Global Sourcing
Global Sourcing
Global sourcing:
1. Good supplier at lesser cost
2. Going across globe for resources
3. BPO = 1/3rd cost in India
Risk of JV
1. Profits are shared
2. Decisions are dependent
3. Copy of technology and take over
4. Start new separate side company with technology copy of the partner company
5. GM in China
a. Legal requirement for automotive
b. JV with GM – 5 years
c. Process, systems, designed, technology, expertise copied from GM – made
another JV within China – poured investment and made another person to control
to cover his tracks
Disadvantage of Subsidiary
Financial risk: entire investment made by main company
Problems in Global Business
1. Meeting demands of foreign stakeholders
a. Without knowing taste, liking, etc. problem to meet demand
b. Stakeholders systems
2. Differences in legal, political systems
a. Government interference
3. Political risks
a. Terrorism
b. Civil wars
c. Military disruptions
d. Shifting political systems
e. New laws and economic policies
4. Political risk analysis technique
a. Send person from your company to different country to do due diligence
b. no company does global business
c. study rules and regulations
d. study political environment
e. research environment
5. Legal Problems
a. Business ownership
b. Negotiating with foreign parties
c. Patents
d. Trademarks
i. Eg: anti-piracy laws etc.
Entrepreneur
o Managing your own unit
Disturbance Handler
o Conflicts
o Strikes
Resource Allocator
o Distribute resource among team
o Time
Negotiator
o Higher management
o MBO – Management by Objective
Involvement of subordinates in setting objectives and performance targets
Figurehead
o Role model
Leader
o Motivation
Liaison
o Link between various departments
o With both internal and external environments
Monitor
o Employees performance
o External environment
Disseminator
o Distribution of roles
Spokesperson
o Representation
TQM:
For every function and process in an organization there is an emphasis on quality. Hence, it is
Total Quality Management.
Constancy of purpose
o Everybody is constantly focused on quality
o Required to not affect the TQM chain
Adopt new philosophy
o If any new technique to improve quality despite the price, adopt it
Stop dependence on mass inspection
o Do minute inspection of each and every good produced
End practice of awarding business on price tag alone
o To achieve TQM one should not customers based on price tag alone
Forever improve system of production and service
Develop modern methods of training on the job
o Despite formal training if the subordinate is not performing well, observe him and
use the feedback gained to help improve his skills
Institute leadership
o Subordinate should come up and object bad quality
Drive out fear
Break down barriers between staff areas
o Interaction between departments
Eliminate slogans, exhortations, Targets for workforce
o Implementation required
Eliminate numerical quotas
Remove barriers to pride of workmanship
o If someone is doing a good job applaud him & award him
Institute a vigorous program of education and Training
Take action to accomplish transformation
Job Description:
On what parameters you will be rated in the organization. A detailed description will be given
for the job.
Example: Sales Manager
b. Cost of Acquiring a customer
c. Attrition Rate
d. FOS
Operatives:
Anybody in the non-management profile is an operative.
History of Management
Adam Smith – Division of Labor
Gantt – Incentives for doing work in less time; bonus for supervisors
Robert Owen’s theory of HR
o No child labor
o Less working hours
o Good working conditions
o Company furnished told and equipment
o Business involvement in community projects (CSR)
Hugo Munsterberg
o Psychology tests for selection (Bernard’s Theory)
o Learning in training
o Study of human behavior for motivation
Mark Follet
o Manager should have Team behavior
Carnegie’s Theory
Make others feel important by appreciating their efforts
o Self esteem need satisfied
Make a good first impression
o As a manager do not de-motivate the sub immediately in the beginning
Let others do the talking, be sympathetic, “never tell a man he is wrong”
Change people by praising good traits and give offender opportunity
Quantitative approach – operational research
o Developed in world war II
o Used as a tool for decision making
o Example: Cost benefit analysis
For every choice you have you associate the cost
Gives optimum decision but not always the best decision
Systems Approach
o Organizations as “Open System”
o Process approach
Parochialism View – narrow focus; one sees things from their own view
CK Prahlad’s (Bottom of the Pyramid) BOP Theory
high
est
seg
me
nt
medium segment
Session 14
Quiz Solutions
Market Research = “evidence based management”
Attrition = efficiency drops, cost incurred for recruiting
Whistle Blower = frauds revealing to higher authority
Fayol’s theory centralization = should the manager consult the employees in the team and
to what extent.
