ORGANIZATION AND MANAGEMENT CONCEPTS

CHAPTER 1-MANAGING AND PERFORMING

Organization - is a group of people working together in a structured and coordinated fashion to
achieve a set of goals.
Managers - are responsible for using the organization’s resources to help achieve its goals.
Good managers can propel an organization into unprecedented realms of success, whereas
poor managers can devastate even the strongest of organizations
Management guru, Peter Drucker, says the basic task of management includes both marketing
and innovation. According to him, “Management is a multi-purpose organ that manages a business
and manages managers, and manages workers and work.”
Harold Koontz defined management as “the art of getting things done through and with people in
formally organized groups.”
In the words of Kimball and Kimball, “Management embraces all duties and functions that pertain
to the initiation of an enterprise, its financing, the establishment of all major policies, the provision
of all necessary equipment, the outlining of the general form of organization under which the
enterprise is to operate and the selection of the principal officers. The group of officials in primary
control of an enterprise is referred to as management”
Management can be defined as a set of activities (including planning and decision making,
organizing, leading, and controlling) directed at an organization’s resources (human, financial,
physical, and information), with the aim of achieving organizational goals in an efficient and
effective manner.
Managerial activities – are usually done in a continuous manner
Manager - is someone whose primary responsibility is to carry out the management process.
efficient, we mean using resources wisely, in a cost-effective way. “doing things right” –
concerned with means
effective, we mean making the right decisions and successfully implementing them. “doing the
right things” -concerned with ends
Managing can be called "art of arts" because it organizes and uses human talent, which is the
basis of every artistic activity.
BASIC MANAGEMENT FUNCTIONS
1. Planning and Decision Making- planning means setting an organization’s goals and
deciding how best to achieve them. Decision making, a part of the planning process,
involves selecting a course of action from a set of alternatives.
2. Organizing - determining how activities and resources are to be grouped. What tasks
are to be done, who is to do them, how the tasks are to be grouped, who reports to whom,
and where decisions are to be made.
3. Leading - used to get/ motivate members of the organization to work together to further
the interests of the organization. MOTIVATING subordinates and influencing individuals or
teams
4. Controlling - controlling, or monitoring the organization’s progress toward its goals.
Performing in such a way as to arrive at its “destination” at the appointed time. Monitoring
ACTUAL performance against GOALS
THE ROLES MANAGER’S PLAY
 1. Informational roles. Managers are required to gather, collate, analyze, store, and
disseminate many kinds of information
Monitors, managers are constantly scanning the environment for information, talking
with liaison contacts and subordinates.
Disseminator role, managers pass privileged information directly to subordinates,
who might otherwise have no access to it.
Spokesperson role, managers send information to people outside of their
organizations: an executive makes a speech.
2. Interpersonal roles. Managers are required to interact with a substantial number of
people in the course of a workweek.
figurehead role. manager must perform some ceremonial duties.
Their actions in this regard are directly related to their role as a leader. Leadership
determines, in large part, how much power they will realize.
liaison role, in which managers establish and maintain contacts outside the vertical
chain of command – manage information links inside and outside the organization
3. Decisional roles. Ultimately, managers are charged with the responsibility of making
decisions on behalf of both the organization and the stakeholders with an interest in it.
entrepreneur, managers seek to improve their businesses, adapt to changing
market conditions, and react to opportunities as they present themselves.
disturbance or crisis handler, Crises can arise because bad managers let
circumstances deteriorate or spin out of control, but just as often good managers find
themselves in the midst of a crisis that they could not have anticipated but must react
to just the same.
resource allocator involves managers making decisions about who gets what, how
much, when, and why. Resources, including funding, equipment, human labor, office
or production space
negotiator. Managers spend considerable amounts of time in negotiations: over
budget allocations, labor and collective bargaining agreements,
ACTIVITIES PERFORMED BY MANAGERS
According to our definition, managers are involved in planning, organizing, directing, and
controlling. Managers have described their responsibilities that can be aggregated into nine major
types of activity. These include:
1. Long-range planning. Managers occupying executive positions are frequently involved
in strategic Chapter 1 Managing and Performing 13 planning and development.
2. Controlling. Managers evaluate and take corrective action concerning the allocation and
use of human, financial, and material resources.
3. Environmental scanning. Managers must continually watch for changes in the business
environment and monitor business indicators such as returns on equity or investment,
economic indicators, business cycles, and so forth.
4. Supervision. Managers continually oversee the work of their subordinates.
5. Coordinating. Managers often must coordinate the work of others both inside the work
unit and out.
6. Customer relations and marketing. Certain managers are involved in direct contact
with customers and potential customers.
7. Community relations. Contact must be maintained and nurtured with representatives
from various constituencies outside the company, including state and federal agencies,
local civic groups, and suppliers.
8. Internal consulting. Some managers make use of their technical expertise to solve
internal problems, acting as inside consultants for organizational change and development.
 9. Monitoring products and services. Managers get involved in planning, scheduling, and
monitoring the design, development, production, and delivery of the organization’s products
and services.

