Monthly Archives: February 2012

MGMT 2/28

Chapter 9 Designing Adaptive Organizations


  • the deployment of resources to achieve strategic goals
  • it is reflection in: division labor into specific departments & jobs, and formal lines of authority
  • Mechanisms for coordinating diverse…

Organization Structure

  • the vertical and horizontal configuration of departments, authority, and jobs within a company
  • Organizational chart shows the formal tasks and the formal reporting relations as well as framework for vertical control

Work Specialization

  • aka division of labor promotes efficiency
  • organizational tasks are subdivided into individual jobs
  • employees perform only the tasks relevant to their specialized function
  • Jobs tend to be small, but they can be performed efficiently

Chain of Command

  • Unbroken line of authority that links all persons in an organization
  • Shows who reports to whom
  • Associated with two underlying principles: 1) unit of command (each employee reports to one supervisor), and 2) Scalar Principle (the chain of authority that includes everyone in the organization)

Span of Management (aka Span of Control)

  • the number of employees who report to a supervisor
  • traditional view = 7 subordinates per manager
  • Lean organizations today = 30+ subordinates
  • Supervisor Involvement:
  • must be closely involved with subordinates, the span should be small
  • need little involvement with subordinates, it can be large
  • the relationship between Span of Management and supervisor involvement is negative

Tall vs. Flat Structure

  • Span of control used in an organization determines whether the structure is tall or flat
  • Tall structure: narrow span and more hierarchical levels
  • Flat structure: wide span, is horizontally dispersed, and has fewer hierarchical levels

Centralization vs. Decentralization

  • Centralization: decision authority is located near the top of the organization
  • Decentralization: decision authority is pushed downward to lower organizational levels (what America has moved to in the past 30 years) why? delegation, relieve the burden of top managers; helps employees feel more wanted and needed (employee moral)
  • fit the organization’s strategy (whether it chooses to be centralized or decentralized)


  • the basis on which individuals are grouped into departments
  • there are five types

5 types of departmentalization

  1. Vertical function structure: people are grouped together in department by common skills; information flows up and down; chain of command converges at the top; managers and employees are compatible because of similar training and expertise
  2. Divisional Structure: grouped together based on a common product, program, or geographic region; product divisions have the same departments
  3. Matrix Structure: functional and divisional chains of command. Some employees report to two bosses; dual chain of command; three departments divided in between two product divisions
  4. Team-based structure: created to accomplish specific tasks
  5. Virtual Network structure: outsources important resources over the internet

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Micro 2/28


Elasticity of Demand

  • known as “price elasticity of demand”
  • measures consumer response to a price change
  • Ed = % change in quantity demanded / % change in price
  • look to handout on site Chris Clarks dope handout
  • should be less than or equal to zero… if you get a positive, it is wrong
  • used by Kroger Plus card
  • Government uses elasticity to control amount of tobacco sales
  • refer to graph in your graph in your notes for elasticity of A & B: (Q1-Q2 / Q1+Q2) / (P1-P2 / P1+P2) = (5 / 15) / (-2 / 18) = -3
  • if price goes up by 10%, quantity demanded goes down by 30%
  • Revenue = P*Q
  • when revenue drops, that is bad
  • slope is constant, elasticity is NOT

Types of elasticity

  1. Elastic: big response (more than 1)
  2. Inelastic: small response (less than 1)
  3. Unit Elastic (directly proportional)

Inelastic demand

  • steep almost vertical slope
  • Insulin (still need it no matter the price)
  • Heroin/Meth

Elastic Demand

  • flat demand curve
  • McDonald cheeseburgers rise in price… go to BK

Determining Elasticity of Demand

  1. Substitutes: increase in the number of substitutes increases the elasticity; decrease in the # of substitutes decreases the elasticity (chicken & Camry’s are elastic; salt & electricity are inelastic)(the more specific the market, the more elastic because there are more substitutes)
  2. Time: more time, more elastic; no time, perfectly inelastic; infinite time, perfectly elastic
  3. Necessity: more necessary, less elastic; water- inelastic; food (in general)- inelastic; toothpaste- inelastic; luxury goods are elastic; yacht- elastic; fur coats- elastic
  4. Budget Share: as the share increase (and takes more budget), it becomes more elastic; gas 40% (at $3.75) of budget, salt 0.0001% (at $1) of budget, if both goods increased in price by 100%, gas would be more elastic


