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Lecture 3

GMS200 - week 3 notes

30 Pages

Global Management Studies
Course Code
GMS 200
Shavin Malhotra

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19/09/2011 12:59:23 PM GMS Week 3 1.) One details assignment should be done by today or tomorrow. Due week 4 2.) Glo-bus groups will be formed this week. Check black board by the end of the week a. Check for your registration information (course code, e.t.c) Camera Situation  Cannot change the price  Think beyond promotions  How do you increase the sales Solution  Changing the features of the second camera (design) maybe performance o Changing the specs of Alt.B  Target another location for Alternative B  Research competition on why or how they are successful in terms of markets, specs and design  Also check other camera’s in the same price range. How do they differ? Is the product competitive enough  Open a whole new high end market specially directed to the expensive higher end technology.  Compromise effect. Adding a third product with a higher price will drive consumers to buy the next best thing if they cannot afford the latest one. What is an organization?  Any Collection of people working together to achieve a common purpose or goal.  Organizations are an open system because it takes a lot of resources from outside. o For an organization to work it needs resource inputs such as people, money, materials, technology and obviously need information and all of this comes from outside. These inputs go into an organization where they are collectively managed and converted into final products and sold to consumers. o Organization cannot survive without working with the outside faculties and resources. As they take in from outside, they have to also give out something to people.  Productivity and dimensions of organization performance depend on two factors 19/09/2011 12:59:23 PM o Effectively reaching their goals. o Efficiently using resources. What is a manager?  A person who plans, directs people and resources  The person who directly supports and helps activate the work efforts and performance accomplishments of others. What are the Management levels in a typical organization? In a Typical Business Typical Non-profit  Top Manager’s  Top Manager’s o Board of Directors o Board of Trustees o Chief executive officer o Executive Director o President o President, Administrator o Vice president o Vice president  Middle Managers  Middle Managers o Division manager o Division manager o Regional Manager o Regional Manager o Plant Manager o Plant Manager  First-line Managers  First-line Managers o Department head o Department head o Supervisor o Supervisor o Team Leader o Team Leader  Non- managerial workers  Non- managerial workers Essential Managerial Skills Lower level managers Middle Level managers  Strong Technical Skills  Stronger conceptual skills  Human Skills  Human Skills  Fair conceptual skills  Medium technical skills 19/09/2011 12:59:23 PM Top Level managers  Strongest conceptual skills  Human Skills  Don’t need much Technical skills Managerial Work The process The Setting  Planning  Hectic pace  Organizing  Interruptions  Leading  Interactions  Controlling  Many tasks  Long hours This results in Performance. Because of Uncertainty, management becomes very stressful. This is because due to the involvement of risks. Environment uncertainty is a lack of complete information regarding what exists and what developments may occur in the external environment. Read about the “agency theory just in case” – How to design incentive Two Dimensions of environmental uncertainty  Complexity  Rate of change What constitutes the external environment of organization?  Economic o Financial market o Employment rate o The GDP rate o Inflation rate o Interest rate (low or high)  Socio-cultural  Legal-political o Governments o Rules, policies o The law, regulations o Trade barriers o Tariffs o Ethics 19/09/2011 12:59:23 PM Governments are very important because they set rules and policies. Political legal factors are very important when going into another country. Microsoft entered china in early 1990s. Developed Chinese versions of windows and used Taiwan as a production base. Since china disliked Taiwan, they allowed people to pirate windows OS and sell them. This is because Windows did not respect the political culture.  Technological What is a specific (task) external environment of organizations?  The specific (task) environment – Actual organizations, groups and persons with whom an organization interacts and conducts business.  Includes important stakeholders such as o Customers o Suppliers o Competitors o Regulators o Investors/owners SWOT analysis – Internal and External  Strengths  Weaknesses  Opportunities  Threats 19/09/2011 12:59:23 PM Week 4 INFORMATION AND D ECISION M AKING The economist is a very famous magazine that is subscribed by many people. Three types of subscriptions are offered: 1. subscription – US $59 One-year subscription to Includes online access to all articles from the economist since 1997. 