VARIATIONS IN MANAGERIAL WORK

1. Management by Level. We can distinguish three general levels of management:
executives, middle management, and first-line management. Executive managers are
at the top of the hierarchy and are responsible for the entire organization, especially its
strategic direction. Middle managers, who are at the middle of the hierarchy, are
responsible for major departments and may supervise other lower-level managers. Finally,
first-line managers supervise rank-and-file employees and carry out day-to-day activities
within departments

: Executive positions require far more conceptual skill and less use of technical skills in
most (but not all) situations
: First-line managers generally require more technical skills and fewer conceptual
skills.

: Human relations skills, or people skills, remain important for success at all three
levels in the hierarchy.
 1. Technical skills. Managers must have the ability to use the tools, procedures, and
techniques of their special areas. An accountant must have expertise in accounting
principles, whereas a production manager must know operations management. These skills
are the mechanics of the job.
2. Human relations skills. Human relations skills involve the ability to work with people
and understand employee motivation and group processes. These skills allow the manager
to become involved with and lead his group.
3. Conceptual skills. These skills represent a manager’s ability to organize and analyze
information in order to improve organizational performance. They include the ability to see
the organization as a whole and to understand how various parts fit together to work as an
integrated unit. These skills are required to coordinate the departments and divisions
successfully so that the entire organization can pull together.

2. Management by Department or Function. In addition to level in the hierarchy, managerial

responsibilities also differ with respect to the type of department or function. There are differences
found for quality assurance, manufacturing, marketing, accounting and finance, and human
resource management departments.
1. Manufacturing department managers will concentrate their efforts on products and
services, controlling, and supervising.
2. Marketing managers, in comparison, focus less on planning, coordinating, and
consulting and more on customer relations and external contact.
3. Managers in both accounting and human resource management departments rate
high on long-range planning, but will spend less time on the organization’s products and
service offerings.
4. Managers in accounting and finance are also concerned with controlling and with
monitoring performance indicators, while human resource managers provide consulting
expertise, coordination, and external contacts.

TYPES OF MANAGERS IN DIFFERENT AREAS OF THE ORGANIZATION

Regardless of their level, managers may work in various areas within an organization. In any
given firm, for example, these areas may include marketing, financial, operations, human
resources, administrative, and others.
1. Marketing manager’s work in areas related to the marketing function—getting
consumers and clients to buy the organization’s products or services. These areas include
new product development, promotion, and distribution. Given the importance of marketing
for virtually all organizations, developing good managers in this area is critical.
 2. Financial managers deal primarily with an organization’s financial resources. They are
responsible for activities such as accounting, cash management, and investments. In some
businesses, especially banking and insurance, financial managers are found in large
numbers.
3. Operations managers are concerned with creating and managing the systems that
create an organization’s products and services. Typical responsibilities of operations
managers include production control, inventory control, quality control, plant layout, and site
selection.
4. Human resources managers are responsible for hiring and developing employees.
They are typically involved in human resource planning, recruiting and selecting employees,
training and development, designing compensation and benefit systems, formulating
performance appraisal systems, and discharging low-performing and problem employees.
5. Administrative, or general, managers are not associated with any particular
management specialty. Probably the best example of an administrative management
position is that of a hospital or clinic administrator. Administrative managers tend to be
generalists; they have some basic familiarity with all functional areas of management rather
than specialized training in any one area.

CHAPTER 2- FOUNDATIONS OF DECISION MAKING

Decision-making is the action or process of thinking through possible options and selecting one.
It is important to recognize that managers are continually making decisions, and that the quality of
their decision-making has an impact—sometimes quite significant—on the effectiveness of the
organization and its stakeholders. Stakeholders are all the individuals or groups that are affected
by an organization (such as customers, employees, shareholders, etc.).