Some Failures in Professional Ethics
For manufacturing and materials management
o Releasing product that are not of consistent quality
Loose trust of customer
Shows inconsistency in quality
o Producing batches of the product that are dangerous and can harm customers
Public will sue
Huge penalty
o Compromising workplace health and safety reduce costs
Theory: Sweat shop concept
Poor working conditions
For sales and marketing managers
o Making unsubstantiated product claims
Example: Mutual Funds & Unit Linked Investment Plan (ULIP)
ULIP: insurance and investment in the stock market
Agent: sir you will get 35% return (but getting this after deduction of
insurance expense which is not mentioned to the customer)
o Unethical advertising
Get fair in one week, unethical
For accounting and finance managers
o “cooking the books”
Scam
Fraud
o Authorizing excessive expenses and perks to managers, customers, suppliers
Managers: Wrongly charging the company and getting personal gain out
of the company
Customers: charged
o Hiding level and amount of top management compensation
Concept: Corporate Governance
When company is suffering, level of compensation should be reduced
relatively to top management also
Shareholders can stop this
For HR managers
o Failing to act fairly
Theory: Fayol’s Equity principle
Not treating all employees equally
Salary
o Excessive encroaching on employee privacy
Crossing the boundaries
Asking personal questions
Checking employee mails for new job offers etc.
o Failing to respond to employee concerns
Entrepreneurship
Risk of time and money
Innovation and growth
o To gain competitive advantage constantly
Identifying opportunities and possible competitive advantage
o Analysis: SWOT
Look at competition and financing options
Establish goals, marketing plan, operations, IT, financial accounting systems
Intrapreneurs
o Companies encourage its talented employees to setup a business
o Company will also have a stake in the setup business
o NIIT was setup by a group of employees working for HCL upon encouragement
Customer Service
Why?
o Because customer has “many” choices
o Important in both product and service
o Repeat purchase
“demanding” customer
Customer – responsive culture, continuous quality improvement
Example: Amex
o Benchmark for quality in service organizations
o If credit card lost, replaced within 2 hours to the door delivery
Training – Satisfying – Revenue Generation
Session 15
Franchiser & Franchisee
Franchiser Perspective
Royalty to Franchiser – upfront commission
Market expansion
No investment
Franchisee agrees to pay percentage of profits to franchiser
Franchisee Perspective
Initial entire investment
Royalty paid regardless of profit or loss
Session 18 - (August 21, 2010)
Johari Window
o Analyze strengths and weaknesses
o HR technique helping manager to analyze his own performance
o Take inputs from others to improve his own performance
Intellectual Capital
Portfolio worker (flexible – full time/part time etc; careers too)
o Shamrock theory
o Able to adapt quickly to different types of works
o Multi-skilled employees
Productivity
o Effectiveness + Efficiency
Upside Down pyramid concept
o Lower level management is most important management function than top
management
Level m
o w e r Level
LLower gm t
mgmt
mtt
m
m
mgmtgggm t
M id d m
Middle le le
m vel
level
l
vve e
le
le
p
p
TTo o
Elements of Organization Culture
Heroes
o Top performers examples given to employees to motivate
o Cite performance of hero in the organization
Ceremonies, rites, rituals
o Inculcating culture of being top performer
o Rewards in open forum
Legends, stories
o Past successes of people
Multicultural Organization*
Has respect for diversity.
Characteristics:
1. Pluralism:
a. Minority, Majority involved taking decisions in all 3 levels
2. Structural integration:
a. Minority culture people present at all levels
b. I should have minority people in all 3 levels
3. Informal network integration:
a. Mentoring & support groups assist in career development of minority members
4. Absence of discrimination
5. Minimum intergroup conflict
Bi-culturalism
Minority tries to adopt the majority culture
Decision Making Process (UNIT 2)
Why decision making for manager?
Self Confidence and decision making
o As a manager your job is to take decisions day to day
o A person who is confident enough can take a decision otherwise he is error prone
Information in decision making
o MIS
Tough Decisions
o Unstructured decision
o Information is not available in MIS
o Entire information not available to take a decision
Crisis conditions and decision making
o Risk, certainty (structured decision) and uncertainty
o Risk decision
There are multiple outcomes
Probability of each outcome is available based on past data
Statistically probability can be determined
o Uncertainty decision
Don’t know the probability of the outcome
Don’t know what are the chances of failure or success
Statistically probability not determined
Unstructured decision
Crisis condition
Data vs. Information
Useful information criteria
o Timely
o High quality (accuracy and reliability)
o Complete (current and up to date)
o Relevant
Getting a “BUY IN” before implementing a decision
o MBO – Management By Objective
Everybody involved (top, middle and lower managements)
Inputs taken from lower management
o Getting acceptance from people who are working for you
Need to heck if the “environment” has changed during implementation
o External environment conditions; environment maybe dynamic
o Decisions may go wrong is external environment does not support you
How to gather information
o Sales person goes to field, gets to know competition and customer
o Evidence based management
o Annual reports of the other companies
o Legal advisers in companies to keep you up to date about legalities
Communicating information to stakeholders
o Shareholder meetings
MIS
o Performance decision of each individual
o Taking proper action
Situation in which decision is vital
Any decision taken based on rational model is called rational decision making
Bounded rationality
o I have information with me through MIS but I am restricting number of
alternatives while taking the decision
o Just satisfying and not maximizing
o Cost benefit analysis is an example
o Intuition Model
HP – COMPAQ acquisition is an example of rationality failure\
o Fiona headed the acquisition
o Acquisition was not supported by enough data
o Without validating the structure of Compaq, culture, etc.