2. Print subscription – US $125 One year subscription to the print edition of the economist 3. Print & Web subscription - $125 One year subscription to the print edition of The Economist and online access to all articles from the economist since 1997 Option 2 is really there to make option 3 more attractive. This was tested by surveying 100 MIT students and asked what option would they choose and the results were:  Option 1 – 16 students  Option 2 – 0 students  Option 3 – 84 students And then in another survey, they removed option 2 and asked MIT students what option would they choose? The results were  Option 1 – 68 students  Option 2 – 32 students This strategy is known as “THE DECOY EFFECT”. This means that an option is there for the sole purpose of making the other (more expensive) options more appealing. Critical Thinking Information is key. But it is important to understand that we need to look @ this information critically. Critically means you want to avoid any bias’s when you’re looking at the information. So it is imperative to any manager to make decisions critically and un-biasedly as possible. If a company has roughly 8,000 men applying for a job, and 4,500 women applying for the same job and 45% men got accepted while 35% of women got accepted. Is this discrimination? Why or Why not? Let us have a closer look Phase one  1000 men applied and 60% accepted  100 women applied and 60% accepted 19/09/2011 12:59:23 PM Phase two  1000 men applied and 30% accepted  1000 women applied and 30% accepted Both phases  2000 men applied and 900 got accepted. (45%)  1,100 women applied and 360 got accepted. (33%) This is known as the “The Simpson’s Paradox” at times aggregate numbers give you a relationship which is very different from the actual relationship. Therefore it needs to be broken down to smaller numbers Stock predications One stock broker provides monthly predications that correctly predicted 7 of the 9 downturns in the economy over the past 3 years  Is this person an expert?  Would you invest with this person? What about the other predictions? What if this person said “Down” 34 times? So we need more information on his other predications. Classic “Linda” Problem  Linda is thirty one years old, single, outspoken, and very bright.  She majored in Philosophy  As a student she was deeply concerned with issues of discrimination and social justice and also participated in antinuclear demonstrations. What is Linda is doing today? Rank the probability of a description of Linda today  A Bank teller  A Bank Teller and Active in the feminist Movement People rank the second description higher that the first, even though, logically, its likelihood is smaller. X can happen and y can happen. But x and y happening together Is less probable than just one variable happening. Because it means two thinks to be true: - That Linda is a bank teller - And that Linda is an active feminist You should know that 2 things happening together is less probable than one thing happening. 19/09/2011 12:59:23 PM Two Main systems of thinking (based on the work done by Daniel Kahneman – Nobel laureate in Economics (2002)) Most people rely on intuitive thinking. Where’s as managers we want you to think more systematically. We are not saying that intuitive thinking is bad; on the contrary it can be very powerful at times. However companies will sometimes try to exploit your systematic thinking and cause you to think intuitive and abuse the fact that you’re not thinking logically but “feelingly”  Intuitive (system 1) o Very fast o Associative o Automatic o Effortless o Pronounced when busy  Systematic (system 2) o Slow o Not associative o Controlled o Effortful o Pronounced when free Other Decision Making Traps Mental Accounting  Imagine that you have decided to see a play where admission is $10 per ticket. As you enter the theater you discover that you have lost a $10 bill. Would you still pay $10 for a ticket for the play? o Yes [88 percent] o No [12 percent]  Imagine that you decided to see a play and paid the admission price of $10 per ticket. As you enter the theater you discover that you have lost the ticket. The seat was not marked and the ticket cannot be recovered. Would you pay $10 for another ticket? o Yes [46 percent] o No [54 percent] The reason why people changed their mind is because they think “Is this movie really worth me paying 20 dollars to watch? Where in the first one, the idea that you lost your money is not directed to the movies. It could be for anything else. Logically it’s the same outcome but perception is different. 19/09/2011 12:59:23 PM Facts and Inferences Know the difference between a FACT and an INFERENCE. When you look at information, you will always assume something. Make sure that what you’re assuming is a fact or an inference. Manager as decision maker Rationality – Acts in perfect world Classical Model is the assumption that everyone around you thinks rationally. This the following has to be true. Structured problem Clearly defined Certain Environment Complete information All alternatives and consequences Known _____________________________________  Optimizing Decision  Choose absolute best among alternatives. Classical Decision Example If you have two computer suppliers, Which one will you choose in order to get your office equipment’s. - Decide between two computer suppliers for your office - How would you go about it? The question you need to ask  What does your office need?  Prioritize your needs (write your objectives down and prioritize them)  Compare and rank both suppliers (which supplier best meets your objective) Bounded Rationality – Acts with cognitive limitations Behavioural Model Unstructured problem Not clearly defined Uncertain environment Incomplete information Not all alternatives and consequences known  Satisficing Decision 19/09/2011 12:59:23 PM  Choose first “satisfactory” alternative This is most likely the type of environment you will be in. Despite that, you need to make as systematic as possible when you make a decision given these constraints that you may face. 19/09/2011 12:59:23 PM W EEK 5 Three environments for managerial decision making and problem solving  Certain Environment o Alternative courses of action and their outcomes are known to decision maker  Risk of Failure : Low  Type of Decision: Programed  Risk Environment o Decision maker views alternatives and their outcomes in terms of probabilities  Risk of Failure : medium  Type of Decision:  Uncertain Environment o Decision maker doesn’t know all alternatives and outcomes, even as probabilities  Risk of Failure : High  Type of Decision: Non-programmed Risky Decisions Risky decisions can go either way. High risk means higher chances of failure but also means high risk of reward. What is culture? Culture is a set of assumptions and values that are shared by a group of people and that guide that group of people’s interaction with each(lane, ,Distefano and Maznevski 2008) What are values? Values are the stable core of culture. They are strong, unconscious emotions with a minus and a plus pole, like:  Evil-good  Dangerous-safe  Dirty-clean  Ugly-beautiful  Abnormal-normal What is normal is a matter of values Organizational culture Organizational culture is the system of shared beliefs and values that develops within an organization and guides the behaviour of its members. 