Poor decision-making by lower-level managers is unlikely to drive the entire firm out of
existence, but it can lead to many adverse outcomes such as:
• reduced productivity if there are too few workers or insufficient supplies,
• increased expenses if there are too many workers or too many supplies, particularly if the
supplies have a limited shelf life or are costly to store, and
• frustration among employees, reduced morale, and increased turnover (which can be costly
for the organization) if the decisions involve managing and training workers.

TWO SYSTEMS OF DECISION-MAKING IN THE BRAIN

The human brain processes information for decision-making using one of two routes: a reflective
system and a reactive (or reflexive) system. The reflective system is logical, analytical,
deliberate, and methodical, while the reactive system is quick, impulsive, and intuitive, relying on
emotions or habits to provide cues for what to do next. Research in neuropsychology suggests
that the brain can only use one system at a time for processing information [Darlow & Sloman] and
that the two systems are directed by different parts of the brain. The prefrontal cortex is more
involved in the reflective system, and the basal ganglia and amygdala (more primitive parts
of the brain, from an evolutionary perspective) are more involved in the reactive system.
1. Reactive Decision-Making: fight-or-flight response kicks in that leads to immediate action
without methodically weighing all possible options and their consequences. Manager has
faced a similar situation in the past and has figured out how to deal with it, the brain shifts
immediately to the quick, intuitive decision-making system.
: These managers will not be able to explain the logic behind their decision, and will instead
say they just went with their “gut”, or did what “felt” right.
 : has faced a similar situation in the past and has figured out how to deal with it
: the brain shifts immediately to the quick, intuitive decision-making system.

2. Reflective Decision-Making: better to process available information logically, analytically,

and methodically.
: serious thought prior to making a decision;

THE ROLE OF EMOTIONS

Emotions can serve as powerful signals about what we should do, especially in situations with
ethical implications. Effective decision-making, then, relies on both logic and emotions.
Emotional intelligence is the ability to recognize, understand, pay attention to, and manage one’s
own emotions and the emotions of others.
- It involves self-awareness and self-regulation
- also involves empathy—the ability to understand other peoples’ emotions (and an interest
in doing so).
- involves social skills to manage the emotional aspects of relationships with others.

PROGRAMMED AND NON-PROGRAMMED DECISIONS

have structure and routine applied to them (called programmed decisions) and decisions that
are novel and require thought and attention (non-programmed decisions)
1. Programmed decisions are those that are repeated over time and for which an existing set of
rules can be developed to guide the process.
- managers often develop heuristics, or mental shortcuts, to help reach a decision

2.Non-programmed Decisions. In contrast, non-programmed decisions are novel, unstructured

decisions that are generally based on criteria that are not well-defined. With non-programmed
decisions, information is more likely to be ambiguous or incomplete, and the decision maker
may need to exercise some thoughtful judgment and creative thinking to reach a good solution.
: These are also sometimes referred to as non-routine decisions or as high-involvement decisions
because they require greater involvement and thought on the part of the decision maker

THE DECISION-MAKING PROCESS

While decisions makers can use mental shortcuts with programmed decisions, they should use a
systematic process with non-programmed decisions. The decision-making process is illustrated in
Exhibit 2.3 and can be broken down into a series of six steps, as follows:
1. Recognize that a decision needs to be made.
2. Generate multiple alternatives.
a. Talk to other people.
: Managers can often improve the quality of their decision making by involving others
in the process, especially when generating alternatives.
: Other people tend to view problems from different perspectives because they have
had different life experiences
b. Be creative.
: Creativity is the generation of new or original ideas; it requires the use of
imagination and the ability to step back from traditional ways of doing things and
seeing the world.
3. Analyze the alternatives.
Four components to ethical decision-making of James Rest:
1. Moral sensitivity—recognizing that the issue has a moral component;
2. Moral judgment—determining which actions are right vs. wrong;
3. Moral motivation/intention—deciding to do the right thing; and
4. Moral character/action—actually doing what is right.
: Note that a failure at any point in the chain can lead to unethical actions!
4. Select an alternative.
5. Implement the selected alternative.
6. Evaluate its effectiveness.

