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Chapter 1

GMS 200 Notes ALL CHAPTERS Ch. 1,2,3,6,7,8,11,13

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Global Management Studies
GMS 200
Shavin Malhotra

Chapter 1  What does Global Management mean?  Involves managing operations in more than one country. Define Globalized economy  Resources, markets, and competition are worldwide in scope. In a competitive global business landscape, the increasing demand for talented, knowledge workers is primarily due to the increasing use of low-cost production. (FALSE). It is due to advancement in technology. The age gap in today’s workplaces is one of the diversity issues that may create major challenges for managers. (TRUE) The recruitment and retention of talented workers is one of the major challenges faced by manager in a global competitive economy (TRUE). According to the Katz’s framework on essential managerial skills, low-level managers need to develop more conceptual skills than top-level managers (FALSE). What are the key conditions that describes the general (business) environment?  Economic Conditions: influence customer spending, resource supplies, and investment capital.  Legal-Political Conditions: laws and regulations, government policies, and philosophies of political parties.  Technological Conditions: Rapid changing technology and implications that it has on work environment.  Socio-cultural Conditions: Norms, customs, social values and beliefs on matters such as ethics, human rights, lifestyles. Companies need to anticipate changing trends.  Natural Environment Conditions: “Green” perspectives, concerned with global warming and being eco friends. Describe a Learning Organization  Renewed belief in human capital  Emphasis on teamwork,  demise of “command and control”,  Pre-eminence of technology,  embrace of networking,  new workforce expectations,  concern for work-life balance,  Focus on speed. What are the critical survival skills for a new workplace?  Planning: process of setting objectives, and ways of accomplishing them  Organizing: arranging tasks, people, and resources to accomplish work  Leading: Inspiring people to work hard  Controlling: Measuring performance and taking actions. Chapter 2 What are the three branches of the classical approach to management?  Scientific management  Administrative principles  Bureaucratic organization Who is known as the father of Scientific Management?  Fredrick W. Taylor, Father of scientific management. Who is known as the father of bureaucratic management?  Max Weber, father of bureaucratic management. What are the main findings of the Hawthorne studies (1924-32)?  Initial study examined how economic incentives and physical conditions affected worker output.  No consistent relationship found  “Psychological factors” influenced results  Relay assembly test-room studies  Manipulated physical work conditions to assess impact on output  Designed to minimize the “psychological factors” of previous experiment  Factors that accounted for increased productivity  Group atmosphere  Participative supervision  Employee attitudes, interpersonal relations and group processes  Some things satisfied some workers but not others  People restricted output to adhere to group norms  Lessons from the Hawthorne Studies:  Social and human concerns are keys to productivity  Hawthorne effect — people who are singled out for special attention perform as expected Review Fredrick Taylor’s approach to scientific management  Develop rules of motion, standardized work implements, and proper working conditions for every job  Carefully select workers with the right abilities for the job  Carefully train workers and provide proper incentives  Support workers by carefully planning their work and removing obstacles  Motion study  Science of reducing a job or task to its basic physical motions  Eliminating wasted motions improves performance  Practical lessons from scientific management  Make results-based compensation a performance incentive  Carefully design jobs with efficient work methods  Carefully select workers with the abilities to do these jobs  Train workers to perform jobs to the best of their abilities  Train supervisors to support workers so they can perform jobs to the best of their abilities Review Max Weber’s approach to bureaucratic management?  Bureaucracy  An ideal, intentionally rational, and very efficient form of organization  Based on principles of logic, order, and legitimate authority  Characteristics of bureaucratic organizations:  Clear division of labour  Clear hierarchy of authority  Formal rules and procedures  Impersonality  Careers based on merit  Possible Disadvantages of bureaucracy:  Excessive paperwork or “red tape”  Slowness in handling problems  Rigidity in the face of shifting need  Resistance to change  Employee apathy Review Maslow’s Hierarchy  A need is a physiological or psychological deficiency a person feels compelled to satisfy  Need levels:  Physiological  Safety  Social  Esteem  Self-actualization  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  Both principles cease to operate at self-actualization level Review Chris Argyris’ theory of adult personality  Classical management principles and practices inhibit worker maturation and are inconsistent with the mature adult personality  Management practices should accommodate the mature personality by:  Increasing task responsibility  Increasing task variety  Using participative decision making Review (human systems) Contingency Thinking (model)  Tries to match managerial responses with problems and opportunities unique to different situations  Especially individual or environmental differences  No “one best way” to manage  Appropriate way to manage depends