Unit 6: Business Management and Human Resource Management mind map

What management is, the schools of thought and their thinkers, Fayol's principles, and the levels and functions of management.

Meaning, thinkers and principles

Meaning and functions of management

Management is the art of getting things done through people. It runs as a cycle of functions.

• Mary Parker Follett gave this definition.
• Functions in order: planning, organising, staffing, directing, coordinating, controlling.
• Management is a set of principles about these functions.
• It is needed to run every kind of organisation.

Planning decides what to do. Organising sets up people and resources. Staffing puts the right people in jobs. Directing guides them. Coordinating links the efforts and controlling checks results. Management theory helps leadership focus on its main goals.

Fayol's principles of management

Henri Fayol gave 14 principles. He is the father of the management process school.

• Examples: division of work, authority, discipline, unity of command, unity of direction.
• Also: equity, stability of tenure, initiative, scalar chain, order, esprit de corps.
• Fayol's term is centralisation, not decentralisation.
• Esprit de corps means team spirit, harmony and unity.

Instability of tenure is not a principle. Stability of tenure is. Fayol described management as planning, organising, commanding, coordinating and controlling. Principles of management are flexible, universal, relative and based on the situation.

Schools of management thought

Management ideas grew in stages. Each school brought a different view of the worker.

• Scientific management: F. W. Taylor.
• Management process school: Henri Fayol.
• Human relations: Elton Mayo and the Hawthorne experiments.
• The human relations school rejected the rabble hypothesis.

Taylor showed how to raise productivity through efficient methods and better pay. The early classical view saw workers as a rabble who work only for money. Mayo's studies showed that workers do not work for money only. They also have social needs.

Levels of management and their functions

Management has three levels. Each level has its own work.

• Top management sets policy and strategy.
• Middle management links top and lower management.
• Lower (first-line) management supervises workers.
• A first-level supervisor assigns jobs, settles grievances and gives technical guidance.

A sales executive is part of the operating force. A branch manager is middle management. A foreman is lower management. Lower management maintains discipline, trains workers and keeps good human relations. The time spent on administration rises as you go up the ladder.

Management theory and the industrial revolution

A passage in a past paper said management theories help organisations focus, communicate and evolve. No single theory suits all firms.

• Management theory helps leadership focus on its main goals.
• There is no one-size-fits-all theory. Theories keep changing.
• The industrial revolution brought faster technology and demanded productive workers.
• Management did not alone start the industrial revolution.

What works for one organisation may not suit another, and theories may become irrelevant as new ones develop. Management does not always move in a straight line.

Planning, decisions and control

Planning and policies

Planning is deciding in advance what to do. A policy guides thinking, while a rule guides action.

• Planning is a significant human feature. A plan is a trap to capture the future.
• Policies are guides to thinking and define the area for decisions.
• Rules are guides to action.
• Stretch goals can be vertical or horizontal.

A vertical stretch goal challenges people to do more of the same activity. A horizontal one adds new activities. A sales team asked to sell 150 units instead of 100 faces a vertical stretch goal.

Decision making and brainstorming

Decision making follows steps. Brainstorming is a group technique for ideas.

• Define the problem, set objectives, find solutions, choose, implement.
• Another list: objectives, explore alternatives, assess consequences, choose, sensitivity analysis.
• In brainstorming, many ideas are produced without judging them.
• Brainstorming works best with high task orientation.

Social pressure and interpersonal conflict hurt brainstorming. Common difficulties in making decisions: non-actionable information, unsupportive environment, ineffective communication and wrong timing. Easy acceptance by subordinates is not a difficulty.

PERT, CPM and the critical path

PERT and CPM plan a project as a network. The critical path is the longest route.

• Steps: define activities, set dependencies, draw network, estimate times, find critical path.
• The critical path decides the shortest time to finish.
• Activities on it have no slack.

Take the longest chain of activities from start to end. That chain sets the project length. A delay on it delays the whole project. Other activities have slack.

The control process and standards

Control compares actual results with standards. Standards can be physical, cost, revenue or programme.

• Steps: set standards, measure performance, compare, take corrective action.
• Physical standards: labour hours per unit.
• Cost standards: material cost per unit.
• Revenue standards: average sales per customer.

Control starts with a standard. Without one, there is nothing to compare. Programme standards relate to timing, such as the timing of production.

How work is arranged: line, functional and matrix structures, departmentation, span, decentralisation, authority and delegation.

