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Global Management Studies
GMS 200
Shavin Malhotra

GMS Lecture Notes By – Rahat Kabir Chapter 1 - Jan, 23, 2013  Organization – A collection of people working together to achieve a common purpose (Ex. Unions)  Are organizations an open or close system?  open system is when u depend on factors outside the system, but a close system is when you can sustain yourself without factors affecting you from outside the system  An organization is an open system, because you need to sustain yourself by relying on the outside environment (different factors)  The environment supplies (resource inputs = ppl, money, materials, technology, information)  The organization creates (work activities turns resources into output = transformation process)  The environmental consumers (product outputs = finished goods/services)  Then there is customer and client feedback (to improve products/services)  Productivity and the dimensions of organizational performance (Goal attainment & Resource utilization)  If you are effective and efficient, then you achieve high productivity (goals achieved & no wasted resources) – gives you competitive advantage over you‟re competition  Manager (traditional) – A person who plans, directs people and resources  Manager (new organization) – A Person who directly supports and helps activate the work efforts and performance accomplishments of others  Management levels in a typical organization – Board of directors, Top managers (chief executive officer/director, president, VP), Middle managers (division manager, regional manager, plant/branch manager), First-line managers (department hear, supervisor, team leader), Non-managerial workers  Conceptual skills – The ability to think analytically and achieve integrative problem solving  Human skills – The ability to work well in cooperation with other persons  Technical skills – The ability to apply expertise and perform a special task with proficiency  These skill sets above are needed for lower, middle and top level managers  Managerial work – The process (planning, organizing, leafing, controlling)  The setting (hectic pace, interruptions, interactions, many tasks, long hours)  The results (performance)  Princess (acronym for managerial work) – Planning, Representing, Investigating, Negotiating, Co-ordinating, Evaluation, Supervising, Staffing  Environmental uncertainty – It is a lack of complete information regarding exists and what developments may occur in the external environment GMS Lecture Notes By – Rahat Kabir  Dimensions of environmental uncertainty (complexity and rate of change) – complexity is the amount of factors (more factors means a higher level of complexity) and the rate of change is how fast do these factors change (slow, fast, constant etc.)  high uncertainty requires the greatest flexibility and adaption to the environment  What constitutes the external environment of organizations?  Economic (Income, exchange rate, economic situation etc.), Socio-cultural (trend, media, beliefs, religion etc.), Political-legal (corruption, political parties in power etc.), Technological (fast change in technology, internet transforms different markets like newspaper etc.)  Flat panel TV‟s  Begins as glass panels manufactured in South Korea, Taiwan and Japan, then sent to Mexico along U.S borders (Maquiladora – free trade zone) for combining with other electrical components shipped from Asia and the U.S, then finished TVs are shipped to retail outlets in Canada  Boeing 777 (manufacturing of plane) – Japan (Fuselage and doors), Singapore Landing gear), Italy (Wings)  30% of manufacturing in the terms of value outside the U.S - - - For Boeing 787 it is as high as 65%  What is a specific (task) external environment of organizations?  The specific (task) environment – Actual organization, groups, and persons with whom an organization interacts and conducts business. This includes important stakeholders such as customers, suppliers, competitors, regulators, and investors/owners.  Managing Uncertainty: SWOT analysis  Strengths, Weaknesses, Opportunities, Threats (Use strengths to capture the opportunities in the market and minimize you‟re weaknesses and threats) Chapter 2? – Information and Decision Making Jan, 30, 2013  The decoy effect is when you add an extra option (the decoy) in order to make the most expensive option more attractive (ex. subscription, Size of TV and price)  The Simpson’s Paradox – It states that if you look at a data, the final data or info may be seen differently, so if you break down the data and see the bigger picture with more information you can come to a more accurate conclusion  If there is a probability of one thing being true instead of two, the probability of the one thing being true is more likely  Rationality acts in a perfect world  Manager as decision maker  Bounded rationality acts with cognitive limitations  Classic Model – Structured problem, clearly defined, certain environment, complete information, all alternatives and consequences knows  Optimizing decision (best decision that anyone can make): Choose absolute best among alternatives  Classic decision example: decide b/w two computer suppliers for your office – How would you go about it?  