Summary Marketing: Real People Real Choices, Michael R. Solomon; Greg W. Marshall; Elnora W. Stuart and Lecture Notes
Management of Organisations and Marketing (EBC1002)
Maastricht University
Preview text
Marketing: organizational function and set of processes for creating/communicating/delivering value to customers and for managing customer relationships in ways that benefit organization and stakeholders.
Meeting needs (difference between a consumer’s actual state and some ideal or desired state).
Creating utility (benefits from using product) and value (utility minus perceived sacrifice). a) Form utility: transforming raw materials into finished product. b) Place utility: making product available where customers want them c) Time utility: storing products until they are needed d) Possession utility: enabling consumer to own and use the product or store it for future use
Exchange relationships: process by which some transfer of value occurs between a buyer and a seller.
Production orientation: emphasizes the most efficient ways to produce and distribute products
Selling orientation: view of marketing as a sales function or way to reduce inventory.
Consumer orientation: focuses on ways to satisfy customers’ needs and want marketing concept.
New Era orientation: commitment to quality and value and concern for economic and social profit.
Consumerism: social movement directed towards protecting consumers from harmful business practices. Accountability: marketing creates more financial value than it costs and marketing resources have been applied with the maximum possible effect. The Infinity Model of Accountable Marketing:
How to imagine value: strategic marketing investment, value proposition and marketing mix
How to predict value: extrapolations from past, simulations of future and analogies and scenarios
How to demonstrate value: marketing cost utilization, Customer Response and profitable revenues Marketing Value Chain
Consumer goods: tangible products that individual consumers purchase for personal/family use.
Services: intangible product that we pay for and use but never own.
Industrial goods: sold to businesses/organizations for further processing or use in operations.
Customer value: whole bundle of benefits product promises to deliver
Producer value: a) Calculating lifetime value of customer: profit expected to be made from a particular customer. b) Providing value to stakeholders creating competitive advantage (outperform competition): i) Identify a distinctive competency (capability that is superior to that of competition) ii) Distinctive competency differential benefit (set product apart from competitors’ product) iii) Providing value through value chain (series of activities involved in designing, producing, marketing, delivering and supporting any product. Main activities of value chain members are inbound logistics (bringing in materials), operations (converting materials into final product), outbound logistics (shipping out final product), marketing and sales, and service.
Society value: ethical, profitable and environmentally friendly exchange relationships.
Marketing plan: document that describes the marketing environment, outlines the marketing objectives and strategy and identifies who will be responsible for carrying out each part of the marketing strategy Market segment: distinct group of customers within a larger market who are similar to one another in some way and whose needs differ from other customers in the larger market. Market position: how the target market perceives the product in comparison to competitor’s brands.
Marketing mix: the four p’s are totally interdependent all used together to satisfy customer needs:
- Product: what satisfies customer needs
- Price: customer assigned value or amount to be exchanged for product.
- Promotion: organisation’s efforts to inform and encourage potential customers to buy product
- Place: availabilty of the product to the customer at the desired time and location Channel of distribution: set of firms working together to get a product from a producter to a consumer
Business plan: includes the decisions that guide the entire organisation or its business units Marketing plan: document that describers the marketing environment, outlines the marketing objectives and strategies and identifies how the strategies imbedded in the plan will be implemented and controlled. Business planning: process of making decisions that guide firm both in short and longterm. Three levels:
- Strategic planning: managerial decision process that matches the firm’s resources and capabilities to
its market opportunities for long-term growth top managemet define the firm’s purpose and what
the firm hopes to achieve over the next five or so years 2) Functional/tactical planning: includes both a broad five-year plan to support the firm’s strateic plan and a detailed annual plan for the coming year 3) Operational planning: day-to-day execustion of the functional plans and inclused detailed annual semiannual and quarterly plans Strategic Business Units (SBU): self-contained divisions: individual units within firm that operate like separate businesses, each having own mission, business objectives, resources, managers and competitors.
- Define missons: mission statement: formal document that describs the organisation’s overall purpose and what It hopes to ahieve in terms of its customers, products and resources.
- Evaluate internal and external environment: two environmental analyses: a) SWOT analysis: Strengths and Weaknesses (internal) and Opportunities and Threaths (external). b) PESTLE analyis: Political, Economic and competitive, Sociocultural, Technology, Legal and Environmental trengs need to be considerd.
Marketer’s global strategies are affected by: elements of a firm’s external environment
- Economic environment: a) Economic health: GDP: total value of goods/services produced in a country in a year b) Level of development of a country: less developed, developing or developed countries. c) Business cycle: pattern of changes/fluctuations of economy (prosperity, recession and recovery).
