1) The passage discusses key concepts in management including the changing nature of organizations, the roles and functions of managers, and approaches to management such as scientific management and organizational behavior. 2) It describes the functions of managers as planning, organizing, leading, and controlling, and the roles of managers as interpersonal, informational, and decisional. 3) Current trends in management discussed include globalization, ethics, workforce diversity, entrepreneurship, knowledge management, and quality management. Understanding an organization's culture and environment is important for managers.

1. Chapter1 IntroductiontoManagementandOrganizationsThe 21st centuryhasbroughtwithit a new
workplace,one inwhicheveryone mustadapttoa rapidlyhangingsocietywithconstantlyshifting
demandsandopportunities.The economyhasbecome globaland isdrivenbyinnovationsand
technologyandorganizationshave totransformthemselvestoserve new customerexpectations.
Today’seconomypresentschallengingopportunitiesaswell asdramaticuncertainty.The new economy
has become knowledge basedandisperformance driven.The themesinthe presentcontextarea
‘respect’,participation,empowerment,teamworkandself management.Inthe lightof the above
challengesanewkindof leaderisneededtoguide businessthroughturbulence.Managersin
organizationsdothistask.A manager issomeone whocoordinatesandoverseesthe workof other
people sothatorganizational goalscanbe accomplished.Itisnotaboutpersonal achievementbut
helpingothersdotheirjob.Managersmayalsohave additional workdutiesnotrelatedtocoordinating
the work of others.Managerscan be classifiedbytheirlevelinthe organization,particularlyin
traditionallystructuredorganizations—those shapedlike apyramid1) First-line managers(oftencalled
supervisors) are locatedonthe lowestlevel of management.2) Middle managersincludeall levelsof
managementbetweenthe first-linelevelandthe toplevel of the organization.3) Topmanagersinclude
managersat or near the top of the organizationwhoare responsiblefor makingorganization-wide
decisionsandestablishingplansandgoalsthataffectthe entire organization.The changingnature of
organizationsandworkoftenrequiresemployeesinformerlynonmanagerial jobstoperformmanagerial
activities.Nonmanagerial jobsare those where one worksdirectlyonajoband had noone reportingto
him.Mary Parker Folletdefinesmanagementas,“The art of gettingthingsdone throughpeople”
Managementinvolvescoordinatingandoverseeingthe workactivitiesof otherssothattheiractivities
are completedefficientlyandeffectively.1) Coordinatingandoverseeingthe workof othersiswhat
distinguishesamanagerial positionfromanonmanagerial one.2) Efficiencyisgettingthe mostoutput
fromthe leastamountof inputsinorderto minimize resource costs.Efficiencyisoftenreferredtoas
“doingthingsright”Effectivenessiscompletingactivitiessothatorganizational goalsare attainedandis
oftendescribedas“doingthe rightthings”Notwomanagers’jobsare exactlyalike.All managers
performcertainfunction,enactcertainrolesanddisplayasetof skillsintheirjobs.Management
FunctionsAccordingtothe functionsapproachmanagersperformcertainactivitiestoefficientlyand
effectivelycoordinatethe workof others.Theycanbe classifiedas1) Planninginvolvesdefininggoals,
establishingstrategiesforachievingthose goals,anddevelopingplanstointegrate andcoordinate
activities.2) Organizinginvolvesarrangingandstructuringworktoaccomplishthe organization’sgoals.
3) Leadinginvolvesworkingwithandthroughpeople toaccomplishorganizational goals.4) Controlling
involvesmonitoring,comparing,andcorrectingworkperformance.Since these fourmanagement
functionsare integratedintothe activitiesof managersthroughoutthe workday,theyshouldbe viewed
as an ongoingprocessandtheyneednotthe done inthe above sequence.ManagementRolesInthe
late 1960s, Henry Mintzbergconductedaprecise studyof managersat work.He concludedthat
managersperform10 differentroles,whichare highlyinterrelated.Managementrolesrefertospecific
categoriesof managerial behavior.Overall thereare tenspecificrolesperformedbymanagerswhichare
includedinthe followingthree categories.1) Interpersonal rolesinclude figurehead,leadership,and
liaisonactivities.2) Informational rolesinclude monitoring,disseminating,andspokespersonactivities.
3) Decisional rolesinclude entrepreneur,disturbance handler,resource allocator,andnegotiator.
Althoughthe functionsapproachrepresentsthe mostuseful waytodescribe the manager’sjob,

2. Mintzberg’srolesgive additionalinsightintomanagers’work.Some of the tenrolesdonotfall clearly
intoone of the fourfunctions,since all managersdo some workthatis notpurelymanagerial.
ManagementSkillsManagersneedcertainskillstoperformthe challengingdutiesandactivities
associatedwithbeingamanager.RobertL. Katzfoundthroughhisresearchinthe early1970s that
managersneedthree essential skills1) Technical skillsare job-specificknowledge andtechniques
neededtoproficientlyperformspecifictasks.2) Human skillsare the abilitytoworkwell withother
people individuallyandinagroup.3) Conceptual skillsare the abilitytothinkandtoconceptualize about
abstract and complex situations.Theseskillsreflectabroad cross-sectionof the importantmanagerial
activitiesthatare elementsof the fourmanagementfunctionsSignificantchangesinthe internal and
external environmentshave ameasurableimpactonmanagement.Securitythreats,corporate ethics
scandals,global economicandpolitical uncertainties,andtechnological advancementshave hadagreat
impacton the manager’sjob.Twosignificantchangesfacingtoday’smanagersare importance of
customerstothe manager’sjobandImportance of innovationtothe manager’sjobOrganizationsneed
managers.Anorganizationisa deliberate arrangementof peopletoaccomplishsome specificpurpose.
Organizationsshare three commoncharacteristics:(1) Each has a distinctpurpose (2) Each iscomposed
of people (3) Eachdevelopssome deliberate structure somemberscandotheirwork.Althoughthese
three characteristicsare importantindefiningwhatanorganizationis,the concept of an organizationis
changing.The characteristicof neworganizationsof todayinclude:flexibleworkarrangements,
employeeworkteams,opencommunicationsystems,andsupplieralliances.Organizationsare
becomingmore open,flexible,andresponsiveto changes.Organizationsare changingbecause the
worldaroundthemhas changedandis continuingtochange.These societal,economic,global,and
technological changeshave createdanenvironmentinwhichsuccessful organizationsmustembrace
newwaysof gettingtheirworkdone.The importance of studyingmanagementintoday’sdynamic
global environmentcanbe explainedbylookingatthe universalityof management,the realityof work,
and the rewardsand challengesof beingamanager.The Universalityof Management:Managementis
neededinall typesandsizesof organizations,atall organizational levels,andinall organizational work
areas throughoutthe world.The Realityof Work:All employeesof anorganizationeithermanage orare
managed.RewardsandChallengesof BeingaManager Challengesa) Managersmay have difficultyin
effectivelyblendingthe knowledge,skills,ambitions,andexperiencesof adiverse groupof employees.
b) A manager’ssuccesstypicallyisdependentonothers’workperformance. Rewardsa) Managershave
an opportunitytocreate a workenvironmentinwhichorganizationalmemberscandotheirworkto the
bestof theirabilityandhelpthe organizationachieve itsgoals.b) Managersoftenreceiverecognition
and statusin the organizationandinthe largercommunity;influence organizational outcomes;and
receive appropriate compensation.c) Knowingthattheirefforts,skills,andabilitiesare neededbythe
organizationgivesmanymanagersgreatsatisfaction.The managerof todaymustintegrate management
skillswithnewapproachesthatemphasize the humantouch,enhance flexibility,andinvolve employees.
Chapter2 ManagementYesterdayandTodayOrganizationsandmanagershave existedforthousandsof
years.The Egyptianpyramidsandthe Great Wall of Chinawere projectsof tremendousscope and
magnitude,andrequiredgoodmanagement.Regardlessof the titlesgiventomanagersthroughout
history,someone hasalwayshadtoplanwhat needstobe accomplished,organize peopleand
materials,leadanddirectworkers,andimpose controlstoensure thatgoalswere attainedasplanned.
Two historical eventssignificanttothe studyof managementare workof AdamSmith,inhisbook,’The

