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GMS Final Exam Review 5,7,8,11.doc

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Ryerson University
Global Management Studies
GMS 200
Sui Sui

GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) Chapter 5: Entrepreneurship Study Question 1: What is entrepreneurship? • Entrepreneurship –Strategic thinking and risk-taking behaviour that results in the creation of new opportunities for individuals and/or organizations. • Entrepreneurs –Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats. Entrepreneurs are … • Founders of businesses that become large-scale enterprises. • People who:  Buy a local franchise outlet  Open a small retail shop  Operate a self-employed service business • People who introduce a new product or operational change in an existing organization. Typical characteristics of entrepreneurs:  Internal locus of control  Self-confidence  High energy level  Passion and action-orientation  High need for achievement  Self-reliance and desire for independence  Tolerance for ambiguity  Flexibility Typical entrepreneurial backgrounds and experiences:  Parents were entrepreneurs or self-employed.  Families encouraged responsibility, initiative, and independence.  Have tried more than one business venture.  Have relevant personal or career experience.  Become entrepreneurs between 22 and 45 years of age.  Have strong interests in creative production and enterprise control.  Seek independence and sense of mastery. Reasons for women and member of visible minorities becoming entrepreneurs:  Out of necessity (necessity-based entrepreneurship)  Gain economic independence.  Provide a pathway to career success that may be blocked otherwise. Common myths about entrepreneurs:  Entrepreneurs are born, not made.  Entrepreneurs are gamblers.  Money is the key to entrepreneurial success.  You have to be young to be an entrepreneur.  You must have a degree in business to be an entrepreneur. Study Question 2: What is special about small businesses? Small businesses … GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Ones with 100 or fewer employees. • Independently owned and operated. • 48 percent of the private labour force works in small businesses. • Are established by:  Starting a new business.  Buying an existing business.  Buying and running a franchise. Internet Entrepreneurship • The Internet offers numerous entrepreneurial opportunities. • Nearly 85% of small businesses are conducting business over the internet. Family businesses … • Owned and financially controlled by family members. • Largest percentage of businesses worldwide. • Can provide an ideal business situation. • Problems unique to family businesses:  Family business feud  Succession problem Reasons for small business failures:  Lack of experience  Growing too fast  Lack of expertise  Insufficient commitment  Lack of strategy and strategic leadership  Ethical failure  Poor financial control Study Question 3: How does one start a new venture? Important issues in new venture creation:  Does the entrepreneur have good ideas and the courage to give them a chance?  Is the entrepreneur prepared to meet and master the test of strategy and competitive advantage?  Can the entrepreneur identify a market niche that is being missed by other established firms?  Can the entrepreneur identify a new market that has not yet been discovered by existing firms?  Can the entrepreneur generate first-mover advantage by exploiting a niche or entering a market before competitors? Life cycle of entrepreneurial firms 1. Birth stage 2. Breakthrough stage 3. Maturity stage • Each stage poses different managerial challenges and requires different managerial competencies. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) Basic items that should be included in a business plan:  Executive summary  Operations description  Industry analysis  Staffing description  Company description  Financial projection  Product and services description  Capital needs  Market description  Milestones  Marketing strategy Forms of legal ownership:  Limited liability partnership  Sole proprietorship  Partnership  Corporation  General partnership  Limited liability corporation (LLC)  Limited partnership Financing the new venture • Sources of outside financing  Debt financing  Equity financing • Equity financing alternatives  Venture capitalists o Focus on relatively large investments o Usually take a management role in order to grow the business and add value as soon as possible o 1999, $25 million funding was announced by Google, with major investors including two venture capital firms  Initial public offerings o Shares of stock in business sold to public and begin trading on a major stock exchange o Google’s IPO took place in 2004 at a price of $85/share. Today’s worth is $820/share.  