- Competitive environment: analyzing the market and the competition a) Competition in micro-environment: alternatives from which members of a target market may choose. Three different levels: disposable income, product competition and brand competition. b) Competition in the macro-environment: four structure of industries: monopoly (one seller), oligopoly (few sellers substantial market share), monopolistic competition (many sellers, slightly different product small market share), perfect competition (many sellers, same good).
- Technological environment:
- Political and Legal environment: local/state/national/global laws/regulations that affect businesses. a) Political contraints on trade: nationalisation and expropriation. b) Regulatory contrains on trade: regulations about of what and how products should be made. c) Local content rules: certain proportion of product must consist of local components.
- Socio-cultural environment: characteristics of society/people/culture reflects values/beliefs of society. a) Demographics: statistics that measure observable aspects of a population b) Values: cultural values, collectivist (community goals) or individualist (personal goals) cultures. c) Norms: rules dictating what is right or wrong. Three types: customs, mores and conventions. d) Language e) Ethnocentrism: prefering products/people of own culture over those from other countries.
Step 3: Set organisational/SBU objectives: goals that broadly identify what the firm hopes to accomplish within the general time frame of its longrange business plan. Objectives need to be SMART to be effective: Specific, Measurable, Attainable, Relevant, Timebound Step 4: Establish business portfolio (range of different businesses that a large firms operates in). Portfolio analysis: tool management uses to asses the potential of a firm’s business portfolio.
BCG Growth-market share matrix:
- Stars: SBUs whose products have a dominant market share in high-growth market generate large revenues, but require large amounts of funding to keep up with production and promotion demands.
- Cashcows: SBUs whose products have a dominant market hare in a low-growth market firm can sustain high market share with minimal funding use profits to fund the growth of other SBUs.
Consumer behaviour: process individuals/groups go through to select, purchase use and dispose of goods/services/ideas or experiences to satifsy their needs and desires
- Habitual decisions low perceived risk and involvement make purchases automatically respond to environmental clues behaviroual learning
- Important decisions high perceived risk and involvement extended problem-solving go through all steps careful processing of information cognitive learning Consumer decision making process:
- Problem recognition: significant difference between current state and desired state
- Information search: consumer searches for appropriate information to make resonable decision
- Evaluation of options: identifying and comparing options on basis of evaluative criteria
- Product choice: deciding on one product and acting on this choice
- Post-purchase evaluation: judging performance against expectations consumer (dis)satisfaction Heuristics: mental rule of thumb simplifies process fast decision (most common: brand loyalty)
Three main categories of influences that affect consumers’ decision-marking process:
- Internal influences a) Perception: select, organise and interpret stimuli (exposure, attention and interpretation) b) Motivation: internal state that drives us to satisfy needs c) Learning: change in behaviours caused by information or experience i) Behavioural learning: learning takes place as a result of conncetions that form between events that we perceive consumer behaviour is changed by external events/stimuli. ii) Cognitive learning: stresses importance of internal mental processes and views people as problem solvers who use information from world around them to master environment d) Attitudes: lasting evalutation of a person/object/issue, consisting of three components: i) Affect: (feeling) overall emotional response to a product ii) Cognition: (knowing) beliefs/knowledge about a product and its important characteristics iii) Behaviour: (doing) consumer’s intention to do something. e) Personality: unique psychological characteristics that consistently influence the way a person responds to situations in the environment. Personality traits relevant to marketing strategies: i) Innovativeness: degree to which a person likes to try new things ii) Materialism: amount of emphasis places on owning products iii) Self-confidence: degree to which a person has a positive evalution of his/her abilities iv) Sociability: degree to which a person enjoys social interaction v) Need for cognition: degree to which a person likes to think about things and expend the necessary effort to process brand information f) Age groups. Family life circle: stages through which family memebers pass as they grow older g) Lifestyle: pattern of living that determines how people choose to spend their time, money and energy and that reflects their values, tastes and preferences. Psychographics: psychological, sociological and anthropological factors to construct market segments.
- Situational influences: physical environment and time
- Social influences a) Culture: values, beliefs, customs and tasted produced or practrised by a group of people b) Subculture: group coexisting with other groups in larger culture whose memebers share a distincitve set of beliefs or characteristics. c) Social class: overall rank of people in society. d) Group membership i) Reference group: set of people a consumer wants to please or imitate ii) Conformity: person changes as a reaction to real or imagined group pressure iii) Opinion leaders: person who influences other’s attitudes or behavirours because others percieve them as possessing expertise about the product.
Consumer-to-consumer e-commerce: online communications and purchases that occur among individuals without directly involving the manufacturer or retailer.
Business-to-business marketing: marketing of goods/services that businesses and other organizations need to produce other goods/services, for resale or to support their operations. Business-to-business markets include manufacturers, wholelers, retailers and other organisations. Business market: few and large buyers, higher prices and quantities, often geographic concentration. Business-to-business demand is:
- Derived demand: business’s demand comes directly or indirectly from consumer demand
- Inelastic demand: changes in price have little/no effect on the amount demanded
- Fluctuating demand: small changes in consumer demand can create large increses/decreses in business demand and business customers tend to purchase certain products infrequenttly because of product’s life expectancy.
