Business Management and Strategy Flashcards
strategic management
ongoing process of innovation, advantage, value creation, and reassessment.
sole proprietorship
Most basic business structure. Owner is a single person who is the final authority for all decisions in the business. Any profits earned by the business belong to the owner, and owner has unlimited personal liability for all business decisions and activities.
partnership
Business owned by two or more people who share final authority for all business decisions and are jointly liable for the actions of the business. Partners are liable not only for their own individual actions but for the actions taken by their other partners as well. Profits are split according to ownership shares established at the beginning of the partnership.
general partnership (GP)
partners share responsibility for managing the business based on the partnership agreement
limited partnership (LP) or limited liability partnership (LLP)
Most partners are involved only as investors and have little input into daily operations of the business. These forms are commonly used for service business.
joint venture (JV)
similar to a GP but formed to manage a specific project or for a limited time frame
corporations
Defined by four characteristics:
1. liability is limited to assets owned by the corp.
2. life of the corp can extend beyond the life of its original owner/founder
3. central management structure
4. ownership may be transferred by selling stock.
Corporations sell stock to raise funds necessary to operate the business. Corporations are legal entities and may incur debts, sign contracts, and be sued in the same way as individuals.
stockholders or shareholders
Owners of stock. Free to sell the stock they own to other investors at any time. Can be individuals or other entities. Not involved in the daily operation of the business. May elect a board of directors to represent their interest with senior management. Liability is limited to assets owned by the corp, so stockholder liability is limited to the amount of stock owned by the individual investor.
limited liability company (LLC)
Cross between a general partnership and a corporation. Provides its owners with the liability protection of a corp with fewer operating restrictions. Exists for a finite period of time defined when organized, and can be extended by a vote of the owner/members when expires. May only have 2 of the 4 characteristics of a corp.
production
refers to the process by which businesses create the product or service offered to customers.
operations
encompasses all activities necessary to produce the goods or services of the business - think SIPOC
capacity - operations
includes determing how much of a product or service is able to be produced with the available inputs, as well as what changes in inputs are required by fluctuating customer demands
inputs
available materials, labor, and equipment
production layout - operations
way in which the goods or service will be produced (process or assembly line)
scheduling - operations
making sure that the products or services are available at times of peak customer demand
quality management - operations
QA ensures that the product or service meets acceptable standards
inventory management - operations
balance the cost of maintaining a large inventory with the need to satisfy customers by filling orders promptly
just-in-time (JIT) inventory management
purchasing smaller amounts of supplies more frequently to reduce inventories and ensure a steady supply of products for distribution
sales
includes near-term activites involved in transferring the product or service from the business to the customer
marketing
Incorporates longer-term functions necessary to promote and distribute products in the marketplace, provide support for sales staff, conduct research on product design, and determine appropriate pricing. Begins by identifying the target market.
Also responsible for determining what new products will be produced based on market research.
4 P’s of Marketing
- Product - what is the product or service, how will it look, packaging
- Price
- Placement - distribution - where will the customer find the product?
- Promotion - advertising, PR, selling, incentives
research and development (R&D)
Charged with designing new product offerings and testing them to make sure they do what they’re designed to do before they’re offered to the public. Includes redesigning old products to meet changing demands and developing products to create demand where none existed.
finance
Responsible for obtaining credit to meet the organization’s needs, granting credit to customers, investing and managing cash for maximum ROI, and establishing banking relationships for the org. Also does budgeting and planning
accounting
responsible for activities that record financial transactions within an org
cost accounting
transactions related to product sales and the costs related to creating the product.
Securities Exchange Act of 1934
Gave statutory authority for establishing reporting standards for publicly held companies to the Securities and Exchange Commission (SEC). Acknowledges the FASB and therefore the GAAP. In 2008, began allowing the IASB and IFRS rules globally.
American Institute of Certified Public Accountants (AICPA)
In 1939, established a committee to develop accoutning standards and reports for the private sector. Developed the generally accepted accounting principles (GAAP), then gave authority for regulating these standards to the Financial Accounting Standards Board (FASB).
