Exam 2 - Tim Waid PDF

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Tim Waid...

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Chapter 3 Lecture Notes and Book Notes 

“Profit is a tool” and “The major purpose of business is to serve” o Judy Wicks

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Triple Bottom line- representing People, Planet, and Profit (3 P’s) o Measures an organizations social, environmental, and financial performance o Responsibility to employees/ wider community (People) o Committed to sustainable (green) environment practices (Planet) o Costs of pollution, worker displacement, etc. in financial calc. (Profit)

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Social Audit- a systematic assessment of a companys performance in implementing socially responsible programs o Based on predefined goals o Way to measure success in the three P’s

The Millennials’ search for meaning o Notion of triple bottom line has appeal to the millennial generation o Includes generation Y (1977-1989) and generation Z (1990-2000) o “Being less focused on financial success than they are on making a difference” o “sense of meaning” Stakeholders o The people whose interests are affected by an organization’s activities o Pillars of society o 1. Government, 2. Individual, 3. For- profit business, 4. God/morality/unknown forces o Two organizational environments: Internal and External o Internal stakeholders- consist of employees, owners, and the board of directors 

Employees- the talent, most important resource

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Owners- consist of all those who can claim it as their legal property

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Could be family

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Ex. Walmart stockholders

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Goal is to make a profit

Board of Directors – Members are elected by the stockholders to see that the company is being run according to their interests

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Hires the Chief Executive (CEO)

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5-12, outside the company, VIP from other industries, independent decision making

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Nonprofit- Board of trustees or Board of regents

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Setting overall strategic goals and approving major decisions and salaries of top management

o External stakeholders- People or groups in the organization’s external environment that are affected by it 

Consists of two groups: Task environment and General Environment

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Task Environment- Consists of 11 groups that present you with daily tasks to handle: 

1. Customers- those who pay to use an organizations goods or services o Service > Price

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2. Competitors- people or organizations that compete for customers or resources (talented employees or raw materials) o Must stay aware of competitors at all times

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3. Suppliers- a person or an organization that provides suppliesthat is raw materials, services, equipment, labor, or energy- to another organization o Supply chain- many suppliers have other supplies

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4. Distributors- a person or an organization that helps another organization sell its goods or services to customers. o Ticketmaster for tickets o Important in industries without a lot of competition 

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Can have a lot of power over the ultimate price

5. Strategic Allies- the relationship of two organizations who join forces to achieve advantages neither could perform as well alone. o Ex. Hotels joining together

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6. Employee organizations- Unions and Associations o

Labor unions usually represent hourly workers

o Professional associations represent salaried workers o Labor force represented by unions has decreased to 11.3% 

7. Local communities- relay on big organizations for their tax base.

o Clawbacks- rescinding the tax breaks when firms don’t deliver promised jobs 

8. Financial Institutions- Banks, savings and loans, and credit unions o Crowdfunding- (crowdsourcing) Raising money for a project or venture by obtaining many small amounts of money from many people (the crowd).

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9. Government Regulators- regulatory agencies that establish ground rules under which organizations may operate o Agencies, boards, and commissions (WTO,FAA) 

Why are they external stakeholders? 

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Because they affect activities of your organization and they are in turn affected by it.

10. Special Interest Groups- groups whose members try to influence specific issues. o EX: PETA, Mothers against drunk driving, NRA o May try to exert political influence 

Contribute funds to lawmakers

o May organize picketing and boycotts 

11. Mass Media o Print, Radio, TV, and the Internet 

To rapidly and widely disseminate news both good and bad

o General Environment (Macroenvironment) 

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Includes 6 forces: economic, technological, sociocultural, demographic, political-legal, and international 

Cannot control these forces, unlike in the task environment

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Can affect task environment without you knowing it

1. Economic Forces- consists of the general economic conditions and trends that may affect an organizations performance 

Unemployment, inflation, interest rates, economic growth

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Indicator: productivity growth o Rising productivity leads to rising profits, lower inflation, and higher stock prices o Technology has helped cut costs

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2. Technological Forces- new developments in methods for transforming resources into goods and services 

Internet, biotechnology, computer communications

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3. Sociocultural forces- influences and trends originating in a country’s, a society’s, or a culture’s human relationships and values that may affect an organization. 

Americans are driving less o Facebook, twitter, and other social media are longstanding sociocultural patterns

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Health o Soda usage is less o Anti-vaccine movement so more diseases are creeping back o Obesity has been on the turnaround

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4. Demographic forces- influences on an organization arising from changes in the characteristics of a population, such as age, gender, or ethnic origin. 

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Marriage rates down, one person households growing, secularism up, people living in rural areas is lowest ever

5. Political-legal forces- changes in the way politics shape laws and laws shape the opportunities for and threats to an organization. 

Anti-trust issues- should Comcast and Time Warner Cable be allowed to merge?

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Legal- more developed legal systems in countries o US has high lawyer per capita o Companies may sue more but have to watch out on being sued

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6. International Forces- changes in economic, political, legal, and technological global system that may affect an organization. 

