Explain how the functions of management are evolving in today’s business environment.

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Chapter 1

Managing and Performing

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Learning Objectives

1-1 Summarize the major challenges of managing in the new competitive landscape.

1-2 Describe the sources of competitive advantage for a company.

1-3 Explain how the functions of management are evolving in today’s business environment.

1-4 Compare how the nature of management varies at different organizational levels.

1-5 Define the skills you need to be an effective manager.

1-6 Understand the principles that will help you manage your career.

Managing in a Competitive World

Four ongoing challenges that characterize the business landscape:

Globalization.

Technological Change.

Knowledge Management.

Collaboration

What defines the competitive landscape of today’s business? We will be discussing many relevant issues in the course, but we begin here by highlighting four ongoing challenges that characterize the business landscape: globalization, technological change, the importance of knowledge and ideas, and collaboration across organizational boundaries.

Globalization

Today’s enterprises are global, with offices and production facilities all over the world.

A company’s talent and competition can come from anywhere.

Globalization affects small and large companies.

Globalization has changed the face of the workforce.

Today’s enterprises are global, with offices and production facilities in countries all over the world. Corporations operate worldwide, transcending national borders. Companies that want to grow often need to tap international markets. Globalization also means that a company’s talent and competition can come from anywhere.

Technological Change

Technology and business:

Online customer engagement, artificial intelligence (A I), data protection, and privacy.

Challenges created by rapid changes.

The Internet creates opportunities but also introduces threats.

The McKinsey Global Institute predicts that the next generation of connectivity technologies and network upgrades will bring billions of new users online in developing economies and create trillions of dollars in advanced economies worldwide.

Technology both complicates things and creates new opportunities. The challenges come from the rapid rate at which communication, transportation, information, and other technologies change.

Knowledge Management

Knowledge workers: Workers whose primary contributions are ideas and problem-solving expertise.

Knowledge management: Finding, unlocking, sharing, and capitalizing on the most precious resources of an organization:

Expertise.

Skills.

Wisdom.

Relationships.

Knowledge management is the set of practices aimed at discovering and harnessing an organization’s intellectual resources—fully using the intellects of the organization’s people.

Collaboration

Collaboration requires productive communications among different departments, divisions, or subunits of the organization.

Coopetition: simultaneous competition and cooperation among companies with the intent of creating value.

Leveraging knowledge for maximum impact requires people in different departments, divisions, or subunits of the organization to collaborate and communicate effectively.

Perhaps there's no more vivid and useful example of these dynamics than the international efforts to combat pandemics. Well-coordinated global collaborations, including between the United States and China, defeated the H1N1 pandemic in 2009 and later prevented Ebola pandemics. But when COVID-19 hit, relations between those two countries were worse. This and other factors– political discord and intense competition for medial supplies– severely delayed and damaged the global response.

Managing for Competitive Advantage

A key to understanding the success of a company is how well it both creates and sustains competitive advantage.

Innovation.

Quality.

Service.

Speed.

Cost Competitiveness.

Sustainability.

The fundamental drivers of competitive advantage contributors to bottom-line organizational performance are innovation, quality, service, speed, cost competitiveness, and sustainability.

Managing for Competitive Advantage: Innovation

A firm must:

Adapt to changes in consumer demands and to new competitors.

Continually innovate—especially important in the global marketplace.

Innovation comes from people and must be a strategic goal.

Innovation is the introduction of new goods and services. Products don’t sell forever; in fact, they don’t sell for nearly as long as they used to because competitors are continuously introducing new products. Your firm must continually innovate, or it will die.

Managing for Competitive Advantage: Quality

Quality is the excellence of your product (goods or services).

Historically, quality referred to attractiveness, lack of defects, and dependability.

Today it is about preventing defects before they occur, achieving zero defects in manufacturing, and designing products for quality.

A philosophy of continuous improvement.

Most companies claim that they are committed to quality. Customers expect high-quality goods and services, and often they will accept nothing less. Quality can be measured in terms of product performance, customer service, reliability (avoidance of failure or breakdowns), conformance to standards, durability, and aesthetics.

Managing for Competitive Advantage: Service and Speed

Service:

Giving customers what they want or need, when they want it.

Continually meeting the needs of customers and establishing mutually beneficial long-term relationships.

Making it easy and enjoyable for the customer.

Speed:

Fast and timely execution, response, and delivery of products.

Important quality measures often pertain to the service customers receive. Service means giving customers what they want or need, when they want it. World-class service focuses on continually meeting the needs of customers and establishing mutually beneficial long-term relationships.

The speed requirement has increased exponentially. Everything, it seems, is on fast-forward. Speed is no longer just a goal of some companies; it is a strategic imperative.

Managing for Competitive Advantage: Cost and Sustainability

Cost competitiveness:

Keeping costs low to achieve profits and be able to offer prices that are attractive to consumers.