International Accounting Standards Board (IASB)
global board that developed the International Financial Reporting Standards (IFRS)
organization lifecycle
- startup
- growth
- maturity
- decline
startup
Org leaders struggle to obtain funding so the organization can survive. Because employees hired during this phase must wear many different hats, there is little time for training, so they are usually fully qualified for their positions, and base pay is often below the market rate. Outsourcing can be cost-effective for specialized functions that do not require full time employees. Few layers of management allow employees to work closely with founders and leaders.
growth
Founder is not able to manage organization alone so additional management personnel are brought into the company. Can lead to morale issues when employees who once had access to organization leaders lose the daily contact common in the startup phase. Funds are available to provide competitive compensation and benefits to attract and retain qualified employees. Growth presents challenges when it exceeds the ability of the infrastructure to handle it, sometimes necessitating the outsourcing of some functions to meet needs.
maturity
Organization has enough resources to provide planning and standardize policies and procedures. Possible to become bureaucratic and unwieldy. Relative stability means it is possible to hire less experienced personnel and provide training.
decline
Characterized by inefficiency and bureaucracy. Leaders may implement workforce reductions, close facilities, take cost-cutting measures.
pre-planning
Sets the stage for success, reduces errors in planning process, ensures commitment form leaders. Decide on process, participants, time frame. Use planning tools: statistical models, SWOT analysis, PEST analysis, Porter’s 5 forces
strategy
Uses the strengths of the business to its competitive advantage in the marketplace
goal
Describes the direction the business will take and what it will achieve. Goals are set at the corporate and business unit level of the org.
objective
Specific description of the practical steps that will be taken to achieve the business goals. Objectives are set at the functional level of the org.
long range forecasting
3-5 years
mid range forecasting
1-3 years
short range forecasting
6-12 months
5 Stages of the Strategic Planning Process
- Pre-Planning - decide on process, participants, time frame, use statistical models to plan. Get commitment from leaders.
- Environmental Scanning - statistical models, SWOT, PEST, Porter’s 5 forces. Answer the question - Where are we now?
- Formulate strategy - Where do we want to be? Develop vision, mission, values, goals
- Implement strategy - How do we get there? Develop goals, budget, plans, execute.
- Evaluate strategy and make adjustments.
vision statement
Should inspire the org and inform the customers and shareholders, describing what will carry the org into the future and what it will accomplish. Concise communication of what the company does, for whom, and what long range success looks like.
mission statement
More specific than vision statement. Describes company, what it does, where it’s going, and how it’s different from others. Directed at employees and tells where the company is headed mid to long term.
core competencies
Parts of the operation an organization does best or that sets them apart from the competition. Focusing on hese competencies makes it possible to expand their revenue streams.
corporate values statement
Communicates the standards for how the organization will conduct business. Values chosen should be true regardless of changes in product lines or business processes. Would the values hold true even if the org began doing business in a completely different way? Beliefs are usually reflected in culture.
SMART goals model
Specific Measurable Action-oriented Realistic Time-based
business plan
Includes the company strategy, vision, mission, values, and goals for getting where the company wants to be. Identifies performance targets, recommends new products or services to use existing talent, and defines net income expectations.
tactical goal
describes what will be accomplished to achieve a strategic goal
action plan
breaks down tactical goals into steps to be taken by individuals, teams, or operating groups to accomplish tactical goals
Human Capital Management Plan (HCMP) or Strategic HR Plan
Strategic planning for HR. Answers the questions: 1. Where are we now? 2. Where do we want to be? 3. How will we get there? 4. How will we know when we arrive? Must align with business goals
format of HCMP
- HR statement of strategic direction
- desired results or goals
- objectives
- action plans
- communication plan
- measurement/metrics
HR Budget
HR Budget may consist of: salaries, payroll taxes, benefits, equipment and supplies, repairs and maintenance, training and development for HR, travel, professional services, outsources services (HRIS, payroll). May also include expenses allocated from budgets in other areas such as: liability insurance, software, hardware. May also include items allocated to other units, including: training, awards, raises, temps, recruiting.
human capital projecting
A budgetary activity in which HR attempts to measure the value of people getting the work done on behalf of the organization. Take into account the HCMP, creating depth by identifying the current competencies of the existing internal workforce. Analyzes current KSAs and compares to the KSAs we need to be where we want to be, then develop a plan to address deficiencies. Addresses cost and ROI.
