Chapter 1

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Toyota Century II

Chapter Objectives

After this chapter, you should be to

* Identify the main environmental influencing managers like Orfalea

* Explain, with what managers do

* Describe why the or people side of managing is so

* Show how modern organizations are

What’s Ahead?



Managing in an Era of

The opportunities and challenges facing illustrate the rapid change and that all managers face Kinko’s has survived and thrived of the remarkable management talent of Orfalea. However, not all companies been so successful. Japanese have surpassed Chrysler as the largest car maker, and Intel Andy Grove predicts an shakeout among PC makers, that there are 500 suppliers—and 450 not exist. 2 Dozens of banks been forced to merge to and many U.S. airlines—Eastern, USAir, Pan Am—have either out of business or been forced to 3 In the process hundreds of thousands of have been thrown out of (downsized) as companies have to drive up their efficiency by more productivity from a employee base.

The main of this chapter is to explain managers do, but in point of fact impossible to do until we first the sorts of changes managers and organizations must increasingly to. We turn to these changes They include: technological globalization; deregulation; new political a new workforce; more service-oriented and a new emphasis on knowledge work.


As Kinko’s Paul knows, technological innovations information highways, the Internet, and automated factories are proliferating. The of U.S. patents issued from 67,000 annually in the to 77,200 in 1985, and to over per year in the 1990s. The number of trademarks issued has risen almost 66,000 in the 1980s to 120,000 per year in the 1990s. And total reflects just patents and trademarks, not those in other industrial countries.

Technological innovations are changing the way compete. For example, Inter-Design of sells plastic clocks, magnets, soap dishes, and products. Its president explains the of information technology, which communications systems with this way: In the seventies we to the post office to pick up our In the early 80s, we put in an 800 number. In the 80s, we got a fax machine. In 1991, by Target [stores, a customer], we electronic data interchange. just two years later, than half of Inter-Design’s arrive via modem, straight company computers. Errors in entry and shipping have all but 4

And that, of course, is just one of of examples. Netscape Navigator has how many companies do business and how shop, almost overnight. 5 has gone from zero sales to tens of millions, to the Internet. 6 Jim Manzi, former of Lotus, hopes to rebuild his new Industry.Net, into a huge market for businesses. 7

Information like this has been a to many companies but a near-disaster for In the 1980s and 1990s, Wal-Mart in size, in part because its used information technology to link their stores their suppliers: Levi Co. for instance, always knew how many size-10, 501-style were being sold and replenish the stores’ supplies at once. But Wal-Mart’s technology almost torpedoed K-Mart, struggled for many years the speed and cost-effectiveness of such a

As more and more firms abroad to make the business truly global, investment firm Goldman Sachs to mine new business in Moscow Evan Newmark’s leadership .

Globalization is the tendency of firms to their sales or manufacturing to new abroad. For businesses everywhere, the of globalization in the past few years has nothing short of phenomenal.

For in the early 1980s General long accustomed to being the lighting manufacturer in the United had a rude awakening. Its relatively competitor, Westinghouse, sold its operations to Dutch electric Philips Electronics; overnight competitive picture changed. As one GE put it, Suddenly we have bigger, competition. They’re coming our market, but we’re not in theirs. So on the defensive. 8

GE did not stay there for It soon bought Hungary’s electronics and is fast moving Asia through a partnership Hitachi. 9 In 1990, GE lighting got than 20 percent of its sales abroad; by 1993, the figure was 40 and for 1996 the estimate is more half.

Globalization is manifesting in U.S. firms in many The value of U.S. imports/exports from 9.4 percent of GNP in 1960 to 23 percent in the 1990s. 10 U.S. are also reaching new markets, big gains since 1988 in to countries ranging from and Mexico to the Netherlands, Hungary, and 11

Production is becoming globalized, as manufacturers around the world put facilities where they be most advantageous. Thus, the Camry—what many would is obviously a Japanese car—is in Georgetown, Kentucky and contains 80 percent U.S.-made parts. At the time, the General Motors LeMans (obviously a U.S. actually contains almost foreign-made parts. 12

Globalization of markets and manufacturing is in part because it has vastly international competition. Throughout the firms that formerly only with local airlines to car makers to banks—have they must now face an of new foreign competitors.

