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Exam 3 - Flashcards

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Class:MGT 415 - BUSINESS STRATEGY
Subject:MANAGEMENT
University:Clemson University
Term:Fall 2012
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Strategic Control the process of monitoring and correcting a firm's strategy and performance
Traditional Approach to Strategic Control a sequential method of organizational control in which (1) strategies are formulated and top management sets goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set
Informational Control a method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization's goals and strategies and the strategic environment
Behavioral Control a method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries
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Organizational Culture a system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms
Reward System policies that specify who gets rewarded and why
Boundaries and Constraints rules that specify behaviors that are acceptable and unacceptable
Corporate Governance the relationship among various participants in determining the direction and performance of corporations; the primary participants are the shareholders, the management, and the board of directors
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Corporation a mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party
Agency Theory a theory of the relationship between principals and their agents, with emphasis on two problems: (1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents, and (2) the different attitudes and preferences toward risk of principals and agents
Board of Directors a group that has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners of a corporation and that acts as an intermediary between the shareholders and management
Shareholder Activism actions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization
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External Governance Control Mechanisms methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system
Market for Corporate Control an external control mechanism in which shareholders dissatisfied with a firm's management sell their shares
Takeover Constraint the risk to management of the firm being acquired by a hostile raider
Principal-Principal Conflicts conflicts between two classes of principals - controlling shareholders and minority shareholders - within the context of a corporate governance system
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Expropriation of Minority Shareholders activities that enrich the controlling shareholders at the expense of the minority shareholders
Business Groups a set of firms, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action
Organizational Structure the formalized pattern of interactions that link a firm's tasks, technologies, and people
Simple Organizational Structure an organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serves as an extension of the top executive
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Functional Organizational Structure an organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally
Divisional Organizational Structure an organizational form in which products, projects, or product markets are grouped internally
Strategic Business Unit (SBU) Structure an organizational form in which products, projects, or product market divisions are grouped into homogenous units
Holding Company Structure an organizational form that is a variation of the divisional organizational structure in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters
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Matrix Organizational Structure an organizational form in which there are multiple lines of authority and some individuals report to at least two managers
International Division Structure an organizational form in which international operations are in a separate, autonomous division; most domestic operations are kept in other parts of the organization
Geographic-Area Division Structure a type of divisional organizational structure in which operations in geographical regions are grouped internally
Worldwide Matrix Structure a type of matrix organizational structure that has one line of authority for geographic-area divisions and another line of authority for worldwide product divisions
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Worldwide Functional Structure a functional structure in which all departments have worldwide responsibilities
Worldwide Product Division Structure a product division structure in which all divisions have worldwide responsibilities 
Global Start-Up a business that, from inception, seeks to derive significant advantage from the use of resources and the sale of outputs in multiple countries
Boundaryless Organizational Designs organizations in which the boundaries, including vertical, horizontal, external, and geographic boundaries, are permeable
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Barrier-Free Organization an organizational design in which firms bridge real differences in culture, function, and goals to find common ground that facilitates information sharing and other forms of cooperative behavior
Modular Organization an organization in which nonvital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control
Virtual Organization a continually evolving network of independent companies that are linked together to share skills, costs, and access to one another's markets
Horizontal Organizational Structures organizational forms that group similar or related business units under common management control and facilitate sharing resources and infrastructures to exploit synergies among operating units and help to create a sense of common purpose
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Adaptibility managers' exploration of new opportunities and adjustment to volatile markets in order to avoid complacency
Alignment managers' clear sense of how value is being created in the short term and how activities are integrated and properly coordinated
Ambidextrous Organizational Designs organizational designs that attempt to simultaneously pursue modest, incremental innovations as well as more dramatic, breakthrough innovations
Leadership the process of transforming organizations from what they are to what the leader would have them become
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Setting a Direction a strategic leadership activity of strategy analysis and strategy formulation
Designing the Organization a strategic leadership activity of building structures, teams, systems, and organizational processes that facilitate the implementation of the leader's vision and strategies
Excellent and Ethical Organizational Culture an organizational culture focused on core competencies and high ethical standards
Integrative Thinking a process of reconciling opposing thoughts by generating new alternatives and creative solutions rather than rejecting one thought in favor of another
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Barriers to Change characteristics of individuals and organizations that prevent a leader from transforming an organization
Vested Interest in Status Quo a barrier to change that stems from people's risk aversion
Systemic Barriers barriers to change that stem from an organizational design that impedes the proper flow and evaluation of information
Behavioral Barriers barriers to change associated with the tendency for managers to look at issues from a biased or limited perspective based on their prior education and experience
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Political Barriers barriers to change related to conflicts arising from power relationships
Personal Time Constraints a barrier to change that stems from people's not having sufficient time for strategic thinking and reflection
Power a leader's ability to get things done in a way he or she wants them to be done
Organizational Bases of Power a formal management position that is the basis of a leader's power
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Personal Bases of Power a leader's personality characteristics and behavior that are the basis of the leader's power
Emotional Intelligence (EI) an individual's capacity for recognizing his own emotions and those of others, including the five components of self-awareness, self-regulation, motivation, empathy, and social skills
Learning Organizations organizations that create a proactive, creative approach to the unknown, characterized by (1) inspiring and motivating people with a mission and purpose, (2) empowering employees at all levels, (3) accumulating and sharing internal knowledge, (4) gathering and integrating external information, and (5) challenging the status quo and enabling creativity
Benchmarking managers seeking out best examples of a particular practice as part of an ongoing effort to improve the corresponding practice in their own organization
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Competitive Benchmarking benchmarking where the examples are drawn from competitors in the industry
Functional Benchmarking benchmarking where the examples are drawn from any organization, even those outside the industry
Ethics a system of right and wrong that assists individuals in deciding when an act is moral or immoral and/or socially desirable or not
Organizational Ethics the values, attitudes, and behavioral patterns that define an organization's operating culture and that determine what an organization holds as acceptable behavior
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Ethical Orientation the practices that firms use to promote an ethical business culture, including ethical role models, corporate credos and codes of conduct, ethically-based reward and evaluation systems, and consistently enforced ethical policies and procedures
Compliance-Based Ethics Programs programs for building ethical organizations that have the goal of preventing, detecting, and punishing legal violations
Integrity-Based Ethics Programs programs for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior, including (1) enabling ethical conduct; (2) examining the organization's and members' core guiding values, thoughts, and actions; and (3) defining the responsibilities and aspirations that constitute an organization's ethical compass
Corporate Credo a statement of the beliefs typically held by managers in a corporation
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Benefits and Drawbacks of Simple Structure Benefits:
Highly informal
Centralized decision making
Little specialization