- Joint demand: two or more goods are necessary to create a product.
Three major classes of business–to-bussiness customers:
- Producers: purchase products for production of other goods that they in turn sell to make a profit
- Resellers: buy finished goods for the purpose of reselling, renting or leasing to other businesses.
- Organisations: buy goods to fulfill their objectives (governments and not-for-profit institutions)
Buy class framework: identifies degree of effort required by firm’s personell to collect information and make a purchase decision. three different buying situations:
- Straight re-buy: routine purchase of items that a business-to-business customer regularly needs.
- Modified re-buy: firm wants to shop aroudn for suppliers with better pries/qualities/deliver times.
- New-task buy: first-time purchase uncertainty, risk and no previous experience
Buying center: group of people in the organisation who participate in the decision-marking process. Roles:
- Initiator: recognises that e purchase needs to be made
- User: will ultimately use the product
- Gatekeeper: controls flow of information to others in the organisation
- Influencer: affects decision by giving advice and sharing expertise
- Decider: makes final purchase decision greatest power within buting center
- Buyer: executes purchase decision.
Business Buying Decision-making process.
- Problem recognition: purchase requisiton/request made and buying centre formed
- Information search: develop product specifications, identify potentail suppliers, obtain proposals.
- Evalution of options: evaluating proposals, obtaining and evaluating samples
- Product and supplier selection: issue purchase order a) Single sourcing: buyer and seller work quite closely together b) Multiple sourcing: buying product from several different suppliers price competitive c) Outsourcing: obtaining outside suppliers to provide goods that might otherwise be supplied inhouse. Reciprocity: buyer and seller are each other’s customer limit effect of free market competition Reverse marketing: buyer tries to identify suppliers who will produce product according to the buyer firm’s specifications.
- Postpurchase evaluation: survey users, document performance
Busines-to-business e-commerce: online exchange of information, products, services or payments between two or more businesses/organisations. Intranet: secure intenral corporate network used to link company departments, employees and databases Extranets: link company with authorised suppliers, customers or other ouside the organisation.
Alexander & Korine: “When You Shouldn’t Go Global”
Three main questions to consider when deciding to go global with a product:
- Are there potential benefits for our company? Race to globalize sometimes leads people to overestimate the size of the prize.
- Do we have the necessary management skills? Theorethical advantages of globalizing are devilishly difficult to achieve in practive and companies often lack the management key neeed to unlock the coffer holding the prize.
- Will the costs outweigh the benefits? Unanticipated collateral damage to your business may make the endeavor counterproductive. Companies fail to see that full costs fo going global may dward even a sizable prize.
Payne & Frow: “A Strategic Framework for Customer Relationship”
Five Customer Relationship Management processes:
- Strategy development process: succes of CRM strategy is fundamentally affected by: a) Bussiness strategy: articulation of vision and review of industry and competitive environment. b) Customer strategy: examining extisting/potential customer base and identifying which forms of segmentation are most approprite consider segment granularity (level of subdivision).
- Value creation process: business and customer strategy specific value proposition statements. Three key elements: a) Value customer receives: benefits that enhance customer offer. i) Value proposition: relationship among performance of product, filfillment of customer’s needs and total cost to customer over customer relationship life cycle. ii) Value assessment: quantify relative importance customers place on attributes of product. b) Value organization receives: determine how existing/potential customer profitablility varies across different customers and customer segments acquisition and retention economics c) Managing value exchange: cocreation and maximizing lifetime value of customer segments.
- Multi-channel integration process: outputs of business strategy and value creation process value-adding activities with customers represents the point of cocration of customer value. a) Channel options: six categories broadly bases on balance of physical or virtual contact: sales force, outlets, telephony, direct marketing, e-commerce and m-commerce b) Integrated channel management: uphold same high standards across multiple, diffent channels establish set of standards for each channel that defines outstanding customer experience.
- Information management process: collection, collation and use of customer data and information from all customer contact points to generate customer insight and appropriate marketing responses. Five key material elements of information management: data repository, IT systems, analytical tools, front office (support all those activiteites that involve direct interface with customers) and back office applications (support internal administration activiteis and supplier relationships).
- Performance assessment process: ensuring that organization’s strategic aims in term of CRm are eing delivered to an appropriate and accpetable standard and that a basis for future improvement is established. Two main components: a) Shareholder results: build employee/customer/shareholder value and reduce costs (macro view). b) Performance monitoring: standards, metrics and key performance indicators (micro view).