5 Basic Management Functions
- Planning
- Organizing
- Coordinating
- Directing
- Controlling
centralized organization
one where decision-making authority is concentrated at higher levels in the organization
decentralized organization
decision-making authority is delegated to lower-levels in the organization
line functions
need to make decisions about operating needs, such as operations or sales
staff functions
don’t make operating decisions but do advise line managers, such as finance or HR
span of control
Number of employees that one manager can directly supervise. Will depend on the nature and complexity of the task.
directing
Managers must establish relationships with employees they supervise to encourage and support them in accomplishing their goals. Management style contributes to the development of these relationships.
controlling
Used by managers to ensure that the strategies, tactics, and plans developed during the planning process are implemented. In addition to evaluating individual goals and action plans, management must have a big picture view of overall progress.
strategic relationship
Advances the contribution of the HR function toward achieving organizational goals. These are relationships built with stakeholders.
corporate responsibility (CR)
a business behavior focused on building strategic relationships.
sustainability
Behavior that doesn’t deplete the resources used to achieve an outcome. Resources include time, labor, and finances, all of which have a significant impact on long-term health of the org.
reengineering
Involves looking at the entire organization to simplify or eliminate unnecessary processes with the goal of increasing customer satisfaction through improvements in efficiency.
corporate restructuring
Looks at individual units in the organization to reduce or eliminate redundancy or bureaucratic processes in order to reduce costs and increase production. May mean reducing the workforce or reassigning employees to new jobs.
workforce expansion
When a large number of employees enter an organization within a short period of time, it can be difficult for them to assimilate into the existing culture and climate. The resulting clashes of operating styles can create mistrust and reduce productivity.
workforce reduction or reduction in force (RIF) or downsizing or rightsizing
Used to decrease expenses by reducing the size of the workforce. Can be used to lower expenses for short-term improvements in net profits in order to meet previously stated earnings targets for stock market analysts.
merger
two or more organizations are combined into a single entity with the goal of leveraging the assets of both into a more successful company
acquisition
One company purchases or trades stock to gain a controlling interest in another. Can be hostile, where the board of directors of the company being acquired object to the takeover.
divestiture
A company asset such as a product line, a division, or another part of the org is sold or somehow disposed of. May occur as the result of a strategic decision to focus on core competencies or because the asset has greater value as a stand-alone operation than s part of the original org. Can mean eliminating jobs or transferring employees to a new operating entity. Reduces the workforce in the divesting organization, and, if appropriate, performing due diligence to determine whether to transfer employees to the new entity.
offshoring
Moving production or service processes to other countries to realize cost savings.
outsourcing
Contracts internal business services to outside organizations that specialize in specific processes (payroll, IT, custodial services). Can result in a workforce reduction or transfer of employees to other jobs. When employees are acquired by an outsource provider, they’re terminated from the org and hired by the new company.
enterprise risk management (ERM)
Practice of forecasting possible risks to the organization and taking steps to mitigate their impact on operations. First step is to identify risks.
HR audit
identifies areas that may be out of compliance with legal requirements and are in need of updating because of strategic changes within the org, and it defines elements that are working well.
The Legislative Process
- Member of Congress agrees to sponsor a bill and presents it to the full body of the House or Senate.
- Bill assigned to a committee for study.
- Committee determines the likelihood the bill will be able to pass a vote in the full body. If the determination is made that the bill isn’t likely to pass, no action is taken and the bill dies in committee.
- Bills deemed likely to pass are studied in subcommittee. Hearings are conducted to obtain input from government representatives, SMEs, and citizens.
- Subcommittee may make changes - known as marking up the bill.
- Subcommittee then votes on whether to return the bill back to the full committee. Bills not reported back die in subcommittee.
