Principles of Management
Dyck / Neubert
Chapter 1
Introduction to Management
Amer Hamzah Jantan
amer@econ.upm.edu.my
Tel: 03-89467781
HP: 012-2352592
Notes:
http://econ3.upm.edu.my/kelasma
ya/
Figure 1.1: Four
Reasons To Study Management
Important Managerial Skills
• Technical Skills
– Expertise in a particular area—marketing,
accounting, finance or human resources
• Human Skills
– Abilities in getting along with people,
leadership, helping others to be motivated,
communication and conflict resolution
• Conceptual Skills
– The ability to think about complex and broad
organization issues
Types of Managers
• First-Line Supervisors
– Manage the work of employees who are
involved in the actual production or creation
of an organization’s products or services.
• Middle Managers
– Manage first-line managers and others.
• Top Managers
– Have organization-wide managerial
responsibilities—Chief Executive Officers
(CEOs), Vice-Presidents, and Board Chairs
What Is Management?
• Management
– The process of planning, organizing, leading
and controlling human and other
organizational resources towards the
effective achievement of organizational goals.
• Organization
– A goal-directed (planning), deliberatelystructured (organizing) group of people
working together (leading) to achieve results
(controlling).
Functions of Management
(Fayol)
• Four Management Functions:
–
–
–
–
Planning
Organizing
Leading
Controlling
Managerial Roles (Mintzberg)
• Interpersonal Roles
– Leader, Liaison and Figurehead
• Decisional Roles
– Resource Allocator, Negotiator, Entrepreneur,
Crisis Handler
• Informational Roles
– Monitor, Disseminator, and Spokesperson
Fayol’s Functions
and Mintzberg’s Roles
Fayol
Mintzberg
Planning
Entrepreneur, negotiator,
spokesperson
Organizing
Resource allocator
Leading
Leader, liaison, disseminator
Controlling
Monitor, crisis handler, figurehead
Defining “Effective”
Management
• Effectiveness
– Choosing the “right” organizational goals to
pursue
• What about moral obligations?
• Is profit-maximization a legitimate goal?
• Efficiency
– The level of output that is achieved with a
given level of inputs
• Maximizing output while minimizing inputs
Principles of Management
Dyck / Neubert
Chapter 3
The Task and Macro Environments of
Management
The Task And Macro
Environments Of Management
• Task Environment
– Has the greatest
immediate
influence on
managers.
– Contains four key
groups of
stakeholders:
•
•
•
•
Customers
Members
Owners
Other organizations
• Macro Environment
– Contains four
dimensions:
•
•
•
•
Socio-cultural
Natural
Political-legal
Economictechnological
Figure 3.1: Three Basic Levels
of the Environment for Managers
Summary: Task Environment
• All managers must pay attention to key
stakeholders to:
– Ensure that they are in tune with customer
needs and wants to serve them adequately.
– Attract and retain an adequately qualified
workforce.
– Ensure that owners’ needs are met.
– Develop and maintain relationships with
suppliers, competitors and neighbors.
Summary: Macro Environment
• Managers must pay attention to the key
dimensions of their macro environment to:
– Monitor socio-cultural trends and changes in
demographics, health care, education and
other social institutions.
– Consider how sensitive they will be with
respect to the natural environment.
– Keep informed of developments in the
political-legal environment.
– Pay close attention to economic opportunities
and threats and remain technologically
competitive.
Principles of Management
Dyck / Neubert
Chapter 4
The International
Environment
Figure 4.1: Ways to
Internationalize an Organization
How to Internationalize
an Organization (cont’d)
• Exporting
– When an organization manufactures products
in its home country and transports them to
other countries for sale there.
• Importing
– When a finished product is brought in from
another country for resale domestically.
How to Internationalize
an Organization (cont’d)
• Global Outsourcing
– When one or more sub-components for an
organization’s products or services are
imported from another country.
• Counter-Trade
– When products or services from one country
are traded (rather than bought and sold for
currency) for products or services from
another country.
How to Internationalize
an Organization (cont’d)
• Licensing
– When an organization in one country sells
specific resources to an organization in
another country.
• Franchising
– When a franchisor in one country sells to a
franchisee in another country a complete
package required to set up an organization.
