PRINCIPLES OF MANAGEMENT With Philip Soward LESSONS 2 AND 3 BUSINESS AND ITS CONTEXT (Material included from Management 8e by Schermerhorn and from Harvard Business Review, 2000 Sept-Oct and February 2004 articles by Kaplan and Norton on Strategy Maps)

CHAPTER 6 The Business Plan Seizing an Opportunity

Study Question 3: How does one start a new venture?  Basic items that should be included in a business plan: –Executive summary –Industry analysis –Company description –Product and services description –Market description –Marketing strategy –Operations description –Staffing description –Financial projection –Capital needs –Milestones

Study Question 3: How does one start a new venture?  Questions that keep a new venture focused on its customers … –Who is your customer? –How will you reach key customer market segments? –What determines customer choices to buy or not buy your product/service? –Why is your product/service a compelling choice for the customer? –How will you price your product/service for the customer? –How much does it cost to make and deliver your product/service? –How much does it cost to attract a customer? –How much does it cost to support and retain a customer?

THE BALANCED SCORECARD STRATEGY MAP BY ROBERT S. KAPLAN AND DAVID P. NORTON A WAY TO TIE TOGETHER ALL THE ASPECTS OF A COMPANY INTO A COHERENT FRAMEWORK

BSC Strategy Map (adapted) & our Chapters Customer Perspective Ch 4 New MarketsCustomer Intimacy Product Leadership Operational Excellence, Ch 8 Financial Objectives: Ch 8 Revenue from new markets Customer Profitability: Product Profitability: Productivity Strategy: lower costs, high asset turnover: Example Company: Cases Coca Cola, allIBM ConsultingAppleUPS, Dell, Walmart Key Internal Processes Marketing, Sales Innovation, R & D Supply Chain, Operations Learning and Growth Perspective: Human Capital: Ch 12, Key Skills International knowledge Marketing, SalesEngineering, Marketing Operations Information Capital: Ch 7 IT Laptop, mobileCRMCADERP Organization Capital: Ch 4 Culture World travellers Customer knowledge ScientistsEfficiency Image of Company: Ch 3 Relationship with Society/Community and Public Relations with external Stakeholders

CHAPTER 4 COMPETITIVE ADVANTAGE –3 STANDARD STRATEGIES: Operational Excellence Customer Intimacy Product Innovation –IN EACH CASE: Can expand to New Markets Must protect Company’s Image BEING CUSTOMER-DRIVEN –Customer Relationship Management ORGANIZATION CULTURE –To strengthen commitment to company’s strategy

Study Question 1: What is the external environment of organizations?  Competitive advantage is a core competency that clearly sets an organization apart from competitors and gives it an advantage over them in the marketplace.

Study Question 2: What is a customer- driven organization?  Customer relationship management establishes and maintains high standards of customer service in order to strategically build lasting relationships with and add value to customers.  Supply chain management is the strategic management of all operations relating to an organization’s resource suppliers.

Study Question 2: What is a customer- driven organization?  Customers want: – High quality. – Low price. – On-time delivery.  Key customer service lessons: – Protect reputation for quality products. – Treat customers right.

Study Question 4: What is organizational culture?  Organizational culture is the system of shared beliefs and values that develops within an organization and guides the behavior of its members.

CHAPTER 3: THE COMPANY IN SOCIETY STAKE HOLDERS CORPORATE RESPONSIBILITY THE COMPANY’S IMAGE GOVERNMENT INTERVENTION

Study Question 4: What is corporate social responsibility?  Organizational stakeholders – Those persons, groups, and other organizations directly affected by the behavior of the organization and holding a stake in its performance.  Typical organizational stakeholders – Employees – Customers – Suppliers – Owners – Competitors – Regulators – Interest groups

Study Question 4: What is corporate social responsibility?  Beliefs that guide socially responsible business practices: – People do their best with a balance of work and family life. – Organizations perform best in healthy communities. – Organizations gain by respecting the natural environment. – Organizations must be managed and led for long- term success. – Organizations must protect their reputations.

