The WTO appears to play an important role even though critics are vocal and highly visible. Different Types of Global Organizations Business has been conducted internationally for many years Multinational corporations did not become popular until the mids.
Global organizations can be classified in the following categories: 1. The term multinational corporation MNC is a broad term that refers to any and all types of international companies that maintain operations in multiple countries. A transnational corporation TNC , sometimes called a borderless organization, is a type of international company in which artificial geographical barriers are eliminated.
Stages of Internationalization An organization that goes international typically progresses through three stages. Companies that go international may begin by using global sourcing also called global outsourcing. In this stage of going international, companies purchase materials or labor from around the world, wherever the materials or labor are least expensive.
Beyond the stage of global sourcing, each successive stage to become more international involves more investment and risk. In the next stage, companies may go international by exporting making products domestically and selling them abroad or importing acquiring products made abroad and selling the products domestically.
Both exporting and importing require minimal investment and risk. In the early stages of going international, managers may also use licensing giving another organization the right to make or sell its products using its technology or product specifications or franchising giving another organization the right to use its name and operating methods After an organization has done international business for a period of time, managers may decide to make more of a direct investment in international markets by forming a strategic alliance, which is a partnership between an organization and a foreign company partner s.
In a strategic alliance, partners share resources and knowledge in developing new products or building production facilities. A joint venture a specific type of strategic alliance may be undertaken to allow partners to form a separate, independent organization for some business purpose.
Managers may decide to make a direct investment in a foreign country by establishing a foreign subsidiary, in which a company sets up a separate and independent production facility or office. Establishing a foreign subsidiary involves the greatest commitment of resources and the greatest risk of all of the stages in going international.
Managing in a global environment entails the following challenges. The Legal-Political Environment: The legal-political environment does not have to be unstable or revolutionary to be a challenge to managers. The Economic Environment: The economic environment also presents many challenges to foreign-based managers, including fluctuations in currency rates, inflation, and diverse tax policies.
In a market economy, resources are primarily owned by the private sector. In a command economy, all economic decisions are planned by a central government. The Cultural Environment: Countries have different cultures, just as organizations do. National culture is the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important.
A framework developed by Geert Hofstede serves as a valuable framework for understanding differences between national cultures. Hofstede studied individualism versus collectivism. Individualism is the degree to which people in a country prefer to act as individuals rather than as members of groups.
Collectivism is characterized by a social framework in which people prefer to act as members of groups and expect others in groups of which they are a part such as a family or an organization to look after them and to protect them. Another cultural dimension is power distance, which describes the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally. Uncertainty avoidance describes a cultural measure of the degree to which people tolerate risk and unconventional behavior.
Hofstede identified the dimension of achievement versus nurturing. Achievement is the degree to which values such as assertiveness, the acquisition of money and material goods, and competition prevail. Nurturing emphasizes sensitivity in relationships and concern for the welfare of others. Long-term and short-term orientation. People in countries having long-term orientation cultures look to the future and value thrift and persistence.
Short-term orientation values the past and present and emphasizes a respect for tradition and social obligations. The increased threat of terrorism, economic interdependence of trading countries, and significant cultural create a complicated environment in which to manage. Successful global managers need to have great sensitivity and understanding.
Managers must adjust leadership styles and management approaches to accommodate culturally diverse views. Chapter 5 Social Responsibility and Managerial Ethics This chapter discusses issues involving social responsibility and managerial ethics and their effect on managerial decision making. Both social responsibility and ethics are responses to a changing environment and are influenced by organizational culture Managers regularly face decisions that have dimensions of social responsibility.
Social Obligations to Responsiveness to Responsibility: Social obligation occurs when a firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. Social responsiveness is seen when a firm engages in social actions in response to some popular social need.
Purposes of Shared Values are: 1 They act as guideposts for managerial decisions and actions. Factors That Affect Employee Ethics 1. Stages of Moral Development. Research confirms three levels of moral development. Each level has two stages. The majority of adults are at Stage 4. The higher the stage an employee reaches, the more likelihood that he or she will behave ethically.
