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Management Practices

Lecture-28

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Recap

• Socialization

–The Socialization Process

–Managerial Decisions Affected by Culture

–External Environment

–Key Stakeholders

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Organizational Stakeholders

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Today’s Lecture

• Social Responsibility

– Obligation to Responsiveness– Factors That Affect Employee Ethics– Stages of Moral Development– Effect of Technological Change

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What Is Social Responsibility?

• The Classical View– Management’s only social responsibility is to

maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation).

– Expending the firm’s resources on doing “social good” unjustifiably increases costs that lower profits to the owners and raises prices to consumers.

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What Is Social Responsibility? (cont’d)

• The Socioeconomic View– Management’s social responsibility goes beyond

making profits to include protecting and improving society’s welfare.

– Corporations are not independent entities responsible only to stockholders.

– Firms have a moral responsibility to larger society to become involved in social, legal, and political issues.

– “To do the right thing”

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To Whom is Management Responsible?

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From Obligation to Responsiveness to Responsibility

• Social Obligation– The obligation of a business to meet its economic

and legal responsibilities and nothing more.• Social Responsiveness– When a firm engages in social actions in response to

some popular social need. • Social Responsibility– A business’s intention, beyond its legal and economic

obligations, to do the right things and act in ways that are good for society.

Johnson & Johnson Credo

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Figure 4.7

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Managerial Ethics

• Ethics Defined– Principles, values, and beliefs that define what is

right and wrong behavior.

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Factors That Affect Ethical and Unethical Behavior

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Factors That Affect Employee Ethics

• Moral Development– A measure of independence from outside influences

• Levels of Individual Moral Development– Preconventional level– Conventional level– Principled level

– Stage of moral development interacts with:• Individual characteristics• The organization’s structural design• The organization’s culture• The intensity of the ethical issue

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Stages of Moral Development

Source: Based on L. Kohlberg, “Moral Stages and Moralization: The Cognitive-Development Approach,” in T. Lickona (ed.). Moral Development and Behavior: Theory, Research, and Social Issues (New York: Holt, Rinehart & Winston, 1976), pp. 34–35.

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Factors That Affect Employee Ethics

• Moral Development– Research Conclusions:• People proceed through the stages of moral

development sequentially.• There is no guarantee of continued moral

development.• Most adults are in Stage (“good corporate citizen”).

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Individual Characteristics Affecting Ethical Behaviors

• Values– Basic convictions about what is right or wrong on

a broad range of issues

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Individual Characteristics

• Personality Variables– Ego strength

• A personality measure of the strength of a person’s convictions

– Locus of Control• A personality attribute that measures the degree to

which people believe they control their own life.

• Internal locus: the belief that you control your destiny.

• External locus: the belief that what happens to you is due to luck or chance.

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Other Variables

• Structural Variables– Organizational characteristics and mechanisms

that guide and influence individual ethics:• Performance appraisal systems• Reward allocation systems• Behaviors (ethical) of managers

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TechnologyTechnologyTechnology refers to the skills, knowledge,

experience, body of scientific knowledge, tools, computers, machines used in the design and production of goods and services.

Quantum technological change: fundamental shift in technology that results in innovation.

• The Internet and genetic engineering are examples.– Incremental technological change: refinements of

current technology over time.• Most firms seek incremental product innovations which

allows constant, but small, improvements.

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Effect of Technological ChangeEffect of Technological Change• Many products undergo constant change and

improvement.• Electronic products provide a great example.

– This change can be a threat to firms that are slow to improve but provides benefits to firms that adjust.• Technological change is both a threat and an opportunity.

– Smith Corona typewriter company missed out on word processing and is now out of business.

– Microsoft was quick to embrace graphic user interface programs and now is dominant in the software business.

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Product Life CyclesProduct Life Cycles

– Refers to demand changes for a product over time.• Embryonic stage: product is not widely accepted and has

minimal demand.

• Growth stage: many consumers seek out the product and buy it for the first time.

• Mature stage: demand peaks since most buyers already have the product and only buy replacements.

• Decline stage: demand falls off perhaps since the product is obsolete.

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Product Life CyclesProduct Life Cycles

EmbryonicStage

GrowthStage

MatureStage

DeclineStage

Time

Demand

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Relationship Between Technological Change and Life Cycle Duration

Relationship Between Technological Change and Life Cycle Duration

Length of Product Life Cycles

Rate of TechnologicalChange

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Rate of Technological ChangeRate of Technological Change

– The rate of change determines the length of the product life cycle demand curve.• The computer industry, life cycle is about 18 months; in the

steel industry, it is many years.– Fads and fashions also impact the life cycle duration.• Style changes alter the demand for goods.• Usually, goods subject to fads and fashion changes will

experience shorter life cycles.– In general, life cycles are getting shorter, forcing

managers to be more responsive to customers.

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The Four Goals of New Product Development

The Four Goals of New Product Development

Reduce Product Cycle Time

Reduce Product Cycle Time

Maximize Fit withCustomer needs

Maximize Fit withCustomer needs

Maximize Manufacturability

Maximize Manufacturability

MaximizeProduct Quality

MaximizeProduct Quality

New ProductDevelopment

Goals

New ProductDevelopment

Goals

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The Four Goals of New Product Development

The Four Goals of New Product Development

1) Reduce Product Cycle Time: reduce time needed to develop a product from conception to market introduction.– Early to market products can command premium prices and will

have a longer life cycle.– Can add new features before competitors

2) Maximize fit with Customer Needs: most products fail because they were not designed to fit customer needs.– Ensure customers want the product features before adding

them to the product.

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The Four Goals of New Product Development

The Four Goals of New Product Development

3) Maximize Product Quality: be sure new products are of superior quality.– Poor quality in a new product can doom its acceptance even

if quality is fixed later on.– Quality problems usually result from rushing product to

market.

4) Maximize Manufacturability: the efficiency with which the product is built impacts its time to market.– Ease of production can shorten development time.– Efficient production can also avoid production problems and

improve quality.

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Stage-Gate Development Funnel Principles

Stage-Gate Development Funnel Principles

– Principle 1: Use a Stage-Gate Development Funnel; managers often try to fund too many projects at once.• Stage 1 considers all new ideas. Those that are feasible

and meet the strategic goals of the firm go through Gate 1.• Stage 2 focuses on the product development plan and

then evaluated at Gate 2. Only the best continue.• Stage 3 issues a contract book and focuses on

responsibilities, budgets, resources, etc. This is the symbolic launch of the formal development.

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Stage-Gate Development FunnelStage-Gate Development Funnel

Ship

Stage 3Stage 2Stage 1

Ideas

Gate 1 Gate 2

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Summary

• Social Responsibility– Obligation to Responsiveness– Factors That Affect Employee Ethics– Stages of Moral Development– Effect of Technological Change

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Next Lecture

• Managing in a Global Environment• Four key questions : I. Global PerspectivesII. Different Types of International OrganizationsIII. How organizations go global (Important)IV. Managing in a global environment