How to Internationalize
an Organization (cont’d)
• Strategic Alliance
– When managers from organizations in at
least two countries agree to pool their
organizations’ resources and “know-how” in
order to share the risks and rewards for
developing a new market or product.
• Joint Venture
– When partnering organizations agree to form
a separate, independent, jointly-owned
organization.
How to Internationalize
an Organization (cont’d)
• Foreign Subsidiaries
– Maquiladoras
• Are assembly plants and factories in special
regions in Mexico along the U.S. border where
international corporations can take advantage of
low wages and also enjoy low duties and tariffs
when their products are exported to the U.S.
Figure 4.3: Overview of Hofstede’s
Five Dimensions of National Culture
Hofstede’s Dimensions of
National Culture (cont’d)
• Materialism
– Is placing a high value on things like getting
better jobs, material possessions, money and
assertiveness.
• Quality of Life
– Is emphasized in cultures that overall tend to
value relationships, the welfare of others, and
the intrinsic satisfaction that comes from
performing meaningful work.
Figure 4.4: Relative Emphasis of Countries on
Hofstede’s Materialism/ Individualism Scores
Hofstede’s Dimensions of
National Culture (cont’d)
• Time Orientation
– Short-term cultures live in the present.
– Long-term cultures have a greater concern
for the future.
• Deference to Authority
– The relative emphasis that a culture places
on power differences
Hofstede’s Dimensions of
National Culture (cont’d)
• Uncertainty Avoidance
– High uncertainty
avoidance cultures
prefer predictable
rules and regulation
over ambiguity and
risk.
– Low uncertainty
avoidance cultures
value risk-taking and
innovativeness.
Principles of Management
Dyck / Neubert
Chapter 5
Ethics
Why Study Ethics?
• The emphasis on ethics is related to:
– The world is changing rapidly.
– Unethical decisions by managers are
receiving more attention.
– Managers are moral agents.
What Is Ethics?
• Ethics
– A set of principles or moral standards that
differentiate right from wrong.
• Management Ethics
– The study of moral standards and how they
influence managers’ actions.
Components of Management
Ethics
1. Sources where a manager may get their
moral standards
2. The moral-point-of-view that a manager
follows
3. The process a manager uses to make
decisions that are ethical
4. The influence of ethics on how managers
practice the four management functions
Sources of Management Ethics
• Informal/Public
– Work experiences, peers, managers
– Ethical climate
• The informal shared perceptions of what are
appropriate practices and procedures
• Informal/private
– Examples set by the behavior of immediate
family members
• Family, friends, peer groups, society, and
unspoken universal human norms
Table 5.1: The Four
Types of Sources of Ethics
Levels of Personal Moral
Development
• Pre-conventional
– What is rewarded and punished
• Self-interest: “What’s in it for me?”
• Conventional
– Social norms or external standards
• By others: “What is everyone else doing?”
• Post-conventional
– Universal principles established through
conscience and reason
• “What are timeless truths?”
Figure 5.2: Increasing
Levels of Moral Development
Principles of Management
Dyck / Neubert
Chapter 7
The Decision-Making Process
Introduction to Decision-Making
• Decision
– A choice that is made among a number of
available alternatives.
• Decision Process
1. Identify the need for a decision
2. Develop alternative responses
3. Choose the appropriate alternative
4. Implement the chosen alternative
Figure 7.1: The Four-step
Decision-making Model
Mainstream Approach to the
Four-Step Decision-Making
Process
• Step 1: Identify the need for a decision
– Identifying problems and opportunities to
meet or surpass financial goals
– Using learned scripts:
• Programmed decisions
• Non-programmed decisions
– Mistaking symptoms for the underlying issue
Figure 7.2: Considerations
that Influence How Much Time
Managers Invest in Developing Alternatives
Mainstream Approach to the
Four-Step Decision-Making
Process
• Step 3: Choose the appropriate alternative
– Choose an alternative, using a method based
on how much goal consensus and knowledge
is available for each alternative.