Individual Characteristics: A person joins an organization with a relatively entrenched set of values. Values are basic convictions about what is right and wrong. Values are broad and cover a wide variety of issues. Individuals who score high on ego strength are likely to resist impulses to act unethically and are likely do what they think is right.
Locus of control is a personality attribute that measures the degree to which people believe they control their own fate. Individuals with an internal locus of control think that they control their destiny, while persons with an external locus of control are less likely to take personal responsibility for the consequences of their behavior and are more likely to rely on external forces. Externals believe that what happens to them is due to luck or chance. A third factor influencing managerial ethics is structural variables.
The existence of structural variables such as formal rules and regulations, job descriptions, written codes of ethics, performance appraisal systems, and reward systems can strongly influence ethical behavior. An organizational culture most likely to encourage high ethical standards is one that is high in risk tolerance, control, and conflict tolerance.
A strong culture exerts more influence on managers than does a weak one. However, in organizations with weak cultures, work groups and departmental standards strongly influence ethical behavior. Finally, the intensity of an issue can affect ethical decisions. Six characteristics determine issue intensity a. Greatness of harm b. Consensus of wrong c. Probability of harm d. Immediacy of consequences e. Proximity to victim f. Concentration of effect Improving Ethical Behavior Organizations can take a number of actions to cultivate ethical behavior among members.
In addition, decision rules can be developed to guide managers in handling ethical dilemmas in decision making. Job goals are usually a key issue in the performance appraisal process. Performance appraisals should include this dimension, rather than focusing solely on economic outcomes. At the least, ethics training should increase awareness of ethical issues.
Social Entrepreneurship: A social entrepreneur is an individual or organization who seeks out opportunities to improve society by using practical, innovative, and sustainable approaches.
Social impact management: Managers are increasingly expected to act responsibly in the way they conduct business. Managers using a social impact management approach examine the social impacts of their decisions and actions. When they consider how their actions in planning, organizing, leading and controlling will work in light of the social context within which business operates, managers become more aware of whether they are leading in a responsible manner.
Decision making is such an important part of all four managerial functions that decision making is said to be synonymous with managing. The Decision-Making Process A decision is a choice made from two or more alternatives. The decision-making process is a set of eight steps that include the following: Identifying a problem: A problem is a discrepancy between an existing state and a desired state of affairs. In order to identify a problem, a manager should be able to differentiate the problem from its symptom; he should be under pressure to taken action and must have the authority and resources to take action.
Identifying decision criteria: Decision criteria are criteria that define what is relevant in a decision. Allocating weights to the criteria: The criteria identified in the previous step of the decision-making process may not have equal importance.
So he decision maker must assign a weight to each of the items in order to give each item accurate priority in the decision. Developing alternatives: The decision maker should then identify viable alternatives that could resolve the problem. Analyzing alternatives: Each of the alternatives are then critically analyzed by evaluating it against the criteria established in Steps 2 and 3. Selecting an alternative: The next step is to select the best alternative from among those identified and assessed.
If criteria weights have been used, the decision maker would select the alternative that received the highest score in Step 5. Implementing the alternative: The selected alternative is implemented by effectively communicating the decision to the individuals who would be affected by it and their commitment to the decision is acquired. Evaluating decision effectiveness: The last step in the decision-making process is to assess the result of the decision in order to determine whether or not the problem has been resolved.
Managers can make decisions on the basis of rationality, bounded rationality, or intuition. Rational decision making. Managerial decision making is assumed to be rational—that is, making choices that are consistent and value-maximizing within specified constraints. A rational manager would be completely logical and objective. The assumptions of rationality can be met if the manager is faced with a simple problem in which 1 goals are clear and alternatives limited, 2 time pressures are minimal and the cost of finding and evaluating alternatives is low, 3 the organizational culture supports innovation and risk taking, and 4 outcomes are concrete and measurable.
Bounded rationality. Intuitive decision making. Managers also regularly use their intuition. Intuitive decision making is a subconscious process of making decisions on the basis of experience and accumulated judgment. Although intuitive decision making will not replace the rational decision-making process, it does play an important role in managerial decision making.