BARRIERS TO EFFECTIVE DECISION-MAKING

1. Bounded rationality is the idea that for complex issues we cannot be completely
rational because we cannot fully grasp all the possible alternatives, nor can we understand
all the implications of every possible alternative. Our brains have limitations in terms of the
amount of information they can process.
2. Escalation of commitment is the tendency of decision makers to remain committed to
poor decision, even when doing so leads to increasingly negative outcomes.
3. Time Constraints: there is little time available to collect information and to rationally
process it
4. Uncertainty: they cannot know the outcome of each alternative until they’ve actually
chosen that alternative.
5. Conflict: effective decision-making can be difficult because of conflict.

GROUP DECISION-MAKING
Involving more people in the decision-making process can greatly improve the quality of a
manager's decisions and outcomes. However, involving more people can also increase conflict
and generate other challenges.
Advantages of Group Decisions
1. An advantage to involving groups in decision-making is that you can incorporate different
perspectives and ideas. For this advantage to be realized, however, you need a diverse group. In
a diverse group, the different group members will each tend to have different preferences,
opinions, biases, and stereotypes. Because a variety of viewpoints must be negotiated and
worked through, group decision-making creates additional work for a manager, but (provided the
group members reflect different perspectives) it also tends to reduce the effects of bias on the
outcome.
 2. Having more people involved in decision-making is also beneficial because each individual
brings unique information or knowledge to the group, as well as different perspectives on the
problem.
3. Additionally, having the participation of multiple people will often lead to more options being
generated and to greater intellectual stimulation as group members discuss the available options.
Brainstorming is a process of generating as many solutions or options as possible and is a
popular technique associated with group decision-making. All of these factors can lead to superior
outcomes when groups are involved in decision-making. Furthermore, involving people who will be
affected by a decision in the decision-making process will allow those individuals to have a greater
understanding of the issues or problems and a greater commitment to the solutions.

Disadvantages of Group Decisions

1. Group decision-making is not without challenges. Some groups get bogged down by conflict,
while others go to the opposite extreme and push for agreement at the expense of quality
discussions.
2. Groupthink occurs when group members choose not to voice their concerns or objections
because they would rather keep the peace and not annoy or antagonize others.
3. Sometimes groupthink occurs because the group has a positive team spirit and camaraderie,
and individual group members don’t want that to change by introducing conflict. It can also occur
because past successes have made the team complacent.
4. Often, one individual in the group has more power or exerts more influence than others and
discourages those with differing opinions from speaking up (suppression of dissent) to ensure that
only their own ideas are implemented. If members of the group are not really contributing their
ideas and perspectives, however, then the group is not getting the benefits of group decision-
making.

How to Form a Quality Group?

1. Effective managers will try to ensure quality group decision-making by forming groups with
diverse members so that a variety of perspectives will contribute to the process. They will also
encourage everyone to speak up and voice their opinions and thoughts prior to the group reaching
a decision.
2. Sometimes groups will also assign a member to play the devil’s advocate in order to reduce
groupthink. The devil’s advocate intentionally takes on the role of critic. Their job is to point out
flawed logic, to challenge the group’s evaluations of various alternatives, and to identify
weaknesses in proposed solutions. This pushes the other group members to think more deeply
about the advantages and disadvantages of proposed solutions before reaching a decision and
implementing it.

CHAPTER 3: THE ORGANIZATION’S ENVIRONMENT

The organization’s environment is classified into two major environments namely: external and
internal environment.

The external environment is everything outside an organization’s boundaries that might affect it.
There are two separate external environments: the general environment and the task
environment.

The general environment is an inclusive concept that involves all outside factors and
influences that impact the operation of a business that an organization must respond or
react to in order to maintain its flow of operations.
 1. The Economic Dimension. The economic dimension of an organization’s general
environment is the overall health and vitality of the economic system in which the
organization operates.
2. The Technological Dimension. The technological dimension of the general
environment is made up of the methods available for converting resources into
products or services.
3. The Political–Legal Dimension. The political–legal dimension of the general
environment consists of government regulation of business and the relationship
between business and government.
This dimension is important for three basic reasons. First, the legal system partially
defines what an organization can and cannot do. Second, pro- or anti-business
sentiment in government influences business activity. Finally, political stability has
ramifications for planning.

Task environment provides useful information more readily than the general environment
because the manager can identify environmental factors of specific interest to the
organization, rather than deal with the more abstract dimensions of the general
environment.
1. Competitors - An organization’s competitors are other organizations that compete
with it for resources.
2. Customers - A second dimension of the task environment is customers, or
whoever pays money to acquire an organization’s products or services.