Drawbacks:
Employees may not understand their responsibilities
May take advantage of lack of regulation
Benefits and Drawbacks of Functional Structure Benefits: 
Enhanced coordination and control
Centralized decision making
Enhanced organizational-level perspective
More efficient use of managerial and technical talent
Facilitated career paths and development in specialized areas

Drawbacks:
Impeded communication and coordination due to differences in values and orientations
May lead to short-term thinking (functions vs organization as a whole)
Difficult to establish uniform performance standards
Benefits and Drawbacks of Divisional Structure Benefits:
Separation of strategic and operating control
Quick response to important changes in external environment
Minimal problems of sharing resources across functional departments
Development of general management talent is enhanced

Drawbacks:
Can be very expensive
Can be dysfunctional competition among divisions
Differences in image and quality may occur across divisions
Can focus on short-term performance
Benefits and Drawbacks of Strategic Business Unit (SBU) Structure Benefits:
Task of planning and control by the corporate office is more manageable
Individual businesses can react more quickly to important changes

Drawbacks:
May become difficult to achieve synergies
Additional level of management increases overhead expenses
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Benefits and Drawbacks of Matrix Structure Benefits:
Facilitates the use of specialized personnel, equipment, and facilities
Provides professionals with a broader range of responsibility and experience

Drawbacks:
Can cause uncertainty and lead to intense power struggles
Working relationships become more complicated
Decisions may take longer
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List View: Terms & Definitions

