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University of Toronto St. George
Rotman Commerce
Khan, Michael

RSM TEST 2 NOTES CHAPTER 2,7,9,10,11,12,13,16,17 Chapter 2 Business Ethic and Social Responsibility Business ethic issues are at the heart of corporate social responsibility (CSR), it’s primary objective is to enhance society’s well-being through philosophies, policies, procedures and actions. This benefits everyone include consumers, the environment and the companies themselves. Firms have many responsibilities to Customers, Employees, Investors, and to the general public. Responsibility to the general public: include dealing with public health issues, protecting the environment, and developing the quality of the workforce.  Public health issues: one of the most complex issues. Central to the public health debate are dangerous products such as tobacco and alcohol.  Protecting the environment: Businesses consume huge amounts of energy which produce pollution. Companies find they can be environmentally friendly and profitable, too. (Recycling, Green marketing)  Quality of the workforce: An educated, skilled workforce provides the know-how needed to develop new technology, improve productivity and compete in the global marketplace. Canadian businesses musk take more responsibility for enhancing the quality of its workforce, including encouraging diversity of all kinds. Responsibility to Customers: Consumerism is the public demand that a business consider the wants and needs of its customers when making decisions. In 1962, Kennedy developed four basic consumer rights, later called The Consumer Bill of Rights: Right to be Heard, Right to be Safe, Right to Choose, Right to be Informed.  Right to be Safe: Businesspeople have moral and legal obligations to ensure their products are safe to use. Product liability refers to the responsibility of manufacturers for injuries and damages caused by their products.  Right to be Informed: Consumers should be able to get enough education and product information to make responsible buying decisions. The Competition Act has rules and regulations that lead to advertising truthfulness.  Right to Choose: Consumers should have the right to choose the goods and services they need and the goods they want to purchase.  Right to be Heard: Consumers should be able to express their valid complaints to the appropriate people. Responsibilities to Employees: Companies have responsibilities to employees which include workplace safety, quality-of-life issues, ensuring equal opportunity on the job, avoiding age discrimination, and preventing sexual harassment and sexism.  Workplace Safety: The safety and health of workers on the job is an important business responsibility. The Canadian Center for Occupational Health and Safety(CCOHS) promotes workplace health and safety.  Quality-of-life issues: Balancing work and family is becoming harder for many employees. Taking care of these employees become an issue for many companies.  Ensuring equal opportunity on the job: Technological advances are expanding the ways people with physical disabilities can contribute in the workplace. Businesses also need to find ways to responsibly recruit and manage older workers and workers with varying lifestyles.  Age Discrimination: The average age of Canadian workers is steadily rising. The Canadian Human Rights Act prohibits age discrimination.  Sexual Harassment and Sexism: Every employer has responsibility to ensure that all workers are treated fairly and are safe from sexual harassment. Responsibilities to Investors and the financial community: A fundamental goal of any business is to make a profit for its shareholders. But investors and the financial community also demand that businesses behave ethically and legally. Walmart’s social responsibility priorities: Envrionment, People, Responsible Sourcing and the Community Sarbanes-Oxley Act of 2002 in US required companies to publish their code of ethics. Four most common ethical challenges that businesspeople face: Conflict of Interest, Honesty and Integrity, Whistle Blowing and Loyalty versus Truth. Conflict of interest: occurs when a businessperson is faced with a situation where an action the benefits one person or group has the potential to harm another Honesty and integrity: An employee who is honest can be relied on to tell the truth. An employee with integrity goes beyond truthfulness, behaving according to one’s deeply felt ethical principles in business situations. Loyalty versus Truth: Businesspeople expect their employees to be loyal and to act in the best interests of the company. Individual sometime has to decide between loyalty to the company and truthfulness in business relationships. Whistle Blowing: an employee’s disclosure to company officials, government authorities or the media of illegal, immoral or unethical practices. In 2004, The Public Servants Disclosure Protection Act was introduced to protect people who expose problems. A corporate culture that supports business ethics develops on four levels: Ethical Awareness, Ethical Reasoning, Ethical action and Ethical Leadership. Ethical Awareness: The foundation of an ethical climate. One way for a firm to provide this support is to develop a code of conduct. Ethical Education: Businesses must provide the tools employees need to evaluate the potions and arrive at suitable decisions. (Training programs) Ethical Action: Firms must provide structures and approaches the allow decisions to be turned into ethical actions. (Employee hotline) Ethical Leadership: Executives need to show their actions. 