Companies must pay close attention to cost because consumers can compare prices from thousands of competitors.

Sustainability:

Minimizing the use and loss of resources, especially those that are polluting and nonrenewable.

Cost competitiveness: if you can offer a desirable product at a lower price, it is more likely to sell. Cutting energy waste can cut costs and help the bottom line while also helping the environment.

Although sustainability means different things to different people, in this text we emphasize a long-term perspective on sustaining the natural environment and building tomorrow’s business opportunities while effectively managing today’s business,

Exhibit 1.1 Staying ahead of the Competition

Access the text alternative for slide images.

Faced with these challenges, how can you make good decisions? The ideal decision-making process includes six phases.

The Functions of Management

Management

Working with people and resources to accomplish organizational goals efficiently and effectively.

Rosalind Brewer, former president and C E O of Sam’s Club, focused on building a dynamic organization. She recently was appointed C O O and group president of Starbucks.

Sarah Bentham/AP Images

To be effective is to achieve organizational goals. To be efficient is to achieve goals with minimal waste of resources—that is, to make the best possible use of money, time, materials, and people.

The Four Functions of Management

Planning: Delivering Strategic Value.

Systematically making decisions about goals and activities to be pursued.

Organizing: Building a Dynamic Organization.

Assembling and coordinating resources needed to achieve goals.

Leading: Mobilizing People.

Efforts to stimulate high performance by employees.

Controlling: Learning and Changing.

Monitoring performance and making needed changes.

Value is an important concept in the planning function. It refers to the monetary amount associated with how well a job, task, good, or service meets a user’s needs.

SPOTLIGHT ON . . . Business for the Better Ashoka’s Bill Drayton

In Drayton’s view, anyone can be a social entrepreneur. All it takes, he says, is the ability to see a problem, put others’ skepticism aside, and allow yourself the time to inch your way first toward a vision and then to a solution.

Should every manager have the responsibility to do good and do well? Why or why not?

Drayton argues that anyone can be a social entrepreneur. What sort of problems would you wish to solve?

Questions:

Discussion of the first question will vary and may focus on how to do “good,” and when and if such activities are appropriate. Students may debate between profit and social responsibility type actions.

For the second question, student answers will vary; however, government, nonprofit and church activities may be mentioned. Students may also discuss social media-based activities.

Performing All Four Management Functions

A typical day for a manager is not neatly divided into the four functions.

Interruptions, meetings, and firefighting prevent a manager from smoothly tending to these functions.

Good managers devote adequate attention and resources to all four management functions.

Some managers are particularly interested in, devoted to, or skilled in one or two of the four functions but not in the others. In order to be a good manager, you must realize the importance of all four functions.

Management Levels

Top-Level Managers

Middle-Level Managers

Frontline Managers

Top-level managers are the senior executives of an organization and are responsible for its overall management. Often referred to as strategic managers.

Middle-level managers are located in the organization’s hierarchy below top-level management and above the frontline managers. Sometimes called tactical managers, they are responsible for translating the general goals and plans developed by strategic managers into more specific objectives and activities.

Frontline managers, or operational managers, are lower-level managers who supervise the operations of the organization. These managers often have titles such as supervisor, team leader, or assistant manager.

Exhibit 1.2 Managerial Roles: What Managers Do

Decisional Roles	Informational Roles	Interpersonal Roles
Entrepreneur: search for new business, initiate new projects	Monitor: seek information, serve as the center of communication	Leader: staffing, developing, motivating people
Disturbance handler: take corrective action during crises	Disseminator: transmit information from source to source	Liaison: maintain network of outside contacts
Resource allocator: provide funding and other resources, make significant organizational decisions	Spokesperson: speak on behalf of organization	Figurehead: perform symbolic duties
Negotiator: negotiate with internal and external parties	n/a	n/a

Adapted from Mintzberg, H., The Nature of Managerial Work. New York: Harper & Row, 19 73, pp. 92–93.

A classic study of top executives found that they spend their time performing 10 key activities or roles, falling into three categories: interpersonal, informational, and decisional.

Exhibit 1.2 summarizes these roles. This slide shows an abbreviated version of Exhibit 1.2.

Must-Have Management Skills

Technical: ability to perform a specialized task involving a particular method or process

Conceptual and Decision: skills related to abilities that help identify and resolve problems

Interpersonal and Communication: people skills that represent the ability to lead, motivate, and communicate effectively with others

Performing management functions and roles, and achieving competitive advantage, are the cornerstones of a manager’s job. However, understanding this does not ensure success. Managers need a variety of skills to do these things well.

You and Your Career

Emotional intelligence:

The skills of understanding yourself, managing yourself, and dealing effectively with others.

Social capital:

Goodwill stemming from your social relationships.

Be both a specialist and a generalist.

Be self-reliant.