Types of structure

Line, functional and matrix organisation

Line is the oldest and simplest form. Functional organisation uses specialists. A matrix mixes functional and project lines.

• Line: one boss, a single chain, suits small firms.
• Functional: specialists, not based on unity of command, suits large firms.
• Matrix: functional and project dimensions of authority.
• In a matrix, functional departments are permanent.

In a functional organisation a worker reports to several specialists, so discipline can become loose. In a matrix, a person has a functional home and works on temporary projects. A matrix works better when roles and objectives are clear.

Departmentation, span and decentralisation

Work can be grouped by function, product or territory. Span and decentralisation shape the structure.

• Product departments need more general managers.
• Territory departments make top control harder.
• Span of management depends on training, personal qualities and subordinates' training.
• Decentralisation pushes authority down to profit, cost and investment centres.

Under product departmentation the manager pays undivided attention to the product, but fewer managers are not needed. Honeywell moving to a flatter, team-based structure is an example of decentralisation. Under the contingency approach, span depends on type of work, abilities and level.

Structural determinants, forms and charts

Chain and span, power and control, and differentiation and integration determine structure. Newer forms are flexible.

• Formalisation is the degree of rules and regulations.
• Organisation charts: vertical, horizontal, circular.
• Modern forms: learning organisation, spaghetti organisation, fishnet organisation, virtual organisation.
• A task force is an ad-hoc team for an unusual problem.

A virtual organisation is a digital or dot com firm. A learning organisation continually changes its structure and processes. A spaghetti organisation shows flexibility, almost no structure. A diagonal chart is not a recognised type.

Authority and delegation

Authority and its types

Authority is the legitimate right of a superior to command subordinates. It is the basis of the formal organisation.

• Types: line, staff and functional authority.
• Line authority is the direct right to command.
• Staff authority is the right to advise.
• Functional authority is the right of a specialist over others in his area.

Authority can be delegated. It is mostly well defined and finite. It is not the basis of the informal organisation. Employees derive authority from position, experience, moral worth, past service and intelligence.

Delegation of authority

Delegation passes authority to subordinates. It relieves the manager and trains the subordinate.

• Effects: better decisions, lighter workload, training of subordinates.
• It does not slow decisions.
• Stages: define assignments, select the person, keep communication open, set controls, reward.
• Delegation is an evolutionary and developmental process.

A new manager who does not know the limits of his authority may cross them. In a case read in a past paper, the fault lay with the HR department that failed to induct him. Delegation is a developmental process, not only an interpersonal transaction.

Sources of power

Power comes from different sources. French and Raven listed five.

• Reward power: ability to reward.
• Coercive power: ability to punish.
• Legitimate power: from position.
• Expert power: special knowledge. Referent power: admiration and identification.

A junior who copies the style of a respected senior is following referent power. A supervisor with technical skill has expert power. Questions often give a definition and ask for the source.

How individuals think and feel at work: perception, personality, attitudes, stress, burnout, conflict, groups and culture.

The individual

Perception and attribution

Perception is how people select and interpret stimuli. Attribution is how they explain behaviour.

• External factors: repetition, novelty, familiarity, size, intensity, contrast.
• Internal factors: experience, needs and motives.
• Fundamental attribution error: overestimating internal causes and underestimating external ones when judging others.
• Boundary spanning links the organisation with its external environment.

Experience is an internal factor, not an external one. If a colleague is late, the error is to blame his character and ignore the traffic. A purchasing officer who deals with suppliers is boundary spanning.

Personality: Big Five, MBTI and Holland

Several frameworks describe personality. The Big Five is the most used.

• Big Five: extroversion, agreeableness, conscientiousness, emotional stability, openness.
• Conscientious means self-disciplined and dependable. Openness means creative and curious.
• MBTI pairs: sensing, thinking, feeling, judging.
• Holland: social is teacher, conventional is manager, investigative is mathematician.

Sensing people work with known facts. Feeling people rely on personal values. Cattell's 16 factors use bipolar traits such as warmth, outgoing versus reserved. Holland's theory says a good fit between personality and occupation gives better performance.

Attitudes, emotions and ego defence mechanisms

An attitude has three components. Defence mechanisms protect the ego.

• Attitude components: cognitive (beliefs), affective (feelings), behavioural (intention).
• Plutchik's primary emotions include fear. Secondary emotions are mixtures.
• Displacement: anger redirected to a safer target.
• Projection, regression, repression, sublimation are other mechanisms.