First decide what factors you are looking for in a computer GMS Lecture Notes By – Rahat Kabir  , and then rank the most important factors that you are looking for in a computer and rank the supplier that provides more of the factors you are looking for.  Behavioural Model – Unstructured problem, not clearly defined, uncertain environment, incomplete information, not all alternatives and consequences known  Satisfaction Decision: Choose first “satisfactory” alternative  Three environments for managerial decision making and problem solving  Certain environment - Alternative courses of action and their outcomes are known for **** finish by reading the book  Two main systems of thinking:  Intuitive (System 1) - Fast, Associative, Automatic, Effortless, Pronounced when busy  Systematic (System 2) – Slow, Not associative, Controlled, Effortful, Pronounced when free  Mental Accounting – The outcome is how you might account (perceive) for what happened  Facts and Inference– Fact is what you know for sure, an inference is what you have to perceive something to be Chapter 3? – Global Dimensions of Management Feb, 6, 2013  Culture: It is a set of assumptions and values that shared by a group of people and that guide that group of people‟s interaction with each other  Values: They 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: It is a system of shared beliefs and values that develops within an organization and guides the behaviour of its members (ex. The change of RIMs culture over the last year with a change in CEO, CFO etc. brings in new views and personalities)  Impact of culture: recent study by Waterstone human capital Ltd. And Canadian business including n-depth interviews with senior Canadian executives at 107 companies – 82% of executives said corporate culture has an impact of financial performance, 82% of executives said it has a tangible impact on their organization‟s ability to recruit, manage and retain the best people  Air Canada vs. West jet – Air Canada is diverse and open to other cultures (ex. Food), West jet is more family orientated and it is more national unlike Air Canada  What constitutes culture – Innovation and risk taking: Apple & Coca Cola, Attention to detail: Motorola (“quality is their driving theme”), Outcome orientation: results more important than process  Where does culture come from – Founders: By acting as a role model: ex. Akio Morita of Sony, Bill Gates of Microsoft, by hiring and keeping similar employees  Strong cultures: Pros and Cons – Drives employees behaviour due to clear vision leading to high performance (3M), it can also lead to rigid beliefs (IBM) GMS Lecture Notes By – Rahat Kabir  Elements of observable culture: Stories, Heroes, Rites and Practices (ex. Employee of the month), Symbols  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: Hofstede (1980) – Book culture‟s consequence: Survey of 72,215 IBM employees in 40 nations , between 1962 and 1973 (the problem is that IBM most likely has a very similar dimension across the globe)  Individualism versus collectivism: Degree to which people in a country prefer to act as individual rather than as members of groups  High versus low power distance: The degree of inequality among people which the population of the country considers as normal  Masculine versus Feminine: 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…….  Uncertainty Avoidance: Degree to which people in a country prefer structured over unstructured situations, what is different is dangerous  Long-term vs. Short-term orientation: Degree to which values orientated towards the future, like saving an persistence prevail over values orientated towards immediate or short term gratification  Culture & Decision Making: “Process time” vs. “Implementation time” – U.S spends little time with the process step and spend more time with implementation, while it is vice versa for Japan  Will North American Management concepts work well everywhere? – For instance: MBO (management by objectives – invested in the US): Where subordinates share their objectives with supervisors  In Spain – Subordinates prefer to focus on individual performance rather than group performance  In Taiwan – Subordinates prefer to focus on groups performance rather than individual performance  Stock equities in Japan: Huge market potential (market worth $2 trillion, Japan is liberalizing its capital markets, presently huge investments are made in to post office long term deposits that yield 2%, bank deposits yield zero %, companies like fidelity investments, Goldman Sachs are rushing new investments products in Japan – Will it th work?: Japan is not America, amount of stock trading in Japan is 1/6 , Only 9% of household investments are made in stocks; it‟s 50% for US, majority do not know what a mutual fund is, Japanese are risk averse – Result: Most companies are cutting back staff  Forms of International Business: Types of market entry strategies – Non-equity modes (entering into a market without equity investments, ex. Exporting, licensing/ franchising GMS Lecture