3. Supplier - Suppliers are organizations that provide resources for other

organizations. Some businesses strive to avoid depending exclusively on particular
suppliers. Others, however, find it beneficial to create strong relationships with single
suppliers.
4. Regulators - Regulators are elements of the task environment that have the
potential to control, legislate, or otherwise influence an organization’s policies and
practices. There are two important kinds of regulators. Regulatory agencies are
created by the government to protect the public from certain business practices or to
protect organizations from one another
5. Strategic Partners – It is also called strategic allies—two or more companies that
work together in joint ventures or other partnerships.

On the other hand, organization’s internal environment consists of conditions and forces within
the organization.
- consists of their owners, board of directors, employees, and physical work environment.
1. Owners. The owners of a business are, of course, the people who have legal property rights
to that business. Owners can be a single individual who establishes and runs a small business,
partners who jointly own the business, individual investors who buy stock in a corporation, or
other organizations.
2. Board of Directors. A corporate board of directors is a governing body that is elected by the
stockholders and charged with overseeing a firm’s general management to ensure that it is run
to best serve the stockholders’ interests. Some boards are relatively passive: They perform a
general oversight function but seldom get actively involved in how the company is really run.
3. Employees. An organization’s employees are also a major element of its internal
environment. Of particular interest to managers today is the changing nature of the workforce,
which is becoming increasingly more diverse in terms of gender, ethnicity, age, and other
dimensions. Workers are also calling for more job ownership—either partial ownership in the
company or at least more say in how they perform their jobs.
 4. Physical Work Environment. A final part of the internal environment is the organization’s
actual physical environment and the work that people do. Some firms have their facilities in
downtown skyscrapers, usually spread across several floors. Others locate in suburban or rural
settings and may have facilities more closely resembling a college campus.

THE ETHICAL AND SOCIAL ENVIRONMENT OF MANAGEMENT

1. Managerial Ethics - Managerial ethics consists of the standards of behavior that guide
individual managers in their work. One important area of managerial ethics is the treatment
of employees by the organization. It includes, for example, hiring and firing, wages and
working conditions, and employee privacy and respect.
2. Managing Ethical Behavior - Spurred partially by increased awareness of ethics
scandals in business and partially by a sense of enhanced corporate consciousness about
the distinction between ethical and unethical behaviors, many organizations have
reemphasized ethical behavior on the part of employees.
3. Emerging Ethical Issues -Ethical scandals have become almost commonplace in
today’s world. Ranging from business and sports to politics and the entertainment industry,
these scandals have rocked stakeholder confidence and called into question the moral
integrity of our society.
4. Ethical Leadership - In recent years, the media have been rife with stories about
unscrupulous corporate leaders. For every unethical senior manager, of course, there are
many highly ethical ones. This leadership, in turn, is expected to help set the tone for the
rest of the organization and to establish both norms and a culture that reinforce the
importance of ethical behavior.
5. Corporate Governance - A related area of emerging concern is ethical issues in
corporate governance. As discussed earlier in this chapter, the board of directors of a public
corporation is expected to ensure that the business is being properly managed and that the
decisions made by its senior management are in the best interests of shareholders and
other stakeholders.
6. Ethics and Information Technology - A final set of issues that has emerged in recent
times involves information technology. Among the specific focal points in this area are
individual rights to privacy and individuals’ potential abuse of information technology.
Indeed, online privacy has become a hot topic as companies sort out the related ethical and
management issues.

Social Responsibility in Organizations

Social responsibility is the set of obligations an organization has to protect and enhance the
societal context in which it functions.
1. Arguments for Social Responsibility - People who argue in favor of social
responsibility claim that—because organizations create many of the problems that need to
be addressed, such as air and water pollution and resource depletion—organizations
should play a major role in solving them.
2. Arguments Against Social Responsibility - Some people, however, including the
famous economist Milton Friedman, argue that widening the interpretation of social
responsibility will undermine the U.S. economy by detracting from the basic mission of
business: to earn profits for owners.

