The Logic of Managerial Enterprise Notes

Pages: 12 (1970 words) Published: February 24, 2013

The logic of managerial enterprise

Step 1: Investments

∙ Build larger, efficient production capacity to exploit economies of - scale: big production to get smallest cost per unit - scope: efficient use of common items
∙ Create extensive marketing and distribution channels ∙ Establish well-organized management teams

Step 2: Implement a “Strategy of Leadership”

∙ Continuous research, improvement and innovation
∙ Systematically lower costs and improve quality
∙ Expand marketing and distribution (geographically and market-wise) ∙ Compete aggressively and never let up

First movers
∙ Confidently seize opportunities through major commitments (FIRST) ∙ Constantly improve and aggressively compete (BEST) ∙ Manage logically and systematically (BEST)
∙ Maintain and nourish their competitive capabilities (RIGHT) Other concepts:

∙ Functional divisions
∙ Management hierarchy
∙ Research and development
∙ Related diversification
∙ Separation of top vs. middle management
∙ Stock market pressures
∙ Short-term thinking


Evolution 1: Creativity
∙ Product
∙ Dedication
∙ Target market
Revolution 1: Leadership
∙ Motivational issues
∙ Leader to manage employees
∙ Capital/accounting processes needed
Evolution 2: Direction
∙ Functional organization: separate manufacturing from marketing ∙ Accounting for inventory and purchasing
∙ Motivation by money
Revolution 2: Autonomy
∙ Lower level have constraints and cannot take initiative ∙ Top level don’t want to give up their responsibilities ∙ Moral and motivation decreases
Evolution 3: Delegation
∙ Responsiveness (delegate tasks)
∙ Profit centers and bonuses
∙ Acquire outside enterprises
Revolution 3: Control
∙ Top executives feel loss of control
∙ Everyone is doing what he/she wants
∙ Lack of communication
Evolution 4: Coordination (formal systems)
∙ Establish new formal procedures
∙ Efficient allocation
∙ No loss of response
Revolution 4: Red-tape (lack confidence)
∙ Gaps in levels
∙ Outgrow the established new procedures because company is too large to be run by formal and rigid systems Evolution 5: Collaboration
∙ Focus of team action
∙ Communication is frequent
Revolution 5: ? crisis
∙ Psychological situation (rest, reflect, revitalize) ∙ Habit structure (daily work)
∙ Reflective structure (personal reflection)

Guidelines for managers of growing organizations:

Know where you are in the development sequence

∙ Leaders should be able to work with the flow
∙ Leaders should not avoid resolutions. They provide pressure, ideas and awareness that initiate change
Recognize the limited range of solutions

∙ Different situations (phases) require different solutions ∙ Solving crisis and moving toward next phase requires self-awareness in top management and inter-personal skills to persuade that change is needed

Realize that solutions breed new problems

∙ Organization solutions create future problems
∙ Being aware of this can help managers evaluate problems with historical understanding instead of blaming current development ∙ Can also help predict problems ahead of time and enforce coping strategies


Five Criteria of a good BHAG:

1. Are set with understanding, not bravado
2. Fit squarely in the three circles
3. Have a longtime frame (10 to 30 years)
4. Are clear, compelling and easy to grasp
5. Directly reflect your core values and core purpose


∙ Core values: guiding...
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