3. Wealthof Nations’,inwhichhe arguedbrilliantlyforthe economicadvantagesof divisionof labor(the
breakdownof jobsintonarrow,repetitive tasks).The Industrial Revolutionissecondimportantpre-
twentieth-centuryinfluenceonmanagement.The introductionof machine powerscombinedwiththe
divisionof labormade large,efficientfactoriespossible.Planning,organizing,leading,andcontrolling
became necessaryactivities.Thereare six majorapproachestomanagement.Theyare explainedas
follows1) SCIENTIFICMANAGEMENTScientificmanagementisdefinedasthe use of the scientific
methodtodetermine the “one bestway”fora jobto be done.The mostimportantcontributorinthis
fieldwasFrederickW.Taylorwhoisknownas the “father”of scientificmanagement.Usinghisprinciples
of scientificmanagement,Taylorwasable todefine the “one bestway”fordoingeachjob.Frankand
LillianGilbrethwereinspiredbyTaylor’sworkandproceededtostudyanddeveloptheirownmethods
of scientificmanagement.Theydevisedaclassificationschemetolabel 17 basichandmotionscalled
therbligsinordertoeliminate wasteful motionsGuidelinesdevisedbyTaylorandothersto improve
productionefficiencyare still usedintoday’sorganizations.However,currentmanagementpractice is
not restrictedtoscientificmanagementpracticesalone.Elementsof scientificmanagementstill used
include:1.Using time andmotionstudies2.Hiringbestqualifiedworkers3.Designingincentive systems
basedon output2) GENERAL ADMINISTRATIVETHEORISTSThisgroupof writers,whofocusedonthe
entire organization,developedmore general theoriesof whatmanagersdoand whatconstitutesgood
managementpractice.Henri Fayol andMax Weberwere the twomost prominentproponentsof the
general administrativeapproach.Fayol focusedonactivitiescommontoall managers.He describedthe
practice of managementasdistinctfromothertypical businessfunctions.He stated14 principlesof
managementwhichare asfollows:1.Divisionof Work2. Authority3.Discipline 4.Unityof Command5.
Unityof Direction6.Subordinationof individual interesttogroupinterest7.Remuneration8.
Centralization9.Scalar Chain10. Order11. Equity12. Stability13.Initiative14.Espiritde corps Max
Weberwasa Germansociologistwhodevelopeda theoryof authoritystructuresanddescribed
organizational activitybasedonauthorityrelations.He describedthe idealformof organizationasa
bureaucracymarkedby divisionof labor,aclearlydefinedhierarchy,detailedrulesandregulations,and
impersonal relationshipsSome currentmanagementconceptsandtheoriescanbe tracedto the workof
the general administrative theorists.The functional view of amanager’sjobrelatestoHenri Fayol’s
conceptof management.Weber’sbureaucraticcharacteristicsare evidentinmanyof today’slarge
organizations—eveninhighlyflexible organizationsthatemploytalentedprofessionals.Some
bureaucraticmechanismsare necessaryinhighlyinnovativeorganizationstoensure thatresourcesare
usedefficientlyandeffectively.3) QUANTITATIVEAPPROACHTOMANAGEMENT The quantitative
approach to management,sometimesknownasoperationsresearchormanagementscience,uses
quantitative techniquestoimprove decisionmaking.Thisapproachincludesapplicationsof statistics,
optimizationmodels,informationmodels,andcomputersimulations.The quantitativeapproach
originatedduringWorldWarII as mathematical andstatistical solutionstomilitaryproblemswere
developedforwartime use.The relevance of quantitative approachtodayisthatit has contributedmost
directlytomanagerial decisionmaking,particularlyinplanningandcontrolling.The availabilityof
sophisticatedcomputersoftware programshasmade the use of quantitative techniquesmore feasible
for managers.4) ORGANIZATIONALBEHAVIORThe fieldof studyconcernedwiththe actions(behaviors)
of people atworkisorganizational behavior.Organizational behavior(OB) researchhascontributed
much of what we knowabouthumanresourcesmanagementandcontemporaryviewsof motivation,

4. leadership,trust,teamwork,andconflictmanagement.The earlyadvocatesof OBapproachwere
RobertOwen,HugoMunsterberg,Mary ParkerFollett,andChesterBarnard.Theirideasservedasthe
foundationforemployeeselection procedures,motivationprograms,workteams,andorganization-
environmentmanagementtechniques.The Hawthorne Studieswere the mostimportantcontributionto
the developmentof organizational behavior.Thisseriesof experimentsconductedfrom1924 to the
early1930s at WesternElectricCompany’sHawthorne WorksinCicero,Illinois,were initiallydevisedas
a scientificmanagementexperimenttoassessthe impactof changesinvariousphysical environment
variablesonemployee productivity.AfterHarvardprofessorEltonMayoand hisassociatesjoinedthe
studyas consultants,otherexperimentswereincludedtolookatredesigningjobs,make changesin
workdayandworkweeklength,introduce restperiods,andintroduceindividual versusgroupwage
plans.The researchersconcludedthatsocial normsorgroup standardswere keydeterminantsof
individualworkbehavior.Althoughnotwithoutcriticism(concerningprocedures,analysesof findings,
and the conclusions),the HawthorneStudiesstimulatedinterestinhumanbehaviorinorganizational
settings.Inthe presentdaycontextbehavioral approachassistsmanagersindesigningjobsthat
motivate workers,inworkingwithemployee teams,andinfacilitatingthe flowof communicationwithin
organizations.The behavioral approachprovidesthe foundationforcurrenttheoriesof motivation,
leadership,andgroupbehavioranddevelopment.5) THE SYSTEMS APPROACHDuringthe 1960s
researchersbegantoanalyze organizationsfromasystemsperspective basedonthe physical sciences.A
systemisa setof interrelatedandinterdependentpartsarrangedina mannerthat producesa unified
whole.The twobasictypesof systemsare openand closed.A closedsystemisnotinfluencedbyand
doesnotinteractwithitsenvironment.An opensysteminteractswithitsenvironment.Usingthe
systemsapproach,managersenvisionanorganizationasabodywithmany interdependentparts,each
of whichisimportanttothe well-beingof the organizationasa whole.Managerscoordinate the work
activitiesof the variouspartsof the organization,realizingthatdecisionsandactionstakeninone
organizational areawill affectotherareas.The systemsapproachrecognizesthatorganizationsare not
self-contained;theyrelyonandare affectedbyfactorsin theirexternal environment.6) THE
CONTINGENCYAPPROACHThe contingencyapproachrecognizesthatdifferentorganizationsrequire
differentwaysof managing.The contingencyapproachtomanagementisaview thatthe organization
recognizesandrespondstosituational variablesastheyarise.CURRENTTRENDS ANDISSUES The
followingare the currentconceptsandpracticesare changingthe way managersdotheirjobstoday.
Globalization:Organizational operationsare nolongerlimitedbynational borders.Managers
throughoutthe worldmustdeal withnew opportunitiesandchallengesinherentinthe globalizationof
business.Ethics:Casesof corporate lying,misrepresentations,andfinancial manipulationshave been
widespreadinrecentyears.Managersof firmssuchas Enron,ImClone,Global Crossing,andTyco
International have placedtheirownself-interestaheadof otherstakeholders’welfare.While most
managerscontinue tobehave ina highlyethical manner,abusessuggestaneedto“upgrade”ethical
standards.Ethicseducationisincreasinglyemphasizedincollege curriculatoday.Organizationsare
takinga more active role increatingand usingcodesof ethics,ethicstrainingprograms,andethical
hiringprocedures.Workforce diversity:Itreferstoa workforce thatisheterogeneousintermsof
gender,race,ethnicity,age,andothercharacteristicsthatreflectdifferences.Accommodatingdiverse
groupsof people byaddressingdifferentlifestyles,familyneeds,andworkstylesisamajorchallenge for
today’smanagers..Entrepreneurship:Itisthe processwherebyanindividual orgroupof individualsuse