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 Strategic Controlthe process of monitoring and correcting a firm's strategy and performance
 Traditional Approach to Strategic Controla sequential method of organizational control in which (1) strategies are formulated and top management sets goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set
 Informational Controla method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization's goals and strategies and the strategic environment
 Behavioral Controla method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries
 Organizational Culturea system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms
 Reward Systempolicies that specify who gets rewarded and why
 Boundaries and Constraintsrules that specify behaviors that are acceptable and unacceptable
 Corporate Governancethe relationship among various participants in determining the direction and performance of corporations; the primary participants are the shareholders, the management, and the board of directors
 Corporationa mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party
 Agency Theorya theory of the relationship between principals and their agents, with emphasis on two problems: (1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents, and (2) the different attitudes and preferences toward risk of principals and agents
 Board of Directorsa group that has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners of a corporation and that acts as an intermediary between the shareholders and management
 Shareholder Activismactions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization
 External Governance Control Mechanismsmethods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system
 Market for Corporate Controlan external control mechanism in which shareholders dissatisfied with a firm's management sell their shares
 Takeover Constraintthe risk to management of the firm being acquired by a hostile raider
 Principal-Principal Conflictsconflicts between two classes of principals - controlling shareholders and minority shareholders - within the context of a corporate governance system
 Expropriation of Minority Shareholdersactivities that enrich the controlling shareholders at the expense of the minority shareholders
 Business Groupsa set of firms, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action
 Organizational Structurethe formalized pattern of interactions that link a firm's tasks, technologies, and people
 Simple Organizational Structurean organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serves as an extension of the top executive
 Functional Organizational Structurean organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally
 Divisional Organizational Structurean organizational form in which products, projects, or product markets are grouped internally
 Strategic Business Unit (SBU) Structurean organizational form in which products, projects, or product market divisions are grouped into homogenous units
 Holding Company Structurean organizational form that is a variation of the divisional organizational structure in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters
 Matrix Organizational Structurean organizational form in which there are multiple lines of authority and some individuals report to at least two managers
 International Division Structurean organizational form in which international operations are in a separate, autonomous division; most domestic operations are kept in other parts of the organization
 Geographic-Area Division Structurea type of divisional organizational structure in which operations in geographical regions are grouped internally
 Worldwide Matrix Structurea type of matrix organizational structure that has one line of authority for geographic-area divisions and another line of authority for worldwide product divisions
 Worldwide Functional Structurea functional structure in which all departments have worldwide responsibilities
 Worldwide Product Division Structurea product division structure in which all divisions have worldwide responsibilities 
 Global Start-Upa business that, from inception, seeks to derive significant advantage from the use of resources and the sale of outputs in multiple countries
 Boundaryless Organizational Designsorganizations in which the boundaries, including vertical, horizontal, external, and geographic boundaries, are permeable
 Barrier-Free Organizationan organizational design in which firms bridge real differences in culture, function, and goals to find common ground that facilitates information sharing and other forms of cooperative behavior
 Modular Organizationan organization in which nonvital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control
 Virtual Organizationa continually evolving network of independent companies that are linked together to share skills, costs, and access to one another's markets
 Horizontal Organizational Structuresorganizational forms that group similar or related business units under common management control and facilitate sharing resources and infrastructures to exploit synergies among operating units and help to create a sense of common purpose
 Adaptibilitymanagers' exploration of new opportunities and adjustment to volatile markets in order to avoid complacency
 Alignmentmanagers' clear sense of how value is being created in the short term and how activities are integrated and properly coordinated
 Ambidextrous Organizational Designsorganizational designs that attempt to simultaneously pursue modest, incremental innovations as well as more dramatic, breakthrough innovations
 Leadershipthe process of transforming organizations from what they are to what the leader would have them become
 Setting a Directiona strategic leadership activity of strategy analysis and strategy formulation
 Designing the Organizationa strategic leadership activity of building structures, teams, systems, and organizational processes that facilitate the implementation of the leader's vision and strategies
 Excellent and Ethical Organizational Culturean organizational culture focused on core competencies and high ethical standards
 Integrative Thinkinga process of reconciling opposing thoughts by generating new alternatives and creative solutions rather than rejecting one thought in favor of another
 Barriers to Changecharacteristics of individuals and organizations that prevent a leader from transforming an organization
 Vested Interest in Status Quoa barrier to change that stems from people's risk aversion
 Systemic Barriersbarriers to change that stem from an organizational design that impedes the proper flow and evaluation of information
 Behavioral Barriersbarriers to change associated with the tendency for managers to look at issues from a biased or limited perspective based on their prior education and experience
 Political Barriersbarriers to change related to conflicts arising from power relationships
 Personal Time Constraintsa barrier to change that stems from people's not having sufficient time for strategic thinking and reflection
 Powera leader's ability to get things done in a way he or she wants them to be done
 Organizational Bases of Powera formal management position that is the basis of a leader's power
 Personal Bases of Powera leader's personality characteristics and behavior that are the basis of the leader's power
 Emotional Intelligence (EI)an individual's capacity for recognizing his own emotions and those of others, including the five components of self-awareness, self-regulation, motivation, empathy, and social skills
 Learning Organizationsorganizations that create a proactive, creative approach to the unknown, characterized by (1) inspiring and motivating people with a mission and purpose, (2) empowering employees at all levels, (3) accumulating and sharing internal knowledge, (4) gathering and integrating external information, and (5) challenging the status quo and enabling creativity
 Benchmarkingmanagers seeking out best examples of a particular practice as part of an ongoing effort to improve the corresponding practice in their own organization
 Competitive Benchmarkingbenchmarking where the examples are drawn from competitors in the industry
 Functional Benchmarkingbenchmarking where the examples are drawn from any organization, even those outside the industry
 Ethicsa system of right and wrong that assists individuals in deciding when an act is moral or immoral and/or socially desirable or not
 Organizational Ethicsthe values, attitudes, and behavioral patterns that define an organization's operating culture and that determine what an organization holds as acceptable behavior
 Ethical Orientationthe practices that firms use to promote an ethical business culture, including ethical role models, corporate credos and codes of conduct, ethically-based reward and evaluation systems, and consistently enforced ethical policies and procedures
 Compliance-Based Ethics Programsprograms for building ethical organizations that have the goal of preventing, detecting, and punishing legal violations
 Integrity-Based Ethics Programsprograms for building ethical organizations that combine a concern for law with an emphasis on managerial responsibility for ethical behavior, including (1) enabling ethical conduct; (2) examining the organization's and members' core guiding values, thoughts, and actions; and (3) defining the responsibilities and aspirations that constitute an organization's ethical compass
 Corporate Credoa statement of the beliefs typically held by managers in a corporation
 Benefits and Drawbacks of Simple StructureBenefits:
Highly informal
Centralized decision making
Little specialization