A person who has a bad day at work and then snaps at his child is using displacement. Regression is returning to an earlier stage of development. Repression pushes a thought into the unconscious. Sublimation channels an impulse in a socially acceptable way. Cognitive dissonance theory says inconsistent beliefs cause discomfort.

Transactional analysis, motives and collectivism

Transactional analysis describes four life positions. Motives and cultural values shape behaviour.

• I am not OK, you are not OK: withdrawn.
• I am OK, you are not OK: task obsessive.
• I am OK, you are OK: confronting. I am not OK, you are OK: dependent.
• Collectivism: relations are moral, relations come before tasks, harmony is valued.

Achievement means concern for excellence. Control means concern for orderliness. Extension means concern for others. Dependency means concern for self development. In collectivism, individual opinions are not independent of the collective's opinion.

Stress, burnout and conflict

Stress and burnout

Stress has physiological, psychological and behavioural symptoms. Burnout is long-term exhaustion from job stress.

• Behavioural symptoms: lower performance, absenteeism, turnover.
• Lower job satisfaction is a psychological symptom.
• Burnout dimensions: exhaustion, cynicism, inefficacy.
• Stages: fatigue, dislike for work, failure to achieve targets.

In burnout, exhaustion means no energy for work, cynicism means no interest in customers and inefficacy means not being able to complete work. The job demands-resources and conservation of resources models treat burnout as a resource imbalance. The three-dimensional model is not one of them. Macro stressors include policies and structure.

Conflict: types, process and handling

Conflict is disagreement. It can be about the task, the relationship or the process.

• Types: task, relationship, process.
• Process stages: potential opposition, cognition, intentions, behaviour, outcomes.
• Intergroup conflict arises from competition for resources, task interdependence and jurisdictional ambiguity.
• Handling styles: competing, collaborating, compromising, avoiding, accommodating.

Competing is high on assertiveness and low on cooperation. Collaborating is high on both. Not all conflict is bad, so it can be taken positively. Product conflict is not a type.

Groups and culture

Group development, norms and teams

Groups develop through stages. Norms are shared expectations. Teams come in several types.

• Tuckman's stages: forming, storming, norming, performing, adjourning.
• Group norms: shared beliefs, attitudes, traditions and expectations.
• A quality circle is a problem-solving team.
• The grapevine is the informal communication system.

Forming is eager and anxious. Storming is conflict. Norming brings belonging. In performing, the group gains identity, morale is high and loyalty is intense. Adjourning is a stage of upset and disengagement.

Organisational culture and climate

Culture is a set of shared values. Climate is the shared perception of the work environment.

• OCTAPACE: openness, confrontation, trust, authenticity, proactivity, autonomy, collaboration, experimentation.
• Handy's types: power, role, task, person.
• Climates: achievement for business, affiliation for clubs, extension for welfare, expert power for universities.
• Leadership style is a determinant of climate.

Extension is not a part of OCTAPACE. A university or research body has an expert-power climate. A club's dominant motive is affiliation. Non-entrepreneurial is not one of Handy's types.

Why people work and how leaders guide them: Maslow, Herzberg, McGregor and ERG, and the leadership theories.

Motivation theories

Maslow's hierarchy of needs

Maslow said needs are arranged in a hierarchy. A lower need must be met before the next one drives behaviour.

• Order: physiological, safety, social, esteem, self-actualisation.
• Food and shelter are physiological.
• Insurance is safety. Meaningful relations are social.
• Recognition and respect are esteem.

In the workplace, working conditions meet physiological needs. Work safety meets safety needs. Supportive co-workers meet social needs. Responsibility meets esteem needs. Job challenge meets self-actualisation. Maslow also said: if all you have is a hammer, everything looks like a nail.

Herzberg, McGregor and ERG

Herzberg split factors into hygiene and motivators. McGregor offered Theory X and Theory Y. Alderfer compressed needs into ERG.

• Hygiene factors prevent dissatisfaction. They do not create satisfaction.
• Motivators create satisfaction.
• Theory X is pessimistic. Theory Y is optimistic.
• ERG: existence, relatedness, growth.

Removing dissatisfaction only brings people to a neutral point. It does not make them satisfied. Under Theory Y, commitment is proportional to rewards and average people learn to accept responsibility. The view that only control and threats produce effort is Theory X.

Porter-Lawler model, chronology and productivity forces

The Porter-Lawler model says effort does not equal satisfaction and performance. Motivation theories came in an order.

• Effort depends on reward value and the effort-reward probability.
• Performance also depends on ability and role perception.
• Chronology: scientific management, human relations, Maslow, Herzberg, Alderfer.
• Forces that raise productivity: ego drive, desire for promotion, motive to do the work.

