Managerial Analysis

Question 1

Management Processes

Answer 1

• Management preferences formed by the interaction of personal attributes, beliefs, character and job context/ situational pressures, career trajectory
• Management preferences are specific to their individual personalities, experiences, and situations
• Differences in personal preferences lead to differences in their strategic preferences lead to differences in organizational strategies

Question 2

Basic needs

Answer 2

• Central aspects of a manager’s personality
• Need for achievement, power, security, recognition
• Stable, enduring, generally consistent
• Fundamental influences on strategic preference

Question 3

Beliefs

Answer 3

• Can vary from deep to casual and can change over time
• Direct management preferences towards specific strategic initiatives and responses

Question 4

Job Context/ Situational Pressures

Answer 4

• Define the scope and nature of manager’s responsibilities, performance assessment and rewards
• Formal and informal relationships
• Job definition (what you do); job relations (expectations of others on you)

Question 5

Personal Attributes and Beliefs

Answer 5

• personality traits
• basic needs
• stable, enduring, generally consistent
• conviction - competences, right way of doing things

Question 6

Developing a strategic vision

Answer 6

• Delineates management’s future aspirations for the business to its stakeholders
• Provides direction – “where are we going”
• Sets out the compelling rationale (strategic soundness) for the firm’s direction
• Uses distinctive and specific language to set the firm apart from its rivals

Question 7

Communicating the vision

Answer 7

• Fosters employee commitment to the firm’s chosen strategic direction
• Ensures understanding of its importance
• Motivates, informs, and inspires internal and external stakeholders
• Demonstrates top management support for the firm’s strategic direction and competitive efforts

Question 8

The mission statement

Answer 8

• Uses specific language to give the firm its own unique identity
• Describe the firm’s current business and purpose – “who we are, what we do, and why we are here”
• Should focus on describing the company’s business, not on “making a profit” – earning a profit is an objective not a mission

Question 9

Ideal mission statement

Answer 9

• Identifies the firm’s products or services
• Specifies the buyer needs it seeks to satisfy
• Identifies the customer group or markets it is endeavoring to serve
• Specifies its approach to pleasing customers
• Sets the firm apart from rivals
• Clarifies the firm’s business to stakeholders

Question 10

Core Values

Answer 10

• Values are ethical standards/norms that govern the behaviour of individuals within a firm
• Beliefs, traits, and behavioural norms that employees are expected to display
• Becomes an integral part of the firm’s culture and what makes it tick when strongly espoused and supported by top management
• Matched with the firm’s vision, mission, and strategy contribute to the firm’s business success

Question 11

The purpose of setting objectives

Answer 11

• To convert the vision and mission into specific measurable, timely performance targets
• To focus on efforts and align actions throughout the organization
• To serve as yardsticks for tracking a firm’s performance and progress
• To provide motivation and inspire employees to greater levels of effort

Question 12

Financial Objectives

Answer 12

• Communiticate top management’s targets for financial performance
• Are focused internally on the firm’s operations and activities

Question 13

Strategic Objectives

Answer 13

• Are related to a firm’s marketing standing and competitive vitality
• Are focused externally on competition vis-a-vis the firm’s rivals

Question 14

Agency Theory

Answer 14

• Views a firm as a nexus is legal contracts
• Relationships among shareholders, managers, and hierarchies
• Front line employees have an advantage of management
• Firms need to design work tasks

Question 15

Adverse Selection

Answer 15

Misrepresentation of a job
Beyond their abilities to do things

Question 16

Moral hazard

Answer 16

Difficulty to ascertain whether the agent gives them their best

Question 17

Principal – Agent Problem

Answer 17

• Information asymmetry
• Principal – hires, monitors, and compensates
• Agent – performs work, provides time and talents

Question 18

Management Breaches/ Corporate Governance (BOD)

Answer 18

• Ensures strategic direction of the organization is in the best interest of the corporation (shareholders)
• Monitor management behaviour
• Ethical breaches may not be so easy to catch (bad judgment)
• Checks and balances
• Align pay with desired actions (stock options)
• Penalize for breachers (firing)

Question 19

Board of Directors

Answer 19

• different shareholder goals
• inside directors (usually apart of company’s sr managment team)
• outside employees

Question 20

Achieving Effective Corporate Governance
– BOD is

Answer 20

• Is well informed about the firm’s performance
• Guides and judges the CEO and other executives
• Can curb management actions the board believes are inappropriate or unduly risky
• Can certify shareholders that the CEO is doing what the board expects
• Provides insight and advice to top management
  Is actively involved in debating the pros and cons of key strategic decisions and actions

Question 21

Preferred Board Characteristics

Answer 21

• Board members must be an expert
• Board members need better access to information
• Board members need the time to devote to the corporation
• Board members must have the right incentive

Question 22

Other Governance Mechanisms

Answer 22

• Executive compensation
  Salary, bonus, and stock option (long-term incentives)
• The market for corporate control – Hostile takeover
  Corporate raiders and hedge funds
• Government regulators and agencies

Securities analysts

Business media and activists