5. organizedeffortstopursue opportunitiestocreate value andgrow by fulfillingwantsandneedsthrough
innovationanduniqueness,nomatterwhatresourcesthe entrepreneurcurrentlyhas.Three important
themesstandoutinthis definition:a.The pursuitof opportunitiesb.Innovationc.Growth
Entrepreneurshipwill continue tobe importanttosocietiesaroundthe world..Managinginan E-
BusinessWorld:E-business(electronicbusiness) isacomprehensivetermdescribingthe wayan
organizationdoesitsworkbyusingelectronic(Internet-based) linkageswithitskeyconstituenciesin
orderto efficientlyandeffectivelyachieve itsgoals.KnowledgeManagementandLearning
Organizations:Change isoccurringatan unprecedentedrate.Tobe successful,today’sorganization
mustbecome a learningorganization—one thathasdevelopedthe capacitytocontinuouslylearn,
adapt,and change.Knowledgemanagementinvolvescultivatingalearningculture whereorganizational
memberssystematicallygatherknowledge andshare itwithothersinthe organizationsoas toachieve
betterperformance.QualityManagement:Qualitymanagementisaphilosophyof managementthatis
drivenbycontinual improvementandresponse tocustomerneedsandexpectations.The objectiveof
qualitymanagementistocreate an organizationcommittedtocontinuousimprovementinwork
Chapter3 OrganizationCulture andEnvironment:The ConstraintsThe componentsof anorganization’s
culture are as complex asthe differentaspectsof anindividual’spersonality.Today’smanagersmust
understandhowthe forcesof an organization’sinternal andexternal environmentinfluence,and
sometimesconstrain,itsproductivity.Managersmustrealizethatorganizationalculture and
organizational environmenthave importantimplicationsforthe wayanorganizationismanaged.Two
perspectivesconcerningthe role thatmanagersplayinan organization’ssuccessorfailure have been
proposed.The omnipotentview of managementmaintainsthatmanagersare directlyresponsiblefor
the successor failure of an organization.Thisviewof managersasbeingomnipotentisconsistentwith
the stereotypical picture of the “take-charge”executive whocanovercome anyobstacle incarryingout
the organization’sobjectives.Whenorganizationsperformpoorly,someone mustbe heldaccountable
and accordingto the omnipotentview,that“someone”ismanagement.The symbolicview of
managementupholdsthe viewthatmuchof an organization’ssuccessorfailure isdue toexternal forces
outside managers’control.The influence thatmanagersdohave isseenmainlyasa symbolicoutcome.
Organizational resultsare influencedbyfactorsoutside of the control of managers,includingthe
economy,marketchanges,governmentalpolicies,competitors’actions,the state of the particular
industry,the control of proprietarytechnology,anddecisionsmade bypreviousmanagersinthe
organization. The manager’srole istocreate meaningoutof randomness,confusion,andambiguity.
Accordingto the symbolicview,the actual partthatmanagementplaysinthe successor failure of an
organizationisminimal.Realitysuggestsasynthesis;managersare neitherhelplessnorall powerful.
Instead,the more logical approachisto see the manageras operatingwithinconstraintsimposedbythe
organization’sculture andenvironmentTHEORGANIZATION’SCULTUREJustas individualshave a
personality,so,too,do organizations.We refertoan organization’spersonalityasitsculture.
Organizational culture isthe sharedvalues,principles,traditions,andwaysof doingthingsthatinfluence
the way organizational membersact.Thisdefinitionimplies: Individuals perceive organizational culture
basedon whattheysee,hear,or experience withinthe organization. Organizational culture issharedby
individualswithinthe organization. Organizational culture isadescriptive term.Itdescribes,ratherthan
evaluates.Sevendimensionsof anorganization’sculture have beenproposeda.Innovationandrisk
taking(the degree towhichemployeesare encouragedtobe innovativeandtake risks) b.Attentionto

6. detail (the degree towhichemployeesare expectedtoexhibitprecision,analysis,andattentionto
detail) c.Outcome orientation(thedegreetowhichmanagersfocusonresultsoroutcomesratherthan
on the techniquesandprocessesusedtoachieve those outcomes) d.People orientation(the degree to
whichmanagementdecisionstake intoconsiderationthe effectonpeoplewithinthe organization) e.
Team orientation(thedegreetowhichworkactivitiesare organizedaroundteamsratherthan
individuals)f.Aggressiveness(the degree towhichpeopleare aggressiveandcompetitiveratherthan
easygoingandcooperative) g.Stability(thedegreetowhichorganizational activitiesemphasize
maintainingthe statusquoincontrastto growth) StrongversusWeakCulturesStrongculturesare found
inorganizationswhere keyvaluesare intenselyheldandwidelyshared.Whetheracompany’sculture is
strong,weak,or somewhereinbetweendependsonorganizationalfactorssuchas size,age,employee
turnoverrate,and intensityof original culture.A culture hasincreasingimpacton whatmanagersdo as
the culture becomesstronger.Mostorganizationshave moderate-to-strongcultures.Inthese
organizations,highagreementexistsaboutwhatisimportantandwhat defines“good”employee
behavior..Culture istransmittedandlearnedby employeesprincipallythroughstories,rituals,material
symbols,andlanguage.Aninnovative cultureshouldhave these characteristics:•Challengeand
involvement•Freedom• Trust and openness•Ideatime • Playfulness/humor•Conflictresolution•
Debates• RisktakingThe Organization’sEnvironmentThe generalenvironmentincludesthese broad
external conditionsthatmayaffectthe organization:economic,political/legal,sociocultural,
demographic,technological,andglobal conditions.•Economicconditionsincludeinterestrates,
inflationrates,changesindisposable income,stockmarketfluctuations,andthe general businesscycle.
• Political/legal conditionsinclude the general political stabilityof countriesinwhichanorganization
doesbusinessandthe specificattitudesthatelectedofficialshave towardbusiness.•Sociocultural
conditionsincludethe changingexpectationsof society.Societalvalues,customs,andtastescanchange,
and managersmustbe aware of these changes.• Demographicconditions,includingphysical
characteristicsof a population(e.g.,gender,age,level of education,geographiclocation,income,
compositionof family) canchange,andmanagersmustadapt to these changes.• Technological
conditions,whichhave changedmore rapidlythananyotherelementof the general environment.•
Global factorsinclude global competitorsandglobal consumermarkets.Environmentsdifferintheir
amountof environmental uncertainty,whichrelatesto(1) the degree of change inan organization’s
environmentand(2) the degree of complexityinthatenvironmentDegreeof change ischaracterizedas
beingdynamicorstable.Ina dynamicenvironment,componentsof the environmentchange frequently.
If change isminimal,the environmentiscalledastable environment.The degreeof environmental
complexityisthe numberof componentsinanorganization’senvironmentandthe extentof an
organization’sknowledge aboutthose components.If the numberof componentsandthe needfor
sophisticatedknowledgeisminimal,the environmentisclassifiedassimple.If anumberof dissimilar
componentsanda highneedforsophisticatedknowledgeexist,the environmentiscomplex.As
uncertaintyisa threatto organizational effectiveness,managerstrytominimize environmental
uncertainty.Chapter4Managing ina Global EnvironmentManagersinall typesandsizesof
organizationsmustconstantlymonitorchangesandconsiderthe particularcharacteristicsof theirown
locationastheyplan,organize,lead,and control inthisdynamicenvironment.Managersmighthave
one of three perspectivesorattitudestowardinternational business1.Anethnocentricattitude isthe
parochialisticbelief thatthe bestworkapproachesandpracticesare those of the home country(the