Managing Social Responsibility

1. Formal Organizational Dimensions- Some dimensions of managing social

responsibility are formal and planned activities on the part of the organization. The formal
 organizational dimensions through which businesses can manage social responsibility
include legal compliance, ethical compliance, and philanthropic giving.
2. Legal compliance is the extent to which the organization conforms to local, state,
federal, and international laws. The task of managing legal compliance is generally
assigned to the appropriate functional managers. For example, the organization’s top
human resource executive is responsible for ensuring compliance with regulations
concerning hiring, pay, and workplace safety and health.
3. Ethical compliance is the extent to which the organization’s members follow basic
ethical (and legal) standards of behavior. We noted earlier that organizations have
increased their efforts in this area—providing training in ethics and developing guidelines
and codes of conduct, for example.
4. Whistle-blowing is an employee’s disclosure of illegal or unethical conduct by others
within the organization. How an organization responds to this practice often indicates its
values as they relate to social responsibility. Whistle-blowers may have to proceed through
a number of channels to be heard, and they may even get fired for their efforts.

THE INTERNATIONAL ENVIRONMENT OF MANAGEMENT

1. Trends in International Business -The stage for today’s international business
environment was set at the end of World War II. Businesses in war-torn countries such as
Germany and Japan had no choice but to rebuild from scratch. Consequently, they had to
rethink every facet of their operations, including technology, production, finance, and
marketing.
2. Levels of International Business Activity- Firms can choose various levels of
international business activity as they seek to gain a competitive advantage in other
countries. The general levels are exporting and importing, licensing, strategic alliances, and
direct investment.

a. Exporting and Importing - Exporting, or making a product in the firm’s domestic

marketplace and selling it in another country, can involve both merchandise and services

b. Licensing - is an arrangement whereby a firm allows another company to use its brand
name, trademark, technology, patent, copyright, or other assets.
In return, the licensee pays a royalty, usually based on sales.
Franchising, a special form of licensing, is also widely used in international business.

c. Strategic Alliances - In a strategic alliance, two or more firms jointly cooperate for
mutual gain. For example, Unisys and Oracle have a strategic alliance that provides
customers with the service and technology of Unisys and the enterprise software of Oracle.
A joint venture is special type of strategic alliance in which the partners actually share
ownership of a new enterprise. Strategic alliances have enjoyed a tremendous upsurge in
the past few years.
d. Direct Investment - Another level of commitment to internationalization is direct
investment. Direct investment occurs when a firm headquartered in one country builds or
purchases operating facilities or subsidiaries in a foreign country.
The foreign operations then become wholly owned subsidiaries of the firm.

The Context of International Business

1. The Cultural Environment - One significant contextual challenge for the international
manager is the cultural environment and how it affects business. A country’s culture
includes all the values, symbols, beliefs, and language that guide behavior. Cultural values
 and beliefs are often unspoken; they may even be taken for granted by those who live in a
particular country. Cultural factors do not necessarily cause problems for managers when
the cultures of two countries are similar.
2. Controls on International Trade - Another element of the international context that
managers need to consider is the extent to which there are controls on international trade.
These controls include tariffs, quotas, export restraint agreements, and “buy national” laws.
A tariff is a tax collected on goods shipped across national boundaries. Tariffs can be
collected by the exporting country, by countries through which goods pass, or by the
importing country. Import tariffs, which are the most common, can be levied to protect
domestic companies by increasing the cost of foreign goods.
3. Economic Communities - Just as government policies can either increase or
decrease the political risk that international managers face, trade relations between
countries can either help or hinder international business. Relations dictated by quotas,
tariffs, and so forth can hurt international trade.

4. The Role of the GATT and WTO - The context of international business is also
increasingly being influenced by the General Agreement on Tariffs and Trade (GATT)
and the World Trade Organization (WTO).

The GATT was first negotiated following World War II in an effort to avoid trade wars
that would benefit rich nations and harm poorer ones. Essentially, the GATT is a
trade agreement intended to promote international trade by reducing trade barriers
and making it easier for all nations to compete in international markets.
The World Trade Organization (WTO) came into existence on January 1, 1995.
The WTO replaced the GATT and absorbed its mission. The WTO is headquartered
in Geneva, Switzerland, and currently includes 140-member nations and 32 observer
countries. Members are required to open their markets to international trade and to
follow WTO rules. The WTO has three basic goals:
1. To promote trade flows by encouraging nations to adopt nondiscriminatory
and predictable trade policies
2. To reduce remaining trade barriers through multilateral negotiations
3. To establish impartial procedures for resolving trade disputes among its
members

THE ORGANIZATION’S CULTURE

Organizational culture is the set of values, beliefs, behaviors, customs, and attitudes that helps
the organization’s members understand what it stands for, how it does things, and what it
considers important.