  • Papa Johns- elastic (other pizza places)

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MGMT 2/27

Movie: Gung Ho… Focus on cultural differences

  • they are more serious; cut straight to the chase
  • streets are busy in Japan, no kids playing around
  • take their shoes off on carpet
  • management training program for failing managers
  • there is no sarcasm or metaphors
  • they are not use to people questioning authority
  • “no music, no cigar, just work”
  • “there is one way to run the factory… one way”
  • they want zero percent defects
  • work cannot suffer for personal purposes
  • go for accuracy rather than distance
  • focus more on technique and strategy; not much human relations
  • Japanese follow the rules stringently
  • women have no place in business
  • Americans put themselves above company
  • power distance: the Japanese managers do not mingle with the line workers; other workers cannot sit down until the boss does
  • Individualism: no sense of individualism (there is only one way)
  • Masculinity:
  • Femininity: do not let them leave

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MGMT 2/22

Chapter 8

Importance of Global business

  • if you are not thinking international, you are not thinking business management

Strategies for entering international markets

  1. Exporting
  2. Global outsourcing
  3. Licensing
  4. Franchising
  5. Joint venture
  6. Acquisition
  7. Greenfield venture


  • transferring its products for sale in foreign countries
  • maintaining products and factories (capital) domestically and sending some overseas
  • low cost because they do not need to build factories in other countries

Global Outsourcing (Offshoring)

  • engaging in the international division of labor
  • maintain the main part of the company within the country and outsource other less significant parts
  • take advantage of efficiencies
  • Efficiency = Output/Input … Input = labor+supply


  • A company (licensor) in one country makes certain resources available to companies (licensee) in another country
  • Typical resources: management skill, patent, trademark rights, technology


  • a special form of licensing
  • Franchisee buys a complete package of materials and services (fast food chains)
  • standardized operating system, technology, and company name

Joint Venture

  • most popular direct investment approach
  • a company shares costs and risks with another firm to build a manufacturing facility, develop new products, or set up a sales and distribution network
  • two companies sponsor to build a new company

Greenfield Venture

  • most risky and costly direct investment
  • a company builds a subsidiary from scratch in a foreign country

International Environment Factors

  • Economic
  • Legal-Political
  • Sociocultural

Economic Development

  • countries categorized as “developing” or “developed”
  • use the tool “per capita income” to find out whether developed
  • Developing countries: Asia, Africa, and South America
  • Developed countries: North America, Europe, and Japan
  • Driving global growth in Asia, Eastern Europe, and Latin America


  • 3 categories: transportation facilities (subway, MARTA), energy-producing facilities(GA Power), communication facilities***(radio stations, cell phone providers)***
  • A country’s physical facilities that support economic activities

***2 types of markets

  • Product market: market demand
  • Resource market: develop plants

Exchange Rates

  • Rate at which one country’s currency is exchanged for another country’s
  • Lower exchange rate: decrease in foreign goods

Legal-Political Environment

  • Political risk: the risk of loss of assets, earning power, or managerial control due to politically based events or actions by host governments
  • Government takeovers of property and acts of violence
  • Political instability
  • Government laws and regulations

Becoming Aware of Cultural Differences (Sociocultural)

  1. Power Distance: if an organizations difference between employees and employers(lower #= higher power distance)
  2. Uncertainty avoidance: degree to which people are uncomfortable with uncertainties (lower #= higher uncertainty avoidance)
  3. Individualism: people prefer independence; look after themselves; personal goals and privacy (lower #= higher individualism)
  4. Masculinity vs. femininity: in countries with masculinity, there is a goal for material success/ femininity focuses on cooperation (Japan)
  5. Short-term/long-term orientation: short-term is when people look at the present and the past/ long-term orientation is when people look at the future (lower #= higher masculinity)(China)

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Micro 2/21

No class Thursday

from test:

1. Many companies are relocating their manufacturing facilities to China, because China is capable of producing more manufactured goods than any other nation (False)
2. The opportunity cost of an action is the sum of all alternatives (False: best alternative)
3. If both supply and demand increase, the price will increase (false)
4. If the market for compact cars is experiencing a shortage, this would imply that the selling price for such cars is currently less than the market equilibrium price (true)
5. A subsidy for a producer will cause a decrease in supply. Note: a subsidy is the opposite of a tax (false)
6. The relationship between quantity demanded and price is a positive relationship (false: negative relationship)
7. If the price of DVD players has just fallen, the demand for DVDs will decease (false: increase)
8. The following is an equation for a PPF, Y=15-2.8X. From this equation we know that opportunity costs are increasing along this PPF


9. Assume Ramen Noodles are an inferior good. What will happen in the market for Ramen Noodles if income decreases? B. Demand will increase and the price will rise.
10. As a society produces more and more of a good, it must give up increasing amounts of an alternative good. This demonstrates the… D. Law of increasing opportunity costs
11. Which of the following factors will not shift demand for bananas? D. the price of bananas
14. A physician’s knowledge and skills is referred to by economists as… B. human capital
15. Don and Juan can each produce two goods, food (F) and Spears (S). The equation for Don’s PPF is F=18-9S, and the equation for Juan’s PPF is F=12-6S. Which of the following statements is correct? B. Don has the comparative advantage in Food production
16. Which of the following countries has a pure command economy? D. There are no pure command economies
18.The above diagram depicts the PPF’s for Larry and Andre in the production of chocolate and basketballs. Before specialization Larry produces 18 chocolates and 6 basketballs and Andre produces 5 chocolates and 10 basketballs. What are the gains to the entire economy if each person specializes and trades? C. 4 chocolates and 2 basketballs

Suppose you graduate and decide to buy your own farm. You decide that you will grow some combination of cantaloupes (C) and pomegranates (P). Based on your research of other similar farms and accounting for the resources you have available you decide that you face a PPF that can be represented by the following equation: C= 20 – 6P

19. Every time you produce one more unit of pomegranates, how many cantaloupes do you give up? C. 6 Cantaloupes
20. An individual will choose what to specialize in based on: D. Comparative advantage

Short Answer

1. Consider the market for medical care in GA. The following linear equations represent the supply and demand of medical care:
Supply: P=100+6Qs
Demand: P=1300-4Qd
a) In the absence of government intervention, what is the market’s equilibrium price (P*) and quantity (Q*). Ans: Q*=120; P*= $820
b) The state government decides to impose a price ceiling in the market in order to make it easier for people to obtain medical care. After some deliberation, the government decides the price should not be any higher than $400. Graphically depict this scenario, being careful to label clearly. Make sure you label equilibrium and label the effect of the ceiling (calculate both the quantity supplied and quantity demanded after the price ceiling is imposed). Ans: Qs=50; Qd= 225
c) Does a surplus or a shortage exist, or is the market still in equilibrium? Shortage
d) Did the government succeed in its goal? No, although it made health care more affordable, it did not make it more attainable.
e) If the government had set the price ceiling at $2,000 would the effect have been different from the one discussed in (c)? Yes, it would not affect the market, so it would be at equilibrium
f) If the government had set the price ceiling at $600 would the effect have been different from the one discussed in (c)? No, there would still be a shortage, but closer to equilibrium

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Management 2/20

Chapter 7

Model of changes

  1. Environmental Forces: monitor global competition, customers, competitors, and other factors
  2. Internal Forces: consider plans, goals, company problems, and needs
  3. Need for Change: evaluate problems and opportunities, and define needed changes in technology, products, people, and culture (SWOT analysis used to evaluate need for change)
  4. Implement change: use force-field analysis, tactics for overcoming resistance

Organizational Development

  • improve an organization’s long-term performance and health
  • three elements:
  1. team building
  2. Survey feeback
  3. Large group intervention: new approach; related to radical organizational changes, goes very fast

Differences in OD

  • Large group focuses on entire system; Traditional OD hone in on a specific problem
  • Traditional’s information source is limited to organization; large-group intervention is widely shared
  • Traditional time frame is gradual; large group is fast
  • Traditional learning is individual, small group; large-group is the whole organization