on the situation Chapter 3  Common reasons for firms becoming international? Profits: Global operations offer greater profit potential Customers: Global operations offer new markets to sell products Suppliers: Global operations offer access to needed products and services Capital: Global operations offer access to financial resources Labour: Global operations offer access to lower labour costs. Advantages/Disadvantages of Direct and Indirect Exporting Advantages of Direct Exporting you are in control of pricing full control of your brand direct understanding of buyers' or end users' needs and an ability to customise accordingly maintain the customer relationship able to identify possible new opportunities Customers may prefer dealing directly with the producer. Disadvantages of Direct Exporting will take a lot of time, energy, staff resources and money competitors with a local presence will be perceived as lower risk to buy from after-sales commissioning and service may require local language capability prompt troubleshooting may not be able to be done remotely and will require additional visits growth will be slower. Advantages of Indirect Exporting Selling to or through an intermediary is a relatively cheap and straightforward way to enter a new market. A good intermediary will have in-market experience, reputation and contacts. Disadvantages of Indirect Exporting intermediary still requires sales support intermediary takes a margin have no direct contact with the end customer will have less control over the actual final transaction Don’t get to learn about the overseas market, which could slow down longer term expansion plans.  What does importing involve?  Importing involves buying foreign-made products and selling them domestically.  What ethical issues are usually raised in relations the international operations of multinational enterprises? Corruption  illegal practices that further one’s business interests Bribery and others forms of corruption can pose significant challenges as global managers around the world. Sweatshops employing workers at low wages for long hours and in poor working conditions Child Labour full-time employment of children for work otherwise done by adults Sustainable Development Global warming, industrial pollution, hazardous waste disposal, depletion of natural resources, and related concerns are worldwide issues. meeting current needs without compromising future needs Difference between brownfield and greenfield investment Greenfield Investment: A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. Brownfield Investment: When a company or government entity purchases or leases existing production facilities to launch a new production activity. What factors should be taken into account when considering a joint venture? Joint Ventures: operates in a foreign country through co-ownership by foreign and local partners. Some factors/questions to take into account when considering a joint venture are:  Is the partner familiar with your firm’s major business Employs a strong local workforce Value its customers Has potential for future expansion Has strong local market for its products Has good profit potential Has sound financial standing. Licensing: one firm pays fee for rights to make or sell another company’s products in a specified region. The license typically grants access to a unique manufacturing technology, special patent, or trademark. In effect, the firm provides the local firm with the technology and knowledge to offer its products or services for local sales. Such licensing involves potential risk. Franchising: a fee is paid for rights to use another firm’s name and operating method in its home country. The international version operates similarly to domestic franchising agreements. Foreign Direct Investment (FDI): involves setting up, buying all, or buying part of a business in another country. For many countries, the ability to attract foreign business investors has been a key to succeeding in the global economy. Insourcing is often used to describe job creation that results from foreign direct investment. Its effect can be very positive for the local economy. Nature of the relationship (i.e. complaints) between host countries and multinational corporations (MNCs). Host-Country complaints about MNCs Excessive profits Domination of local economy Interference with local government Hiring the best local talent Limited technology transfer Disrespect for local customs MNCs complaints about host countries Profit limitations Overpriced resources Exploitative rules Foreign exchange restrictions Failure to uphold contracts. Major regional blocks/free-trade agreements World Trade Organization (WTO): Currently 153 members, agree to negotiate and resolve disputes about tariffs and trade restrictions. Established to promote free trade and open markets around the world. “Liberal trade policies – which involve allow the unrestricted flow of goods and services – sharpen competition, motivate innovation, and breed success. They multiply the rewards that result from producing the best products, with the best design, at the best price. “ North American Free Trade Agreement (NAFTA): Creates a trade zone with minimal barriers, which frees the flow of goods and services, workers, and investments among the three countries – Canada, USA, and Mexico. NAFTA include greater cross-border trade, benefits to farm exports, greater productivity of manufacturers, and reform of the Mexican business environment. European Union (EU): Now links 27 countries that agree to support mutual economic growth by removing barriers that previously limited cross-border trade and business development. Define a Global Manager  Someone who is culturally aware and informed on international affairs. Difference between low-context and high-context culture Low-context culture  Emphasize communication via spoken or written words  As the saying goes in U.S, Canada, and Germany, “we say or write what we mean, and we mean what we say” High-context culture  Rely on non-verbal and situational cues as well as on spoken or written words in communication.  