1. The Importance of Organizational Culture. Culture determines the organization’s

“feel.” A strong and clear culture can play an important role in the competitiveness of a
business. At the same time, though, there is no universal culture that will help all
organizations.
2. Determinants of Organizational Culture- Where does an organization’s culture come
from? Typically, it develops and blossoms over a long period of time. Its starting point is
often the organization’s founder.
3.Managing Organizational Culture- How can managers deal with culture, given its clear
importance but intangible nature? Essentially, the manager must understand the current
culture and then decide whether it should be maintained or changed. By understanding the
organization’s current culture, managers can take appropriate actions. Culture can also be
maintained by rewarding and promoting people whose behaviors are consistent with the
 existing culture and by articulating the culture through slogans, ceremonies, and so forth.

CHAPTER 4 FOUNDATION OF PLANNING

Planning encompasses defining the organization's objectives or goals, establishing an overall

strategy for achieving those goals, and developing a comprehensive hierarchy of plans to integrate
and coordinate activities It's concerned with ends (what is to be done) as well as with means
(how it's to be done)

MANAGERS PLAN FOR AT LEAST FOUR REASONS

• First, planning establishes coordinated effort. It gives direction to managers and non-
managerial employees.
• Second, by forcing managers to look ahead, anticipate change, consider the impact of
change, and develop appropriate responses, planning reduces uncertainty.
Third, planning reduces overlapping and wasteful activities. Coordination before the fact is
likely to uncover waste and redundancy
• Finally, planning establishes the goals or standards that facilitate control.
Organizational Goal
Goals are critical to organizational effectiveness, and they serve a number of purposes.
Organizations can also have several different kinds of goals, all of which must be appropriately
managed. And a number of different kinds of managers must be involved in setting goals.

Purposes of Goals
1. Goals provide guidance and a unified direction for people in the organization. Goals can
help everyone understand where the organization is going and why getting there is
important.
2. Goal-setting practices strongly affect other aspects of planning. Effective goal setting
promotes good planning, and good planning facilitates future goal setting. Specifically, the
firm will need to work aggressively to boost both profits and cash flow to meet its goals.
3. Goals can serve as a source of motivation for an organization's employees. Goals that
are specific and moderately difficult can motivate people to work harder, especially if
attaining the goal is likely to result in rewards.
4. Goals provide an effective mechanism for evaluation and control. This means that
performance can be assessed in the future in terms of how successfully today's goals are
accomplished.

Kinds of Goals
1. An organization's mission is a statement of its "fundamental, unique purpose that sets a
business apart from other firms of its type and identifies the scope of the business's operations in
product and market terms."
2. Strategic goals are set by and for an organization's top management. They focus on broad,
general issues.

KINDS OF ORGANIZATIONAL PLAN

  STRATEGIC PLANS ARE DEVELOPED TO ACHIEVE STRATEGIC GOALS
 A tactical plan, aimed at achieving tactical goals, is developed to implement specific parts
of a strategic plan.
 An operational plan focuses on carrying out tactical plans to achieve operational goals

A NATURE OF STRATEGIC MANAGEMENT

A strategy is a comprehensive plan for accomplishing an organization's goals. Strategic
management, in turn, is a way of approaching business opportunities and challenges it is a
comprehensive and ongoing management process aimed at formulating and implementing
effective strategies. Finally, effective strategies are those that promote a superior alignment
between the organization and its environment and the achievement of strategic goals.

COMPONENTS OF STRATEGY

1. A distinctive competence is something the organization does exceptionally well. A distinctive

competence of Abercrombie & Fitch is its speed in moving inventory. It tracks consumer
preferences daily with point-of-sale computers, electronically transmits orders to suppliers in Hong
Kong, charters 747 cargo planes to fly new products to the United States, and has those products
in stores 48 hours later. Because other retailers take weeks or sometimes months to accomplish
the same things, Abercrombie & Fitch uses this distinctive competence to remain competitive.
2. The scope of a strategy specifies the range of markets in which an organization will compete.
Hershey Foods has essentially restricted its scope to the confectionery business, with a few
related activities in other food-processing areas. In contrast, its biggest competitor, Mars, has
adopted a broader scope by competing in the pet food business and the electronics industry,
among others. Some organizations, called conglomerates, compete in dozens or even hundreds
of markets.
3. A strategy should also include an outline of the organization's projected resource deployment
how it will distribute its resources across the areas in which it competes. General Electric, for
example, has been using profits from its highly successful U.S. operations to invest heavily in new
businesses in Europe and Asia. Alternatively, the firm might have chosen to invest in different
industries in its domestic market or to invest more heavily in Latin America. The choices it makes
as to where and how much to invest reflect issues of resource deployment.

