PRINCIPLES OF
MANAGEMENT
With Philip Soward
LESSONS 2 AND 3
BUSINESS AND ITS CONTEXT
(Material included from Management 8e by
Schermerhorn and from Harvard Business Review,
2000 Sept-Oct and February 2004 articles by Kaplan
and Norton on Strategy Maps)
CHAPTER 6
• The Business Plan
• Seizing an Opportunity
Study Question 3: How does one start
a new venture?
 Basic items that should be included in a business plan:
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Executive summary
Industry analysis
Company description
Product and services description
Market description
Marketing strategy
Operations description
Staffing description
Financial projection
Capital needs
Milestones
Study Question 3: How does one start
a new venture?
 Questions that keep a new venture focused on its
customers …
– Who is your customer?
– How will you reach key customer market segments?
– What determines customer choices to buy or not buy your
product/service?
– Why is your product/service a compelling choice for the
customer?
– How will you price your product/service for the customer?
– How much does it cost to make and deliver your
product/service?
– How much does it cost to attract a customer?
– How much does it cost to support and retain a customer?
THE BALANCED SCORECARD
STRATEGY MAP
• BY ROBERT S. KAPLAN AND DAVID P.
NORTON
• A WAY TO TIE TOGETHER ALL THE
ASPECTS OF A COMPANY INTO A
COHERENT FRAMEWORK
BSC Strategy Map (adapted) & our Chapters
Customer
New Markets
Perspective Ch 4
Customer
Intimacy
Product
Leadership
Operational
Excellence, Ch 8
Financial
Objectives: Ch 8
Revenue from
new markets
Customer
Profitability:
Product
Profitability:
Productivity Strategy:
lower costs, high
asset turnover:
Example
Company:
Cases
Coca Cola, all
IBM Consulting
Apple
UPS, Dell, Walmart
Key Internal
Processes
Marketing,
Sales
Marketing, Sales
Innovation,
R&D
Supply Chain,
Operations
Human Capital:
International
Ch 12, Key Skills knowledge
Marketing, Sales
Engineering,
Marketing
Operations
Information
Capital: Ch 7 IT
Laptop, mobile
CRM
CAD
ERP
Organization
Capital: Ch 4
Culture
World
travellers
Customer
knowledge
Scientists
Efficiency
Image of
Company: Ch 3
Relationship with Society/Community and Public Relations with external
Stakeholders
Learning and Growth Perspective:
CHAPTER 4
• COMPETITIVE ADVANTAGE
– 3 STANDARD STRATEGIES:
• Operational Excellence
• Customer Intimacy
• Product Innovation
– IN EACH CASE:
• Can expand to New Markets
• Must protect Company’s Image
• BEING CUSTOMER-DRIVEN
– Customer Relationship Management
• ORGANIZATION CULTURE
– To strengthen commitment to company’s strategy
Study Question 1: What is the external
environment of organizations?
 Competitive advantage is a core
competency that clearly sets an
organization apart from competitors and
gives it an advantage over them in the
marketplace.
Study Question 2: What is a customerdriven organization?
 Customer relationship management
establishes and maintains high standards of
customer service in order to strategically build
lasting relationships with and add value to
customers.
 Supply chain management is the strategic
management of all operations relating to an
organization’s resource suppliers.
Study Question 2: What is a customerdriven organization?
 Customers want:
– High quality.
– Low price.
– On-time delivery.
 Key customer service lessons:
– Protect reputation for quality products.
– Treat customers right.
Study Question 4: What is organizational
culture?
 Organizational culture is the system of
shared beliefs and values that develops
within an organization and guides the
behavior of its members.
CHAPTER 3: THE COMPANY IN
SOCIETY
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STAKE HOLDERS
CORPORATE RESPONSIBILITY
THE COMPANY’S IMAGE
GOVERNMENT INTERVENTION
Study Question 4: What is corporate social
responsibility?
 Organizational stakeholders
– Those persons, groups, and other organizations directly
affected by the behavior of the organization and holding a
stake in its performance.
 Typical organizational stakeholders
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Employees
Customers
Suppliers
Owners
Competitors
Regulators
Interest groups
Study Question 4: What is corporate social
responsibility?
 Beliefs that guide socially responsible
business practices:
– People do their best with a balance of work and
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family life.
Organizations perform best in healthy
communities.
Organizations gain by respecting the natural
environment.
Organizations must be managed and led for longterm success.
Organizations must protect their reputations.
Study Question 5: How do organizations and
governments work together in society?