Types of Problems and Decisions Managers encounter different types of problems and use different types of decisions to resolve them. Problems can be structured problems or unstructured problems and decisions can be programmed decisions or nonprogrammed decisions.
Structured problems are straightforward, familiar, and easily defined. In dealing with structured problems, a manager may use a programmed decision, which is a repetitive decision that can be handled by a routine approach. Managers rely on three types of programmed decisions: a.
A procedure is a series of interrelated sequential steps that can be used to respond to a structured problem. A rule is an explicit statement that tells managers what they can or cannot do. A policy is a guideline for making decisions. Unstructured problems are problems that are new or unusual and for which information is ambiguous or incomplete.
These problems are best handled by a nonprogrammed decision that is a unique decision that requires a custom- made solution. At higher levels in the organizational hierarchy, managers deal more often with difficult, unstructured problems and make nonprogrammed decisions in attempting to resolve these problems and challenges. Lower-level managers handle routine decisions, using programmed decisions. Decision-Making Conditions Decision can be made under conditions of certainty, uncertainty and risk.
Certainty is a situation in which a manager can make accurate decisions because all outcomes are known. Few managerial decisions are made under the condition of certainty. More common is the situation of risk, in which the decision maker is able to estimate the likelihood of certain outcomes. Uncertainty is a situation in which the decision maker is not certain and cannot even make reasonable probability estimates concerning outcomes of alternatives.
In such a situation, the choice of alternative is influenced by the limited amount of information available to the decision maker. Decision-Making Styles: Managers have different styles in making decisions and solving problems.
One perspective proposes that people differ along two dimensions in the way they approach decision making. Diagramming these two dimensions lead to a matrix showing four different decision-making styles. The directive style is characterized by low tolerance for ambiguity and a rational way of thinking.
The analytic style is one characterized by a high tolerance for ambiguity and a rational way of thinking. The conceptual style is characterized by a high tolerance for ambiguity and an intuitive way of thinking.
The behavioral style is characterized by a low tolerance for ambiguity and an intuitive way of thinking. In reality, most managers have both a dominant style and alternate styles, with some managers relying almost exclusively on their dominant style and others being more flexible, depending on the particular situation.
Some of decision making biases and errors are: 1. Overconfidence bias occurs when decision makers tend to think that they know more than they do or hold unrealistically positive views of themselves and their performance. Immediate gratification bias describes decision makers who tend to want immediate rewards and avoid immediate costs. The anchoring effect describes when decision makers fixate on initial information as a starting point and then, once set, fail to adequately adjust for subsequent information.
Selective perception bias occurs when decision makers selectively organize and interpret events based on their biased perceptions.
Confirmation bias occurs when decision makers seek out information that reaffirms their past choices and discount information that contradicts their past judgments. Framing bias occurs when decision makers select and highlight certain aspects of a situation while excluding others. Availability bias is seen when decision makers tend to remember events that are the most recent and vivid in their memory. Decision makers who show representation bias assess the likelihood of an event based on how closely it resembles other events or sets of events.
Randomness bias describes the effect when decision makers try to create meaning out of random events. The sunk costs error is when a decision maker forgets that current choices cannot correct the past.
Instead of ignoring sunk costs, the decision maker cannot forget them. In assessing choices, the individual fixates on past expenditures rather than on future consequences. Self-serving bias is exhibited by decision makers who are quick to take credit for their successes and blame failure on outside factors.
Hindsight bias is the tendency for decision makers to falsely believe, once the outcome is known, that they would have accurately predicted the outcome. Chapter 7 Foundations of Planning Planning is one of the four functions of management. The term planning as used in this chapter refers to formal planning.
Purposes of Planning Planning serves a number of significant purposes. Planning gives direction to managers and nonmanagers of an organization. Planning reduces uncertainty. Planning minimizes waste and uncertainty. Planning establishes goals or standards used in controlling.
Planning and Performance Although organizations that use formal planning do not always outperform those that do not plan, most studies show positive relationships between planning and performance. Effective planning and implementation play a greater part in high performance than does the amount of planning done. Studies have shown that when formal planning has not led to higher performance, the external environment is often the reason. The Role of Goals and Plans in Planning Planning is often called the primary management function because it establishes the basis for all other functions.