CRM: implementation of an integrated series of customer-oriented technology solutions. CRM continuum:
- Broad/strategic CRM: holistic approach to managing customer relationships to create shareholder value involving entire company not one specific, but many solutions need to be considered.
- Narrow/tactical CRM: implementation of a specific technology solution project.
Organizations: collections of people who work together and coordinate their actions to achieve a wide variety of goals or desired future outcomes Management: planning, organizing, leading and controlling of human and other resources to achieve organizational goals effciently and effectively.
1) Efficiency: measure of how productively resources are used to achieve a goal minimizing input
- Effectiveness: measure of the approporateness of the goals an organization is pursuing and of the
degree to which the organization achieves those goal choosing and achieving appropriate goals
Four essential managerial tasks:
- Planning: identifying and selecting appropriate organizational goals and courses of action a) Deciding which goals the organization will pursue b) Deciding what strategies to adopt to attain those goals c) Deciding how to allocate organizational resources to pursue the strategies that attain those goals
- Organizing: structuring working relationships so organizational members work together to achieve organizational goals creation of organizational structure: formal system of task and reporting relationships that coordinates and motivaties organizational members so thathey work together to achieve organizational goals determines how resources can be best used to create goods
- Leading: articulating clear vision and energizing and enabling organizational members understand the part they play in achieving organizational goals highly motivated and committed workforce
- Controlling: evaluating how well organization is achieving goals and taking action to maintain or improve performance measure performance accurately and regulate efficiency and effectiveness.
Organizations normally have three levels of management:
- First-line managers/supervisors: responsible for daily supervision of nonmanagerial employees.
- Middle managers: responsible for developing and utilizing resources efficiently and effectively
- Top managers: responsible for performance of all departments (crossdepartmental responsibility). establishes organizational goals, decides how departments should interact. Top-management team: CEO, COO, president and heads of most important departments. Education and experience help managers ecquire and develop three types of managerial skills:
- Conceptual skills: ability to analyze and diagnose situation and distinguish between cause and effect
- Human skills: ability to understand, alter, lead and control behaviour of other individuals/groups.
- Technical skills: job-specific knowledge and techniques required to perform an organizational role. Core competency: specific set of departmental skills, knowledge and experience that allows one organization to outperform another competitive advantage
Two major factors that have led to changes in tasks and responsibilities of managers:
- Global competition increased pressure on managers to improve efficiency and effectiveness
- Advances in new IT improves managers ability to plan, organize, lead and control, and allows employees to become more skilled, specialized and productive. Principle ways in which managers have sought to increase efficiency and effectiveness:
- Restructuring: simplifying/shrinking/downsizing organization’s operations to lower operating costs. Outsourcing: contracting with company to have it perform an activity the organizaton previously
performed itself lower operating costs freeing money and resources increases efficiency.
2) Empowerment: expansion of employees’ knowledge, tasks and responsibilities performance gains
Selfmanagement teams: group of employees who assume responsibilty for organizing controlling and supervising own activities and monitoring the quality fo the goods and services they provide.
Five major challenges for managers in a global environment:
- Building competitive advantage: ability to outperform other organizations, because it produces desired goods/services more efficiently and effectively than they do. Four building blocks are superior efficiency, quality, (speed, flexibility and) innovation and responsiveness to customers. Turnaround management: creation of new vision for struggling company based on new approach to planning and organizing to make better use of company’s resources to allow it to survive and prosper.
- Maintaining ethical and socially responsible standards
- Managing diverse workforce
- Utilizing new information systems and technologies
- Practicing global crisis management
Global environment: set of forces and conditions that operate beyond an organization’s boundaries but affect manager’s ability to acquire and utilize resources opportunities and threaths. Two components:
- Task environment: forces and conditions that originate with global suppliers, distributors, customers and competitors that influence amangers on a daily basis most immediate/direct effect a) Suppliers: sole source of input and input is vital to organization strong bargaining position.
many suppliers for input organization strong bargaining position lowcost highquality inputs
b) Distributors: large, powerful control customers’ acces to organization’s goods threathen
organization by demanding lower price. Many options distributor’s power weakened. c) Customers: changes in number and type of customers and their tastes and needs d) Competitors: high rivalry price competition reduce access to resources lower profit. Potential competitors new competitors competition increases prices and profits decrease. Barriers of entry: factors that make it difficult and costly for company to enter. High barriers to entry fewer competitors in task environment lower threat of competition easier to obtain customers and keep prices high. Three main sources: i) Economies of scale: cost advantages associated with large operations ii) Brand loyalty: preference for product of organization currently existing in task environment iii) Government regulations: high level of new entry after deregulation. 2) General environment: global, economic, technological, sociocultural, demographic, political and legal forces that affect organization and task environment difficult to identify and respond to. a) Economic forces: affect general health and well-being of a country or world region. b) Technological forces: outcomes of changes in technology that managers use c) Sociocultural forces: pressures emenating from social structure or national culture d) Demographics forces: outcomes of changes in ( attitudes towards) characteristics of a population e) Political and legal forces: outcomes of changes in laws/regulations (political/legal developments)
Globalization: set of specific and general forces that work together to integrate and connect, economic, political and social systems across countries, cultures or geographic regions nations and people become increasingly interdependent and similar. Globalization and flow of human, financial, resource and political capital open global environment. Main factors that have speeded globalization by freeing movement of capital:
- Declining barriers to trade and investment: free trade best way to foster healthy domestic economy. Tariff: tax that a government imposes on imported goods protect domestic industries and jobs. Free-trade doctrine: each county specializes in production of goods/services that it can produce most efficiently best use of global capital resources lower prices.
