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Management > 1st midterm > Flashcards

1st midterm Flashcards

1
Q
  1. Managament def
A

range of decisions associates with the acquisition, allocation and integration of resources required to perform a certain economic activity

Key points:
decisions
acquisition, allocation, integration of resources
perform an activity

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2
Q
  1. Economic Activity
A

actions that involve the production, distribution and consumption of goods and services at all levels within society

  • takes place in human society
  • carried out through human efforts
  • satisfies human needs
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3
Q
  1. cycle of economic activity
A
  • people
  • needs
  • goods&services
  • economic activity
  • management
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4
Q
  1. People, goals and needs
A

Goals are peoples purposes & aspirations

  • drive all human activities
  • needs arrise from dissatisfaction
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5
Q
  1. types of needs
A

natural vs social (radical or non radical)

essential/primary vs non-essential/secondary

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6
Q
  1. needs as lack of something (tangible or intangible)
A

maslow hierarchy of needs
physiological - safety - belonging - self esteem - self actualization

theory that states fulfilling innate human needs in priority

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7
Q
  1. types of goods
A 
primary goods vs non essential goods
complementary goods vs substitute goods
differentiable goods vs commodities
consumer vs industrial goods
disposable goods vs durable goods
goods for individuals vs collective consumption
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8
Q
  1. public goods (vs private goods)
A
  1. goods that are both non excludable and non rivalrous in consumption
  2. goods produced by the state or its branches

note:

excludable: it’s possible to prevent people from accesing a good
rivalrous: consumption by one consumer prevents consumption by other

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9
Q
  1. what does the economic activity envolve
A
  1. technical transformation
    transformation changes and combines raw materials, systems data and knowledge
    (physical transf., spatial transf., logical transf.)
  2. transactions
    buy input and sell output, links organizations to other organizations and individuals
  3. complementary (support activity)
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10
Q
  1. where does economic activity take place
A

within social bodies
families, firms, state and non profits

all with different fundamental purposes, primary economic goals, core stakeholders

specializations and functions differ

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11
Q
  1. possible alternatives to the current economic system and why would be inefficient
A
  1. only families
  2. only individuals
  3. only state

inefficiency because:

  1. lack of specialization economies
  2. transaction costs (costs related to negotiating and finalizing contracts)
  3. exceeding quantity (and complexity) of information needed
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12
Q
  1. Relationship between business and society
A

business is a part of society but also a distinct entity with clear boundaries

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13
Q
  1. Milton Friedman

Shareholder Theory

A

firms should primarily satisfy shareholders by making profits

arguments

  • only people have responsibilities, not firms
  • an executive is an employee of the owners. his/her responsibility is to conduct business in accordance with their desires (which is usually to make the most profit)
  • if the executive persues social responsability, he/she is spending the money of company owners for general interest. that is, he/she is imposing taxes
  • executives who impose taxes are like civil cervants, but then they should be chosen through a political process (elections). and how do they know what is the general interest?
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14
Q
  1. Edward Freeman

Stakeholder Theory

A

firms must take into consideration stakeholders, not just shareholders

arguments

  1. descriptive: managers direct their energy towards all stakeholders, not just owners
  2. instrumental: good relationships are a source of value for the firm
  3. normative: any individual who makes a contribution or takes a risk has a moral right to some claim of the corporation’s reward
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15
Q
  1. Comparing the theories
A

shareholder theory

  1. firm is seen as property
  2. purpose is to make profits
  3. managers and board of directors are agents of shareholders and have no obligations to others
  4. owners interests take precedents over interest of others

stakeholder theory

  1. corporations create value for society
  2. purpose is to satisfy a need in the society corporations
  3. accountability is towards key stakeholders
  4. all stakeholders interests must be taken into account
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16
Q
  1. Basic two-tier stakeholder map
A

Primary: those who are vital to the growth and survival of the business

  • customers
  • communities
  • employees
  • suppliers
  • financiers

Secondary: those who affect primary stakeholders

  • government
  • competitors
  • consumers advocacy groups
  • special interest groups
  • media

Observations:

  • unsatisfied primary stakeholders will withdraw their contributions which are essential to a firms performance
  • unsatisfied secondary stakeholders have the means to influence negatively primary stakeholders/to make life hard for companies
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17
Q
  1. stakeholder analysis & key questions
A

identify signific stakeholders; understand their interests and power they may have to assert their interest

key questions

  1. who are the relevant stakeholders
  2. how are they likely to form coalitions
  3. what are the interests of each stakeholder
  4. what is the power of each stakeholder (voting power, economic power, legal power, informational power)
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18
Q
  1. central principles of managing for stakeholders
A
  1. different interests of the various stakeholder groups go together over time
  2. firms should have a purpose
  3. firms cannot put aside ethics and value questions
  4. not confirmed in the realm of missions and abstract principles but should be included in everyday business processes
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19
Q
  1. alternative processes for dealing with stakeholders
A
  1. do nothing
  2. public relations approach (executives write the company story for an issue and try to convince the public by using communication, advertising)
  3. implicit negotiation (take the position of stakeholders into account but do not interact or explicitly negotiate w/ them)
  4. stakeholder engagement (explicit negotiation w/ stakeholder, accept all the complexities, ambiguities & risks of the relationship)
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20
Q
  1. agency relationship
A

a contract according to which the principal delegates and agent to fulfil a task, which implies a power, for the regent itself, to take decisions in name of the principal

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21
Q
  1. consequences of the agency relationship
A
  1. if both the principal and the agent are utility maximizers, the agent will probably act in her own interest rather than in the interest of the principal
  2. the principal is forced to get costly safeguard mechanisms or controls to protect her investment
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22
Q
  1. corporate governance goal
A

minimize agency costs given a certain ownership structure and context in which the firm operates

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23
Q
  1. costs involved in agency relationship
A
  1. Principal - Monitoring cost
    audits, writing compensation contracts
    having a board of directors
    financial statements
  2. Residual Loss
    arise from conflict of interest
  3. Agent - Bonding Cost
    provide accurate info to shareholders
    the agent may commit to contract obligations that limit/restric agents activity
24
Q
  1. sources of agency conflict
A
  1. moral hazard
  2. earning retentions
  3. time horizon
  4. risk aversion
25
Q
  1. managerial discretion
A
  1. plain expropriation
  2. schemes to take cash out
  3. use company funds to engage in activities that generate personal benefits
  4. entrenchment
26
Q
  1. symptoms of bad governance
A 
excessive risk-taking
extremely long CEOs
little or absent shareholder/border
overinvestment
dissipation of cash holding
27
Q
  1. board of directors
A

shareholders elect a group of specialized individuals to deal w/ management on their behalf

main tasks
ensure proper corporate governance of the firm
appoint & replace CEO
provide skills & specialized knowledge
monitor CEO
make sure financial reports are accurate
28
Q
  1. governance vs management
A

governance: decides the strategic direction of the company & sees to it that is run properly
management: runs the business on a daily basis, executing strategy

29
Q
  1. alternative boar structures
A
  1. all executive director board
  2. major executive directors board
  3. majority non executive directors board
  4. indepedent directors
  5. all non executive directors
30
Q
  1. potential board problems
A

board capture
busy board
tokenism

31
Q
  1. questionable board practises
A

lack of diversity
board members dependent on the management (conflict of interests)
lack of CEO - chairman separation

32
Q
  1. activist & institutional shareholders
A

mutual funds, pension funds, hedge funds
use their equity shares to put pressure on the managers
how? selling shares, voting against the annual meeting, discussion w/ executive board, contract supervisory board, disclosure voting, proposals at the annual meeting, critical speeches, legal measures, public criticism
typically effective

33
Q
  1. blockholder model
A

concentrated ownership/large financiers
shareholder large enough to have an incentive to monitor managers and power to replace them
ex: large financiers (banks), institutional investors (pensions funds, etc)

RISK: may pursue their own interests rather than interests of minority shareholders

34
Q
  1. small shareholders
A

minimum share of ownership to call for an extraordinary shareholder meeting
proxy vote by email
direct representation on board (via cumulative voting or quotas)
or can just walk away

35
Q
  1. management functions
A

1 planning
2 organizing
3 directing
4 controlling

36
Q
  1. levels of management
A

top, middle, firstline

37
Q
  1. managers skills
A

technical expertise
conceptual skills
analytical skills
human relation skills

38
Q
  1. decision making: homo economicus (lwon walras)
A

the rational individual, motivated by self-interest

  • problem faced & objective clear
  • all info is available freely & immediately
  • all alternatives can be compared simultaneously
  • all possible future possible outcomes known w/ certainty
  • there is only 1 isolated decision-maker w/ enough time & energy to calculate optimal choice
  • not much room for reciprocity, trust, altruism, emotions
39
Q
  1. decision making: human being/ behavioral view (herbert simon; richard cyert; james march)
A

bounded by rationality, member of groups, complex motivation, including altruism

  • cooperative behaviour - it may still be oportunistic
  • limited info (costly, might not be retrievable)
  • uncertainty
  • unclear priorities
  • cognitive limitation
  • time limitation

SATISFICE (satisfy + suffice)