TYPES OF STRATEGY ALTERNATIVES

1. Business-level strategy is the set of strategic alternatives from which an organization chooses
as it conducts business in a particular industry or market
2. Corporate-level strategy is the set of strategic alternatives from which an organization
chooses as it manages its operations simultaneously across several industries and several
markets.
SWOT- Strength, Weakness, Opportunities, Threats

EVALUATING ORGANIZATION STRENGTH

Organizational strengths are skills and capabilities that enable an organization to create
and implement its strategies. Strengths may include things like a deep pool of managerial
talent, surplus capital, a unique reputation and/or brand name, and well-established
distribution channels.
Mission - An organization's fundamental purpose
SWOT Analysis - To formulate strategies that support the mission
 Good Strategies - Those that support the mission and exploit opportunities and
strengths - neutralize threats- avoid weaknesses
Organizational weaknesses are skills and capabilities that do not enable an organization
to choose and implement strategies that support its mission. An organization has essentially
two ways of addressing weaknesses.

EVALUATING AN ORGANIZATIONS OPPORTUNITIEN AND THREATS

1. Organizational opportunities are areas that may generate higher performance.

2. Organizational threats are areas that increase the difficulty of an organization performing at a
high level.

TACTICAL PLANNING
tactical plans are developed to implement specific parts of a strategic plan. You have probably
heard the saying about winning the battle but losing the war. Tactical plans are to battles what
strategy is to a war: an organized sequence of steps designed to execute strategic plans. Strategy
focuses on resources, environment, and mission, whereas tactics focus primarily on people and
action.

Developing Tactical Plans

1. First, the manager needs to recognize that tactical planning must address a number of tactical
goals derived from a broader strategic goal. An occasional situation may call for a stand- alone
tactical plan, but most of the time tactical plans flow from and must be consistent with a strategic
plan.
2. Second, although strategies are often stated in general terms, tactics must specify resources
and time frames. A strategy can call for being number one in a particular market or industry, but a
tactical plan must specify precisely what activities will be undertaken to achieve that goal.
3. Finally, tactical planning requires the use of human resources. Managers involved in tactical
planning spend a great deal of time working with other people. They must be in a position to
receive information from others within and outside the organization, process that information most
effectively, and then passes it on to others who might use it.

OPERATIONAL PLANNING
Another critical element in effective organizational planning the development and implementation
of operational plans. Operational plans are derived from tactical plans and are aimed at achieving
operational goals. Thus, operational plans tend to be narrowly focused, have relatively short time
horizons, and involve lower-level managers

TYPES OF OPERATIONAL PLANNING

1. Single-Use Plans. A single-use plan is developed to carry out a course of action that is not
likely to be repeated in the future. As Disney planned its newest theme park in Hong Kong, it
developed numerous single-use plans for individual rides, attractions, and hotels. The two most
common forms of single-use plans are programs and projects.
2. Programs - A program is a single-use plan for a large set of activities. It might consist of
identifying procedures for introducing a new product line, opening a new facility, or changing the
organization's mission
3. Projects - A project is similar to a program but is generally of less scope and complexity. A
project may be a part of a broader program, or it may be a self-contained single-use plan.
4. Standing Plans. Whereas single- use plans are developed for nonrecurring situations, a
standing plan is used for activities that recur regularly over a period of time. Standing plans can
greatly enhance efficiency by making decision making routine. Policies, standard operating
procedures (SOPs), and rules and regulations are three kinds of standing plans.
5. Policies - As a general guide for action, a policy is the most general form of standing plan that
specifies the organization's general response to a designated problem or situation.
6. Standard Operating Procedures - Another type of standing plan is the SOP. An SOP is more
specific than a policy, in that it outlines the steps to be followed in particular circumstances.
7. Rules and Regulations - The narrowest of the standing plans, rules and regulations describe
exactly how specific activities are to be carried out. Rather than guiding decision making, rules and
regulations actually take the place of decision making in various situations.

Contingency planning is a useful technique for helping managers cope with uncertainty and
change. However, crisis management, by its very nature, is more difficult to anticipate. But
organizations that have a strong culture, strong leadership, and a capacity to deal with the
unexpected stand a better chance of successfully weathering a crisis than other organizations.