Notes By – Rahat Kabir agreement), Equity modes or Direct Investment Strategies (invest into capital, ex. Joint ventures, mergers and acquisitions, 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  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 – advantages for the new exporter (the need for local market research is reduced, the licensee may support the product strongly in the new market), disadvantages (can lose control over the core competitive advantage of the firm, the license can become a new competitor to the firm)  Case of Pizza Hut (today‟s scenario in Thailand) – The pizza company was created by breaking ties with Pizza Hut and now owns 70% of the shares in Thailand Multinational corporations and forms of international business Feb, 13, 2013  Midterm exam - Chapters covered 1,2,3,13 (everything covered in class)  Forms of international business: types of market entry strategies (non-equity modes – exporting, franchising/licensing)  Equity modes or direct investment strategies: Joint ventures, mergers and acquisitions, greenfield investments / wholly owned subsidiaries)  Joint Ventures – A „corporate child‟, a new entity given birth and owned jointly by two or more parent companies (separate legal entity)  Three possibilities: Minority owned (less than 50 equity), 50/50 Joint venture, Majority owned (more than 50% equity)  Joint Venture Ex. – Bombardier Sifang Transportation Ltd. b/w Bombardier and Sifang Transportation (China) – In order to build fastest train in China (work around the law)  Merger and Acquisitions – Accounts for 70% of all FDI (Foreign direct investment), quick way to enter a new market, gain market power, ex. Lenovo‟s acquisition of IBM PC business,  When you acquire a company in a new country, it is difficult to integrate different cultures and it is mandatory to be successful in that country  Wholly-owned subsidiary (green field investments) – 100% investment in production, local subsidiary, more control and more risk, reduces the risk of cultural differences, recruit local workers of that country that you think will work best for your company  The Internationalization Stages – Stage 1 – Indirect exporting, Stage 2 – Direct exporter, via independent distribution, Stage 3 – Establishing foreign sales subsidiary, Stage 4 – Local assembly, Stage 5 – Foreign production  Born Globals – Firm that form the outset view of the world as one market (typically small technology-based business, ex. Facebook, Google) GMS Lecture Notes By – Rahat Kabir  Decision of FDI – Control (majority or minority owned), Resource commitment (more vs. less), Flexibility (can you pull out of that country), Risk ( high vs. low risk take)  Most control: Wholly owned subsidiary, Least control: Exporting, Most resource commitment: Wholly owned subsidiary,, Least resource commitment: Exporting, Most Flexibility: Exporting, Least flexibility: Wholly owned subsidiary, Most Risk: Wholly owned subsidiary, Least risk: Exporting  Management History – Scientific management era, Social man/behavioural era, Modern era (Contingency theory)  Industrial revolution – Substitution of machine power for human power, Steam engine, The “Factory System”, Charles Babbage (1792 – 1871: Designed first ever computer, storage device, arithmetic unit, and a punch card input system)  Scientific Management - F.W Taylor (1856 – 1915): “One best way”, measure and find the best way of managing an activity most efficiently  Midvale Steel Company – Workers purposely operate below their capabilities  Soldiering - The almost universally held belief among workers that if they became more productive, fewer of them would be needed and jobs would be eliminated  Workers worked together to maintain lower productivity,  Non-incentive wage systems encourage low productivity  Workers waste much of their effort by relying on “rule-of-thumb methods” rather than on optimal work methods that can be determined by scientific study of the task  Taylor’s 4 Principles 1. Replace rule of thumb work methods with methods based on a scientific study of the task 2. Scientifically select end then train, teach, and develop the workman, whereas in the past the employee (or workmen) choose this own work and trained himself as best he could 3. Provide “Detailed instruction and supervision of each worker in the performance of that workers discrete task 4. Divide work nearly equally b/w managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform tasks  Drawbacks of Taylorism – Slow to change, Change in capacities and process expensive, Limited job enrichment (doing the same thing every day)  Behavioural Management - Human resource approaches include: Hawthorne studies, Maslow‟s theory of human needs, McGregor‟s theory of  Hawthorne Studies: As part of the scientific management regime, companies routinely studied the effects of the physical environment on their workers, the Hawthorne studies were out by the Western Electric company (with 40,00 workers) at their Hawthorne pant in the 1920‟s, initially the stud focused on lighting (no relationship was seen), GMS Lecture Notes By – Rahat Kabir  Elton Mayo (Harvard) – Selected six women, and segregated them from the rest of the factory and put them under the eye of a supervisor who was more a friendly observer than disciplinarian.  