Including body language, physical setting, and even past relationship among the people involved. Hofestede’s five cultural dimensions:  Power Distance: Degree to which a society accepts unequal distribution of power. In high-power cultures, we expect to find great respect for age, status, and titles. People in these cultures tend to be tolerant of power; they are prone to follow orders and accept differences in rank.  Individualism – Collectivism: Degree to which a society emphasizes individuals and their self-interests.  Uncertainty Avoidance: Degree to which a society is uncomfortable with risk, change and situational uncertainty, versus having tolerance for them. Low-uncertainty avoidance cultures display openness to change and innovation. In high-uncertainty avoidance cultures, by contrast, one would expect to find a preference for structure, order and predictability.  Masculinity – Femininity: Degree to which a society values assertiveness and materialism. It is a tendency for members of a culture to show stereotypical masculine and feminine traits and reflect different attitudes toward gender roles.  Time-Orientation: Degree to which a society emphasizes short-term or long-term goals. Chapter 5 Who is an entrepreneur? What is entrepreneurship?  Entrepreneur: risk-taking individual who takes action to pursue opportunities others fail to recognize, or even view as problems or threats. Business entrepreneurs start new ventures that bring to life new products or service ideas.  Entrepreneurship: Strategic thinking and risk-taking behaviour that results in the creation of new opportunities for individuals and/or organizations. 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 Different forms of Business Ownerships:  Sole Proprietorship: simply an individual or a married couple pursuing a business for a profit. This does not involve incorporation. A sole proprietorship is easy to start, run, and terminate and it is the most common form of small business ownership In Canada.  Partnership: formed when two or more people agree to contribute resources to start and operate a business together. It is usually backed by a legal and written partnership agreement. Business partners agree on the contribution of resources and skills to the new venture, and on the sharing of profits and losses.  General Partnership: simplest and most common form, they also share management responsibilities.  Limited Partnership: consists of a general partner and one or more “limited” partners who do not participate in day-to-day business management.  Limited Liability Partnership: common among professionals such as accountants and lawyers, limits the liability of one partner of the negligence of another.  Corporation: commonly identified by the “Inc.” designation in a name, is a legal entity that is chartered by the government and exists separately from its owners. The corporation can be for-profit or non-profit. The corporate form offers 2 major advantages: (1) it grants the organization certain legal rights, and (2) the corporation becomes responsible for its own liabilities.  Limited Liability Corporation (LLC): combines the advantages of the other forms. For liability purposes, it functions like a corporation, protecting the assets of owners made against the company. Financing options available to new ventures:  Debt Financing: involves going into debt by borrowing money from another person, bank, or financial institution. This loan must be paid back over time, with interest. It also requires collateral that pledges business assets or personal assets, such as home, to secure the loan in case of default.  Equity Financing: involves giving ownership shares in the business t outsiders in return for their cash investments. This money does not need to be paid back. It is an investment, and the investor assumes the risk for potential gains and losses. It return for taking the risk, the equity investor gains some proportionate ownership control.  Venture Capitalists: companies and individuals make large investments in new ventures in return for an equity stake in the business. Most venture capitalists tend to focus relatively large investments of $1 million or more, and they usually take a management role.  Initial Public Offering (IPO): when shares of stock in the business are first sold to the public and then begin trading on a major stock exchange. Stages in the life cycle of an entrepreneurial firm  Birth Stage:  Establishing the firm  Getting customers  Finding the money  Breakthrough stage:  Working on finances  Becoming profitable  Growing  Maturity Stage:  Refining the strategy  Continuing growth  Managing for success Chapter 6 What does planning as a management function entail?  The Planning Process  Planning: The process of setting objectives and determining how to best accomplish them  Objectives: Identify the specific results or desired outcomes that one intends to achieve  Plan: A statement of action steps to be taken in order to accomplish the objectives  Steps in the Planning Process  Define your objectives: Identify desired outcomes or results in very specific ways. Know where you want to go.  