UNIVERSITY OF NATIONAL AND WORLD ECONOMY

ACADEMIC DEPARTMENT "MANAGEMENT" "PRINCIPLES OF MANAGEMENT"

Complex Crisis Team 36

1. 2. 3. 4. 5. Names Martina Gardeva Veronika Goranova Sylvette Mehmed Denitsa Marinova Aisel Hrlova Faculty Number 13114156 13114159 13114170 13114147 13114171 Professional Field Economics and Management by Education in English Language -------------------------------------------------

Sofia, 2013

Mass Storage -----------

Program Microsoft Word

Starting File Complex Crisis http://google-ptoject-unss.weebly.com/apps.html http://sisi1377.edu.glogster.com/google-glog Index.html http://www.youtube.com/watch?v=Pv0m_kpYTDo / projects.avi

Blog Glogster Prezi Video

Set-up the problem situation

a) Evaluation of the candidates according to the specific scenarios. Currently, the giant company Google is facing a complex crisis which consists of finding and staffing a new Chief Financial Officer and the loss of a great amount of money. This situation requires valuable, rational and objective decisions, evaluation and taking actions. Therefore, the first step is to evaluate each of the candidates for the position CFO, taking into consideration how they possibly perform in a current and complex crisis. Assessing the candidates in this situation would be quite difficult because it is going to be against the agreed standards of competence. In this place the evaluation will be done due to bearing in mind various criteria, experience, fast-thinking and creativity. Moreover, while assessing each of the candidates we should be very careful because when a person tries to overcome a crisis, he/she uses not only his previous experience but also what he/she is learning during the difficult process. Here the candidates should meet the agreed assessment requirements in compliance with the variety of additional and impressive tools and methods to deal with the situation. One of the principles we used for evaluation of the candidates was the possible interaction between the individual performance which could affect the rest of the company. Specifically, we are looking for how his/her job itself contributes to the success and prosperity of the company. Secondly, uniformity was considered. We are trying to explore and evaluate his/her previous productivity of every candidate for CFO in order he/she to be assigned to this great project "Dealing with the current financial crisis and the possible ones". Furthermore, we took into consideration the candidates personal skills, their former experiences in such situations, responsibility for the taken actions, as well as their ability to think about abstract ideas and conceptualize complex situations. This could give us a flavor of the whole picture and will allow us to take the best possible decision and choose the most suitable candidate, because we know for sure that every one of the 10 candidates for the job are excellent choices for new CFO of Google and amazing managers with their own

still and ideas, but here we pay attention to the details. They are the ones who distinguish a good candidate from a great CFO. All things considered, in the base of our evaluation was the evasion of the "halo effect". This type of error represents the bias in a judgment of a candidate due to someone's general impression of him/her. By trying to avoid this error, we do not rely on subjectivity because an objective judgment results in more rational and effective methods and techniques for communication and goal-setting.
Here is our evaluation scale and table ( from 1 to 10) where 1 represents bad performance and 10 - the most appropriate and successful appliance of techniques.

Complex Crisis Problem

Advertising + increased number of users Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald Well-used investment + competition Bad Investors' Investors' investment refusal + Advertising refusal + + declining technological + well-used declining number of advances and investment number users competition of users Advertising + constant number of users

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 10 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

b) Probability/likelihood estimation of each of the scenarios.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition 24% Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald 15% 10% 11% 23% 6% 11%

States of nature

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 9 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

Scenario 1 (Advertising + increased number of users) - The possibility the first scenario to happen is reliably high (24%) because Google Corporation is famous for its commercial policy and even in times of crisis would come up with fresh ideas and brilliant strategies. Moreover, the business of making advertisements helps building awareness of products and encourages sales of