U.S. companies who do lots of business in Europe are subject to regulation from the EU o Google had to change its search results because companies in Europe complained

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ETHICS AND VALUES

18% of Americans speak another language yet 53% of Europeans speak a second language

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Ethical Dilemma- a situation in which you have to decide whether to pursue a course of action that may benefit you or your organization but is unethical or even illegal. o Choosing between economic performance and social performance is what most ethical conflicts are about

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Ethics- are the standards of right and wrong that influence behavior o vary among countries and cultures

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Ethical Behavior- behavior that is accepted as “right” as opposed to “wrong” according to those standards o Pharmaceutical companies giving doctors “small gifts”- ipads, sports tickets, free drug samples, in order to promote their drugs to patients

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Business ethics: morality applied to business decisions o Laws are not equal to ethics in 3 ways

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Law applies to everyone, unlike ethics

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Law break= jail, fine, prison… No consequence for ethics

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Laws are society, Ethics are individual

Values- the relatively permanent and deeply held underlying beliefs and attitudes that help determine a person’s behavior o Underpinnings for ethics and ethical behavior

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Value system- the pattern of value within an organization o Ethical dilemmas take place because of an organizations value system o 2 value systems that can conflict 

1. The value system stressing financial performance (profit)

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2. Stressing cohesion and solidarity in employee relationship

FOUR APPROACHES TO DECIDING ETHICAL DILEMMAS 1. The Utilitarian approach: for the greatest good a. Guided by what will result in the greatest good for the greatest number of people (Ex. Free books) i. Managers often take this approach, using financial performance (Efficiency and profit) as the best definition for “greatest good for greatest number” 2. The Individual approach: for your greatest self-interest long term, which will help others

a. What will result in the individual’s greatest long-term interests, which are in everyone’s self interest i. Act ethically in short run to avoid others harming you in long run ii. Flaw: one person’s short term self-gain may not be good for everyone in the long-term 3. The Moral-Rights Approach: Respecting fundamental rights shared by everyone a. Respect for the fundamental rights of human beings i. US Constitutions bill of rights 1. Right to life, liberty, privacy, health and safety, due process ii. Employees privacy 1. Employers can legally listen to business phone calls and monitor nonspoken communication 4. The Justice Approach: Respecting impartial standards of fairness a. Respect for impartial standards of fairness and equity i. Is a company’s policies governing promotions or sexual harassment cases administered fair and impartial, regardless of age, sex, gender, etc ii. Distributive: fair pay for work done iii. Procedural: same rules for everyone iv. Interactive: respect, dignity, and interactions v. Communicative: equal access to information How to solve ethical dilemmas by building an ethical framework 1. Apply FOUR approaches 2. Apply personal approaches 3. Apply principle of double effect o Every action has a good effect and a bad effect: the good effect must be much greater than bad 4.Use time/experience to solidify framework Insider Trading: the illegal trading of a company’s stock by people using confidential company information Ponzi Scheme: using cash from newer investors to pay off older ones (Bernard Madoff) o 150 years in prison Sarbanes-Oxley Act of 2002 (SOX): established requirements for proper financial record keeping for public companies and penalties of as much as 25 years in prison for noncompliance o Administered by the SEC

o CEO and CFO must personally certify the organizations financial report, prohibits them from taking personal loans/lines of credit, restatement of corporate profits, and establish procedures for audit committees

Schools bear responsibility for the behavior of executives  Students cheating on exams o 26% of business majors admitted to cheating on exams  Kohlberg’s Theories: Three levels of personal moral development 1. Level 1 Preconventional: follow rules a. Obey authority to avoid unpleasant consequences b. Managers are autocratic/coercive, make employees be obedient 2. Level 2 Conventional: follow expectations of others a. Conformist, adhering to expectations of others b. Managers are encouraging and cooperation, more group and team oriented c. Most Mangers are at this level 3. Level 3 Postconventional: guided by internal values a. Farthest along in moral development b. Managers are independent souls who follow own values and standards i. Focus on need of their employees and try to lead by empowering ii. 1/5th of mangers reach this level HOW ORGANIZATIONS CAN PROMOTE ETHICS (Must be a daily basis) 1. CREATE A STRONG ETHICAL CLIMTATE o Ethical Climate: represents perceptions about the extent to which work environments support ethical behavior o Promote climates through policies, produces, practices 2. SCREENING PROSPECTIVE EMPLOYEES o Check resumes and references to screen out dishonest, irresponsible o E-verify: federal program that allows to check for illegal aliens o Personality tests 3. INSITIUTING ETHICS COES & TRAINING PROGRAMS o Code of Ethics: a formal written set of ethical standards guiding an organization’s actions o How to treat customers, suppliers, and other stakeholders o Purpose: state top management’s expectations o Using training: case approach to see situational problems 4. REWARDING ETHICAL BEHAVIOR: PROTECTING WHISTLE-BLOWERS o Whistle-Blower (Narc): an employee, or even an outside consultant, who reports organizational misconduct to the public o Health/safety, waste, corruption, overcharging customers, etc.