1. Use clear language rather than euphemisms for corrupt behavior. 2. Encourage behavior that generates and fosters ethical values 3. Practise moral absolutism, insisting on doing right, even if it proves financially costly. A second major issue affecting business is the question of social responsibility-business’s consideration of society’s well-being and consumer satisfaction, in addition to profits. Social audits measure social performance of firms. It’s formal procedures that identify and evaluate all company activities that relate to social issues. Corporate philanthropy: an organization’s contribution to the communities where it earns profits. (Cash contributions, donations of equipment and products, volunteer of company employees.) CHAPTER 10 Production and Operations Management PRODUCTION STRATEGIES: Mass Production: A system for manufacturing products in large quantities by using effective combinations of employees with specialized skills, mechanization, and standardization. Flexible Production: uses three resources information technology to share the details of customer orders, programmable equipment to fill the orders, and skilled people to carry out the tasks needed to complete an order. Customer-Driven Production: assesses customer demands to make connection between the products that are manufactured and the products people want to buy. Another approach is to wait until a customer orders a product and then produce it. PRODUCTION PROCESSES: Analytic production system: reduces a raw material to its component, or individual, parts to extract one or more marketable products. Synthetic production system: Combines two or more raw materials or parts, or transforms raw materials to produce finished products. Continuous production process: creates finished products over a long period of time. Intermittent production process: creates products in short production runs. Machines may be shut down frequently or may be changed so they produce different products. TECHNOLOGY AND THE PRODUCTION PROCESS: Green Manufacturing Processes: More manufacturing firms are investing resources into developing processes that result in less waste, lower energy use and little or no pollution. (LEED, leadership in energy and environmental design certification) Robots: a machine that can be programmed to perform tasks that require the repeated use of materials and tools. Computer-aided design (CAD): is a process used by engineers to design parts and entire products on the computer. Engineers who use CAD can work faster and with fewer mistakes. Computer aided manufacturing (CAM) then picks up where the CAD system leaves off. Flexible Manufacturing System (FMS): is a production facility that workers can quickly change to manufacture different products. Computer-Integrated Manufacturing (CIM): Combination of robots, CAD/CAM, FMS, computers and other technologies. It involves a new type of automation that is organized around the computer. It brings increased productivity, decreased design costs, increased equipment utilization and improved quality. THE JOB OF PRODUCTION MANAGERS 1. Planning the overall production process: Begins by choosing the goods or services to offer to customers. 2. Selecting the best layout for the firm’s facilities: An efficient facility layout can reduce material handling, decrease costs, and improve product flow through the facility. Three most common layout designs:  Process layout: groups machinery and equipment according to their functions.  Product layout: assembly line, sets up production equipment along a product-flow line.  Fixed-position layout: places the product in one spot. He workers, materials, and equipment go to the product’s location.  Service organizations must also decide on suitable layouts for their production processes. (customer oriented layout) 3. Carrying out the production plan:  Make, Buy, Or Lease Decision: whether to manufacture a product or part in-house, buy it from an outside supplier, or lease it.  Selection of Suppliers: After a company decides what inputs to buy, it must choose the best suppliers for its needs. Managers compare quality, prices, dependability of delivery, and services offered by competing companies.  