- Bills returned to full committee may be subjected to further study.
- Full committee may vote to accept bill and order the bill reported to the full body.
- Written report of findings and recommendations of the committee are prepared, including dissenting views.
- Placed on legislative calendar and schedule for a vote by full body.
- Debate by full body, including adding amendments.
- When debate is completed, vote is conducted.
- If the full body passes the bill, it must go to the other body and begin the process again.
- Second body may vote it down, table it, or change it. Bills rejected or tabled at this stage are considered dead and won’t become laws.
- If the bill passes the second body, are reconciled in a conference committee. If the conference committee can’t agree on the form of the bill, it will die and not become a law.
- If the committee recommends a conference report incorporating the changes, both houses of Congress must vote to approve the conference report before the bill is forwarded to the president for signature.
- When the president receives the bill, he has 3 choices: he may sign it into law, veto it, or fail to sign.
- If the bill is vetoed, Congress may override the veto by a two-thirds vote of a quorum in each house, in which case the bill will become law in spite of the veto.
- If the president fails to sign, one of two things will happen. When Congress is in session, a bill that remains unsigned for 10 days will become law without the president’s signature. If Congress adjourns before the 10 day period is up, the bill won’t become law. This is known as a pocket veto.
administrative laws
agency rules and regulations, agency orders, and executive orders
Process for Developing Administrative Law
- Develop rules or regulations and publish them in the Federal Register to give the public an opportunity to coment on heir proposals.
- Once the comment period has been completed, the agency publishes final rules that take effect no less than 30 days after the date of public notice.
administrative law courts
Courts associated with federal agencies (such as the EEOC or NLRB) that have the power to order compliance with federal laws. Rulings have the effect of law and are published and the Federal Register.
administrative law judge (ALJ)
judge associated with administrative law court
executive order (EO)
Issued by the president of the United States and become law after they have been published in the Federal Register for 30 days. Executive orders relating to employment issues are enforced by the Office of Federal Contract Compliance Programs (OFCCP).
lobbying
An activity in which anyone can participate when the want to influence new laws and regulations.
planning
Lays the groundwork for how managers will work toward accomplishing the organization’s goals. Mnagers decide what needs to get done, when it needs to get done, who ill do it, and how it will get done.
organizing
Speaks to the ways in which the manager obtains and arranges the resources that he or she needs to implement the plans (output of the planning function). Resources could include people, facilities, materials, etc. Managers must also designate reporting relationships during this function. Linkages between peoples, places, and things must be established.
coordinating
Manager brings together all the resources that he or she has organized to accomplish the stated plan. Manager must also ensure the pieces fit.
BASIC feedback
Behavioral As soon as possible Specific Interactive Consistent
balanced scorecard
Approach to strategic management that balances financial measures of success with non-financial measures of success. Basically, businesses can grow in other ways than financially. Includes 4 perspectives:
- Learning and Growth
- Business Processes
- Customers
- Financial
effectiveness
the degree to which carefully established and strategically aligned goals are met (doing the right things)
efficiency
ratio of outputs to inputs (doing things right)
Sarbanes-Oxley Act
Requires violations of securities laws or breaches of fiduciary responsibility to be reported to either the chief legal officer or CEO by in-house attorneys or outside counsel. If resolution doesn’t occur, attorneys must report the concerns to the audit committee of the BOD.
Section 806 of SOX
provides protection for employees who initiate reports of company actions in violation of SEC regulations or federal securities laws. Enforcement is delegated to OSHA.
inside director
a person with operational responsibilities who is employed by the org who is also on the BOD. May be CEO or CFO
outside director
someone who isn’t employed by the corp and doesn’t have operational duties.
prima facie violation of an unfavorable employment action
- employee was engaged in a protected activity (whistleblowing)
- employer knew or suspected that the employee was engaged in the protected activity
- employee suffered an unfavorable employment action
- sufficient circumstances existed to infer that a contributing factor to the action was the employee’s participation in the protected activity.
Pocket Veto
President fails to sign legislation. If Congress adjourns before the 10 day period is up, the bill won’t become law.
