the same
○ Financial reporting is not dead. Long live non-financial reporting!
○ Most customers are king (but also overweight and in debt). While too many others
have no shelter or are food insecure. We need marketing in consumers’ real
interests.
○ Big data, small data; it all matters! And the trains still have to run on time; people
want good service, superior quality and meaningful jobs and careers, etc.
Lesson 3: You can make a difference
○ Ethics is not philosophical gibberish from dead white men! It’s everyday practical
and relevant for all
○ You can become better decision makers both when alone or groups. Understand
and practice what it takes in your personal and business lives
Speak up, vote, boycott, organize, volunteer, donate, get heard, don’t take a job
you don’t want, or work for a company you don’t like. Reject apathy & embrace
passion
Challenge: Reframe Pressure
○ You are going to face a probably ever-growing amount of pressure as you go
through BU and the rest of your life
○ Pressure creates stress and stress impacts you and the people around you
○ Negative and out-of-control stress is bad for us
○ But science suggests that stress can be reframed into motivation or other positive
psychological constructs
○ When reframed, stress can help us perform better
○ Research shows that stress is your enemy if you believe that it is
○ Instead, turn stress into your superpower
○ How to reframe stress?
■ Beliefs are powerful
● For example: research shows relationship between negative
emotions and cardiovascular disease; whole positive emotions are
better for your health
■ Don’t look for external fixes
● Managing stress requires cultivating your own resilience skills
● Don’t seek external solutions
● You have the power to turn stress and challenges into
opportunities
■ Use cognitive reappraisal to change stress into something that helps you
● Turn the stress of a deadline into a mechanism to focus
● Turn a dreaded public speaking event into an opportunity to make
a difference in someone’s life
● Turn a traffic backup during your commute into an opportunity to
check out the homes and flowers on the side of the road
● Turn a missed flight into an opportunity to spend one more night in
a city you enjoy. Call up a friend in the town and ask them out for a
drink
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Knowledge Checks for Module 3
1. Ethics are all of the following except:
a. Legal guidelines of acceptable content
2. Unethical decisions are usually costly for you, your community or your business
a. True
3. Making ethical decisions is hard because
a. There can be many contextual factors that interfere in the decision making
progress
4. Bounded ethicality is the idea that even when we try to behave ethically, it is difficult due
to a variety of organizational pressures and psychological tendencies
a. True
5. The building blocks of an ethical framework are
a. Purpose, values, principles
6. An ethical framework should meet all of the following criteria, EXCEPT:
a. Be dynamic
7. One goal of an ethical framework is to make more expedient and faster decisions
a. False
8. To recognize an ethical issue, one must ask the following question:
a. All of the above are potential ethical issues
9. Ethical tests are useful to clarify what the most prudent course of action should be. All of
the following are ethical tests, EXCEPT:
a. Sins test
10. All of the followings are ethical approaches grounded in philosophical thinking that we
discussed in the lecture, EXCEPT:
a. Moral approach
11. The goal of the common good approach to ethics is to:
a. Make sure society benefits
12. The goals of the virtues approach to ethics is to:
a. Make sure that I live up to my best self
13. The rights approach to ethics is often associated with
a. John Locke
14. Ethics is not following culturally accepted norms
a. True
15. Studies have shown that the number 1 driver impacting unethical behavior in
organizations is:
a. Behavior of superiors
16. What is it called when even if we try to behave ethically, it is difficult to do so based on
many reasons?