Connect with people.

Actively manage your relationship with your organization.

Survive and thrive.

Throughout your career, you’ll need to lead teams effectively as well as influence people over whom you have no authority; therefore, the human skills are especially important. Business people often talk about emotional intelligence, or EQ—the skills of understanding yourself (including strengths and limitations), managing yourself (dealing with emotions, making good decisions, seeking and using feedback, exercising self-control), and dealing effectively with others (listening, showing empathy, motivating, leading, and so on).

Exhibit 1.4 Two Relationships: Which Will You Choose?

We have noted the importance of taking responsibility for your own actions and your own career. Unless you are self-employed and your own boss, one way to do this is to think about the nature of the relationship between you and your employer. The exhibit shows two possible relationships—and you have some control over which relationship develops.

Exhibit 1.5 Managerial Action Is Your Opportunity to Contribute

Access the text alternative for slide images.

Common Practices of Successful Executives

They convey to others “Why we do what we do.”

They ask, “What needs to be done?” not just “What do I want to do?”

They write an action plan. They don’t just think, they do, based on a sound, ethical plan.

They take responsibility for decisions.

Today, managers must do more, better. Management scholar Peter Drucker, in considering what makes managers effective, noted that some are charismatic whereas some are not, and some are charismatic whereas some are not, and some are visionary whereas others are more numbers-oriented. But successful executives do share some common practices.

Management in Action In-N-Out’s Lynsi Snyder: Organizing for Efficiency

Good managers deliver strategic value for the present and the future.

In-N-Out Burger has stuck to its core principle of using never frozen ground beef and fresh baked buns.

In-N-Out Burger does not franchise and has grown more slowly than McDonald’s, but generates twice the revenue per store with a higher profit margin.

Questions:

In what ways do you think Snyder’s planning and control efforts affect its strategy and success?

Student answers will vary but should focus on control efforts around high quality food and service and the slower approach to growing sales and commitment to a limited, stable menu.

If you were a restaurant owner, would you be interested in applying for an In-N-Out Burger franchise? Why or why not?

Student answers will vary based on their preferences, they should note the higher revenue and profit margin as a reason if they express interest.

In Review

Summarize the major challenges of managing in the new competitive landscape.

Describe the sources of competitive advantage for a company.

Explain how the functions of management are evolving in today’s business environment.

Compare how the nature of management varies at different organizational levels.

Define the skills you need to be an effective manager.

Understand the principles that will help you manage your career.

This slide relists the chapter learning objectives and can be used to review the chapter highlights.

Chapter 2 will focus on the internal and external environments.

End of Main Content

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Accessibility Content: Text Alternatives for Images

Exhibit 1.1 Staying Ahead of the Competition – Text Alternative

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The fundamental drivers of competitive advantage and bottom-line performance include innovation, quality, service, speed, cost effectiveness, and sustainability.

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Exhibit 1.5 Managerial Action Is Your Opportunity to Contribute – Text Alternative

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The graphic suggests that the interaction between employee and organization leads to the following managerial actions: delivering strategic value, building a dynamic organization, mobilizing people, and learning and changing.

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Chapter 2

The External and Internal Environments

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Learning Objectives

2-1 Describe how environmental forces influence organizations and how organizations can influence their environments.

2-2 Distinguish between the macroenvironment and the competitive environment.

2-3 Identify elements of the competitive environment.

2-4 Summarize how organizations respond to environmental uncertainty.

2-5 Define elements of an organization’s culture.

2-6 Discuss how an organization’s culture and climate affect its response to its external environment.

Open Systems

Organizations are affected by, and affect, their environment.

Inputs:

Goods and services organizations take in and transform them into products.

Outputs:

The products and services organizations create.

In this chapter, we discuss in detail factors outside the organizations create the context in which managers and their companies operate – and affect their success and failure.

Organizations are open systems—that is, they are affected by and in turn affect their external environment. For example, from their environment they take in inputs such as human resources and investment capital and transform them into products that are outputs to their environment.

Exhibit 2.1 Organization as an Open System

Access the text alternative for slide images.

Organizations take inputs from the external environment and return outputs, as shown in Exhibit 2.1. But when we use the term external environment here, we mean more than an organization’s clients or customers; the external environment includes all relevant forces outside the organization’s boundaries.

External Environment

External environment:

All relevant forces outside a firm’s boundaries, such as competitors, customers, the government, and the economy.

Competitive environment.

Includes the firm and its rivals, suppliers, buyers, new entrants, and substitute or complementary products.

Macroenvironment.

Affects all organizations and includes economic, technological, legal and political, demographic, social, and natural environment factors.

The organization exists in its competitive environment, which is composed of the firm and its rivals, suppliers, buyers (customers), new entrants, and substitute or complementary products. More genera

Explain how the functions of management are evolving in today’s business environment.

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