Angel investors • Individual who is willing to invest a portion of his or her wealth in return for equity in a new venture • The first funding for Google was a 1998 contribution of 100k from Andy Bech. Study Question 4: What resources support entrepreneurship and business development? Promoting entrepreneurship in large enterprises  Intrapreneurship o Why Google Succeeds at Intrapreneurship o NYT (2011.01.14): Google just announced that John Hanke, its Google Maps leader was moving to San Francisco to head up a brand new Google incubator o This little group of intrapreneurs –maybe fewer than 20 geeks will be working on mobile, social networking and location based apps  Skunkworks GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) o Separate group of secretive people that develop new products o Common; airplans and high tech products o Example: Sony Play Station; invented in a skunkworks o Kutaragi, leader on project set up a splinter cell within Sony, and developed the console that persuaded company to launch the PlayStation in 1994 • Business incubators o Support entrepreneurial motivation without the discouragement of startup requirements o Ie.Ryerson’s Digital Media Group • Small Business Development Centers Examples: 1. Google; began in Jan 1996 as a research project by Larry Page and Sergey Brin when they were both PhD students at Standford 2. Starbucks; English (Jerry), History (Zev) and Writer (Gordon) a. Open in Seattle 1971 b. 1984 sold to Entrepreneur Howard Schlutz 3. Second Cup; Frank O’dea HQ in Mississauga 4. Body Shop; Anita Roddick 1976 with her husband profit use of animals, first to promote fair trade with third world countries 5. Zappos; Tony Hsieh; earthworms farms, garage sales, button making, pizza shop; path to profits, passion and purpose 6. Damn Heels; Hailey Coleman 7. and QCon conferences; 29 employees in U.S, Canada, Romania, China, Greece, Brazil, Virtual Whats in store for Canadian small businesses in budget 2013 The national research council support (121m/2years) Access to post secondary research and development (20m/3yrs) Incubators and accelerators (60m/5yrs) Business development bank of Canada financing for accelerating grades (100m) Youth entrepreneurship (18m/2 yrs) GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ← Chapter 7: Strategy and Strategic Management ← Study Question 1: What is strategic management? ← Basic concepts of strategy:  Competitive advantage — operating with an attribute or set of attributes that allows an organization to outperform its rivals.  Sustainable competitive advantage — one that is difficult for competitors to imitate.  Strategy — comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage. • Accomplish organizational goals with SCA  Strategic intent — focusing all organizational energies on a unifying and compelling goal. ←  Goal of strategic management is to create above-average returns for investors.  Returns exceeding those for alternative opportunities at equivalent risk.  Earning above-average returns depends in part on the organization’s competitive environment. ← ← The Pause that refreshes … strategy ← Coca Cola Company: multinational beverage corporation and manufacturer and marketer ← Coca-Cola Enterprises (the bottler) –Marketer, producer and distributor of Coca-Cola products ← Became different companies, want to purchase bottler in North America ← Video about formulating their strategy (Wall Street Journal)  Strategic Management Process: • Strategic management — the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage. • Strategic analysis – process of analyzing the organization, the environment, its competitive position and current strategies • Strategy formulation – the process of crafting strategies to guide allocation of resources • Strategy implementation – putting strategies into action ← ← Figure 7.2 Strategy formulation and implementation in the strategic management process. ← GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ← ← Study Question 2: What are the essentials of strategic analysis? ← Drucker’s strategic questions for strategy formulation: • What is our business mission? • Who are our customers? • What do our customers consider value? • What have been our results? • What is our plan? ← ← Analysis of mission: • The reason for an organization’s existence. • An important test of the mission is how well it serves the organization’s stakeholders. ← ← EXAMPLE: ← Mission of TRSM is to develop global leaders with an entrepenurial orientation and the knowledge and critical thinking skills needed to solve real world programs. ← Vision: “Shaping the global leaders of tomorrow” ← ← Figure 7.3 How external stakeholders can be valued as strategic constituencies of organizations. ← ← ← Analysis of core values: • Values are broad beliefs about what is or is not appropriate. • Organizational culture reflects the dominant value system of the organization as a whole. ← Strong core values: • Helps build organizational identity. • Gives character to the organization in the eyes of employees and external stakeholders. • Backs up the mission statement. • Guides the behaviour of organizational members in meaningful and consistent ways. ← Analysis of objectives: • Operating objectives direct activities toward key and specific performance results. • Typical operating objectives: o Profitability o Market share o Human talent o Financial health o Cost efficiency o Product quality GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) o Innovation o Social responsibility ← ← Study Question 2: What are the essentials of strategic analysis? ← ← ← Analysis of organizational resources and capabilities: • Core competency is a special strength that gives an organization competitive advantage • Important goal of assessing core competencies. • Potential core competencies: o Special knowledge or expertise. o Superior technology. o Efficient manufacturing approaches. o Unique product distribution systems. ← ← Figure 7.4 SWOT analysis of strengths, weaknesses, opportunities, and threats. ← ← ← Porter’s Model of Five Strategic Forces Affecting Competition: 1. Industry competition –Intensity of rivalry among firms and their competitive behaviour 2. New entrants –threat of new competitors entering the market 3. Substitute products or services –threat of substitute products or services 4. Bargaining power of suppliers –ability of resource suppliers to influence the cost of products or services 5. Bargaining power of customers –ability of customers to influence the price they will pay for products or services ← ← Figure 7.5 Porter’s model of five strategic forces affecting industry competition. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ← ← ← Study Question 3: What are corporate strategies and how are they formulated? ← Levels of strategies: • Corporate strategy –sets long-term direction for the total enterprise • Business strategy –Identifies how a division or strategic business unit will compete in products or services • Functional strategy –guides activities within one specific area of operations ← Questions addressed by different strategic level: • Corporate strategy –In what industries and markets should we compete? • Business strategy –How are we going to compete for customers in this industry and market? • Functional strategy –How can we best utilize resources to implement our business strategy? ← ← Figure 7.1 Three levels of strategy in organizations- corporate, business, functional strategies. ← Grand or master strategies: • Growth strategies: seek an increase in size and the expansion of current operations. • Stability strategy: maintains current operations without substantial changes • Renewal strategy:tries to solve problems and overcome weaknesses that are hurting performance. • Combination strategy: pursues growth, stability, or retrenchment in some ← ← Growth and diversification strategies: • Growth strategies –Seek an increase in size and the expansion of current operations. • Types of growth strategies: o Concentration strategies (e.g Coca-Cola Company sells Coca-Cola in a new market) o Diversification strategies  Related diversification (e.g Coca Cola Company sells energy drinks)  Unrelated diversification (e.g Coca-Cola Company makes movies)  Vertical integration (e.g Coca-Cola Company purchases its bottlers GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Restructuring strategies: Tries to correct weaknesses by changing the mix or reducing the scale of operations. o Restructuring through turnaround o Restructuring through downsizing o Restructuring through divestiture ← ← Global strategies: • Globalization strategy. o World is one large market; standardize products and advertising as much as possible. o Ethnocentric view. • Multidomestic strategy. o Customize products and advertising to local markets as much as possible. o Polycentric view. • Transnational strategy. • Balance efficiencies in global operations and responsiveness to local markets. • Geocentric view. ← ← Cooperative strategies ← Strategic alliances — two or more organizations partner to pursue an area of mutual interest. ← e.g Dell and EMC ← Types of strategic alliances: • Outsourcing alliances • Supplier alliances • Distribution alliances • Co-opetition ← ← E-business strategies • The strategic use of the Internet to gain competitive advantage. • Popular e-business strategies o Business-to-business (B2B) strategies o Business-to-customer (B2C) strategies ← ← Web-based business models: • Brokerage model • Advertising model • Merchant model • Subscription model • Infomediary model • Community model ← ← Strategic portfolio planning: • Seeks the best mix of investments among alternative business opportunities. • “Boston Consulting Group Matrix” • BCG Matrix analyzes business opportunities according to market growth rate and market share GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ← ← BCG matrix • Ties strategy formulation to analysis of business opportunities according to … o Industry or market growth rate  Low versus high • Market share o Low versus high ← ← Figure 7.6 The BCG matrix approach to corporate strategy formulation ← . • BCG matrix — business conditions and related strategies: o Stars  High share/high growth businesses.  Preferred strategy — growth. o Cash cows  High share/low growth businesses.  Preferred strategy — stability or modest growth. o Question marks  Low share/high growth businesses.  Preferred strategy — growth for promising question marks and restructuring or divestiture for others. o Dogs  Low share/low growth businesses.  Preferred strategy — retrenchment by divestiture. ← ← Study Question 4: What are business strategies and how are they formulated? ← Porter’s generic strategies model • Business-level strategic decisions are driven by: o Market scope o Source of competitive advantage • Market scope and source of competitive advantage combine to generate four generic strategies. ← ← Figure 7.7 Porter’s generic strategies framework: soft-drink industry examples. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ← ← ← Porter’s generic strategies for gaining competitive advantage: • Differentiation strategy • Cost leadership strategy • Focused differentiation strategy • Focused cost leadership strategy ← ← Study Question 5: What are current issues in strategy implementation? • Strategic planning failures that hinder strategy implementation: o Failures of substance  Inadequate attention to major strategic planning elements • Failures of process o Poor handling of strategy implementation  Lack of participation error  Goal displacement error ← Corporate governance: • System of control and performance monitoring of top management. • Done by boards of directors and other major stakeholder representatives. • Controversies regarding roles of inside directors and outside directors. • Increasing emphasis on corporate governance in contemporary businesses. ← ← Strategic control • Making sure strategies are well implemented and that poor strategies are scrapped or modified. • The top leadership of a firm or organization is expected to exercise strategic control of the enterprise. ← ← Strategic leadership • Capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies. ← ← Critical tasks of strategic leadership • Be a guardian of trade-offs. • Create a sense of urgency. • Ensure that everyone understands the strategy. • Be a teacher. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) ____________ EXAMPLE: Scotiabank ← Brief Facts • 1832 • 82,000 people (most in Canada) • ROE 19.7% -how well they’re managing their assets • Market capitalization -21 place • Consistency driven by business model; international market • It’s a supermarket, many lines and markets ← ← Business Model: 4 Business Lines • Canadian Banking –retail and commercial banking • International Banking • Global marketing • Global wealth management –insurance, mutual funds • Try to keep equal balance between international and Canada; going faster internationally though • More involved in personal and commercial > wholesale • -Lower risk • Targeting higher growth market ← ← Competitive advantage ← 1. Cost conscious – Productivity: 50s range ← 2. Good risk managers –loans they give out ← Money they set aside ← ← Expansion through the crisis • 2007 to 2012 • Continued to grow, while others shrunk • Deleveraging –shrinking loans and assets on balance sheet • Becoming a Spanish speaking bank, 5 largest bank in Thailand ← ← Higher growth markets • Economies are growing faster • Canada, U.S, Mexico, Thailand, Dominican, Colombia, China, Peru ← ← Canada’s most international bank • Started in Halifax • Minneapolis > Jamaica > Trinidad and Puerto Rico > Mexico 67 > Brazil > Haiti > Asia 73 –exiting Philippines > Venn? • Require long term outlook and investment –China and Indian ← ← Lesson #1: Follow our customers • Develop related businesses (Resorts, Shipping, Trade finance, Cash management) • Find local partners, minority investments • Develop as a local bank GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Trade businesses allowed them to be familiar with shipping • Finding right local partner • Might buy the partner out or they might sell it • ie. Jamaica thought it was a local bank ← ← Lesson #2: Long Term commitment ← Committed to markets and some exits (go back in, Trinidad) ← Seized by government in Argentina ← Multinational bank (not global) based in Canada ← Diversification (country limits); not going to invest any more_ ← ← Lesson #3: Progression to organic growth • One best way • Cross Sell and cross broker • Global labour pool –need to think of staff as a big pool and find future leaders • Mobility is a lot more than what we can do • ie. CFO from Thailand is from Dominican Republic • Leading our customers ← ← Scotiabank: Outlook  Strong economic growth rates  Room to increase banking g/s  Fast growing middle class  Significant opportunities for consumer and micro-finance segment  Sound and stable regulatory environment ← ← Consumer Finance ← Borrowing to purchase consumer goods such as furniture and appliances ← Asking if they want a loan ← Loan size: 300-2000 ← Microfinance ← Same ← ← Growth = ← 1. Retail banking ← 2. Commercial Banking ← 3. Global Wholesale banking ← 4. Operating Convergence ← 5. Acquisitions ← Multiple Levers ← ← Challenges and Risks • Political Risk (biggest) • Protectionism (trade, regulatory) GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Canadian FTAs (mode if entry, equal treatment, dispute settlement) • Regulatory Risk ← -SIFI ← -Ring-Fencing and Balkanization ← -Extraterritoriality ← -Compliance • Technology • Financial Inclusion • Canada Brand : Lead our customers GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) Chapter 8: Organizational Structure and Design Study Question 1: What is organizing as a management function?  Organizing and organization structure • Organizing: process of arranging people and other resources to work together to accomplish a goal. • Organization structure: system of tasks, workflows, reporting relationships, and communication channels that link together diverse individuals and groups. • Figure 8.1 Organizing viewed in relationship with the other management functions.  Formal structures … • The structure of the organization in its official state. • An organization chart is a diagram describing reporting relationships and the formal arrangement of work positions within an organization. • An organization chart identifies the following aspects of formal structure: • The division of work. • Supervisory relationships. • Communication channels. • Major subunits. • Levels of management.  Informal structures … • A “shadow” organization made up of the unofficial, but often critical, working relationships between organization members. • Potential advantages of informal structures: • Helping people accomplish their work. • Overcoming limits of formal structure. • Gaining access to interpersonal networks. • Informal learning. • Potential disadvantages of informal structures: • May work against best interests of entire organization. • Susceptibility to rumor. • May carry inaccurate information. • May breed resistance to change. • Diversion of work efforts from important objectives. • Feeling of alienation by outsiders. Study Question 2: What are the traditional types of organization structures?  