Drawbacks:
Employees may not understand their responsibilities
May take advantage of lack of regulation
 Benefits and Drawbacks of Functional StructureBenefits: 
Enhanced coordination and control
Centralized decision making
Enhanced organizational-level perspective
More efficient use of managerial and technical talent
Facilitated career paths and development in specialized areas

Drawbacks:
Impeded communication and coordination due to differences in values and orientations
May lead to short-term thinking (functions vs organization as a whole)
Difficult to establish uniform performance standards
 Benefits and Drawbacks of Divisional StructureBenefits:
Separation of strategic and operating control
Quick response to important changes in external environment
Minimal problems of sharing resources across functional departments
Development of general management talent is enhanced

Drawbacks:
Can be very expensive
Can be dysfunctional competition among divisions
Differences in image and quality may occur across divisions
Can focus on short-term performance
 Benefits and Drawbacks of Strategic Business Unit (SBU) StructureBenefits:
Task of planning and control by the corporate office is more manageable
Individual businesses can react more quickly to important changes

Drawbacks:
May become difficult to achieve synergies
Additional level of management increases overhead expenses
 Benefits and Drawbacks of Matrix StructureBenefits:
Facilitates the use of specialized personnel, equipment, and facilities
Provides professionals with a broader range of responsibility and experience

Drawbacks:
Can cause uncertainty and lead to intense power struggles
Working relationships become more complicated
Decisions may take longer
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