40
Q
  1. decision making: comparison
A

homo economicus

  1. utility maximization
  2. perfect/ full info
  3. limitless cognitive ability
  4. opportunist

behavioural view

  1. utility satisfaction
  2. ill-defined problem
  3. bounded rationality
  4. altruism, emotions
41
Q
  1. organizational culture
A

a firm’s shared values, beliefs, traditions, philosophies, rules and role models for behaviour

expressed in: the mission statement of ethics, manual, ceremonies, informally, dress codes, work habits, extracurricular, stories

42
Q
  1. functional areas
A

sets of processes characterized by

  1. common functions
  2. specialised set of skils

core operations: set of activities by which the firm actually carries out economic production

examples: r&d, purchasing, manufacturing, sales & mkt, logistics
debt&equity management/ finance, logistics, hr management, tax management, non core investment, insurance management

43
Q
  1. equity vs debt
A

equity: (by owners)
- suffer the general risk of enterprise
- rewarded by dividends
- substantial influence on decision making
- high risk/ higher expected reward

debt: (by lenders)
- only bankruptcy risk
- reward by interest (more rigid - regardless of profit/loss)
- little influence on decision making
- lower risk/ lower expected reward

44
Q
  1. organization design
A

formal, guided process for integrating people, structure, process & culture of an organization

45
Q
  1. factors of organization design
A

size
activity
product
geographic spread

46
Q
  1. firms need organization design
A
  1. divide labor among members
  2. coordinate units
  3. ensure cooperation
47
Q
  1. main outcomes of organization design
A

organizational structure
organizational systems
organizational culture

48
Q
  1. organizational structure
A

a structure is the arrangement of the relationship of positions within an organization

refers to the division of labor and the patterns of coordination, communication workflow and formal power that direct organizational activities

49
Q
  1. fundamental processes
A

division of labor

coordination

50
Q
  1. division of labour
A

distributing tasks

a) horizontal division ( increases work efficiency - cycles are shorter, time to switch task, training cost)
b) vertical division

51
Q
  1. coordination issues & solutions
A

issues & solutions (coordination mechanisms)

  1. misalignment -> informal communication
  2. duplication -> standardization
  3. mistiming -> formal hierarchy

notes:

  • > informal communication (common mental models, ensured by: tech, liasion role, integrator role, temporary teams)
  • > standardization (standardized skils (training & hiring) -> standardized processes (call center script; problems: standardized criativity & motivation) -> standardized output)
52
Q
  1. organizational structure elements
A
  1. span of control
  2. centralization
  3. formalization
  4. departmentalization
53
Q
  1. types of organization
A
  1. functional
  2. divisional
  3. matrix
  4. team-based

in a broader classification:
mechanistic structure vs organic structures

54
Q
  1. functional structure
A

ex barnes & noble, wall mart

pros
. technical excellence within functions
. centralizations leads to cost saving & specialization
. single accountability for each function
. easier supervision
. support professional identity & career paths

cons
. no accountability for profits
. empshis subunit more than organizational goals
. difficul to develop general management expertise
. difficult to expant to new product/ mkt
. problems of coordination & cooperation

typical used for
. small organizations, singles business firms
. simple production lines (focus on efficiency)
. stable mkt & products

55
Q
  1. divisional structure
A

ex LVMH (Moet Henessy Louis Vitton)

pros
. clear responsability& easy comparision
. accountability & manag motivation
. develop product/mkt expertise (tailored offerings)
. facilitates cross-functional cordination
. develop expertise (facilitates top mng sucession)

cons
.duplication of resources across divisions
. units may give to compete to secure resources
.difficul to obtain synergies across divisions/ product lines

typical used
. products/regions/customers require different
management logic
. distinct product technology

56
Q
  1. matrix structure
A

ex: ABB, Shell

companies that hvbe multiple products, multiple functions and multiple locations, must coordinate across all two or three dimension

pros
. uses resources & expertise effectively
. potentially better communication, flexibility, innovation
. focuses specially in clients & products (?)

cons
. complex system excessive staff
. high degree of horizontal & vertical coordination & communication required
. more conflict among managers who share panel (?)
. two bosses dillute accountability
. more conflict, organizational, politics & stress

typical used
. large scope & scale across product & mkts (need for integration)
. need for technical & product /mkt expertise

57
Q
  1. team based structues
A

ex: valve, accenture

self-directed work teams organised around work process

pros:
. responsive, flexible
. creative
. lower admin cost
. quicker, more informed, decisions
cons
. interpersonal training costs
. role ambiguity increases stress
. team leader issues, less power ambiguous roles/ career
. duplication of resources

typically organic structure (wide span of control, highly decentralized, low formalization); usually found within divisionalized structure

Management (7 decks)

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