Implications (lessons from the Hawthorne studies) – Social and human concerns are keys to productivity  Hawthorne effect – People who are singled out for special attention perform better  Hawthorne researchers found that a worker might feel rewarded if she had pleasant association with her co-workers and that this might mean more to her than a little extra money  Management, then was not about controlling human behaviour but unleashing human possibility  Maslow’s theory of human needs - In the text book ***  Two main principles – Deficit principle (A satisfied need is not a motivator of behaviour), Progression principle (A need becomes a motivator once the preceding lower-level need is satisfied, needs must be satisfied in the given order)  You can‟t motivate someone to achieve their sales target (level 4) when they‟re having problems with their marriage (level 3)  You can‟t expect someone to work as a team member (level 3) when they‟re having their house re-possessed (level 2)  McGregor’s theory – McGregor‟s Theory X assumes the workers: Dislike work, lack ambition, are irresponsible, resist change, prefer to be led  McGregor‟s Theory Y assumes that workers are: Willing to work, capable of self-control, willing to accept responsibility, imaginative and creative, capable of self-direction  Implications of Theory X and Theory Y – Managers create self-fulfilling prophecies, Theory X managers create situations where workers become dependent and reluctant, Theory Y managers create situations where workers respond with initiative and high performance  The Modern Era – Contingency thinking: Tries to match managerial response with problems and opportunities unique to different situations, Especially individual or environment or environment difference, No “one best way” to manage, Appropriate way to manage depends on situation Management Planning March, 6, 2013  FedEx logo has hidden arrow which represents precision  Enatic logo represents 4 clues and a key  Eighty 20 has a binary symbol to show what they specialize in  Amazon arrow represents A to Z and a smile GMS Lecture Notes By – Rahat Kabir  Chile: Hyperinflation – During a period of hyperinflation in Chile, the story is told that the government‟s imposition of a maximum price made it unprofitable for suppliers to sell bread, the legal maximum was below the cost of production  The size of bread was shrunk so the cost of loaf fell below the legally mandated price  The government retaliated by making a mandatory weight for each loaf of bread  The enterprising bakers then sold the raw dough in bags with water so the minimum weight could be achieved  Euro Disney: Case Study – Disney was making losses in Paris because unlike Americans, Europeans were more frugal and they saw Disney as one excursion rather than an extended vacation period. Also, Europeans spent a lot less inside the theme park than Americans (brought own food etc.)  Why planning creates value – Leads to an increased match between the internal organization conditions of the firm and its external environment, creates awareness of problems, strengths and weaknesses, improves focus and flexibility (avoids wasting time, takes in to account all factors and focus on critical ones, Pareto principle (Ex. 80% result from 20% of activities) allows systematic resource allocation), minimization of affects of adverse conditions, gives advantage over competitors, gives advantage over competitions, Helps stakeholders to plan for their future  Beware of planning paralysis – Why people avoid planning: Poor reward structure, fire- fighting (like on the spot decisions), opposition to time and expense of planning, resistance to change, fear of failure, prior bad experience, overconfidence  Steps in the planning process - Define objectives, determine where you stand vis-à-vis objectives (use various planning tools such as SWOT, BCG etc…) , develop premises regarding future conditions, analyze and choose among action alternatives, implement the plan and evaluate results  What types of plans do managers use – short-range plan = 1 year or less, intermediate range plans = 1 to 2 year plans, long range plans = 3 or more year plans, people vary in their capability to deal effectively with different time horizons, higher management levels focus on longer time horizons  Three levels of strategy in organizations – Corporate (what business are we in), business (how do we complete in each of our major business), functional strategies (how do we best support each of our business strategies)  What types of plans do managers use? - Strategic plans : set broad, comprehensive  Vision (What do we want to become) - Should be short, preferably one sentence, and as many managers as possible should have input  Mission (What is our business) – Statements distinguishes in‟s business with others, define the “reason of being”, a clear mission statement is important for an effective long- term strategy GMS Lecture Notes By – Rahat Kabir  O
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