- Declining barriers of distance and culture
Norms: unwritten, informal codes of conduct that prescribe how people should act in particular situaitons and are consider important by most members of a group or organization. Two types:
- Folkways: routine social conventions of everyday life
- Mores: norms that are considered to be central to functioning of society and to social life
Hofstede’s Model of National Culture: five dimensions along which national cultures can be placed:
- Individualism: worldview that values individual freedom and self-expression; principle that people should be judged by their individual achievements rather than by their social background
- Collectivism: worldview that values subordination of the individual to the goals of the group; principle that people should be judged by their contribution to the group.
2) - Low power distance: large inequalities between citizens are not allowed to develop taxation and
social welfare programs to reducne inequality and improve the welfare of the least fortunate.
- High power distance: inequalities allowed to persist or grow over time gap between rich and poor, with all the attendant political and social consequences, grows very large.
- Achievement orientation: assertiveness, performance, success and competition
- Nurturing orientation: quality of life, warm personal friendships and services/care for the weak
- Low uncertainty avoidance: value diversity and tolerate differences in personal beliefs/actions
- High uncertainty avoidance: rigid/skeptical about people whose behaviours/beliefs differ from the norm, value conformity to values of social/work groups and structured situations.
- Short-term orientation: values personal stability/happiness and living for the present
- Long-term orientation: values thrift and persistence in achieving goals.
Decisionmaking: managers respond to opportunities and threaths by analyzing options and making determinations about sepcific organizational goals and courses of action increase/lower performance.
Programmed decisionmaking: rules/guidelines routine, virtually automatic decision-making.
Nonprogrammed decisionmaking: unusual, unpredictable opportunities/threats nonroutine decision making. Absence of decision rules managers may rely on intuition or reasoned judgement.
Classical model: decision maker can identify and evaluate all possible alternatives and their
consequences and rationally choose the most appropriate course of action optimum decision.
- Administrative model: decision making is inherently uncertain and risky and managers usually make satisfactory rather than optimum decision. Based on three concepts: a) Bounded rationality: cognitive limitations constrain ability to interpret/process information. b) Incomplete information due to risk and uncertainty, ambiguous information (can be interpreted in multiple and often conflicting ways) and time constraints and information costs. c) Satisficing: exploring limited sample of potential alternatives searching/choosing acceptable or satiffactory response to problems/opportunities rather than trying to make best decision.
Six steps in decisionmaking process:
- Recognize need for decision: proactive (internal stimuli) or reactive ( external stimuli).
- Generate alternatives: set of feasible alternative courses of action in response to opportunity/threath.
- Asses alternatives: legality, ethicalness, economic feasibility and practicality evaluate pros/cons.
- Choose among alternatives: rank various alternatives (using criteria) and make a decision
- Implement chosen alternative: implement alternative and make subsequent and related decisions.
- Learn from feedback: retrospective analysis learn from successes/failures learn from experience
Groupthink: members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision pattern of faulty/biased decision making. Can be counteracted by:
- Devil’s advocacy: critical analysis of preferred alternative, made in response to challgenges raised by a group member defends unpopular or opposing alternatives for the sake of argument.
2) Diversity broadens range of life experiences and opinions and less prone to groupthink.
Organizational learning: improve employees’ desire and ability to understand/manage organization and its task environment employees can make decisions that continuously raise organizational effectivess. Learning organization: maximize ability of individuals/groups to think/behave creatively maximize potential for organziational learning to take place. Five principles for creating a learning organization:
- Develop personal mastery empower employees and allow them to experiment/create/explore.
- Build complex, challenging mental models find new/better ways of performing a task
- Promote team learning
- Build shared vision (mental model organizational members use to frame problems/opportunities).
- Encourage systems thinking recognize the effect of one level of learning on another.
Promoting individual creativity: giving opportunity and freedom to generate new ideas, giving opportunity to experiment, to take risks and to make mistakes and learn from them, providing constructive feedback, stress importance of looking for alternative solutions and visibly reward creativity. Promoting group creativity: prevent groupthink and uncover biases three group decision-making techniques: brainstorming (face-to-face), nominal group technique (read) and delphi technique (written).