7. countryin whichthe company’sheadquartersare located).2.A polycentricattitudeisthe view thatthe
managersinthe hostcountry(the foreigncountrywhere the organizationisdoingbusiness)knowthe
bestworkapproachesand practicesforrunningtheirbusiness.3.A geocentricattitude isaworld-
orientedview thatfocusesonusingthe bestapproachesandpeoplefromaroundthe globe.Tobe a
successful global manager,anindividual needstobe sensitive todifferencesinnationalcustomsand
practicesSeveral significantforcesare reshapingtoday’sglobal environment.Importantfeaturesof the
global environmentinclude regional tradingalliancesanddifferenttypesof global organizations.A.
Regional TradingAlliancesRegional tradingalliancesare reshapingglobalcompetition.Competitionisno
longerlimitedtocountryversuscountry,butregionversusregion.1.The EuropeanUnion(EU) isa union
of 25 Europeannationscreatedasa unifiedeconomicandtrade entitya.The primary motivationforthe
creationof the EU in February1992 wasto allow membernationstoreasserttheirpositionagainstthe
industrial strengthof the UnitedStatesandJapan.b.All memberstatesof the EU participate inthe EMU
(EconomicandMonetary Union).The EMU consistsof three stagesforcoordinatingeconomicpolicy.
Twelve memberstatesof the EuropeanUnionhave enteredthe thirdstage of the EMU, inwhich
participatingcountriesshare asingle currency,the euro.c.In2004 the EU added10 new members
(Cyprus,Malta,the CzechRepublic,Estonia,Hungary,Latvia,Lithuania,Poland,Slovakia,andSlovenia.
Two additional countiesmayjointhe EUby the year 2007. 2. The North AmericanFree Trade Agreement
(NAFTA) isanagreementamongthe Mexican,Canadian, andU.S.governmentsinwhichbarriersto
trade have beeneliminated.a.NAFTA wentintoeffectonJanuary1,1994. b. The signingof NAFTA was
bothcriticizedandsupported.c.Eliminatingbarrierstofree trade (tariffs,importlicensing
requirements,customsuserfees) hasresultedinastrengtheningof the economicpowerof all three
countries.d.Colombia,Mexico,andVenezuelasignedaneconomicpacteliminatingimportdutiesand
tariffsin1994. e.Thirty-fourcountriesinthe WesternHemisphere continue tonegotiate aFree Trade
Areaof the Americas(FTAA) agreement.FTAA wastohave beenineffectnolaterthan2005, but has not
yetbecome operational;itsfuture isstill undetermined.3.The Associationof SoutheastAsianNations
(ASEAN) isatradingalliance of 10 Asiannationsa.In the future,the SoutheastAsianregionpromisesto
be one of the fastest-growingandincreasinglyinfluential economicregionsof the world.b.The future
economicimpactof the SoutheastAsianregioncouldrival that of bothNAFTA and the EU. 4. Other
Trade AlliancesThe 53-nationAfricanUnioncame intoexistence inJuly2002. Membersplanto achieve
greatereconomicdevelopmentandunityamongAfrica’snations.B.The WorldTrade Organization
(WTO) Formedin1995 and evolvingfromGATT,the WTO isthe onlyglobal organizationdealingwiththe
rulesof trade among nations.1. Membershipconsistsof 149 countriesand32 observergovernmentsas
of January2006. 2. The WTO appearsto playan importantrole eventhoughcriticsare vocal andhighly
visible.DifferentTypesof Global OrganizationsBusinesshasbeenconductedinternationallyformany
yearsMultinational corporationsdidnotbecome popularuntil the mid-1960s.Global organizationscan
be classifiedinthe followingcategories:1.The termmultinational corporation(MNC) isabroad term
that referstoany and all typesof international companiesthatmaintainoperationsinmultiple
countries.2.A transnational corporation(TNC),sometimescalledaborderlessorganization,isatype of
international companyinwhichartificialgeographical barriersare eliminated.Stagesof
InternationalizationAnorganizationthatgoesinternational typicallyprogressesthroughthree stages.
Companiesthatgointernational maybeginbyusingglobal sourcing(alsocalledglobal outsourcing).In
thisstage of goinginternational,companiespurchase materialsorlaborfromaroundthe world,

8. whereverthe materialsorlaborare leastexpensive.Beyondthe stage of global sourcing,each
successive stage tobecome more international involvesmore investmentandrisk.Inthe nextstage,
companiesmaygo international byexporting(makingproductsdomesticallyandsellingthemabroad) or
importing(acquiringproductsmade abroadandselling the productsdomestically).Bothexportingand
importingrequire minimalinvestmentandrisk.Inthe earlystagesof goinginternational,managersmay
alsouse licensing(givinganotherorganizationthe righttomake or sell itsproductsusingitstechnology
or product specifications) orfranchising(givinganotherorganizationthe righttouse itsname and
operatingmethodsAfteranorganizationhasdone international businessforaperiodof time,managers
may decide tomake more of a directinvestmentininternationalmarketsbyformingastrategicalliance,
whichisa partnershipbetweenanorganizationandaforeigncompanypartner(s).Inastrategicalliance,
partnersshare resourcesandknowledge indevelopingnew productsorbuildingproductionfacilities.A
jointventure (aspecifictype of strategicalliance)maybe undertakentoallow partnerstoforma
separate,independentorganizationforsome businesspurpose.Managersmaydecide tomake a direct
investmentinaforeigncountrybyestablishing aforeignsubsidiary,inwhichacompanysetsupa
separate andindependentproductionfacilityoroffice.Establishingaforeignsubsidiaryinvolvesthe
greatestcommitmentof resourcesandthe greatestriskof all of the stagesingoinginternational.
Managing ina global environmententailsthe followingchallenges.The Legal-Political Environment:The
legal-political environmentdoesnothave tobe unstable orrevolutionarytobe achallenge tomanagers.
The fact that a country’spolitical systemdiffersfromthatof the UnitedStatesisimportanttorecognize.
The Economic Environment:The economicenvironmentalsopresentsmanychallengestoforeign-based
managers,includingfluctuationsincurrencyrates,inflation,anddiverse tax policies.Inamarket
economy,resourcesare primarilyownedbythe private sector.Inacommand economy,all economic
decisionsare plannedbyacentral government.The Cultural Environment:Countrieshave different
cultures,justasorganizationsdo.National culture isthe valuesandattitudessharedbyindividualsfrom
a specificcountrythatshape theirbehaviorandtheirbeliefsaboutwhatisimportant.A framework
developedbyGeertHofstede servesasavaluable frameworkforunderstandingdifferencesbetween
national cultures.1.Hofstede studiedindividualismversuscollectivism.Individualismisthe degree to
whichpeople inacountrypreferto act as individualsratherthanasmembersof groups.Collectivismis
characterizedbya social frameworkinwhichpeople prefertoact as membersof groupsand expect
othersingroupsof whichtheyare a part (suchas a familyor an organization) tolookafterthemandto
protectthem.2. Anothercultural dimensionispowerdistance,whichdescribesthe extenttowhicha
societyacceptsthe fact that powerininstitutionsandorganizationsisdistributedunequally.3.
Uncertaintyavoidance describesacultural measure of the degree towhichpeopletolerateriskand
unconventional behavior.4.Hofstede identifiedthe dimensionof achievementversusnurturing.
Achievementisthe degree towhichvaluessuchasassertiveness,the acquisitionof moneyandmaterial
goods,and competitionprevail.Nurturingemphasizessensitivityinrelationshipsandconcernforthe
welfare of others. 5.Long-termandshort-termorientation.Peopleincountrieshavinglong-term
orientationcultureslooktothe future andvalue thriftandpersistence.Short-termorientationvalues
the past and presentandemphasizesarespectfortraditionandsocial obligations.6.Countrieshave
differentrankingsonHofstede’scultural dimensions,andmanagersshouldbe aware of the cultural
differencespresentincountriesinwhichtheydobusinessThe Global LeadershipandOrganizational
BehaviorEffectiveness(GLOBE) researchprogramisanassessmentthatupdatesHofstede’sstudies.