o Not used any information for taking a decision
Intuition
o Opposite of rational decision
o Uncertain decisions
o They succeed when the person has expertise in the respective domain area
o Data may not always support
o May not have past data
o Manager
Based on past experience
Understanding capabilities
Structured Decision
o Refer to SOP for such decisions
o Manager should refer to SOP
Structured Problems:
o Structured problems are those problems that occur on regular basis
o Solution for structured program is programmed decision
o SOP – Standard Operating Procedure - is the solution for structured problems;
programmed decisions; example is salary hike of employees
Un-structured Problems:
o Does not occur on a regular basis
o Past data is not available
o Risk model can be used for solution
o Uncertainty model for intuition based on domain expertise and past experience
Group Decision
More information and expertise
Expand number of alternatives
Avoid tunnel vision
Increased understanding by members
Increased acceptance and commitment by
team
Avoidance of “Biases”
FUNDAMENTALs OF PLANNING
Characteristics of Planning
Alternative Planning
o Benefits of each alternative
o Determine benefit as per the cost
What affects a plan
o Government regulation
o Global economy
o Technology
Good plan has focus
o Example customer needs
Market research
Good plan is Flexible
Planning avoids complacency
Planning improves coordination and control
o Between departments
o Improve the control
Long range plans
o 3+ years into the future
o Top management involved
Short range plans
o 1 year or less
o Middle management involved
Strategic plans
o Vision
o Vision statement is a long term goal
Operational Plans
o Short term activities to implement strategic plans
o Lower Level
Specific vs. Directional Plans
o Specific plans contain numeric data
o Directional plans are plans without numeric data
Single use vs. Standing Plans (SOP)
o Standing plans are for structured types of problems
o Single use plans are for unstructured problems which do not occur on a recurring
basis
Traditional Goal Setting
o Top level as per vision of company sets a plan
o The same is communicated to middle management
o And lower management executes the plan
o Disadvantage:
There is no proper communication from lower management
Top management does not know the ground reality based on external
environments
Lower & middle management is not involved in decision making
This becomes a disadvantage because the lower management actually
knows the ground realities and is the point of contact with various stake
holders like customers, suppliers, etc.
o To avoid this disadvantage we go for MBO method of decision making
Session 22
MBO PROCESS
Overall objectives and strategies are formulated
Objectives are allocated among divisions
Unit managers collaboratively set specific objectives for their units with their managers
Specific objectives are collaboratively set with all department members
Action plans are specified and agreed upon by managers and employees*
Action plans are implemented
Periodic review and feedback
Performance based rewards
Procedures (SOP)
Budget-Plan for resource allocation
Continuous review planning
o Means the plan is reviewed at predetermined time intervals
o Indirect way of keeping pressure on employee
o Control function
Zero based budgeting
o Previous year’s budget for allocation of resources is not considered while making
the budget for the current year during the budgeting process
o Why?
Because environment is dynamic
Decision may go wrong by considering previous year’s environment
Staff Planners
Staff planners are specialist whose only job is to study the environment internally and
externally and suggest best possible plan/strategy to top management
Taylors principle of Division of Labor
Disadvantage
o Staff planner is assisting top management to form the plan
o He does not interact with lower management
o He does not know the ground reality
Staff planner should have proper interaction with line manager and middle management
in order for his strategy to work
Disadvantages of MBO
Tying MBO to pay
o Why?