– Key Factors:
• Goal consensus about which goals to pursue
• Available knowledge about:
– How to achieve goals
– Uncertainty about outcomes
– Risk that alternative will result in negative outcome
Decision Making Approaches
• Classical Rational Approach
– High consensus, high knowledge
• Political Approach
– Low consensus, high knowledge
• Incremental Trial-and-Error Approach
– High consensus, low knowledge
– Continuous improvement
– Intuition
Decision-Making Approaches
(cont’d)
• Random (low consensus, low knowledge)
– No agreement on goals and lack of
knowledge about how to reach goals
• Administrative model (medium consensus,
medium knowledge)
– Bounded rationality
• Limited cognitive capabilities and personal biases
• Limited information—anchoring, past practices
• Limited resources for processing information
– Satisficing—choosing an adequate response
Mainstream Approach to the
Four-Step Decision-Making
Process
• Step 4: Implement the chosen alternative
– Implement the alternative. Use a participative
approach to overcome resistance
• Involving members in earlier steps
– Factors in implementation
• Significance of the problem for the organization
• Competency to analyze the problem and develop
alternatives
• Availability of adequate knowledge
• Commitment to implementing the alternative
Poor Decisions
• Causes
–
–
–
–
–
Failure to recognize significance of problem
Lack of participation
Insufficient information
Failure to delegate/facilitate decisions
Lack of commitment and support
• Persistence Errors
– Escalation of commitment
– Information distortion
– Administrative inertia
Principles of Management
Dyck / Neubert
Chapter 8
Setting Goals and
Making Plans
Introduction to Goals and Plans
• Goals
– The desired results or objectives that
members in an organization are pursuing.
• Plans
– Describe the steps and actions that are
required to achieve goals.
The Planning Process
• Steps in the Planning Process
1. Setting an organization’s overarching mission
and vision.
2. Setting strategic goals and plans.
3. Taking the strategic goals and plans and
putting them into practice in everyday
operations.
4. Implementing and monitoring the goals and
plans.
Figure 8.1: Overview of the
Four Steps of the Planning Process
Organizational Goals and Plans
• Ongoing Goals and Plans
– Guide the continuing activities that are
consistent with the basic purpose of the
organization.
• Change-Oriented goals and Plans
– Refer to new initiatives and changes to be
made in an organization’s practices.
Mission Statements
• Mission Statement
– Identifies the fundamental purpose of the
organization.
• Describes what the organization does, whom it
serves, and how it differs from similar
organizations.
• Can provide social legitimacy and a sense of
identity for the members of the organization.
Mission Statements (cont’d)
• Ideas are commonly mentioned in mission
statements:
•
•
•
•
•
•
•
•
•
Products/services
Customers
Organizational selfSurvival/growth/pro
Employees
Markets
Philosophy
Technology
Public image
Vision Statements
• Vision Statement
– Describes what an organization is striving to
become.
– Provides guidance to organizational
members.
– Describes goals that an organization hopes to
achieve five or more years into the future.
The Mainstream
Approach to Goals and Plans
• Step 1: Develop the Organization’s
Overarching Mission and Vision
– Mission/Vision Focus:
• Top-down management of the planning process to
enhance financial well-being.
• Focus is on things that will contribute to the future
competitiveness and financial success of an
organization.
The Mainstream Approach
to Goals and Plans (cont’d)
• Step 2: Develop Strategic Goals and Plan
– How managers can position the organization
in the eyes of stakeholders so as to achieve
advantages over its competitors.
• Step 3: Develop Operational Goals
and Plans
– Are set by lower-level managers.
– Have a less than one-year time horizon.
The Mainstream Approach
to Goals and Plans (cont’d)
• Stretch Goals (Jack Welch)
– Are so difficult that people do not know how
to reach them.
– Cannot be achieved simply by making
incremental changes to the status quo.
– Require outside-the-box thinking that
dramatically improves productivity, efficiency,
and profitability.
Figure 8.3: Checklist
for Making a Plan
Why Goals Aren’t Achieved
• Unexpected changes in other parts of the
organization or in the larger environment
• Some stakeholders are not convinced of
the legitimacy of a goal.
• Too much emphasis placed on members’
change-oriented goals rather than on their
ongoing goals.
Principles of Management
Dyck / Neubert
Chapter 9
Strategic Management
Importance of Strategic
Management
• Why Is Strategic Management Important?