Fear of working oneself out of a job and the difficulty of the work do not push productivity up. Freud's psychoanalytic theory is another theory of motivation.

Leadership theories

Leader versus manager, and functional and transactional leadership

A leader looks at the horizon and originates. A manager focuses on systems and does things right.

• Leader: eye on the horizon, originates, asks what and why.
• Manager: systems and structure, asks how and when, does things right.
• Transactional leaders exchange reward for effort and intervene only when standards are not met.
• Functional leadership theory: Hackman and Walton, and McGrath.

Giving personal attention to each employee is a feature of transformational leadership, not transactional. Abdicating responsibility is laissez-faire leadership. Functional theory looks at what a leader must do for the group to succeed.

Managerial grid and the Tannenbaum-Schmidt continuum

The grid rates concern for people and for production. The continuum runs from boss-centred to subordinate-centred leadership.

• (9,1) task management: authority-obedience.
• (1,9) country club management: love conquers all.
• (1,1) impoverished management: minimum effort. (9,9) team management: committed people.
• Continuum: more subordinate freedom means less manager control.

Manager control rises along the continuum. Subordinates first work within limits. Then the group decides within limits. Then the manager takes suggestions, offers a tentative decision and finally sells it.

Level 5 leadership and leadership thinkers

Collins described five levels of leadership. Different thinkers gave different leadership models.

• Level 1 is a highly capable individual. Level 2 is a contributing team member.
• Level 3 is a competent manager. Level 4 is an effective leader.
• Level 5 is an executive who builds enduring greatness.
• Fiedler: position power, task structure, leader-member relations. Lewin: unfreezing, moving, refreezing.

McClelland is linked with power, affiliation and achievement. Fayol is linked with authority, unity of command and scalar chain. The question may ask for a match of thinker and concept.

What HRM is, how a firm forecasts and describes jobs, and how it recruits, selects and inducts people.

HRM and job design

HRM versus personnel management, VRIO and strategic HRM

HRM treats people as a source of advantage. Personnel management treats them as a cost to control.

• Personnel management focuses on profit by controlling people.
• HRM develops attitudes so that people give their best.
• VRIO: value, rarity, imitability, organisation. It is Barney's framework.
• Strategic HRM covers macro concerns such as structure and culture.

VRIO asks whether a resource gives a lasting advantage. Objectives of HRM are societal, organisational and functional. Group objectives are not an HRM objective. Skills and capabilities competencies include analysis, organisation and problem solving.

Job analysis, description and specification

Job analysis collects work information. A description lists duties. A specification lists the human qualities required.

• Job description: duties, responsibilities, reporting, working conditions.
• Job specification: education, skills, personality, initiative, judgement.
• Location belongs to the job description or context.
• Job context: physical conditions, work schedule, incentives, people interacted with.

Job analysis information includes work activities, work performance, job context and job-related tangibles and intangibles. Job enlargement adds more tasks of the same level. Job enrichment adds responsibility and depth.

Job design and the job characteristics model

Hackman and Oldham's model has five core job dimensions. They produce three psychological states.

• Skill variety, task identity and task significance give meaningfulness.
• Autonomy gives responsibility.
• Feedback gives knowledge of results.
• Non-functional rewards from job design include flexible hours and participation.

Experienced meaningfulness of work comes from skill variety, task identity and task significance. A compliment on work progress is a non-functional reward but not a job design feature.

HR cases: retention, analytics and career growth

Cases in past papers test practical HR judgement. Fair pay and visible career growth reduce attrition.

• To reduce attrition: increments and career growth opportunities.
• First step for unclear career progression: skill gap analysis and a career development plan.
• To predict turnover, study attrition trends and exit interview feedback.
• To convince management: show the financial impact of HR initiatives.

Making resignation harder or increasing workload does not retain people. To build future leaders, invest in intensive development programmes such as mentoring and job rotation.

The Taj case: service quality through people

A case on the Taj group showed how a service firm builds quality through its people.

• Hire for competency and inclination. Compete for the best.
• Treat employees as customers and make them part of the vision.
• Reward and recognise staff, set standards and train continuously.
• Collective bargaining and out-of-turn promotion were not part of the story.

Supporting employees means giving them the equipment and systems to deliver service, internal controls and a service-oriented process. Restoring reputation involved customer retention, treating employees as customers and a performance management system.