Employee should not be paid incentives for every performance
Should be paid only if he goes beyond set targets
Focusing too much attention on easy objectives
Excess paper work
Supervisors simply “TELL” subordinates
Not effective in dynamic environment change
Advantages of MBO
Focuses working on most important tasks
Focuses supervisors on areas of support
Relationship building
Giving people an opportunity to “participate”
Disadvantages of Planning Process (Criticisms)
Creates rigidity
o In dynamic environment you have to keep changing plans to keep up with
competition
Plans can’t replace intuition/creativity
Focuses attention today’s competition, not on tomorrow’s survival (entering new
industries)
Formal planning may reinforce success, which may lead to failure
Session 23
STRATEGIC MANAGEMENT
Strategy
o Sole purpose to get “sustainable competitive advantage”
WALMART
o Cut costs to deliver low cost and high quality customer service
o Uses latest techniques (buying trends) and SCM
Need competitive advantage to stay ahead
DELL
o Eliminates wholesale markups
o No wholesalers
Get and stay ahead with strategy
Competitive advantage
o A “must” to stay ahead
Dabbawala
o Barrier to entry
o Not everybody can operate on such thin profit margins
Sustainable competitive advantage can be achieved through strategy
Strategy is in lines with the mission statement and vision statement of the organization
COCA COLA
o “to put coke within arm’s reach of every consumer in the world”
o Distribution network so strong that it is accessed by everybody
PEPSICO
o “to be the world’s premier consumer products company focused on convenient
food and beverages”
o Focuses on both beverages and food products
Levels of Strategy
Corporate Level
o “in what industries and markets should we compete”
o Whether to sell off a business, merger and acquisition
o Example: JC Penny
Expanded pharmaceuticals business
Sold credit card business
o Conglomerate is a group having multiple businesses
Each business of the conglomerate is called Strategic Business Unit (SBU)
Example: Tata Group
Business Level Strategy refers to strategy adopted for each and every SBU
Functional Level Strategy
o Refers to strategy adopted by the various departments of the SBU
o Marketing, Finance, HR, etc.
Strategic Flexibility
Environment effect
Monitor and measure of current strategy
Encourage employees to share negative information
Get new ideas from outside the organization
o Benchmarking
Have multiple alternatives
o Contingency planning or scenario planning
Learn from mistakes
Innovation Strategies
Use of technology
o Cutting down cost
o Helps price product lower w.r.t competition
Market research
o To know wants & needs of customers
o Preference of their brand
Process improvement
Product development
Forecasting Effectiveness
Environment
Competitor reaction
o Refers to: if competitor reacts too quickly to strategy, forecasting can go wrong
Involve “more” people
o All levels of management + staff planners (whose exclusive job is planning)
o Staff planners because spot changes in external environment
Don’t use single model of forecasting
o Use quantitative and qualitative methods of forecasting
o Quantitative: Rational decision
o Qualitative: Intuitive Model; experts based on experience use intuition to forecast
Benchmarking – search for “best practices”
o Adopting best practices from competition
Budgeting
Numerical Plan
Types of budgets
o Cash budget
Cash inflow & outflow
o Revenue budget
Sales
o Expense budget
Total cost incurred
o Profit budget
{Revenue} – {Expense} = {Profit}
Scheduling
What activities need to be done
Order in which sequence to be done
Who is to do each activity
When are the activities to be completed, which will determine overall time for
completion
CPM
o Critical Path Method
o Used to determine the correct sequence of the various modules in the project
which will result in the least possible time
Scenario Planning
Monitor external environment for trends and changes
Contingency planning
Identify potential unexpected events
Determine if any of these events could have an early indicator
Setup information gathering system to indentify early indicators
Have appropriate responses in place
Taking help of Staff planners for Scenario Planning
Fundamentals of Organizing
Growth & Complexity
Empowerment & Structure
o Greater complexity of structure, better is working of organic structure
o Organic structure, giving power to lower mgmt; decentralization
Taylor’s theory and Organization Management
o Division of labor
Choosing the most suitable structure as per strategy
Re-structuring
o Cutting of cost; vertical is too costly
o Existing structure is not giving high efficiency
o Banking & Insurance
Typical channels for distribution: agents
Alternate channels: bank assurance mode of issuance
Formal structures
o Structures as per organizational structures chart/hierarchy
o Better coordination
Informal structures
o Not as per organizational hierarchy
o Unnecessary functional conflict is disadvantage
o Advantage is greater efficiency
Social network analysis
o Identify informal structure in an organization
o And formalizing them if necessary
Type of Structures
Functional
o Divide according departments
o Small business
Divisional
o Business expansion
Matrix
o Operating multiple modules
o Every employee has 2 bosses
o Advantage: when work is done employee can move on to next job
o Disadvantage: 2 bosses results in unnecessary conflicts
Functional Structures
Groups of people with similar skills and doing similar tasks
Example: marketing, HR, Finance etc
Advantages:
o Learn from each other
o Cooperation within a function (example: sales, advertising)
o Easier for evaluation
o Can respond to competitors functional strategy
Disadvantages
o Functional chimneys problems
Lack of cooperation in between departments
Missed class
Protectionism Strategies
Tariff
Quota
o Particular amount of import goods are allotted so that customer can go for
domestic product
Subsidy
o When country business is selling up in host country than home country,
government provide same taxes to start a business
Cartel
o Companies coming together to protect themselves from increasing taxes and
increase their profits
Cash Cow
As long as industry is growing stow away the money