1.) Level of Rivalry: Degree of competition for customers tends to drive down profits - good example are the overabundance of restaurants in Boulder. Competition leads to lowering of prices and more advertising. Just look in a supermarket for this. Level of rivalry is high in the t shirt business, in the car business, in the supermarket business. (Restaurants (most cut costs, etc...)_
2.) Potential for Entry: When a company can easily enter a market. For example, Starbucks has threat of entry coffee shops that want to enter this market. They need to continuously innovate to remain competitive. Barriers to entry are advantages that incumbents may have relative to newcomers.
-Barriers to entry: supply-side economy of scale, capital requirements to enter the market (pharmaceuticals), government policy restricts entry (taxi, liquor).
3.) Power of suppliers: if there are only a few large suppliers, they can drive up the prices. For example, when Microsoft had a near monopoly on operating systems, they would cut profitability out of PC sellers. Labor unions can control the supply of labor, and increase labor costs. (Microsoft and up prices for Dell).
4.) Power of Buyers: Big, powerful buyers or buyers group can bargain prices down particularly when they buy in volume. The Federal government buys weapons. They can bargain the prices down. Big box stores, like Walmart, buy a lot and have significant buying power. (Walmart: only customers for many products)
5.) Threat of Substitutes: performs the same or a similar function as an industry's product by a different means. Videoconferencing is a substitute for travel, plastic is a substitute for aluminum. Substitutes are always present but they are easy to overlook because they may appear to be very different from the industry's product. (Hyatt vs. Air B&B)
Classical Model: list all alternative courses of actions and consequences, rank alternatives, and select the best alternative
assumes that all information is known and mental capacity is infinite
bounded rationality - cognitive limitations constrain ability to interpret, process, and make decisions.
incomplete information - uncertainty, ambiguous information, time constraints
satisficing - choose an acceptable response rather than the best decision
decision making model:
step 1: recognize the need for a decision - sparked by an event such as environment changes
may also be proactive
managers must first realize that a decision must be made
step 2: generate alternatives - managers must develop feasible alternative courses of action
if good alternatives are missed, the resulting decision is poor
it is hard to develop creative alternatives, so managers need to look for new ideas
step 3: assess alternatives - what are the advantages and disadvantages of each alternative?
managers should specify criteria, then evaluate
general criteria for evaluating possible courses of action:
step 4: choose among alternatives - rank the various alternatives and make a decision
tendency is for managers to ignore critical information, even when available
step 5: implement the chosen alternative - managers must now carry out the alternative
often a decision is made and not implemented
step 6: learn from feedback - compare what happened to what was expected to happen
explore why any expectations for the decision were not met
derive guidelines that will help in future decision making
Job enrichment theory
Skill Variety: The degree to which a job requires various activities, requiring the worker to develop a variety of skills and talents. Jobholders can experience more meaningfulness in jobs that require several different skills and abilities than when the jobs are elementary and routine.
Task Identity: The degree to which the job requires the jobholders to identify and complete a workpiece with a visible outcome. Workers experience more meaningfulness in a job when they are involved in the entire process rather than just being responsible for a part of the work.
Task Significance: The degree to which the job impacts other people's life. The influence can be either in the immediate organization or in the external environment. Employees feel more meaningfulness in a job that substantially improves either psychological or physical well-being of others than a job that has limited impact on anyone else.
Autonomy: The degree to which the job provides the employee with significant freedom, independence, and discretion to plan out the work and determine the procedures in the job. For jobs with a high level of autonomy, the outcomes of the work depend on the workers' own efforts, initiatives, and decisions; rather than on the instructions from a manager or a manual of job procedures. In such cases, the jobholders experience greater personal responsibility for their own successes and failures at work.
Feedback: The degree to which the worker is provided with clear, specific, detailed, actionable information about the effectiveness of his or her job performance. When workers receive clear, actionable information about their work performance, they have better overall knowledge of the impact of their work activities, and what specific actions they need to take (if any) to improve their productivity.
