Ch. 3 Reading Guide 1. What is the difference between a commercial opportunity, occupational opportunity, and an organizational opportunity. Give a brief example of each. P. 67-69. a. Commercial opportunity is the opportunity to make and sell goods or services to consumers. It is discovering a new product a good or service. An example of this would be the Rolling Stones, who have spent a lot of time over the years finding new ways to format and perform their concerts. b. An occupational opportunity is an opportunity to use a person's set of skills to produce a good or service. It's the process of choosing a profession or what you want to do with your life. An example of this would be changing your major in college from accounting to management information systems, because you know that the world is advancing in technology at a fast pace and the need for MIS and IT workers is increasing as a result. c. An Organizational opportunity is the opportunity for entrepreneurs to create new business organization forms and find new ways to design and control a business's organizational structure to increase its profitability. An example of this would be the shift our world has had from human labor to machine labor. Many factories now employ less human labor and more machines because it is more cost efficient and can increase profitability. 2. Explain the difference in terms of responsibility between Top managers, Middle managers, and First-line managers. Give a brief example of each p. 74-77 a. Top managers report to the chief executive officer (CEO) or president of the organization. They establish the firm's major goals, such as revenue and profit targets. Top managers then decide how the company should be structured in order to achieve those goals. They are also responsible for monitoring and controlling the actions of middle managers. An example of a CEO given in the book is Ann Mulcahy, who worked for Xerox. She successfully got Xerox out of a tough period of decreasing revenues and controversies over scandals in the company. b Middle managers are in charge of the "nuts and bolts" of the company's functions. They make thousands of decisions that go into the production of goods and services on a daily basis. A major part of the middle manager's job is to develop a function's occupational skills and know-how. They monitor the employees lower in the company, such as first-line managers. c. First-line managers are employees at the base of the managerial hierarchy, and often referred to as supervisors. They are responsible for daily supervision of nonmanagerial employees--the people whose job it is to perform the different work activities necessary to get the product to the customer. 3. For Efficiency and effectiveness: (see figure 3.6 p. 79) a. Explain the difference between these two measures of how a business is doing. Efficiency is a COST-focused measure of how resources are being used to produce goods and services. Companies are efficient when they minimize the resources and/or time needed to produce a given output of goods or services. Effectiveness is a REVENUE-focused measure of how competitive the firm's business model is. By becoming more effective, a company can increase its revenue. The most important difference in these measurements is that by becoming more efficient (and increasing productivity), a company can be more profitable over time. Effectiveness is not as focused on the long run profitability, but rather meeting short term sales goals. b. Give an example in each of the 4 areas where they relate to each other. Like--What is an example of a choice a manager might make that shows high efficiency and low effectiveness. 1. Low efficiency/High effectiveness Manager chooses the right goals to pursue, but does a poor job of using resources to achieve these goals, which results in ZERO profitability. An example of this would be a customer seeing a trendy new outfit and going to the store to buy it, but they find out it is $100 more than they wanted to pay for it. 2. Low efficiency/Low effectiveness Manager chooses the wrong goals to pursue and makes poor use of resources, which results in BANKRUPTCY. An example of this would be producing a low quality product that customers do not have a demand for. Opening up a winter coat shop, with cheaply made products in Florida would be an example of low efficiency and effectiveness in a business. Florida does not have a need for winter coats, and an unknown brand-name with cheaply made products would probably not survive in that area. 3. High efficiency/High effectiveness Manager choose the right goals to pursue, and makes good use of resources to achieve these goals, which results in HIGH PROFITABILITY. An example of this is providing a quality product, at a price that consumers can afford. Some may argue that Wal-Mart could be an example of an efficient and effective firm. Wal-Mart has created a reputation for itself for having low prices, but the quality is debatable. 4. High efficiency/Low effectiveness Manager chooses inappropriate goals, but makes good use of resources to pursue these goals, which results in ZERO PROFITABILITY. These would be high quality products, but ones that customers do not want. This depends a lot on consumer taste, so a lot of products could fall under this category. One example of this would be opening up a designer bathing suit store in Alaska. Customers there probably will not want a bathing suit living in a colder climate, despite the fact that the business is known for its great quality.
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