9. GLOBE beganin1993 and identifiednine dimensionsonwhichnational culturesdiffer:Assertiveness,
future orientation,genderdifferentiation,uncertaintyavoidance,powerdistance,individualism/
collectivism,in-groupcollectivism,performance orientation,andhumane orientation.Intoday’sworld
the opennessthatisnecessarytoconductbusinesssuccessfullyinaglobal environmentposesgreat
challenges.The increasedthreatof terrorism, economicinterdependence of tradingcountries,and
significantcultural create acomplicatedenvironmentinwhichtomanage.Successful globalmanagers
needtohave great sensitivityandunderstanding.Managersmustadjustleadershipstylesand
managementapproachestoaccommodate culturallydiverse views.Chapter5Social Responsibilityand
Managerial EthicsThischapter discussesissuesinvolvingsocial responsibilityandmanagerialethicsand
theireffectonmanagerial decisionmaking.Bothsocial responsibilityandethicsare responsestoa
changingenvironmentandare influencedbyorganizational culture Managersregularlyface decisions
that have dimensionsof social responsibility.Examplesinclude employeerelations,philanthropy,
pricing,resource conservation,productquality,anddoingbusinessincountriesthatviolatehuman
rightsSOCIALRESPONSIBILITYTwoopposingviewsof social responsibilityare presented:The classical
viewisthe viewthatmanagement’sonlysocialresponsibilityistomaximize profits.The socioeconomic
viewisthe viewthatmanagement’ssocial responsibilitygoesbeyondthe makingof profitstoinclude
protectingandimprovingsociety’swelfare.A fourstage model showshow social responsibility
progressesinorganizationsSocialresponsibilitymayprogressfromthe stance of obeyingall lawsand
regulationswhile caringforstockholders’interests(Stage 1) tothe pointof demonstratingresponsibility
to societyasa whole (Stage 4),whichcharacterizesthe highestsocioeconomiccommitment.Social
ObligationstoResponsivenesstoResponsibility:Social obligationoccurswhenafirmengagesinsocial
actionsbecause of itsobligationtomeetcertaineconomicandlegal responsibilities.Social
responsivenessisseenwhenafirmengagesinsocial actionsinresponse tosome popularsocial need.
Social responsibilityisabusiness’sintention,beyonditslegal andeconomicobligations,todothe right
thingsandact inways thatare good forsocietyThe Greeningof ManagementA numberof highlyvisible
ecological problemsandenvironmental disasters(e.g.,ExxonValdezoil spill,mercurypoisoningin
Japan,Three Mile Island,Chernobyl) broughtaboutanew spiritof environmentalism.Recognizingthe
close linkbetweenanorganization’sdecisionsandactivitiesanditsimpacton the natural environment
iscalledthe greeningof management.Values-basedmanagementisanapproachto managinginwhich
managersare guidedbythe organization’ssharedvaluesintheirmanagementpractices.Purposesof
SharedValuesare:1) Theyact as guidepostsformanagerial decisionsandactions.2) Sharedvalues
serve toshape employee behaviorandtocommunicate whatthe organizationexpectsof itsmembers.
3) Sharedcorporate valuescan influence anorganization’smarketingefforts.4) Sharedvaluesare away
to buildteamspiritinorganizations.MANAGERIALETHICSThe termethicsreferstoprinciples,values,
and beliefsthatdefinewhatisrightandwrong behavior.FactorsThatAffectEmployee Ethics1.Stages
of Moral Development.Researchconfirmsthree levelsof moral development.Eachlevel hastwostages.
a) The firstlevel iscalledpreconventional.Atthislevel,the individual’schoice betweenrightorwrongis
basedon personal consequencesinvolved.b) Atthe secondstage,whichislabeledconventional,moral
valuesreside inmaintainingexpectedstandardsandlivinguptothe expectationsof others.c) The third
level—theprincipledlevel—the individual makesaclearefforttodefine moral principlesapartfromthe
authorityof the groupsto whichthe personbelongs.d) Researchonthe stagesof moral development
indicatesthatpeople proceedsequentiallythroughthe six stagesof these threelevels,withno

10. guarantee of continueddevelopmentatanystage.The majorityof adultsare at Stage 4. The higherthe
stage an employee reaches,the more likelihoodthathe or she will behaveethically.2.Individual
Characteristics:A personjoinsanorganizationwitharelativelyentrenchedset of values.a.Valuesare
basicconvictionsaboutwhatisright andwrong.Valuesare broad andcover a wide varietyof issues.b.
Ego strengthisa personalitymeasure of the strengthof aperson’sconvictions.Individualswhoscore
highon egostrengthare likelytoresistimpulsestoactunethicallyandare likelydowhattheythinkis
right.c. Locus of control isa personalityattribute thatmeasuresthe degree towhichpeople believe
theycontrol theirownfate.Individualswithaninternal locusof control thinkthattheycontrol their
destiny,while personswithanexternal locusof control are lesslikelytotake personal responsibilityfor
the consequencesof theirbehaviorandare more likelytorelyonexternal forces.Externalsbelieve that
whathappensto themisdue to luckor chance. 3. A thirdfactor influencingmanagerial ethicsis
structural variables.The existenceof structural variablessuchasformal rulesandregulations,job
descriptions,writtencodesof ethics,performance appraisal systems,andrewardsystemscanstrongly
influenceethical behavior.4.The contentand strengthof an organization’sculture influencesethical
behavior.a.Anorganizational culture mostlikelytoencourage highethical standardsisone thatishigh
inrisk tolerance,control,andconflicttolerance.b.A strongculture exertsmore influence onmanagers
than doesa weakone.c. However,inorganizationswithweakcultures,workgroupsanddepartmental
standardsstronglyinfluence ethical behavior.5.Finally,the intensityof anissue canaffectethical
decisions.Six characteristicsdetermine issue intensitya.Greatnessof harmb. Consensusof wrongc.
Probabilityof harmd.Immediacyof consequencese.Proximitytovictimf.Concentrationof effect
ImprovingEthical BehaviorOrganizationscantake anumberof actionsto cultivate ethical behavior
amongmembers.Some of those are”1) The selectionprocessforbringingnew employeesinto
organizationsshouldbe viewedasanopportunitytolearnaboutan individual’slevelof moral
development,personalvalues,egostrength,andlocusof control.2) A code of ethicsisa formal
statementof anorganization’sprimaryvaluesandthe ethical rulesitexpectsemployeestofollow.In
addition,decisionrulescan be developedtoguide managersinhandlingethical dilemmasindecision
making.3) Top management’sleadershipandcommitmenttoethical behaviorisextremelyimportant
since the cultural tone foran organizationisestablishedbyitstopmanagers4) Employees’jobgoals
shouldbe tangible andrealistic,because clearandrealisticgoalsreduce ambiguityandmotivate rather
than punish.Jobgoalsare usuallyakeyissue inthe performance appraisal process.5) If anorganization
wantsemployeestoupholdhighethical standards,thisdimensionmustbe includedinthe appraisal
process.Performance appraisalsshouldincludethisdimension,ratherthanfocusingsolelyoneconomic
outcomes.6) Ethics trainingshouldbe usedtohelpteachethical problemsolving andtopresent
simulationsof ethicalsituationsthatcouldarise.Atthe least,ethicstrainingshouldincreaseawareness
of ethical issues.7) Independentsocial auditsevaluate decisionsandmanagementpracticesintermsof
the organization’scode of ethicsandcan be usedto deterunethical behavior.8) Organizationscan
provide formal protectivemechanismssothatemployeeswithethical dilemmascandowhatis right
withoutfearof reprisal.Social Entrepreneurship:A social entrepreneurisanindividualororganization
whoseeksoutopportunitiestoimprove societybyusingpractical,innovative,andsustainable
approaches.Social impactmanagement:Managersare increasinglyexpectedtoact responsiblyinthe
waytheyconduct business.Managersusing asocial impactmanagementapproachexamine the social
impactsof theirdecisionsandactions.Whentheyconsiderhow theiractionsinplanning,organizing,