a. Bounded ethicality
17. Bex works in a law office as a receptionist and is confronted with an ethical dilemma. She
was recently exposed to someone who tested positive for COVID-19 but she does not
suffer from any symptoms. She fears getting tested because she would rather not receive
bad news. In terms of the 20 cognitive biases that get in the way of good decision
making, this is an example of:
a. Ostrich effect
18. Tiffany cheated on her first biology exam by getting a copy of last semester’s exam from
her roommate who had taken the class. Tiffany received an A on the first exam. Judging
from the outcome of her first exam, Tiffany decided to ask her roommate for copies of the
other two exams. In terms of the 20 cognitive biases, this is an example of:
a. Outcome bias
19. Humans sometimes behave unethically out of self interest. This phenomenon is called:
a. Motivated blindness
20. Georgia’s boss, Stanley, recently turned her down for a promotion at work because he
assumed that as a woman, Georgia would prioritize her role as a wife and mother over a
high-paying career. In this way, Stanley has engaged in the cognitive bias known as:
a. Stereotyping bias
21. According to the TED Talk by Dan Ariely called “Our Buggy Moral Code”, which of the
following statements is TRUE?
a. Two of the above are correct (incidence of cheating goes down when we are
reminded of our morality, and people cheat less when they see members in their
out-group cheat more
22. In the movie Star Trek, Dr. Spock was always stoic but logical. He always approached
every problem with critical thinking. In this way, Dr. Spock follows what system of
thinking?
a. System 2 thinking
23. Gabriel was driving on a highway when all of a sudden, he noticed a car moving into his
lane. Gabriel quickly swerved into the lane to his left to avoid the collision. Lucky for him,
he avoided a terrible collision. We can say that Gabriel engaged in:
a. System 1 thinking
24. Elizabeth Holmes supposedly created the technology to test and pre-diagnose illnesses
with only a few drops of blood. The company she started was called Theranos. She was
so confident in her technology that she was able to raise millions of dollars from investors.
However, she never allowed the scientific community to test her product and ultimately it
was revealed that the technology did not work and her company committed fraud.
Investors in her business fell victim to which type of cognitive bias?
a. Pro-innovation bias
25. What is it called when we no longer see the ethical implications of our business
decisions?
a. Ethical fading
26. Which statement is NOT true?
a. Perception mistakes are limited to visual illusions
27. To encourage organ donations in some European nations, authorities have decided to
enroll citizens in the system automatically, and then let them opt out if they wish. The
program increased the proportion of people agreeing to be donors from less than 30% to
more than 80%. This is an example of what psychological effect:
a. Nudge effect
28. According to the video you watched on the Stroop effect, which of the following
statements is true?
a. Squint to see more clearly
29. The answer to 2+2 will draw on system 2 thinking
a. False
30. In GVV, Gentile advocates that people should ask the following question:
a. How will I act on my values?
31. When training people in the art and practice of GVV, one should emphasize the
followings, EXCEPT:
a. The opportunity to concentrate on pre-decision making
32. What are the 3 A’s of the GVV process?
a. Awareness, Analysis, and Action
33. Which of the following is NOT one of the seven Pillars of GVV?
a. Self-awareness
34. GVV pillars 4-6 (Normalizations, Self-Knowledge & Alignment, and Voice) are most closely
aligned with which of the 3 A’s of Business Ethics process
a. Action
35. GVV seeks to help people figure what the ethical choice should be
a. False
36. For “acting on your values”, all of the following are true, EXCEPT
a. You need to persuade others
37. Values conflicts in the workplace often appear in the form of reasons and rationalizations
for pursuing a particular course of action
a. True
38. Which of the following is a key question you should respond to when thinking about
“reasons and rationalizations” in GVV?
a. What is at stake for key parties who may be impacted by this decision?
39. It is important to consider what is at stake for the parties you are trying to influence in the
GVV approach. Which is the question you should consider?
a. All of the above are aspects that should be considered
40. Which of the following is NOT a potential lever that can be used in crafting your GVV
a. Position yourself as a conservative agent
41. When making ethical decisions, one should remember:
a. Two of the above are correct when making ethical decisions (using GVV
framework allows you to make more rational and practical decisions; and one
often knows what the right decision is, how to act on it is the difficulty)
42. Most ethical dilemmas fall in the following categories or patterns, EXCEPT:
a. “Money versus people”
43. Which statement is true:
a. GVV is rational and practical ethics
44. GVV is a proactive approach to ethics for large organizations
a. false