o May receive reward: IRS pays 30% for tips on fraud

Social Responsibility: a manager’s duty to take actions that will benefit the interests of society as well as of the organization Corporate Social Responsibility (CSR): the notion that corporations are expected to go above and beyond following the law and making profit Archie Carrol: corporate social responsibility rests at the top of a pyramid of a corporation’s obligations, right up there with economic, legal, and ethical obligations  Be a good global corporate citizen- defended by host-countries expectations  Be ethical in its practices- host country and global standards  Obey the law- host country and international  Make a profit

Against Social Responsibility: social responsibility of business is to make profits o Milton Freidman o If a company does not focus on max profits, it will lose focus o Companies who have offshore tax havens to minimize tax burdens For Social Responsibility: a company must be concerned for society’s welfare as well as for corporate profits o Paul Samuelson o Business should help solve the problems it creates (Pollution) o Gives business favorable public image Climate Change: major changes in temperature, precipitation, wind patterns, and similar matters occurring over several decades

Global Warming: the rise in global average temperature near the Earth’s surface, caused mostly by increasing concentrations in the atmosphere of greenhouse gases, such as carbon emissions from fossil fuels Natural Capital: the value of natural resources, such as topsoil, air, water, and genetic diversity, which humans depend on o Approaching the planet’s limitations Philanthropy: making charitable donations to benefit humankind o Andrew Carnegie: “he who dies rich dies thus disgraced” o Supporter of free libraries Being Good pays off: o Effects on customers, employees work effort, job applicants, sales growth, company efficiency, company revenue, stock price, and profits. Corporate Governance: the system of governing a company so that the interests of corporate owners and other stakeholders are protected o Directors are clearly separated in their authority from the CEO (Independent) o Need for trust

Chapter 6 Lecture Notes and Book Notes Strategic Positioning: attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company  Michael Porter- Harvard business professor, “single most important strategist”  Performing different activities from rivals, or performing similar activities in different ways  Core competency- activity that an organization does best that is leveraged by competitive advantage  1. Strategy is the creation of a unique and valuable position (3 sources) o Few needs, many customers (Ex: Jiffy Lube) o Broad needs, few customers (Ex: Bessemer Trust) o Broad needs, many customers (Ex: Carmike Cinemas)  2. Requires trade-offs in competing o What strategy to follow and which not to follow  3. Involves creating a “fit” among activities o “fit”- the ways a company’s activities interact and reinforce another Five Steps of Strategic-Management Process (plus a feedback loop) STRATEGIC MANAGEMENT IS REINVENTION (NIKE, APPLE, MIZZOU)

1. Establish the mission & visions (Original Idea) a. Mission: purpose (mission statement) b. Vision: what to become (vision statement) 2. Assess the current reality (internally and externally) (Analyze Forces)  Current Reality Assessment (organizational assessment): to look at where the organization stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization’s mission  SWOT Analysis, forecasting, benchmarking, and Porters model 3. Formulate the Grand Strategy (Develop new ideas)  Grand Strategy: explains how the organization’s mission is to be accomplished  Three common strategies: growth, stability, and defensive  Strategy Formulation: the process of choosing among different strategies and altering them to best fit the organization’s needs (think)  Time consuming- important and must be translated into specific strategic plans (1-5 yrs) 4. Implement the strategy (choose)  Strategy Implementation: putting strategic plans into effect (DO) 5. Maintain Strategic control: Feedback loop (measure idea: Effective/efficient?)  Strategic Control: consists of monitoring the execution of strategy and making adjustments o Quantitative (Benchmarks); Qualitative (Balanced scorecard) o Financial: unit cost, profit margin, revenue) o Customer (retention, satisfaction)  Repeat customers (20% of customers give 80% of business)

TOOLS FOR ASSESSING THE CURRENT REALITY Competitive Intelligence (Task-specific-competetive-industry): gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately  Ways to gain Competitive Intelligence (Public sources): o The public prints and advertising (press release, news leak, internet, Nexus) o Investor information (SEC reports) o Informal sources (Trade shows) SWOT Analysis (Situational analysis)  Environmental Scanning: careful monitoring of an organization’s internal and external environments to detect early signs of opportunities and threats that may influence the firm’s plans

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Match internal strength to external opportunity (leverage) Avoid external threat to internal weakness (exposure)

Two parts: Inside matters and outside matters o Inside matters: Internal strengths and weaknesses o Organizational Strengths: the skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its vision o Organizational Weakness: the drawbacks that hinder an organization in executing strategies in pursuit of its vision  Outside matters: External opportunities and threats o Organizational Opportunities: environmental factors that the organization may exploit for competitive advantage o Organizational Threats: environmental factors that hinder an organization’s achieving a competitive advantage Forecast: a vision or projection of the future (Two types)  Trend Analysis: a hypothetical extension of a past series of events in the future o Time- series forecast: predicts future data based on patterns of historical data  Long-term, cyclic patterns, seasonal variations (Christmas vs summer)  Contingency Planning (scenario analysis): the creation of alternative hypothetical but equally likely future conditions o 5 or more years into future, gets managers thinking strategically Benchmarking (comparing with the best): a process by which a company compares its performance with that of high-performing organizations (pro sports teams) Where you wanna be o

Porter’s Model for Industry Analysis: business-level strategies originate in fi...