Resistance to Change

  1. Self-Interest
  2. Lack of Understanding and Trust
  3. Uncertainty
  4. Different Assessments and Goals

Overcoming Resistance

  • Communication (when change is technical)
  • Education (when change is technical)
  • Participation (when users need to feel involved; users have power to resist)
  • Negotiation (group has power over implementation)
  • Coercion (not commonly used; a last resort; crisis exists)(GM closing plants)
  • Top Management Support (users doubt legitimacy of change; involves multiple departments or reallocation of resources)

Organizational Change
adoption of new ideas or behaviors by the organization
Organizational Development
a philosophy and collection of planned change interventions

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Management 2/15/12

Portfolio Strategy

  • A corporate level strategy that minimizes risk by diversifying investment among various businesses or product lines
  • Corporate example: General Electric (has no dogs; 2 cash cows: appliance & lighting; 2 stars: security & healthcare; 2 question marks: renewable energy & consumer finance)
  • BCG Matrix: implement of portfolio strategy; shows whether a business has a larger or smaller share to other corporations as well as business growth rate
  • order from highest to lowest on BCG Matrix (stars: rapid growth; Cash cows: milk to finance question marks and stars; Question Marks : new ventures, risky, few become stars, others are divested; dogs: no investment, keep if some profit, consider divestment

Grand Strategy (2nd Corporate level strategy)

  • a broad corporate-level strategic plan used to achieve strategic goals
  • Growth: internal and external
  • internal growth: investing in expansion; development of new or changed products; expansion of current products into new markets (Avon from internet to mall kiosks)
  • External growth: Acquiring additional business divisions; acquisition of businesses related to current product lines (AT&T + Cingular); acquisition of businesses that take the corporation into new areas (Procter & Gamble + Iams Company)
  • Stability: a pause strategy means that the organization wants to remain the same size
  • Retrenchment: shrinking the current business units; the selling off or liquidating entire businesses
  • Divestiture: selling off businesses that no longer seem central to the corporation (JCPenny sold its Eckerd chain of drugstores)

Three Parts of Grand strategy

  1. Growth
  2. Stability
  3. Retrenchment

Porter’s 5 Forces Affecting Industry Competition

  1. Potential new entrants; internet reduces barriers to entry (makes competition easier)
  2. Bargaining power of buyers (they must have informed information)(internet increases buyer power)
  3. bargaining power of suppliers (De Beers)(internet tends to increase the bargaining power of suppliers)
  4. Threat of substitute products (more substitutes, more competition)(sugar v Splenda & agave… high competition)(internet expands the market size, but creates new substitution threats)
  5. Rivalry among competitors (McDonalds v Burger King)(internet blurs differences among competitors so it increases competition)

Competitive strategies

  1. Differentiation: distinguish products or services from others in the industry (Hilton Hotel & the box company from the SWOT example)
  2. Cost Leadership: seek efficient facilities, pursue cost reductions, and use tight cost controls to produce products more efficiently than competitors (SouthWest Airlines & Motel 6, used by relatively small companies)
  3. Focus: concentrate on a specific regional market or buyer group (SouthWest focused on three cities in the beginning years of company)

Collaboration Strategies

  1. Acquisitions: one company buys another
  2. Mergers: 2 companies come together and share the company name
  3. Joint ventures: a new company is funded by two separate companies; shared risks and costs
  4. Strategic Business Partnering (major hotel companies making a website to compete with Expedia… relatively low)
  5. Preferred Supplier Arrangements

Functional Level Strategies

  1. Marketing (important for differentiation strategy by setting product apart)
  2. Human resources (under differentiation strategy, would provide good training)
  3. Finance (if a cost leadership strategy implemented, find ways to save money)
  4. Research and development (cost leadership strategy, find ways to cut costs)

Effective Strategy Implementation

  1. Build commitment to the strategy
  2. Devise a clear implementation plan
  3. Pay attention to culture
  4. Take advantage of employees’ knowledge and skills
  5. Communicate, communicate, communicate

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