Inventory Control: Managers need to balance the costs of storing inventory with the need to have stock on hand to meet demand. Just-in-Time System (JIT): a broad management philosophy that reaches beyond the narrow activity of inventory control to affect the entire system of production and operations management. Materials Requirement Planning (MRP): a computer-based production planning system that ensures a firm has all the parts and materials it needs to produce its output at the right time and place and in the right amounts. 4. Controlling the manufacturing process to maintain the highest possible quality: Production control creates well-defined procedures for coordinating people, materials and machinery to provide the greatest production efficiency. Five-step process:  Planning: managers decide on the amount of resources needed to produce a certain output.  Routing: Manager decides on the sequence of work throughout the facility, who will perform each part of the work, and where the work will be done. Routing choices depend on two factors: the nature of the good or service and the facility layout.  Scheduling: Mangers develop timetables that show how long each operation in the production process takes and when workers should perform it. Efficient scheduling means that production will meet the delivery schedules and make efficient use of resources.  Dispatching: managers instruct each department on the work it needs to do and how long it has to do the work. The dispatcher authorizes performance, provides instructions and lists job priorities.  Follow-Up: managers and employees, or team members, spot problems and come up with solutions. IMPORTANCE OF QUALITY Quality matters because it is costly to fix, replace or redesign imperfect products. Companies can use benchmarking to ensure that they always produce high- quality products, the process of looking at how well other companies perform business functions or tasks and using their performance as a standard for measuring another company’s performance. Quality Control involves measuring output against quality standards. Firms use quality control to spot defective or imperfect products and to avoid delivering poor-quality goods to customers. ISO Standards stands for International Organization for Standardization. ISO 9000 help organizations to ensure that their products and services 1) Are of high quality 2) provide a basis for continual improvement. ISO 14000 ensure that operations 1) cause little harm as possible to the environment 2) continually improve their environmental performance. Chapter 7 Management, Leadership, and the Internal Organization WHAT IS MANAGEMENT? Management is the process of achieving organizational goals through people and other resources. Three levels of a firm’s management: 1.Top management: The highest level of management. Include CEO, CFO, and executive vice-president. They decide whether to introduce new products, purchase other companies, etc. 2.Middle management: Second level of management. Includes general managers, plant managers, division managers, and branch managers. They focus their attention on specific operations, products or customer groups. 3.Supervisory management (First-live management): Includes supervisors, section chiefs and team leaders. They work directly with employees who produce and sell the firm’s goods and services. Skills Needed for Managerial Success: Three basic skills: Technical, human, and conceptual. 1) Technical skills: manager’s ability to understand and use the techniques, knowledge, tools and equipment of a specific department or area of study. (First-line managers) 2) Human skills: Interpersonal skills that help managers to work effectively with people which include the ability to communicate with, motivate, and lead employees to complete their assigned activities. 3) Conceptual skills: Help a manager to see the organization as a single unit and to understand how each part of the overall organization interacts with other parts. Especially important to top-level managers. Four Basic Managerial Functions: a) Planning: the process of looking forward to future events and conditions and deciding on the courses of actions for achieving organizational goals. b) Organizing: the process of blending human and material resources through a formal structure of tasks and authority: arranging work, dividing tasks among employees and coordinating them to ensure plans are carried out and goals are met. c) Directing: include training, setting up schedules, assigning tasks, and monitoring progress. d) Controlling: has four basic steps: setting performance standards, monitoring actual performance, comparing actual performance with the standards, and making corrections if needed. IMPORTANCE OF PLANNING Four Types of Planning 1) Strategic Planning: The most far-reaching level of planning. The process of deciding on the primary objectives of an organization and then taking action and setting aside resources to achieve those objectives. 2) Tactical Planning: involves carrying out the activities set out in the strategic plans. 3) Operational Planning: Sets the detailed standards that help to carry out tactical plans. 