- Entrepreneur: individual who noticees opportunities and decides how to mobilize the resources necessary to produce new/improved goods/services. important source of creativity high on openness to experience, self-esteem and need for achievement, internal locus of control
- Intrapreneur: manager/scientist/researcher who works inside an organization and notices opportunities to develop new/improved product and batter ways to make them Higher level of intrapreneurship higher level of learning and innovation. Promote intrapreneurship:
- Product champion: managers who takes “ownership” of project and provides leadership and vision.
- Skunkworks: group of intrapreneurs who are deliberateely seperated from the normal operation of an organzational to encourage them to devote allt heir attention to developing new products
- Rewards for innovation: rewarding entrepreneurs on basis of outcome of product development process if product succeeds: large bonusses/stockoptions, promotion to ranks of top management.
Organizational structure: formal system of task/job reporting relationships that coordinates/motivates organizational members work together to achieve organizational goals. Four main determinants:
- External environment: changing ( flexible structure) or stable ( formal structure control)
- Strategy: low-cost ( formal structure) or vertical integration/diversification ( flexible structure).
- Technology: complicated ( flexible structure, progressive culture) or routine ( formal structure).
- Human resources: highly skilled workforce ( flexible structure, professional culture). In general: higher level of uncertainty associated with these factors more approporate is flexible adaptable structre as opposed to a formal rigid one
Organizational design: managers make specific organizing choices particular organizational structure Job design: process by which managers decide how to divide tasks into jobs. Three ways:
1) Job simplification: reducing number of tasks each worker performs may reduce efficiency.
2) Job enlargement: increasing number of tasks by changing division of labor increase motivation.
3) Job enrichment: increasing degree of responsibility worker has over job increase involvement.
Job characteristics model: five characteristics determine how motivating job is: skill variety, task identity, task significance, autonomy and feedback.
Divisional structures allows managers to respond more quickly and flexibly to circumstances.
- Product structure: each productline/business is handled by self-contained division specialization of functional managers, expertise of division’s managers and latitude of corporate managers.
- Geographic structure: each region of country of area of world is served by self-contained division.
- Market/customer structure: each kind of customer is served by self-contained division allows managers to be responsive to needs of customers and act flexibly in makign decisions in response to customers changing needs. IT or customers needs are changing rapidly and environment is very uncertain more flexibility needed:
- Matrix structure: simultaneously groups people and resources by function and by product
- Product team structure: employees are permanently assigned to cross-functional team and report only to product team manager of to one of his/her direct subordinates. Cross-functional team: group of managers brought together from different departments to perform organizational tasks.
- Hybrid structure: large organization: many divisions and simultaneously many different structures
Complex structure greater problems of linking and coordinating diffrenct functions/divisions. Hierarchy of authority: organization’s chain of command, specifying relative authority of each manager. Company grows hierarchy of authority lengthens (more levels) taller organizational structure. Decentralizing authority: giving lower-level managers and nonmanagerial employees the right to make important decisions about how to use organizational resources keep organizational hierarchy flat. Advantages: problems of slow/distorted communication kept to minimum, fewer managers needed, employees are better able to recognize and respond to customer needs, increases flexibility. Too much decentralization divisions/functions/teams may begin to pursue own goals at expense of organizational goals; lack of cummunication among functions and divisions prevents synergies.
Integrating mechanisms increase communication and coordination among functions and divisions:
direct contact, liaison roles (responsibility for coordinating with other function and transmitting information), task forces/ad hoc committee (managers from various functions/divisions who meet to
solve a specific mutual problem temporary), cross-functional teams, integrating roles ( performance
gains from synnergies) and matrix structure (formed from complex integrating mechanisms flexible).
Increasing globalization and use of new IT two innovations in organizational architecture:
- Strategic alliance: formal agreement that commits companies to exchange/share their resources. Network structure: series of strategic alliances that organizaiton created with suppliers, manfacturers and /or distributors to product and market product. allow organization to manage global value chain find new ways to reduce coststs and increase the quality of product boundaryless organization.
- Business-to-business network: group of organizatiosn that join together and use IT to link themselves to potential global suppliers to increase effciency and effectiveness.
Controlling: process whereby managers monitor and regulate how efficiently and effectively organization and members are performing activities necessary to achieve organizational goals. Three types of control: feedforward (anticipate problems), concurrent (immediate feedback), feedback (customer’s reactions).
Four steps of control process:
- Establishing performance standards efficiency, quality, responsiveness to customers, innovation
- Measuring actual performance behavior of members and actual outputs that result from this.