Determine where you stand vis-à-vis objectives: Evaluate current accomplishments relative to the desired results. Know where you stand in reaching your objectives'  Develop premises regarding future conditions: Anticipate future events. Generate alternative “scenarios” for what may happen;  Analyze and choose among action alternatives: List and evaluate possible actions. Chose the alternative most likely to accomplish your objectives’  Implement the plan and evaluate results: Take action and carefully measure your progress toward objectives.  Benefits of Planning:  Improves focus and flexibility  Improves action orientation  Improves coordination and Control  Improves time management What is planning?  Process of setting objectives and determining how to accomplish them.  Creates a solid platform for the other management functions: organizing, planning, leading, and controlling. Two factors Walmart primarily gains directions from are:  Basic Beliefs (respect for the individual, service to our customers, striving for excellence) +  Customer Service Rule (sundown, ten foot, and everyday low prices rule). What is Scenario planning? What are its benefits?  Scenario planning identifies alternative scenarios and makes plans to deal with each. A long-term version of contingency planning  Benefits of Scenario planning:  Managers are forced to break out of their standard world view, exposing blind spots that might otherwise be overlooked in the generally accepted forecast.  Decision-makers are better able to recognize in its early stages, should it actually be the one that unfolds.  Managers are better able to understand the source of disagreements that often occur when they are envisioning different scenarios without realizing it. What is Contingency planning:  Identifies alternative courses of action to take when things go wrong or if circumstances change. What are organizational procedures and policies? What is the main difference between them?  Organizational Procedures: precisely describe actions that are to be taken in specific situations. They are stated in employee handbooks and often called “SOPs” – standard operating procedures.  Organizational Policies: communicate broad guidelines for making decisions and taking action in specific circumstances. Organizations operate with lots of policies, and they set expectations for many aspects of employee behavior. Chapter 7 What is Strategy? What is strategic management?  Strategy: comprehensive plan guiding resource allocation to achieve long-term organization goals.  Strategic management: Process of formulating and implementing strategies. What are two basic ways in which firms compete against their rivals?  Competitive Advantage: the ability to do something so well that one outperforms competitors.  Sustainable Competitive Advantage: ability to outperform rivals in a way that are difficult or costly to imitate. Porter’s five forces of framework:  Industry Competition: the intensity of rivalry among firms in the industry and the ways they behave competitively toward one another.  New entrants: the threat of new competitors entering the market, based on the presence or absence of barriers to entry.  Substitute products or service: the threat of substitute products or services, based on the ability of consumers to find what they want from other sellers.  Bargaining power of suppliers: the ability to resource suppliers to influence the price that one has to pay for their products or services.  Bargaining power of customers: the ability of customers to influence the price that they will pay for the firm’s products or services. Porter’s model of generic strategies:  Cost Leadership Strategy (Broad): seeks to have low costs so that they can sell products and services at low prices. While the low cost drive sales, the low cost structure allows them to still make profits even when selling at low prices that competitors can’t match. Success with the cost leadership at low prices strategy requires a continuing search for innovations that increase operating efficiencies throughout purchasing, production, distribution, and other organizational systems. Walmart is an example of Cost Leadership Strategy.  Differentiation Strategy: seek competitive advantage through uniqueness. Then try to develop goods and services that are clearly different from the competition or that, through successful advertising, are perceived as clearly different. The objective is to build a strong base of customers that are loyal to the organization’s products and lose in those of competitors. Polo Ralph is an example of Differentiation Strategy.  Focused low-cost strategy: seeks the lowest costs of operations within a special market segment.  Focused Differentiation: offers a unique product to a special market segment. Various components of SWOT Analysis:  SWOT Analysis: examines organizational strengths and weaknesses and environmental opportunities and threats.  Strengths: Positive Internal assessment of the Organization.  Manufacturing efficiency?  Skilled workforce?  Good market share?  Strong financing?  Superior reputation?  Weaknesses: Negative Internal assessment of the Organization.  Outdated facilities?  Inadequate research and development?  Obsolete technologies?  Weak management?  Past planning failures?  Opportunities: Positive External assessment of the Organization.  Possible new markets?  Strong economy?  Weak market rivals?  Emerging technologies?  Growth of existing market?  Threats: Negative External assessment of the Organization.  New competitors  Shortage of resources?  Changing market tastes?  New regulations?  Substitute products? Total Quality Management (TQM): managing with an organization-wide commitment to continuous improvement, product quality, and customer needs. This is a process that makes quality principles part of the organization’s strategic objectives, applying them to all aspects of operations and striving to meet customers
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