Study Question 5: How do organizations and governments work together in society?  How government influences organizations: – Common areas of government regulation of business affairs: Occupational safety and health Fair labor practices Consumer protection Environmental protection

CHAPTER 12: HUMAN CAPITAL VALUING HUMAN CAPITAL DEVELOPING STAFF SKILL –Emphasis needed depends on chosen strategy

CHAPTER 7: INFORMATION CAPITAL HOW IT IS CHANGING: –BUSINESS, –ORGANIZATIONS, –AND THE OFFICE. AGAIN, WHICH SYSTEMS ARE MOST IMPORTANT WILL DEPEND ON THE CHOSEN STRATEGY, THAT MUST BE SUPPORTED

Organizations are flatter as IT replaces management levels IT breaks barriers People, teams and departments are better connected by IT SuppliersCustomers Strategic Partners Supply chain management is improved by IT connections Customer relationship management is improved by IT connections More things are done by outsourcing and partnerships using IT How IT Breaks Barriers

Study Question 1: How is information technology changing the workplace?  Information and knowledge — basic linkages: – Knowledge and knowledge workers provide a decisive competitive factor in today’s economy. – Knowledge worker. Someone whose value to the organization rests with intellect, not physical capabilities. – Intellectual capital. Shared knowledge of a workforce that can be used to create wealth.

Study Question 1: How is information technology changing the workplace?  Implications of IT within organizations: – Facilitation of communication and information sharing. – Operating with fewer middle managers. – Flattening of organizational structures. – Faster decision making. – Increased coordination and control.

Study Question 1: How is information technology changing the workplace?  Implications of IT for relationships with external environment: – Helps with customer relationship management. – Helps organizations with supply chain management. – Helps in monitoring outsourcing and other business contracts.

Study Question 1: How is information technology changing the workplace?  How IT is changing the office … – Progressive organizations actively use IT to help achieve high performance in uncertain environments. – IT has dramatically changed nature of offices. – Key developments in networked offices: Instant messaging. Peer-to-peer file sharing (P2P).

CHAPTER 8: PUTTING IT INTO PRACTICE PLAN FOR SUCCESS CONTROL: MAKE SURE IT HAPPENS MBO TO SECURE STAFF COMMITMENT HOW EACH STRATEGY WILL AFFECT THE BREAK-EVEN POINT

What is “Planning”? Planning is a process of… setting objectives and… determining how to accomplish them.

Karnak’s Criteria for a Good Objective Specific Measurable Linked to a timetable Challenging but attainable

Study Question 1: How do managers plan?  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.

Study Question 1: How do managers plan?  Benefits of planning: –Improves focus and flexibility. –Improves action orientation. –Improves coordination. –Improves time management. –Improves control.

Study Question 4: What is the control process?  Steps in the control process: –Step 1 — establish objectives and standards. –Step 2 — measure actual performance. –Step 3 — compare results with objectives and standards. –Step 4 — take corrective action as needed.

Joint objective setting Individual works Supervisor supports Joint review of results THIS IS THE REAL MBO

Study Question 5: What are the common organizational controls?  Management by Objectives (MBO) –A structured process of regular communication. –Supervisor/team leader and workers jointly set performance objectives. –Supervisor/team leader and workers jointly review results.

Study Question 5: What are the common organizational controls?  Advantages of MBO –Focuses workers on most important tasks and objectives. –Focuses supervisor’s efforts on important areas of support. –Contributes to relationship building. –Gives workers a structured opportunity to participate in decision making.

Study Question 5: What are the common organizational controls?  Break-even analysis … –Determination of the point at which sales revenues are sufficient to cover costs. –Break-Even Point = Fixed Costs / (Price – Variable Costs) –Used in evaluating: New products New program initiatives

Dollar Costs & Revenues Unit Sales Fixed Costs Variable Costs Total Costs = Fixed+Variable Total Sales Revenue Break-even Point Revenues = Costs Loss Profit