- Comparing actual performance against performance standards decide if corrective action is needed
- Evaluating results and initiating corrective action if needed
Three organizational control systems that managers use to coordinate and motivate employees to ensure they pursue superior efficiency, quality, innovation and responsiveness to customers:
- Output control keeping managers and employees at all levels motivated and organization on track. a) Financial measures of performance: profit, liquidity, leverage and activity ratios. b) Organizational goals: specific, difficult goals challenge and stretch managers’ ability. c) Operating budgets: budget that states how managers intend to use organizational resources.
- Behavior control shape behavior, induce workers to work toward achieving organizational goals. a) Direct supervision: managers actively monitor and observe behavior of subordinates, teach subordinates the behaviors that are appropriate and inappropriate and intervene to take corrective action as needed. managers can lead by example effective way of motivating employees and promoting behaviors that increase efficiency and effectiveness. b) Management by objectives: goal-setting process in which manager and each of his/her subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate the extent to which the subordinate is achieving those goals. c) Bureaucratic control: control of behavior by means of comprehensive system of rules and SOPs. Overly bureaucratic slow decision making and managers react slowly to changing conditions. Too much standardization reduce learning get organization off track.
- Organizational culture/clan control make control possible in situations where mangers cannot use output or behavior control and strong organizational control employees focus on thinking about what is best for the organization in the long run. Organizational culture: values, norms, standards of behavior and common expectations that control way in which individuals/groups in organization interact and work to achieve organizational goals. a) Adaptive culture: help build momentum, grow/change to achieve goals and be effective. b) Inert culture: fail to motivate/inspire employees lead to stagnation/failure over time. Clan control: control exerted on individuals/groups in an organization by organizational culture. Need to balance two opposing forces in control process that influence the way organizations change:
- Ability to control activities and make operations routine and predictable
- Be responsive to need to change and realize when they need to depart from routines to be responsive to unpredictable events.
Organizational change increase efficiency and effectiveness. Four steps to manage change effectively:
- Assessing the need for change recognizing that there is a problem and identifying its source
- Deciding on the change to make decide what organization’s ideal future state would be (and how to attain this state) and identify obstacles to change. Sources of resistance can be overcome by improving communication, empowering employees and emphasizing group/shared goals.
3) Implementing the change decide whether change will occur from top down (top managers identify
what needs to be changed and then move quickly to implement the changes throughout the organization (fast/revolutionary)) or bottom up (managers at all levels work together to develop a detailed plan for change (gradual/evolutionary) and introduce and manage change. 4) Evaluating the change compare prechange with postchange performance and use benchmarking. Benchmarking: comparing performance with performance of other, high-performing organizations.
Entrepreneurs: people who notice opportunities and collect and mobilize resources necessary to produce new and improved goods/services
Intrapreneurs: employees in existing companies who notice opportunities to improve companies’ product and become responsible for managing the development process. Intrapreneurs become entrepreneurs and found companies that may compete with companies they left.
Group: two or more people who interact to accomplish certain goals or meet certain needs. a) Formal groups: a group that managers establish to achieve organizational goals b) Informal group: a group that managers or non-managerial employees form to help achieve their own goals or meet their own needs i) Friendship group enjoy one another’s company and socialize with one another ii) Interest group achieve a common goal related to their membership in an organization.
Teams: group whose members work intensely with one another to achieve common goal/objective. a) Cross-functional teams: managers from different departments perform organizational tasks. b) Cross-cultural teams: members from different cultures/countries. c) Top-Management team: composed of CEO, president and heads of most important departments d) Research and development teams: a team whose members have the expertise and experience needed to develop new products. e) Command groups (department/unit): subordinates who report to the same supervisor f) Task forces (ad hoc committee): a committee of managers or non-managerial employees from various departments or divisions who meet to solve a specific, mutual problem. g) Self-managed work team: supervise own activities and monitor quality of goods they provide. h) Virtual team: members rarely/never meet face-to-face but interact by using various forms of IT.
Groups and teams can help organization gain a competitive advantage because they can:
- Enhance performance: individuals/departments coordinate actions performance gains synergy.
- Increase responsiveness to customers: cross-functional teams diversity of expertise and knowledge
- Increase innovation: uncover errors or false assumptions, critique approaches and build off strengths
- Increase motivation and satisfaction: satisfy need for engaging in social interaction, feeling connected
Group dynamics determine the ways in which groups function and their effectiveness:
- Group size and roles: Small groups: interact more, easier to coordinate efforts, more motivated, satisfied and committed, easier to share information, better able to see importance of personal contributions for group success. Large groups: more resources at their disposal to achieve group goals, enable managers to obtain advantages stemming from division of labor. Role making: taking the initiative to modify assigned role by assuming additional responsibilities.
- Group leadership: formal (appointed by manager) or informal (emerge naturally in group) leaders.