· The decisions made by court was all about timing - prisoners who appeared early in the morning received parole about 70 percent of the time, while those who appeared late in the day were paroled less than 10 percent of the time
· Decision fatigue helps explain why ordinary sensible people get angry at colleagues and families, spluge on clothes, buy junkfood, etc. no matter how rational and high-minded you try to be, you can't make a decision without paying a biological price
· The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of 2 very different ways: one shortcut is to become reckeless: to act impulsively instead of expending the energy to first think through the consequences. The other shortcut is the ultimate energy saver: do nothing, avoid any choice
· Ego depletion - they studied self control, willpower
how chipotle transformed itself by upending its approach to management
chipotle favors human skills over rules, robots, and timers.
the company focused on creating a system where promoting managers from within would create a feedback loop of better, more motivated employees
restaurateur program → allows hourly crew members to become managers earning well over 100,000 dollars a year
they are chosen from the ranks of general managers for their skill at managing their restaurant and, especially their staff
it is a way to make sure that great managers are given the chance to make an individual store great
workers can move much more quickly through the ranks of promotion than one normally can with another company (Flores)
the manager is the most important person at the company of chipotle, and they were making bad workers managers, and that needed to change
they also weren't treating managers like the most important
the common element among the best-performing stores was a manager who had risen up from the crew → so moran started to outline a program that would retain and train the best managers, and reward them to the point that they would be thrilled to stay
the restaurateur program - is unique because it ties pay and promotion to how well you mentor people rather than store sales
Flores was promoted to a restaurateur
the goals of every manager is to become a restaurateur
they dont look for experience, they look for certain qualities that cannot be taught - there is a checklist of certain qualities that chipotle employees should have
→ you should be able to pick up whether a candidate has these certain traits
chipotle's increasing size and their insistence on cooking everything on location presents a unique challenge: the growth rate puts a strain on our culture, and if growth slows, it could put strain on company's cost structure
Moran doesn't believe in promoting people because of seniority
companies take diverse approaches to attendance reward programs
absenteeism is often a workplace challenge for today's employers
even though about half of the decision-makers in midsize and large companies report that absenteeism has reduced their productivity.
While United uses giveaways, a variety of attendance rewards programs are in place at other companies.
Steel Warehouse's Memphis and Chattanooga workforces incorporated a point system for attendance
half a point if they arrive late or leave early
one point if they are absent or miss more than half
one and a half points if they fail to call in when they will miss work
Besides losing out on the attendance rewards, employees with four or more points are not eligible for job transfers or raises.
To be eligible for attendance rewards, employees must have worked at least two-thirds of their scheduled duty days. They start out with a maximum reward of $1,600, and that amount is reduced for each sick-leave incident that occurs that year
Steel Warehouse doesn't have a tangible ROI figure for its attendance rewards program, but Taylor says the program helps with morale, keeps communication open and lets people know what's expected of them
The first month after Continental employees were given a chance to win one of 18 cars, the airline set a goal of having 85 percent of its flights be on time. That year, the company saw a 60 percent improvement on loss time, or time lost due to employee absences.
Towle cautions that company leaders should not think an attendance bonus is going to solve their absenteeism problems. People come to work because you've created an environment where they enjoy coming to work each day." The attendance rewards program is just the icing on the cake.
an attendance rewards program is probably the last piece of the puzzle if a company wants to address absenteeism problems → they need to figure out why employees are late or not showing up, and then fix the environment based off that
-organizations group managers into departments on the basis of their job specific skills (figure 1.5 in book) → (research and development department, marketing and sales department, manufacturing department, accounting department, materials management department)
-inside each department, a managerial hierarchy of first-line managers, middle managers, top managers, and CEO emerges
-core competency - is often used to refer to the specific set of department skills, knowledge, and experience that allows one organization to outperform its competitors → department skills that create a core competency give an organization a competitive advantage
effective managers need all three kinds of skills - conceptual, human, and technical - to help their organizations perform more efficiently and effectively. the absence of even one type of managerial skill can lead to failure.