Planning involves two important elements: goals and plans. Goals often called objectives are desired outcomes for individuals, groups, or entire organizations. Types of goals a. Financial goals versus strategic goals Financial goals related to the financial performance of the organization while strategic goals are related to other areas of an organizations performance.
Real goals are those that an organization actually pursues, as defined by the actions of its members. Types of Plans Plans can be described by their breadth, time frame, specificity, and frequency of use o On the basis of Breadth plans can be Strategic or operational plans. Operational plans short-term plans are plans that specify the details of how the overall goals are to be achieved.
Short- term plans are plans that cover one year or less. Long-term plans are plans with a time frame beyond three years. Specific plans are plans that are clearly defined and leave no room for interpretation. Directional plans are flexible plans that set out general guidelines. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Standing plans are ongoing plans that provide guidance for activities performed repeatedly.
Approaches to Establishing Goals Goals can be established through the process of traditional goal setting or through MBO management by objectives. Traditional goal setting is an approach to setting goals in which goals are set at the top level of the organization and then broken into subgoals for each level of the organization.
This traditional approach requires that goals must be made more specific as they flow down to lower levels in the organization. In striving to achieve specificity, however, objectives sometimes lose clarity and unity with goals set at a higher level in the When the hierarchy of organizational goals is clearly defined, it forms an integrated means- end chain—an integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level.
Management by objectives MBO is a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. However, top management commitment and involvement are important contributions to the success of an MBO program.
The following steps are involved in a typical MBO program: The organizations overall objectives and strategies are formulated Major objectives are allocated among divisional and departmental units. Unit managers collaboratively set specific objectives for their units with their managers Specific objectives are collaboratively set with all department members Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employee The action plans are implemented Progress toward objectives is periodically reviewed, and feedback is provided Successful achievement of objectives is reinforced by performance based rewards Whether an organization uses a more traditional approach to establishing objectives, uses some form of MBO, or has its own approach, managers must define objectives before they can effectively and efficiently complete other planning activities.
Characteristics of Well-Designed Goals 1 Written in terms of outcomes 2. Measurable and quantifiable 3. Clear as to a time frame 4.
Challenging, but attainable 5. Written down 6. Communicated to all organizational members Five Steps in Goals Setting 1. Evaluate available resources. Determine the goals individually or with input from others 4. Write down the goals and communicate them to all who need to know. Review results and whether goals are being met.
Make changes as needed. Developing Plans The process of developing plans is influenced by three contingency factors and by the particular planning approach used by the organization.
As managers move up through the levels of the organization, their planning becomes more strategy oriented. Degree of environmental uncertainty: The greater the environmental uncertainty, the more directional plans should be, with emphasis placed on the short term. When uncertainty is high, plans should be specific, but flexible. Managers must be prepared to rework and amend plans, or even to abandon their plans if necessary.
Length of future commitments: According to the commitment concept, plans should extend far enough to meet those commitments made today. Planning for too long or for too short a time period is inefficient and ineffective. Approaches to Planning In the traditional approach, planning was done entirely by top-level managers who were often assisted by a formal planning department.
Another approach to planning is to involve more members of the organization in the planning process. In this approach, plans are not handed down from one level to the next, but are developed by organizational members at various levels to meet their specific needs.
Criticisms of Planning Although planning is an important managerial function with widespread use, five major arguments have been directed against planning: Planning may create rigidity. Formal planning reinforces success, which may lead to failure. The external environment is constantly changing. Therefore managers should develop plans that are specific, but flexible.
Managers must also recognize that planning is an ongoing process, and they should be willing to change directions if environmental conditions warrant. Flexibility is particularly important. Managers must remain alert to environmental changes that could impact the effective implementation of plans, and they must be prepared to make changes as needed.
Chapter 8 Strategic Management The present day news is filled with examples of changing organizational strategies like Mergers, Strategic alliances, Downsizing, Spin-offs and Global expansion. This chapter examines the strategic management process as it relates to the planning function. The value of thinking strategically has an important impact on organization performance. Strategic management involves all four of the basic management functions—planning, organizing, leading, and controlling.
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