- Group development over time: five stages that many groups seem to pass through: a) Forming: get to know each other and reach common understanding of goals and behavior. b) Storming: experience conflict and disagreements c) Norming: close ties between group members develop and friendship/camaraderie emerge. d) Performing: real work of group gets accomplished e) Adjourning: group is dispersed (sometimes when group completes finished product).
- Group norms: shared rules for behavior that most group members follow.
Encouraging a balance of conformity and deviance (violation of a group norm) high performance.
Low conformity and high deviance group can’t control its members behavior low performance.
High conformity and low deviance group fails to change dysfunctional norms low performance.
- Group cohesiveness: degree to which members are attracted/loyal to group needs to be moderate. Three major consequences of group cohesiveness are level of participation and communication, level of conformity to group norms and emphasis on group goal accomplishment. Four factors that contribute to level of group cohesiveness: Small/medium group size, effectively managed diversity, group identity and healthy competition and success
Groups/teams perform at high level and contribute to organizational effectiveness when managers:
- Motivate members to achieve organizational goals members themselves benefit when group/team performs highly.
- Reduce social loafing (putting forth less effort when working in groups than when working alone). a) Making individual contributions to a groups identifiable. b) Emphasizing the valuable contributions of individual members. c) Keeping group size at an appropriate level.
Appendix A
Taylor: increasing specialization and division of labor reducing amount of time and effort that each worker expends to produce unit of output production process will become more efficient. Scientific management: systematic study of relationships between people and tasks for the purpose of redesigning work processes to increase efficiency. Taylor developed four principles to increase efficiency in the workplace:
- Study the way workers perform their tasks, gather all the informal job knowledge that workers posses and experiment with ways of improving the way tasks are performed discover most efficient method of performing specific tasks
- Codify new methods of performing tasks into written rules and standard operating procedures standardize and simplify jobs increase efficiency.
- Carefully select workers so that they posses skills and abilities that match needs of task and train them to perform task according to established rules/procedures increase specialization.
- Establish a fair/acceptable level of performance for task and develop a pay system that provides a reward for performance above the acceptable level encourage workers to perform at high level of efficiency and reveal most efficient techniques for performing a task.
Weber: bureaucracy: formal system of organization/administration ensure efficiency and effectiveness. Weber created bureaucratic theory and five famous principles of bureaucracy:
- Manager’s formal authority derives from position he/she holds in an organization.
- People should occupy positions because of performance (not social standing or personal contacts).
- Formal authority, task responsibilities and relationship to other positions should be clearly specified.
- Authority can be exercised effectively in an organization when positions are arranged hierarchically.
- Well-defined system of rules, SOPs and norms effectively control behavior within an organization.
Follet: management often overlooks multitude of ways in which employees can contribute to organization when managers allow them to participate and exercise initiative in their everyday work lives workers should be involved in job analysis and allowed to participate in work development process. Workers have relevant knowledge they, rather than managers, should be in control of work process managers should behave as coaches and facilitators knowledge and expertise, not manager’s formal authority, should decide who would lead horizontal view of power and authority. Recognized the importance of having managers in different departments communicate directly with advocated “cross-functioning”: members of different departments working together in cross- departmental teams to accomplish projects speeds decision making. Believed that power is fluid and should flow to person who can best help organization achieve its goals.
Hawthorne: how characteristics of work setting (specifically level of lighting/illumination) affect worker fatigue and performance regardless of whether they raised/lowered the level of illumination, productivity raised presences of researchers was affecting results Hawthorne effect: manager’s behavior or leadership approach can affect worker’s level of performance Human relations movement: behaviorally train supervisors to manage subordinated in ways that elicit their cooperation and increase productivity Organizational behavior: study of factors that have an impact on how individuals/groups respond to and act in organizations.
McGregor: proposed that two different sets of assumptions about work attitudes/behaviors dominate the way managers think and affect how they behave in organizations:
- Theory X: set of negative assumptions about workers that lead to the conclusion that manager’s task is to supervise workers closely and control their behavior (by means of rewards and punishment). (lazy, dislikes work, try to do as little as possible, little ambition and wish to avoid responsibility maximize control over worker’s behavior and minimize worker’s control over pace of work).
- Theory Y: set of positive assumptions about workers that lead to the conclusions that a manager’s task is to create a work setting that encourages commitment to organizational goals and provide opportunities for workers to be imaginative and to exercise initiative and self-direction. (not inherently lazy, dislike work and , if given opportunity, will do what is good for organization work setting determines whether workers consider work to be source of satisfaction or punishment).
Summary Marketing: Real People Real Choices, Michael R. Solomon; Greg W. Marshall; Elnora W. Stuart and Lecture Notes
Course: Management of Organisations and Marketing (EBC1002)
University: Maastricht University
This is a preview
Access to all documents
Get Unlimited Downloads
Improve your grades