11. leadingandcontrollingwill workinlightof the social contextwithinwhichbusinessoperates,managers
become more aware of whethertheyare leadinginaresponsiblemanner.Chapter6 DecisionMaking:
The Essence of the Manager’sJob Everyone inanorganizationmakesdecisions,butdecisionmakingis
particularlyimportantinamanager’sjob.Decisionmakingissuchanimportantpart of all four
managerial functionsthatdecisionmakingissaidtobe synonymouswithmanaging.The Decision-
Making ProcessA decisionisachoice made from twoor more alternatives.The decision-makingprocess
isa setof eightstepsthatinclude the following: Identifyingaproblem:A problemisadiscrepancy
betweenanexistingstate andadesiredstate of affairs.Inorderto identifyaproblem, amanagershould
be able to differentiatethe problemfromitssymptom;he shouldbe underpressure totakenactionand
musthave the authorityandresourcestotake action. Identifyingdecisioncriteria:Decisioncriteriaare
criteriathat define whatisrelevantinadecision. Allocatingweightstothe criteria:The criteria
identifiedinthe previousstepof the decision-makingprocessmaynothave equal importance.Sohe
decisionmakermustassignaweighttoeach of the itemsinorder to give eachitemaccurate priorityin
the decision. Developingalternatives:The decisionmakershouldthenidentifyviable alternativesthat
couldresolve the problem. Analyzingalternatives:Eachof the alternativesare thencriticallyanalyzed
by evaluatingitagainstthe criteriaestablishedinSteps2and3. Selectinganalternative:The nextstep
isto selectthe bestalternative fromamongthose identifiedandassessed.If criteriaweightshave been
used,the decisionmakerwouldselectthe alternative thatreceivedthe highestscore inStep5.
Implementingthe alternative:The selectedalternative isimplementedbyeffectivelycommunicatingthe
decisiontothe individualswhowouldbe affectedbyitandtheircommitmenttothe decisionis
acquired. Evaluatingdecisioneffectiveness:The laststepinthe decision-makingprocessisto assessthe
resultof the decisioninordertodetermine whetherornotthe problemhasbeenresolved.Managers
can make decisionsonthe basisof rationality,boundedrationality,orintuition.1.Rational decision
making.Managerial decisionmakingisassumedtobe rational—thatis,makingchoicesthatare
consistentandvalue-maximizingwithinspecifiedconstraints.A rational managerwouldbe completely
logical andobjective.Rational decisionmakingassumesthatthe managerismakingdecisionsinthe best
interestsof the organization,notinhis/herowninterests.The assumptionsof rationalitycanbe metif
the manageris facedwitha simple probleminwhich(1) goalsare clear andalternativeslimited,(2) time
pressuresare minimal andthe costof findingandevaluatingalternativesislow,(3) the organizational
culture supportsinnovationandrisktaking,and(4) outcomesare concrete andmeasurable.2.Bounded
rationality.Asthe perfectlyrational model of decisionmakingisn’trealistic,managerstendtooperate
underassumptionsof boundedrationality,whichisdecision-makingbehaviorthatisrational,but
limited(bounded) byanindividual’sabilitytoprocessinformation.Underboundedrationality,managers
make satisficingdecisions,inwhichtheyacceptsolutionsthatare “goodenough.”Managers’decision
makingmaybe stronglyinfluencedbythe organization’sculture,internal politics,powerconsiderations,
and bya phenomenoncalledescalationof commitment— anincreasedcommitmenttoa previous
decisiondespite evidence thatitmayhave beenwrong.3. Intuitive decisionmaking.Managersalso
regularlyuse theirintuition.Intuitivedecisionmakingisasubconsciousprocessof makingdecisionson
the basisof experience andaccumulatedjudgment.Althoughintuitive decisionmakingwill notreplace
the rational decision-makingprocess,itdoesplayanimportantrole inmanagerial decisionmaking.
Typesof ProblemsandDecisionsManagersencounterdifferenttypesof problemsanduse different
typesof decisionstoresolve them.Problemscanbe structuredproblemsorunstructuredproblemsand

12. decisionscanbe programmeddecisionsornonprogrammeddecisions.Structuredproblemsare
straightforward,familiar,andeasilydefined.Indealingwithstructuredproblems,amanagermayuse a
programmeddecision,whichisarepetitivedecisionthatcanbe handledbya routine approach.
Managers relyonthree typesof programmeddecisions:a.A procedure isa seriesof interrelated
sequentialstepsthatcan be usedtorespondto a structuredproblem.b.A rule isan explicitstatement
that tellsmanagerswhattheycanor cannotdo. c. A policyisa guideline formakingdecisions.
Unstructuredproblemsare problemsthatare new or unusual andforwhichinformationisambiguous
or incomplete.These problemsare besthandledbyanonprogrammeddecisionthatisa unique decision
that requiresacustommade solution.Athigherlevelsinthe organizationalhierarchy,managersdeal
more oftenwithdifficult,unstructuredproblemsandmake nonprogrammeddecisionsinattemptingto
resolve these problemsandchallenges.Lower-level managershandle routine decisions,using
programmeddecisions.Decision-MakingConditionsDecisioncanbe made underconditionsof certainty,
uncertaintyandrisk.Certaintyisa situationinwhichamanagercan make accurate decisionsbecause all
outcomesare known.Fewmanagerial decisionsare made underthe conditionof certainty.More
commonis the situationof risk,inwhichthe decisionmakerisable toestimate the likelihoodof certain
outcomes.Uncertaintyisa situationinwhichthe decisionmakerisnotcertainandcannot evenmake
reasonable probabilityestimatesconcerningoutcomesof alternatives.Insucha situation,the choice of
alternative isinfluencedbythe limitedamountof informationavailable tothe decisionmaker.It’salso
influencedbythe psychological orientationof the decisionmaker.1) Anoptimisticmanagerwill followa
maximax choice,maximizingthe maximumpossiblepayoff.2) A pessimisticmanagerwill pursuea
maximinchoice,maximizingthe minimumpossible payoff.3) The managerwhodesirestominimize the
maximumregretwill optfora minimax choice.Decision-MakingStyles:Managershave differentstyles
inmakingdecisionsandsolvingproblems.One perspective proposesthatpeopledifferalongtwo
dimensionsinthe waytheyapproachdecisionmaking.One dimensionisanindividual’swayof
thinking—rationalorintuitive.The otheristhe individual’stolerance forambiguity—low orhigh.
Diagrammingthese twodimensionsleadtoamatrix showingfourdifferentdecision-makingstyles.a.
The directive style ischaracterizedbylow tolerance forambiguityanda rational wayof thinking.b.The
analyticstyle isone characterizedbyahightolerance forambiguityanda rational wayof thinking.c.The
conceptual style ischaracterizedbyahightolerance forambiguityandanintuitive wayof thinking.d.
The behavioral style ischaracterizedbyalow tolerance forambiguityandanintuitivewayof thinking.In
reality,mostmanagershave botha dominantstyle andalternate styles,withsome managersrelying
almostexclusivelyontheirdominantstyleandothersbeingmore flexible,dependingonthe particular
situation.Decision-MakingBiasesandErrors:Managers use differentstylesand“rulesof thumb”
(heuristics)tosimplytheirdecisionmaking.Some of decisionmakingbiasesanderrorsare:1.
Overconfidence biasoccurswhendecisionmakerstendtothinkthatthey know more thantheydo or
holdunrealisticallypositiveviewsof themselvesandtheirperformance.2.Immediategratificationbias
describesdecisionmakerswhotendtowantimmediaterewardsandavoidimmediatecosts.3.The
anchoringeffectdescribeswhendecisionmakersfixate oninitial informationasa startingpointand
then,once set,fail toadequatelyadjustforsubsequentinformation.4.Selective perceptionbiasoccurs
whendecisionmakersselectivelyorganize andinterpreteventsbasedontheir biasedperceptions.5.
Confirmationbiasoccurswhendecisionmakersseekoutinformationthatreaffirmstheirpastchoices
and discountinformationthatcontradictstheirpastjudgments.6.Framingbiasoccurswhendecision