– Because managers vary in how well they
formulate and implement strategies, and this
affects their organization’s competitiveness.
– Strategic management
• The analysis and decisions that are necessary to
formulate and implement strategy.
– Strategy
• The combination of goals, plans and actions
designed to accomplish an organization’s mission.
Strategic Management Process
1.Review the mission and vision of the
organization
2.Analyze the organization’s external
environments and internal resources
3.Choose and develop the strategy to be
followed
4.Implement the chosen strategy.
Figure 9.1: Overview of the
Strategic Management Process
Mainstream Strategic
Management
• Step 1: Review mission and vision
– Emphasis is on maximizing competitiveness.
– Plan is revisited on a regular basis.
• Step 2: Analyze internal and factors
– (SWOT)
• Internal strengths and weaknesses
• External opportunities and threats
– An analysis of the external environment is key
to uncovering what current and future
opportunities and threats might exist.
SWOT Analysis
Strengths
Valuable or unique resources of an organization
or any activities that it does particularly well that
can help managers to achieve their strategic
objectives.
Weaknesses
A lack of specific resources or abilities that an
organization needs in order for it to do well; a
characteristic that hinders the achievement of the
strategic objectives of an organization.
Opportunities
Conditions in the external environments that have
the potential to help managers meet or exceed
organizational goals.
Threats
Conditions in the external environments that have
the potential to prevent managers from meeting
organizational goals.
Table 9.1: Overview of Porter’s Five
Competitive Forces and Strategic
Management
Strategies
• Competitive Strategy
– A strategy that seeks to create value for
customers by providing low prices or unique
features that are not offered by rival
organizations.
• Sustained Competitive Advantage
– A competitive strategy that other
organizations are unable to duplicate.
Mainstream Strategic
Management
• Step 3: Formulate Strategy
– Competing within a specific industry
• Business level strategies
– Cost leadership strategy
– Differentiation
– Focus strategy
– Competing multiple industries
• Diversification strategies
– Related
– Unrelated
Business-Level Strategies
• Cost Leadership
– Increase the profit margin by keeping overall
costs lower than competitors through
efficiencies in production and distribution.
– Maintaining price and quality at roughly the
same level as competitors.
– Gaining economies of scale as the market
leader.
Business-Level Strategies
(cont’d)
• Differentiation Strategy
– Offering a product or service with a significant
difference for which buyers are willing to pay
a higher price than they would for a
competitor’s product or service.
• Focus Strategy
– Choosing a small niche in the overall market.
– Strategy can be based on either cost
leadership or differentiation.
Diversification Strategies
• Related Diversification
– Involves expanding an organization’s activity
in industries related to its current activities.
• Synergy
– The performance gain that results from two or
more units working together is greater than
the sum of their individual contributions.
Diversification Strategies (cont’d)
• Horizontal Integration
– Services and products are expanded or
offered in new markets.
• Vertical Integration
– Occurs when an organization produces its
own inputs (backward integration) or sells its
own outputs (forward integration).
Diversification Strategies (cont’d)
• Unrelated Diversification
– Occurs when an organization grows by
acquiring or entering new industries unrelated
to its current activities.
– Reasons for diversification:
• When there are no opportunities for expansion in
current markets.
• When current markets are beginning to decline.
Business Portfolio Planning
• BCG Matrix
– Developed by the Boston Consulting Group.
– Classifies portfolio businesses by relative
market share (strength) and market growth
rate (potential).
•
•
•
•
Stars—high growth, high market share
Cash cows—low growth, high market share
Question marks—high growth, low market share
Dogs—low growth, low market share
– Is limited by its focusing exclusively on
market share and market growth.
Figure 9.2: BCG Portfolio Matrix
for Managing Diversified Organizations
Figure 9.3: The Product Life
Cycle
Mainstream Strategic
Management
• Step 4: Implement Strategy
– Content school approach to strategy
• Emphasizes the rational-analytic, top-down and
linear aspects of strategy formulation.
• Aligned with mainstream approach.
– Process school of strategic management
• Bottom-up, emergent (un-planned), and egalitarian
approach that emphasizes strategic learning—
strategy formulation and implementation are
ongoing and iterative.
• Aligned with the Multistream approach.