Functional structures • People with similar skills and performing similar tasks are grouped together into formal work units. • Members work in their functional areas of expertise. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Are not limited to businesses. • Work well for small organizations producing few products or services. • Figure 8.2 Functional structures in a business, branch bank, and community hospital.  Potential advantages of functional structures: • Economies of scale. • Task assignments consistent with expertise and training. • High-quality technical problem solving, • In-depth training and skill development. • Clear career paths within functions.  Potential disadvantages of functional structures: • Difficulties in pinpointing responsibilities. • Functional chimneys problem. • Sense of cooperation and common purpose break down. • Narrow view of performance objectives. • Excessive upward referral of decisions.  Divisional structures • Group together people who work on the same product or process, serve similar customers, and/or are located in the same area or geographical region. • Common in complex organizations. • Avoid problems associated with functional structures. • Figure 8.3 Divisional structures based on product, geography, customer, and process.  Types of divisional structures and how they group job and activities: GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) • Product structures focus on a single product or service. • Geographical structures focus on the same location or geographical region. • Customer structures focus on the same customers or clients. • Process structures focus on the same processes.  Potential advantages of divisional structures: • More flexibility in responding to environmental changes. • Improved coordination. • Clear points of responsibility. • Expertise focused on specific customers, products, and regions. • Greater ease in restructuring.  Potential disadvantages of divisional structures: • Duplication of resources and efforts across divisions. • Competition and poor coordination across divisions. • Emphasis on divisional goals at expense of organizational goals.  Matrix structure • Combines functional and divisional structures to gain advantages and minimize disadvantages of each. • Used in: • Manufacturing • Service industries • Professional fields • Non-profit sector • Multi-national corporations • Figure 8.4 Matrix structure in a small multi-project business firm.  Potential advantages of matrix structures: • Better cooperation across functions. • Improved decision making. • Increased flexibility in restructuring. • Better customer service. • Better performance accountability. • Improved strategic management.  Potential disadvantages of matrix structures: • Two-boss system is susceptible to power struggles. • Two-boss system can create task confusion and conflict in work priorities. • Team meetings are time consuming. • Team may develop “groupitis.” • Increased costs due to adding team leers to structure. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11) Study Question 3: What are the newer types of organization structures?  Team structures • Extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish day-to-day tasks. • Often use cross-functional teams composed of members from different functional departments. • Project teams are convened for a specific task or project and disbanded once completed. • Figure 8.5 How a team structure uses cross-functional teams for improved lateral relations.  Potential advantages of team structures: • Eliminates difficulties with communication and decision making. • Eliminates barriers between operating departments. • Improved morale. • Greater sense of involvement and identification. • Increased enthusiasm for work. • Improved quality and speed of decision making.  Potential disadvantages of team structures: • Conflicting loyalties among members. • Excessive time spent in meetings. • Effective use of time depends on quality of interpersonal relations, group dynamics, and team management.  Network structures • A central core that is linked through networks of relationships with outside contractors and suppliers of essential services. • Own only core components and use strategic alliances or outsourcing to provide other components. • Figure 8.6 A network structure for a Web-based retail business. GMS200 Final Exam Review (Chapter 5, 7, 8 ,11)  Potential advantages of network structures: • Firms can operate with fewer full-time employees and less complex internal systems. • Reduced overhead costs and increased operating efficiency. • Permits operations across great distances.  Potential disadvantages of network structures: • Control and coordination problems may arise from network complexity. • Potential loss of control over outsourced activities. • Potential lack of loyalty among infrequently used contractors. • Excessively aggressive outsourcing can be dangerous.  Boundaryless organizations • Eliminate internal boundaries among subsystems and external boundaries with the external environment. • A combination of team
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