13. makersselectandhighlightcertainaspectsof asituationwhileexcludingothers.7.Availabilitybiasis
seenwhendecisionmakerstendtoremembereventsthatare the mostrecentand vividintheir
memory.8. Decisionmakerswhoshowrepresentationbiasassessthe likelihoodof aneventbasedon
howcloselyitresemblesothereventsorsetsof events.9.Randomnessbiasdescribesthe effectwhen
decisionmakerstrytocreate meaningoutof randomevents.10. The sunkcosts error iswhena decision
makerforgetsthat currentchoicescannotcorrect the past. Insteadof ignoringsunkcosts,the decision
makercannot forgetthem.Inassessingchoices,the individualfixatesonpastexpendituresratherthan
on future consequences.11.Self-servingbiasisexhibitedbydecisionmakerswhoare quicktotake
creditfor theirsuccessesandblame failure onoutside factors.12.Hindsightbiasisthe tendencyfor
decisionmakerstofalselybelieve,once the outcome isknown,thattheywouldhave accurately
predictedthe outcome.Chapter7Foundationsof PlanningPlanningisone of the fourfunctionsof
management.Planninginvolvesdefiningthe organization’sgoals,establishinganoverall strategyfor
achievingthese goals,anddevelopingplansfororganizational workactivities.The termplanning asused
inthischapter referstoformal planning.Purposesof PlanningPlanningservesanumberof significant
purposes.1.Planninggivesdirectiontomanagersandnonmanagersof anorganization.2.Planning
reducesuncertainty.3.Planningminimizeswasteanduncertainty.4.Planningestablishesgoalsor
standardsusedincontrolling.PlanningandPerformanceAlthoughorganizationsthatuse formal
planningdonotalwaysoutperformthose thatdonot plan,moststudiesshow positive relationships
between planningandperformance.Effectiveplanningandimplementationplayagreaterpart inhigh
performance thandoesthe amountof planningdone.Studieshave shownthatwhenformal planning
has notledto higherperformance,the external environmentisoften the reason.The Role of Goalsand
PlansinPlanningPlanningisoftencalledthe primarymanagementfunctionbecause itestablishesthe
basisfor all otherfunctions.Planninginvolvestwoimportantelements:goalsandplans.Goals(often
calledobjectives)are desiredoutcomesforindividuals,groups,orentire organizations.Typesof goalsa.
Financial goalsversusstrategicgoalsFinancialgoalsrelatedtothe financial performance of the
organizationwhilestrategicgoalsare relatedtootherareasof an organizationsperformance.b.Stated
goalsversusreal goalsStatedgoalsare official statementsof whatanorganizationsaysandwhatit
wantsits variousstakeholderstobelieve itsgoalsare.Real goalsare those thatan organizationactually
pursues,asdefinedbythe actionsof itsmembers.Typesof PlansPlanscanbe describedbytheir
breadth,time frame,specificity,andfrequencyof use oOn the basisof Breadthplanscan be Strategicor
operational plans.Strategicplans(long-termplans) are plansthatapplytothe entire organization,
establishthe organization’soverallgoals,andseektopositionthe organizationintermsof its
environment.Operational plans(short-termplans)are plansthatspecifythe detailsof how the overall
goalsare to be achieved.oOnthe basisof Time frame planscan be Short-termorlong-termplans.
Shorttermplansare plansthat coverone year or less.Long-termplansare planswithatime frame
beyondthree years.oOnthe basisof Specificityplanscanbe Specificordirectional plans.Specificplans
are plansthat are clearlydefinedandleave noroomforinterpretation.Directional plansare flexible
plansthat setout general guidelines.oOnthe basisof Frequencyof use planscanbe Single-use or
standingplans.A single-use planisaone-time planspecificallydesignedtomeetthe needsof aunique
situation.Standingplansare ongoingplansthatprovide guidance foractivitiesperformedrepeatedly.
ApproachestoEstablishingGoalsGoalscanbe established throughthe processof traditional goal
settingorthroughMBO (managementbyobjectives).Traditional goal settingisanapproachto setting

14. goalsinwhichgoalsare setat the top level of the organizationandthenbrokenintosubgoalsforeach
level of the organization.Traditionalgoal settingassumesthattopmanagersknow whatisbestbecause
of theirabilitytosee the “bigpicture.”Employeesare toworkto meetthe goalsfortheirparticulararea
of responsibility.Thistraditional approachrequiresthatgoalsmustbe made more specificastheyflow
downto lowerlevelsinthe organization.Instrivingtoachieve specificity,however,objectives
sometimesloseclarityandunitywithgoalssetata higherlevel inthe Whenthe hierarchyof
organizational goalsisclearlydefined,itformsanintegratedmeansendchain—anintegratednetworkof
goalsinwhichthe accomplishmentof goalsatone level servesasthe meansforachievingthe goals,or
ends,at the nextlevel.Managementbyobjectives(MBO) isa processof settingmutuallyagreed-upon
goalsand usingthose goalstoevaluate employeeperformance.Studiesof actual MBOprograms
confirmthat MBO can increase employee performance andorganizationalproductivity.However,top
managementcommitment andinvolvementare importantcontributionstothe successof an MBO
program.The followingstepsare involvedinatypical MBOprogram: The organizationsoverall
objectivesandstrategiesare formulated Majorobjectivesare allocatedamongdivisional and
departmental units. Unitmanagerscollaborativelysetspecificobjectivesfortheirunitswiththeir
managers Specificobjectivesare collaborativelysetwithall departmentmembers Actionplans,
defininghowobjectivesare tobe achieved,are specifiedandagreeduponbymanagersandemployee
The action plansare implemented Progresstowardobjectivesisperiodicallyreviewed,andfeedbackis
provided Successfulachievementof objectivesisreinforcedbyperformancebasedrewardsWhetheran
organizationusesamore traditional approachtoestablishingobjectives,usessomeformof MBO, or has
itsown approach,managersmustdefine objectivesbefore theycaneffectivelyandefficientlycomplete
otherplanningactivities.Characteristicsof Well-DesignedGoals1Writteninterms of outcomes2.
Measurable andquantifiable 3.Clearasto a time frame 4. Challenging,butattainable5.Writtendown
6. Communicatedtoall organizational membersFiveStepsinGoalsSetting1.Review the organization’s
mission(the purpose of the organization).2.Evaluate availableresources.3.Determine the goals
individuallyorwithinputfromothers4. Write downthe goalsand communicate themtoall whoneed
to know.5. Reviewresultsandwhethergoalsare beingmet.Make changesasneeded.DevelopingPlans
The processof developingplansisinfluencedbythree contingencyfactorsandbythe particular
planningapproachusedbythe organization.Three ContingencyFactorsinPlanningare Manager’slevel
inthe organization:Operational planningusuallydominatesthe planningactivitiesof lower-level
managers.Asmanagersmove upthrough the levelsof the organization,theirplanningbecomesmore
strategyoriented. Degree of environmental uncertainty:The greaterthe environmental uncertainty,the
more directional plansshouldbe,withemphasisplacedonthe shortterm.Whenuncertaintyishigh,
plansshouldbe specific,butflexible.Managersmustbe preparedtoreworkandamendplans,oreven
to abandontheirplansif necessary. Lengthof future commitments:Accordingtothe commitment
concept,plansshouldextendfarenoughtomeetthose commitmentsmade today.Planningfortoolong
or for too shorta time periodisinefficientandineffective.ApproachestoPlanningIn the traditional
approach,planningwasdone entirelybytop-levelmanagerswhowere oftenassistedbyaformal
planningdepartment.Anotherapproachtoplanningistoinvolve more membersof the organizationin
the planningprocess.Inthisapproach,plansare not handeddownfromone level tothe next,butare
developedbyorganizational membersatvariouslevelstomeettheirspecificneeds.Criticismsof
PlanningAlthoughplanningisanimportantmanagerial functionwithwidespreaduse,five major