Human resource planning

Forecasting demand and supply, and succession planning

HR planning forecasts how many people are needed and who is available. Tools differ for demand and supply.

• Demand tools: trend analysis, ratio analysis, scatter plot, managerial judgement.
• Internal supply tools: personnel replacement charts and Markov analysis.
• Markov analysis shows the probability of staying, moving or leaving.
• Succession planning: identifying, assessing and developing leadership.

Markov analysis is a supply tool, not a demand tool. Succession planning ensures suitable people are ready when senior roles fall vacant.

Recruitment and selection

Recruitment sources and costs

External recruitment brings new skills. It also has costs.

• Advantages: new talent, no jealousy among insiders, easy reservation compliance.
• Rewarding good performance is an advantage of internal, not external recruitment.
• A recruiting yield pyramid shows ratios of candidates at each stage.
• Hiring costs: advertising, interviewing, recruiter fees. Training is a replacement cost.

Turnover costs include separation costs, vacancy costs and replacement costs. In the pyramid, the ratio of official needs to hires is about 2 to 1.

The selection process and tests

Selection follows steps. Tests measure different things.

• Steps: screening, tests, interview, reference checks, offer, physical exam, placement.
• Another list: preliminary interview, tests, employment interview, reference check, job offer.
• Aptitude test: capacity to learn.
• Achievement test: present knowledge and skill in the job.

Interest tests measure interest in a job. Intelligence tests measure mental ability. Personality tests measure traits. The typical sequence: application blank, screening interview, tests, more interviews, reference checks, conditional offer, physical examination, hire.

Validity and interviews

A valid test measures what it should. Validity has types. Interviews can be structured or unstructured.

• Test validity: does the test measure what it is supposed to?
• Criterion validity: test scores relate to job performance.
• Content validity: the test samples the tasks and skills the job needs.
• Structured interviews give comparable results.

Criterion validity has predictive and concurrent forms. Content validity is built by analysing the job. Structured interviews suit large numbers of applicants. Unstructured interviews help probe reasoning.

Induction and orientation

Induction is a planned process that introduces new employees to the organisation. It integrates staff for mutual benefit.

• It is not an informal chat on miscellaneous issues.
• Stages of staffing: recruitment, selection, induction, appraisal, transfer.
• A new manager must be told the limits of his authority.

A case in a past paper showed that the induction programme was the weak link. A new manager joined and did not know the purchasing rules.

How people are developed, assessed and paid: training methods, appraisal tools and errors, and pay and incentive schemes.

Training and development

Training concepts, evaluation and methods

Training builds skills. Its value is judged at four levels. Methods may be on the job or off the job.

• Kirkpatrick: reaction, learning, behaviour, results.
• Off-the-job methods: sensitivity training, transactional analysis, conference, case study.
• Apprenticeship is on-the-job.
• The case study method develops problem-solving skills.

Andragogy is the art and science of teaching adults. Thorndike's law of effect says behaviour that brings satisfaction is repeated. Training needs can be assessed by interviews or focus groups. Interviews allow questions to be modified. Focus groups can be time consuming.

Socialisation and cross-cultural training

Socialisation helps newcomers fit in. Cross-cultural training deals with two ideas.

• Enculturation: learning one's own culture.
• Acculturation: learning the norms of a host culture.
• On-the-job instruction begins by explaining why the employee is being trained.

Socialisation of new managers includes acquiring work skills and adopting role behaviour. On-the-job steps: explain why, create interest, explain the whole job, place the trainee, follow up.

Performance appraisal

Appraisal methods, purposes and errors

Appraisal rates how well employees perform. Methods and errors are tested often.

• BARS is a behaviourally anchored rating scale.
• Critical incident method: record of uncommonly good or bad behaviour.
• Rating errors: halo, horns, central tendency, leniency.
• Purposes: administrative, developmental, documentation.

The horns effect rates an employee lower than deserved. The halo effect rates higher. A graphic rating scale has unclear standards, halo effect and leniency. Self-ratings tend to be inflated. Helping meet legal requirements is a documentation purpose.

Ranking methods and the systems approach to appraisal

Ranking methods compare employees with one another. The systems approach treats appraisal as part of the whole system.

• Simple ranking: one overall rank list.
• Alternation ranking: best and worst by a trait, which avoids central tendency.
• Systems approach: low formality, facilitative leadership, problem solving.
• Appraising self-managed teams is a serious challenge.

An effective appraisal system can give competitive advantage by improving performance. Under a systems approach, appraisal focuses on improving how work gets done. Paired comparison and forced distribution are other ranking methods.