4) Contingency Planning: Helps firms to resume operations as quickly and smoothly as possible after a crisis. THE STRATEGIC PLANNING PROCESS Six steps in Strategic Planning: 1) Defining the Organization’s Mission: Translate the firm’s vision into a mission statement. A good mission statement states the firm’s purpose for being in business and its overall goal. 2) Assessing Competitive Position: Decide on the firm’s current, or hoped position in the marketplace. SWOT: short form for strengths, weaknesses, opportunities and threats. Is often used in this part of strategic planning. 3) Setting Objectives for the Organization: Objectives set targets so that managers can plan for the organization’s hoped for performance. Such as new product development, sales, customer service, growth, environmental and social responsibility and employee satisfaction. 4) Creating Strategies for Competitive Differentiation: the unique mix of a company’s abilities and resources that set it apart from its competitors. 5) Implementing the Strategy: The middle managers or supervisors are often the people who actually implement a strategy. 6) Monitoring and Adapting Strategic Plans: Monitoring involves gathering feedback about performance. Managers can continue to use SWOT analysis and forecasting to help adapt their objectives and functional plans as changes occur. MANAGERS AS DECISION MAKERS Decision-making is the process of seeing a problem or opportunity, assessing possible solutions, selecting and carrying out the best-suited plan, and assessing the results. Two basic kinds of decisions:  Programmed Decision: involves simple, common and frequently occurring problems that already have solutions.  Nonprogrammed decision: involves a complex and unique problem or opportunity and has important results for the organization. How Managers Make Decisions: See Problem or Opportunity-Develop Possible Ways or Taking Action-Evaluate options-Select and Carry out one option-Assess Outcome. MANAGERS AS LEADERS Three personal qualities of managers: Empathy, self- awareness, and objectivity. Leadership Styles: 1) Autocratic Leadership: Centered on the boss. They make decisions on their own without consulting employees. 2) Democratic Leadership: Centers on employees’ contribution. The concept of empowerment shares authority, responsibility and decision making with their managers. 3) Free-rein Leadership: They allow employees to make most of their own decisions. They communicate with employees frequently. ORGANIZATIONAL STRUCTURES Three key elements of an organization: human interaction, goal directed activities, and structure. Steps in organizing process: 1) Decide on the specific activities need to carry out plans and achieve objectives. 2) Group all work activities into a pattern or structure that makes sense. 3) Assign activities to specific employees and give them the resources they need 4) Coordinate the activities of different groups and individuals 5) Evaluate the results of the organizing process. Departmentalization is the process of dividing work activities into unites within the organization.  Product departmentalization: Organizes work unites based on the goods and services a company offers.  Geographical departmentalization: Organizes unites by geographical regions within a country.  Customer departmentalization: Used by a firm that offers a variety of goods and services for different types of customers.  Functional departmentalization: organize work unites according to business functions.  Process departmentalization: For goods and services require multiple work processes to complete their production. Types of Organization Structures:  Line Organizations: The oldest and simplest organization structure. It sets up a direct flow of authority from the chief executive to the employees.  Line and Staff Organizations: Combines the direct flow of authority of a line organization with staff departments that support the line departments.  Committee Organization: a structure that places authority and responsibility in a group of individuals, not a manager.  Matrix Organizations: Links employees from different parts of the organization who work together on specific projects. Chapter 9 Top Performance through Empowerment, Teamwork, and Communication EMPOWERING EMPLOYEES Sharing Information and Decision-Making Authority: One of the most effective ways to empower employees is to keep them informed about the company’s financial performance. The second way that companies empower employees is by giving them broad authority to make decisions that carry out a firm’s vision and its competitive strategy. Linking Rewards to Company Performance: Companies offer worker ownership in two ways:  Employee Stock Ownership Plans: About 7 percent of Canadians participate in ESOPs. Under ESOPs, the employer buys shares of the company stock on behalf of the employee as a retirement benefit which motivate employees to work harder and smarter.  