15. argumentshave beendirectedagainstplanning: Planningmaycreate rigidity. Planscan’tbe developed
for a dynamicenvironment. Formal planscan’treplace intuitionandcreativity. Planningfocuses
managers’attentionontoday’scompetition,notontomorrow’ssurvival. Formal planningreinforces
success,whichmayleadto failure.The external environmentisconstantlychanging.Therefore
managersshoulddevelopplansthatare specific,butflexible.Managersmustalsorecognize that
planningisanongoing process,andtheyshouldbe willingtochange directionsif environmental
conditionswarrant.Flexibilityisparticularlyimportant.Managersmustremainalerttoenvironmental
changesthat couldimpactthe effective implementationof plans,andtheymust be preparedtomake
changesas needed.Chapter8StrategicManagementThe presentdaynewsisfilledwithexamplesof
changingorganizational strategieslike Mergers,Strategicalliances,Downsizing,Spin-offsandGlobal
expansion.Thischapterexaminesthe strategicmanagementprocessasitrelatestothe planning
function.Managersmustcarefullyconsidertheirorganization’sinternalandexternal environmentsas
theydevelopstrategicplans.Theyshouldhave asystematicmeansof analyzingthe environment,
assessingtheirorganization’sstrengthsandweaknesses,identifyingopportunitiesthatwouldgivethe
organizationacompetitive advantage,andincorporatingthese findingsintotheirplanning.The value of
thinkingstrategicallyhasanimportantimpactonorganizationperformance.Strategicmanagementis
whatmanagersdo to developthe organization’sstrategies.Strategicmanagementinvolvesall fourof
the basic managementfunctions—planning,organizing,leading,andcontrolling.Strategicmanagement
has a is importantfororganizationsasithas a significantimpactonhow well anorganizationperforms.
In today’sbusinessworld,organizationsof all typesandsizesmustmanage constantlychanging
situations.Today’scompaniesare composedof diverse divisions,units,functions,andworkactivities
that mustbe coordinated.Strategicmanagementisinvolvedinmanyof the decisionsthatmanagers
make.The strategicmanagementprocessisasix-stepprocessthatencompassesstrategicplanning,
implementation,andevaluation. Identifyingthe Organization’sCurrentMission,Objectives,and
Strategies:Everyorganizationneedsamission,whichisastatementof the purpose of anorganization.
The missionstatementaddressesthe question:Whatisthe organization’sreasonforbeinginbusiness?
The organizationmustidentifyitscurrentobjectivesandstrategies,aswell. External Analysis:Managers
ineveryorganizationneedtoconductanexternal analysis.Influentialfactorssuchas competition,
pendinglegislation,andlaborsupplyare includedinthe external environment.Afteranalyzingthe
external environment,managersmustassesswhattheyhave learnedintermsof opportunitiesand
threats.Opportunitiesare positive trendsinexternal environmental factors;threatsare negative trends
inenvironmentalfactors.Because of differentresourcesandcapabilities,the same external
environmentcanpresentopportunitiestoone organizationandpose threatstoanother Internal
Analysis:Internalanalysisshouldleadtoa clearassessmentof the organization’sresourcesand
capabilities.Anyactivitiesthe organizationdoeswell oranyunique resourcesthatithasare called
strengths.Weaknessesare activitiesthe organizationdoesnotdowell orresourcesitneedsbutdoes
not possess.The organization’smajorvalue-creatingskillsandcapabilitiesthatdetermineits
competitiveweaponsare the organization’score competencies.Organizational cultureisimportantin
internal analysis;the company’sculture canpromote orhinderitsstrategicactions.SWOTanalysisisan
analysisof the organization’sstrengths,weaknesses,opportunities,andthreats. FormulatingStrategies:
Afterthe SWOT, managersdevelopandevaluate strategicalternativesandselectstrategiesthatare
appropriate.Strategiesneedtobe establishedforcorporate,business,andfunctional levels.

16. ImplementingStrategies EvaluatingResultstoknow how effectivethe strategieshave beenandif any
adjustmentsare necessary.Typesof OrganizationalStrategiesStrategicplanningtakesplace onthree
differentanddistinctlevels:corporate,business,andfunctional Corporate strategyItisan
organizational strategythatdetermineswhatbusinessesacompanyisin,shouldbe in,or wantsto be in,
and whatit wantsto do withthose businesses.There are three maintypesof corporate strategies:a.A
growthstrategyisa corporate strategythat isusedwhenan organizationwantstogrow and doessoby
expandingthe numberof productsofferedormarketsserved,eitherthroughitscurrentbusiness)or
throughnewbusinesses.b.A stabilitystrategyisacorporate strategycharacterizedbyanabsence of
significantchange inwhatthe organizationiscurrentlydoing.c.A renewal strategyisa corporate
strategydesignedtoaddressorganizational weaknessesthatare leadingtoperformance declines.Two
such strategiesare retrenchmentstrategyandturnaroundstrategy.Corporate PortfolioAnalysisisused
whenan organization’scorporate strategyinvolvesanumberof businesses.Managerscanmanage this
portfolioof businessesusingacorporate portfoliomatrix,suchasthe BCG matrix.The BCG matrix is a
strategytool that guidesresource allocationdecisionsonthe basisof marketshare and growthrate of
StrategicBusinessUnits(SBUs).Business(Competitive)StrategyA businessstrategy(alsoknownasa
competitivestrategy) isanorganizationalstrategyfocusedonhow the organizationwillcompete ineach
of itsbusinesses.Competitive advantage playsanimportantrole informulatingthe businessstrategy.A
competitiveadvantage iswhatsetsanorganizationapart,thatis, itsdistinctiveedge.Anorganization’s
competitiveadvantage cancome fromitscore competencies.If implementedproperly,qualitycanbe
one way foran organizationtocreate a sustainable competitive advantage.Anorganizationmustbe
able to sustainitscompetitive advantage;itmustkeepitsedge despite competitors’actionand
regardlessof majorchangesinthe organization’s industry.Michael Porter’sworkexplainshow
managerscan create and sustaina competitiveadvantage thatwill giveacompanyabove-average
profitability.IndustryanalysisisanimportantstepinPorter’sframework.He saysthere are five
competitiveforcesatworkinan industry;together,these five forcesdetermineindustryattractiveness
and profitability.Porterproposesthatthe followingfivefactorscanbe usedtoassessan industry’s
attractiveness:i.Threatof newentrants.How likelyitisthat new competitorswill come intothe
industry?Managersshouldassessbarrierstoentry,whichare factorsthat determine how easyor
difficultitwouldbe fornewcompetitorstoenterthe industry.ii.Threatof substitutes.How likelyisit
that products of otherindustriescouldbe substitutedforacompany’sproducts?iii.Bargainingpowerof
buyers.Howmuch bargainingpowerdobuyers(customers) have?iv.Bargainingpowerof suppliers.
How muchbargainingpowerdoa company’ssuppliershave?v.Current rivalry.How intense isthe
competitionamongfirmsthatare currentlyinthe industry?AccordingtoPorter,managersmustchoose
a strategythat will give theirorganizationacompetitive advantage.Porteridentifiesthreegeneric
competitivestrategies. Whichstrategymanagersselectdependsonthe organization’sstrengthsand
core competenciesandthe particularweaknessesof itscompetitor(s).Basedonthe above analysis,only
three typesof genericstrategiesare available toorganizationstochoose from.Theyare:a. A cost
leadershipstrategyisabusinessorcompetitivestrategyinwhichthe organizationcompetesonthe
basisof havingthe lowestcostsinits industry.b.A differentiationstrategyisabusinessorcompetitive
strategyinwhicha companyoffersunique productsthatare widelyvaluedbycustomers.c.A focus
strategyisa businessorcompetitive strategyinwhichacompanypursuesa cost or differentiation
advantage ina narrow industrysegment.Anorganizationthathasbeennotbeen able todevelopeither

17. a lowcost or a differentiationcompetitive advantage issaidtobe “stuckin the middle.”Functional
StrategyThese are strategiesusedbyanorganization’svariousfunctional departmentstosupportthe
businessorcompetitive strategyNewDirectionsinOrganizational Strategies E-BusinessStrategies.
Usingthe Internet,companieshave createdknowledge basesthatemployeescantap intoanytime,
anywhere.E-businessasa strategycan be usedto developasustainablecompetitive advantage;itcan
alsobe usedtoestablishabasisfordifferentiationorfocus. CustomerService Strategies.These
strategiesgive customerswhattheywant,communicate effectivelywiththem, andprovideemployees
withcustomerservice training. Innovation Strategies.Thesestrategiesfocusonbreakthroughproducts
and can include the applicationof existingtechnologytonew uses. ----------------