Compensation

Principles of compensation, claims and perquisites

Compensation has economic and psychological sides. Its administration follows principles.

• It should be objective, not subjective.
• Claims are reimbursed against bills, such as mobile and medical allowance.
• Fringe benefits: canteen, uniform, accident relief.
• Perquisites: company car, club membership, furnished house.

Job evaluation rates the job and fixes pay. Performance appraisal rates the person. Categories of compensation include pay for time not worked (sick leave), protection programmes (pension), incentive pay (stock option) and deferred pay (savings plan).

Incentive schemes and the pay plan

Incentive schemes link pay to output. Some give differential rates.

• Differential piece rate schemes: Gantt task and bonus, Emerson's efficiency plan.
• Premium bonus plans: Halsey and Rowan.
• Advantages of incentives: better use of equipment, less absenteeism and turnover.
• Increased scrap is not an advantage.

Pay plan steps: choose benchmark jobs and factors, define the factors, adjust wage rates to the market, develop pay grades, then set rate changes.

Unions and labour laws, how organisations change, and the models of strategy.

Industrial relations

Approaches, collective bargaining and participation

The unitary approach sees common interest. Collective bargaining is negotiation between employers and workers. Participation takes several forms.

• Unitary approach: harmony and common interest.
• The Webbs coined collective bargaining.
• Forms of participation: consultative, associative, administrative, decisive.
• Co-determination: workers jointly decide safety, welfare and work-related issues.

In associative participation, management is morally bound to accept the council's unanimous decisions. In consultative participation, management may ignore the views. In bargaining, a good negotiator is both fair and firm, and does not hurry.

Labour laws and industrial relations objectives

India's labour laws were passed over many decades. Questions ask for their order.

• Minimum Wages Act 1948.
• Mines Act 1952.
• Apprentices Act 1961.
• Payment of Gratuity Act 1972. Child Labour Act 1986.

The objectives of industrial relations include social equity and economic growth. Providing credit to industry is not one. Workers' participation has not worked well in India because of lack of attitudinal change and many unions.

Industrial safety and grievance handling

Industrial safety protects workers from accidents. Grievance procedures protect industrial peace.

• Work accidents kill very many workers every day, as the key accepted.
• An accident-free plant need not reduce productivity.
• Healthy relations rely on voluntary arbitration and responsible unions.
• The Industrial Disputes Act is the industrial peace law.

A safe plant helps productivity because injuries cost output. A grievance procedure follows guiding principles so that complaints are settled early.

Change and development

The process of change and resistance

Change needs a process. People resist it for reasons that call for different responses.

• Need is voiced, considered, causes searched, alternatives developed and evaluated.
• Reducing resistance: education, participation, support, negotiation.
• Fear of overload calls for role clarity.
• Change targets task, structure, technology or people.

Diversifying into new businesses is a task change. Merger anxiety is reduced by speeding integration, counselling and social support. Design thinking runs: empathise, define, ideate, prototype, test.

Life cycle and work from anywhere

Organisations pass through life cycle stages. Work from anywhere has benefits and limits.

• Stages: start-up, survival, expansion, consolidation, decline.
• WFA cuts commuting and widens the talent pool.
• Hybrid work needs more investment in technology.

A passage in a past paper said WFA is not limited to independent workers. Earlier, home working was not possible because the technology was missing, not because nobody thought of it. WFA does not increase the distance barrier. It reduces it.

Strategy and entrepreneurship

Strategy models

Strategy tools give a framework. The GE matrix, Porter's generic strategies and McKinsey's 7-S are common.

• GE matrix: market attractiveness and business position.
• Porter's generic strategies: cost leadership, differentiation, focus.
• Market penetration is Ansoff's growth strategy, not Porter's.
• 7-S: strategy, structure, systems, shared values, skills, style, staff.

A defined business has products, markets and functions. Core competencies are valuable to customers, give access to many markets and are hard to imitate. A third-generation Balanced Scorecard has a destination statement, strategic objectives, a linkage model and measures.

Innovation, budget airlines and entrepreneurship theories

Innovation grows from culture. Entrepreneurship has theories linking it to upbringing and personality.

• Tellis: culture is the single most important driver of innovation.
• Budget airlines win by low operating costs while increasing revenue.
• Cochran: upbringing determines entrepreneurial urge.
• Rotter: locus of control.

Most innovations are incremental and involve commercial use of ideas. Southwest Airlines began the no-frills model in the USA in the 1970s.