Many have successfully responded to new international environment, while have failed. For instance, Swedish furniture retailer built its first U.S. superstore in New Jersey, its superior and management systems grabbed share from numerous competitors, driving several out of

Toyota Century II

Global competition is a two-way though. Ford and GM have market shares in Europe, for while IBM, Microsoft, and countless smaller firms major market shares the world. As one international business puts it, the bottom line is the growing integration of the world into a single, huge is increasing the intensity of competition in a range of manufacturing and service 13


Meanwhile, the comfortable provided to thousands of businesses the world by government regulations has stripped away in country country. In the United States, as earlier, a dozen airlines Eastern, People’s Express, and Piedmont have either bought up or gone bust as deregulation exposed inefficiencies less-responsive competitors couldn’t in time. In 1997, ATT—formerly a long-distance phone service poised to invade the regional local-phone service turf: in Congress had approved sweeping of local and long distance service, allowing carriers to each other’s markets. 14 The Air Entrepreneurs in Action box shows how one firm dealt with


The business philosophy at Morris Air was simple: offer low fares, and travelers will up their own excuses to journey by Then all you have to do is operate and the increased volume will into profits. But that part is not as easy as it sounds.

June Morris was the driving behind Morris Air. characteristic understatement, Morris that in starting the company she identified a need and filled the She believed she had talent, but perhaps importantly, she found good and let them use their own abilities in Morris Air.

The Salt City-based regional carrier to 2,000 employees, including son Rick Fendt, the airline’s and a few others who went as far back as school with June She thinks Utah was a good to find good employees; ethics are solid and people are educated and polite. That, is important, because despite low and cost-conscious operations, Morris customer service be the best. her management style focuses on the side, she wants to hear problems, too. Personally, stays on top of what’s happening by in-flight surveys, reading letters, and occasionally fielding calls.

One way the airline has managed to fares low—often below fare-war prices—was by leasing of its planes and contracting flight Another tactic was more an advertising strategy that flyers to see that their own interests coincide with of Morris Air. One of the company’s brochures summed it up: A ticket on Air is a vote for permanent low fares! the carrier began Salt City to Denver service four flights daily, American, and United had to slash as much as 50 percent.

The increased competition hit Delta the In mid-1992, 75 percent of passengers flights in Salt Lake Delta flyers. A little a year later that had dropped to 67 percent while Air’s market share from 8 to 14 percent. Analysts the big airline underestimated Morris Whatever the case, it’s to assume Delta management was not and retaliation was swift. Delta travel agents in mid-1993 booking flyers on Morris Air cost them lucrative from the big carrier. Delta gave away free to loyal agents as a further Morris was forced to hire new agents, but the small carrier won back the 20 percent loss in

June Morris patterned of her airline operations around Southwest Airlines. The two carriers much in common. Both 737 jets exclusively and concentrated on flights of around 500 miles. they have even in common, as deregulation continues to airlines and their management. In 1993, Southwest announced it was Morris Air. The relationship has to be very beneficial. For example, Air helped show Southwest how to to a ticketless travel system in so it could keep up with competitive moves. *

source: Accola, Tiny Morris Air Is the Big Airlines Nervous with Its Fares, Rocky Mountain 88A, 90A; Judy B. Morris Air Owner Says Cloud Has a Silver Lining, Lake Tribune, 10 January F8, F9; Julie Schmit and Jefferson When Morris Took Fares Fell, USA Today, 30 1993, B1; Carlene Canton, High, The Costco Connection #6, no. 8 1992): 1 15; and Terry Maxon, to Buy Carrier, Dallas Morning 14 December 1993, 1A, 10A; Ron Southwest Soars with Travel, Lan Times On Line


As ranging from the Philippines to Russia, and Chile join the of democracies, central planning and are being replaced by capitalism. prompted Francis Fukuyama, a Department planner, to declare the end of Fukuyama characterized the conquest of over communism and its consequences as the end of the conflict between two economic 15 To him, the overthrow of Marxist-Leninist means the victory of the principles of and equality, and thus the strengthening of liberalism, capitalism, and competition. says Fukuyama, the meaning of power ‘ will be increasingly on economic rather military, territorial, or other measures of might. 16

Such changes have triggered an opening of new markets, markets hundreds of millions of potential in countries from Russia to For business firms, the opportunities are see for instance, the photo of Evan head of investment banker Sachs’ new Moscow office. 17 Yet the burgeoning demand for goods and comes increased global See, for instance, the photo of the new bus now cruising the streets of Portland, 18

Toyota Century II
Toyota Century II
Toyota Century II
Toyota Century II
Toyota Century II

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