Stock Options: Employees can own the stock themselves if they exercise or use their options by purchasing stock. About 9 million employees in North American companies hold stock options. TEAMS Five basic types of teams: 1) Work Teams: Perform day-to-day work of the organization. 2) Problem-Solving Team: Temporary combination of workers who gather to solve a specific problem. 3) Self-Managed Team: Team that has the authority to decide how its members will complete their daily tasks. 4) Cross-Functional team: Made up of members from different functions. 5) Virtual teams: groups of geographically or organizationally separated co-workers who use telecommunications and information technologies to accomplish an organizational task. TEAM CHARACTERISTICS  Team size: range in size from two people to 150. Most teams have fewer than 12 members. Research shows that teams achieve their best results with six or seven members.  Team Level: Team’s average level of ability, experience, personality or any other factor.  Team diversity: Represents the team’s differences in ability, experience, personality or any other factor. Five Stage of Team Development:  Forming: Orientation period when team members get to know each other and learn what behaviors are acceptable to the group.  Storming: The personalities of team members begin to emerge.  Norming: Members resolve their differences, accept each other, and reach broad agreement about the roles of the team leader and other participants.  Performing: Members focus on solving problems and accomplishing tasks.  Adjourning: The team adjourns after members have completed their assigned task or solved the problem. Six Elements of the process of Communication: Sender, message, channel, audience, feedback and context. BASIC FORMS OF COMMUNICATION:  Oral communication: Communication transmitted through speech.  Written communication: Communication transmitted through writing.  Formal communication: Communication transmitted through the chain of command within an organization to other members or to people outside the organization.  Informal communication: Communication transmitted outside formal channels without regard for the organization’s hierarchy of authority.  Nonverbal communication: Communication transmitted through actions and behaviors rather than through words. (Intimate zone, personal zone, social zone, public zone) Chapter 16 The Financial System THREE TYPES OF SECURITIES: 1) Money Market Instruments: Short-term debt securities issued by governments, financial institutions, and corporations. Mature within one year from the date of issue. 2) Bonds: Bondholders are creditors of a corporation or government body. Usually between 1000-25,000.  Government bonds: Bonds sold by the Canadian Government. Least risky of all bonds. As little as $100.  Provincial and municipal bonds: Issued by provincial or local governmental unites with taxing authority.  Corporations: a) Secured bonds: Bonds that are backed by specific assets. b) Unsecured bonds (Debentures): Bonds that are backed by the financial health and reputation of the issuer.  Mortgage-backed corporate bonds (MBSs): Backed by a pool, or group, of mortgage loans purchased from lender. Low risk. 3) Shares:  Common Shares: The basic form of corporate ownership. Holders of common shares vote on major company decisions and expect to receive some sort of return.  Preferred Shares: Holders of preferred shares receive preference in the payment of dividends.  Convertible Securities: This feature gives the bondholder or holder of preferred shares the right to exchange the bond or preferred shares for a fixed number of common shares. Quality rating for bonds: two factors affect the price of a bond, its rick and its interest rate. Bonds with the lowest level of risk are rated AAA. As ratings descend, risk increases. Bonds with ratings of BBB and above are classified as “Investment-grade bonds”. Bonds with ratings of BB and below are classified as “Speculative bonds or junk bonds”. Financial Markets  Primary markets: Firms and governments issue securities and sell them initially to the general public. In the share offering, investors are offered the opportunity to purchase ownership shares in a firm and participate in future growth.  Secondary markets: a collection of financial markets where previously issued securities are traded among investors. Monetary Policy  Bank rate: The interest rate that the Bank of Canada charges banks for loans. An increase in the bank rate slows the growth rate in the money supply and economic growth.  Open market operations: The buying and selling of government securities. Selling government securities reduces bank reserves and slows the growth rate in the money supply and economic growth. CHAPTER 17: Financial Management THE ROLE OF THE FINANCIAL MAMAGER Three senior managers often report directly to the CFO. I. Vice-President of Financial Planning: responsible for preparing financial forecasts and analyzing major investment decisions related to new products, new production facilities, and acquisition
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