 How government influences organizations:
– Common areas of government regulation of
business affairs:
• Occupational safety and health
• Fair labor practices
• Consumer protection
• Environmental protection
CHAPTER 12: HUMAN CAPITAL
• VALUING HUMAN CAPITAL
• DEVELOPING STAFF SKILL
– Emphasis needed depends on chosen
strategy
CHAPTER 7: INFORMATION
CAPITAL
• HOW IT IS CHANGING:
– BUSINESS,
– ORGANIZATIONS,
– AND THE OFFICE.
• AGAIN, WHICH SYSTEMS ARE MOST
IMPORTANT WILL DEPEND ON THE
CHOSEN STRATEGY, THAT MUST BE
SUPPORTED
How IT Breaks Barriers
People, teams and
departments are better
connected by IT
Suppliers
Supply chain
management is
improved by IT
connections
Organizations are flatter
as IT replaces
management levels
IT
Customers
breaks
barriers
Strategic
Partners
Customer relationship
management is improved
by IT connections
More things are done by
outsourcing and
partnerships using IT
Study Question 1: How is information
technology changing the workplace?
 Information and knowledge — basic
linkages:
– Knowledge and knowledge workers provide a
decisive competitive factor in today’s
economy.
– Knowledge worker.
• Someone whose value to the organization rests
with intellect, not physical capabilities.
– Intellectual capital.
• Shared knowledge of a workforce that can be used
to create wealth.
Study Question 1: How is information
technology changing the workplace?
 Implications of IT within organizations:
– Facilitation of communication and information
sharing.
– Operating with fewer middle managers.
– Flattening of organizational structures.
– Faster decision making.
– Increased coordination and control.
Study Question 1: How is information
technology changing the workplace?
 Implications of IT for relationships with
external environment:
– Helps with customer relationship
management.
– Helps organizations with supply chain
management.
– Helps in monitoring outsourcing and other
business contracts.
Study Question 1: How is information
technology changing the workplace?
 How IT is changing the office …
– Progressive organizations actively use IT to help
achieve high performance in uncertain environments.
– IT has dramatically changed nature of offices.
– Key developments in networked offices:
• Instant messaging.
• Peer-to-peer file sharing (P2P).
CHAPTER 8: PUTTING IT INTO
PRACTICE
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•
PLAN FOR SUCCESS
CONTROL: MAKE SURE IT HAPPENS
MBO TO SECURE STAFF COMMITMENT
HOW EACH STRATEGY WILL AFFECT
THE BREAK-EVEN POINT
What is “Planning”?
Planning is a process of…
setting objectives
and…
determining how to accomplish
them.
Karnak’s Criteria
for a Good Objective
• Specific
• Measurable
• Linked to a timetable
• Challenging but attainable
Study Question 1: How do managers plan?
 Planning
– The process of setting objectives and determining
how to best accomplish them.
 Objectives
– Identify the specific results or desired outcomes that
one intends to achieve.
 Plan
– A statement of action steps to be taken in order to
accomplish the objectives.
Study Question 1: How do managers plan?
 Benefits of planning:
– Improves focus and flexibility.
– Improves action orientation.
– Improves coordination.
– Improves time management.
– Improves control.
Study Question 4: What is the
control process?
 Steps in the control process:
– Step 1 — establish objectives and standards.
– Step 2 — measure actual performance.
– Step 3 — compare results with objectives and
standards.
– Step 4 — take corrective action as needed.
THIS IS THE REAL MBO
• Joint objective setting
• Individual works
• Supervisor supports
• Joint review of results
Study Question 5: What are the common
organizational controls?
 Management by Objectives (MBO)
– A structured process of regular
communication.
– Supervisor/team leader and workers jointly
set performance objectives.
– Supervisor/team leader and workers jointly
review results.
Study Question 5: What are the common
organizational controls?
 Advantages of MBO
– Focuses workers on most important tasks and
objectives.
– Focuses supervisor’s efforts on important
areas of support.
– Contributes to relationship building.
– Gives workers a structured opportunity to
participate in decision making.
Study Question 5: What are the common
organizational controls?
Break-even analysis …
– Determination of the point at which sales
revenues are sufficient to cover costs.
– Break-Even Point = Fixed Costs / (Price –
Variable Costs)
– Used in evaluating:
• New products
• New program initiatives
Total Sales
Revenue
Break-even Point
Revenues = Costs
Dollar
Costs &
Revenues
Total Costs =
Fixed+Variable
Variable Costs
Fixed Costs
Unit Sales