19/09/2011 12:59:23 PM Culture is firm’s personality; helps to distinguish it from others Example:  Hewlett-Packard o ‘When I come back next year I do not want to see that project in the lab’ – David Packard o ‘Medal of Defiance’ o “For contempt and defiance above and beyond the call of engineering duty,” the certificate read. Impact of culture  Recent study by Waterstone Human Capital Ltd. And Canadian Business including in-depth interviews with senior Canadian executives at 107 companies: o 82% of executives said corporate culture has an impact on financial performance. o 82% of executives said it has tangible impact on their organization’s ability to recruit, manage and retain the best people. o 20% of executives said that organizational culture was the primary thing. What constitutes culture?  Innovation and risk taking o Apple and Coca Cola  Attention to detail o Motorola – ‘Quality is their driving theme’ and German car manufacturers  Outcome Orientation – Results more important than the processes Where does culture come from?  Founders  By acting as a role model  E.G Aiko Morita of Sony  Bill Gates of Microsoft  By hiring and keeping similar employees   www, Strong cultures: pros and cons  Drives employee behaviour due to clear vision leading to high performance  3M  It can also lead to rigid beliefs  IBM 19/09/2011 12:59:23 PM Global mindset Many people assert that cultures around the world are converging:  People are same everywhere  They wear jeans and European designer fashions  They eat at McDonald’s, talk on Nokia phones and listen to iPod. Hofstede’s Cultural Dimensions  Individualism versus Collectivism o Degree to which people in a country prefer to act as individual rather than as members of groups  High versus Low Power Distance o The degree of inequality among people which the population of the country considers as normal  Masculine versus feminine o Degree to which tough values like assertiveness, performance, success and competition (associated with the role of men in most societies) prevail over tender values like the quality of life, maintaining warm personal relationships, service and care for the weak (associate with the role of women in most societies)  Uncertainty Avoidance o Degree to which people in a country prefer structured over unstructured situations o What is different is dangerous  Long-term vs. Short-term orientation o Degree to which values oriented towards the future, like saving and persistence prevail over values oriented towards immediate or short-term gratification Will North American Management concepts work well everywhere?  For instance – MBO (management by Objectives) – Invented in the U.S o Where subordinates share their objectives with supervisors  In Spain – Subordinates prefer that their supervisors make decisions o They feel uncomfortable making their own decisions or suggesting supervisors what they should do.  In Taiwan – Subordinates prefer to focus on group performance rather than individual performance. Stock Equities in japan  Huge Market potential o Market worth 2 trillion dollars o Japan is liberalizing its capital markets 19/09/2011 12:59:23 PM o Presently huge investments are made in to post office long term deposits that yield only 2% o Bank deposits yield zero % o Companies like Fidelity investments, Goldman Sachs are rushing new investment products to Japan.  WILL IT WORK?  Japan is not America th  Amount of stock trading in Japan is 1/6  Only 9% of household investments are made in stocks; its 50% for U.S  Majority do not know what a mutual fund is  Japanese are risk averse  Result: Most companies are cutting back staff. 19/09/2011 12:59:23 PM Forms of international business Types of market entry strategies:  Non-equity modes o Exporting o Licensing/Franchising agreement  Equity modes or Direct investment strategies o Joint ventures o Mergers and Acquisitions o Greenfield investments/Wholly owned subsidiaries Non-Equity modes Exporting – New firms need to overcome fear – Minimizing international market and political risks – Helps to obtain knowledge When you decide to go out there is a high risk, you don’t know about the culture, market, economic conditions. As you gain more knowledge, your risk associated with market entry reduces. Exports HELP to give you that learning with little investments and risk, simply because if your product doesn’t sell you can just stop exporting to that market and export somewhere else. This gives you flexibility. Licensing/Franchising – LICENSING refers to offering a firm’s know-how or other intangible asset to a foreign company for a fee, royalty, and/or other type of payment. o Advantages for the new exporter  The need for local market research is reduced  The license may support the product strongly in the new market  If a business has bought your licences or franchise, it’s in their best interest to sell your products. So you have someone else to push your product to the market. Requires very little investment because u rely the person in the local market to
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