To utilize IT to increase efficiency and effectiveness, CEOs and top management teams have been restructuring organizations and outsourcing specific organizational activities to reduce the number of employees on the payroll and make more productive use of the remaining workforce.
restructuring - involves simplifying, shrinking, or downsizing an organization's operations to lower operating costs. This can be done by eliminating product teams, shrinking departments, and reducing levels in hierarchy, all of which result in the loss of large numbers of jobs of top, middle, or first-line managers, as well as nonmanagerial employees
outsourcing - involves contracting with another company, usually in a low cost country abroad, to have it perform a work activity the organization previously performed itself, such as manufacturing, marketing, or customer service. Increases efficiency because it lowers operating costs, freeing up money and resources that can be used in more effective ways - for example, developing new products.
insourcing - there are other areas in which companies that depend on a reliable supply of high-quality components and finished products have experiences problems with outsourcing production abroad, and many companies have or are in the process of moving back production to the US
the second principal way managers have sought to increase efficiency and effectiveness is by empowering lower-level employees and moving to self-managed teams
empowerment - a management technique that involves giving employees more authority and responsibility over how they perform their work activities
self managed teams - a group of employees who assume collective responsibility for organizing, controlling, and supervising their own work activities
global organizations - organizations that operate and compete in more than one country, has pressured many organizations to identify better ways to use their resources and improve their performance
today, managers who make no attempt to learn from and adapt to changes in the global environment find themselves reacting rather than innovating, and their organizations often become uncompetitive and fail. Four challenges stand out for managers in today's world:
building a competitive advantage - competitive advantage is the ability of one organization to outperform other organizations because it produces desired goods or services more efficiently and effectively than its competitors. The four building blocks of competitive advantage are superior efficiency, quality, innovation, and responsiveness to customers
innovation - the process of creating new or improved goods and services that customers want or developing better ways to produce or provide goods and services, poses a special challenge. Managers must create an organizational settings in which people are encouraged to be innovative.
turnaround management - is the creation of a new vision for a struggling company using a new approach to planning and organizing to make better use of a company's resources and allow it to survive and eventually prosper
maintaining ethical standards - managers at all levels are under considerable pressure to make the best use of resources to increase the level at which their organizations perform
pressure to increase performance can be healthy for an organization because it leads managers to question how the organization is working, and it encourages them to find new and better ways to plan, organize, lead, and control
however, too much pressure to perform can be harmful. It may induce managers to behave unethically, and even illegally, when dealing with people and groups inside and outside the organization.
managing a diverse workforce - a major challenge for managers everywhere is to recognize the ethical need and legal requirement to treat human resources fairly and equitably. Today, the age, gender, race, ethnicity, religion, sexual preference, and socioeconomic composition of the workforce presents new challenges for managers.
to create a highly trained and motivated workforce, as well as to avoid lawsuits, managers must establish human resource management (HRM) procedures and practices that are legal and fair and do not discriminate against any organizational members
managers must recognize the performance-enhancing possibilities of a diverse workforce, such as the ability to take advantage of the skills and experiences of different kinds of people
utilizing new information systems and technologies - another important challenge for managers is to continually utilize and effective new IT that can link and enable managers and employees to better perform their jobs
new kinds of IT enable not just individual employees but also self-managed teams by giving them important information and allowing virtual interactions around the globe using the internet.
Increased global coordination helps improve quality and increase the pace of innovation - use of IT also helps build a competitive advantage
A. Extraversion: tendency to experience positive emotions and moods and feel good about oneself and the rest of the world
1. Managers high in extraversion tend to be sociable, affectionate, outgoing and friendly
2. Managers low in extraversion tend to be less inclined toward social interaction and have a less positive outlook
B. Negative Affectivity: tendency to experience negative emotions and moods, feel distressed, and be critical of oneself and others Ex: Bezos
C. Agreeableness: tendency to get along well with others
1. managers high in this are likable, affectionate and care about others
2. managers low in this may be distrustful, unsympathetic, uncooperative and antagonistic
D. Conscientiousness: tendency to be careful, scrupulous and preserving (ex: marshmallow experiment)
1. managers high in this trait are organized and self- disciplined
2. managers low in this trait lack direction and self- discipline
E. Openness to Experience: tendency to be original, have broad interests, be open to a wide range of stimuli, be daring and take risks