the companys goods. Another reason for the probability of happening this specific scenario is the fact that advertising in business is a strong weapon of marketing communication used to encourage and persuade an audience. Therefore, Google's advertising campaign is very likely to succeed, which will help the company to increase the numbers of users and all the stakeholders. As a result of good management strategies, the personal skills of the directors and all the CEO-s, such as leading, organizing, controlling and staffing, will help Google eventually overcome the crisis and continue to be one of the biggest and most remarkable companies of 21-st century. Scenario 2 (Well-used investment + competition) - We give 15% probability of the second scenario that might happen. We believe that the chance for Google of finding suitable investors is great because Google presents an organization with profits of billion dollars every year. As one of the leading companies in the whole world Google must have already found ways to escape from the investment traps as hiring the best investment advisors and applying the most efficient strategies. Even in times of crisis, Google is one of the most successful companies of all time, so eventually it will pass through the difficulties and rise again. The smartest and professional businessmen are aware of the enormous potential of Google and would be ready to commit their money in the future of the company in order to increase their profits in long-term. However, the development of the competitors of Google is also a very possible scenario, because corporations like Microsoft, Apple, Samsung, etc. simply wait for troubles in the other companies to take advantage of them and will try to do their best to make it possible. Google has to be very flexible and adapt to the situation the best way possible in order to keep its leading position. Scenario 3 (Bad investment + declining number of users) - On the third scenario we put 10 % probability as a future event because Google has consistent and successful operating results. This lowers the risk that Google will suddenly have difficulty and increases investor confidence in the value they place on each share. In our opinion, Google is a big company with thousands of employees and partners, so before it makes an investment referring its future, especially in times of crisis, it will make deep market researches, it will hire the best economists and will examine all the statistics and data available, will figure

out all the possible scenarios and evaluate the chances of success/failure properly, will take all the preventive measures in order to reassure its shareholders and partners about the safe business future of the company, and only then would invest in anything. This is the most rational thing to do when making a decision in order to minimize the risk and maximize the profit and Google managers know it very well. When this happens, the chance of the turndown of stakeholders is slightly to happen but it still presents an issue directly connected with the strong competition and the new technological advances. Scenario 4 (Investors' refusal + technological advances and competition) - It is hard to believe that even in times of crisis Google Corporation will not find suitable sponsors that are ready to put their mutual funds into the companys business, one of the most profitable businesses all over the world. Google is an organization with long traditions and through the years has created very valuable partnerships and strong relationships built on mutual respect and success, so one of them will help the company to overcome difficulties for sure. However, it is likely for some moment in the future that Google will lag behind technologically regarding to the strong competition on the market and the lack of serious investments, because a new investments is a new risk and the company probably will not do it for a long period in the future due to the crisis with Motorola. Therefore, our opinion about the likelihood of this scenario is 11%. Scenario 5 (Advertising + well-used investment) - Considering the facts carefully, the fifth scenario is also very likely to happen, approximately 23%, because nowadays the big successful companies are looking for new foreign markets and the investments in the areas with significant potential such as Africa and the Middles East are a good value for money for the rationally thinking businessmen. They represent a perfect business environment with long-term profits. The Middle East has become a popular investment destination, given its extensive energy resources and rapidly growing population. However, investing in these young and new regions has some risks, with the so called Arab Spring, terrorism and oil conflicts having been traditional problems in the area. We believe that Google will make deep researches, calculations and evaluation of the risk, so eventually will make the best possible decision and will actually win. This, combined with a successful

advertising strategy, would make Google rise and take its leading position again. Scenario 6 (Investors' refusal + declining number of users) - As we have already mentioned, the chance Google not to find big sponsors is very little, because of all the long-lived partners and co-operators the company possesses. With all of the young and promising Chinese, Arabian and Japanese millionaires it is hard to assume that every one of them will refuse to commit its mutual funds into the business of the organization. Moreover, working with the best economists and managers, examining every chance of failure and researching every possible future scenario, is even more unlikely the significant decline of the stakeholders of Google. Consequently, we suppose this is the least possible scenario for further development of the Google Corporation and its probability percentage is 6%. Scenario 7 (Advertising + constant number of users) - Judging by its success and excellent management strategy, we hold an opinion that Google will hire the best possible advertising agency in order to maximize the profits and will use every possible media to do it. The campaign, although, could result as insufficient for the prosperous future of the company and this could actually lead to the constant number of stakeholders of the firm. The troubles after the crisis with Motorola could be so big that Google could not handle it for just one year. However, we are optimistic about the whole situation about the company and we think Google will eventually overcome difficulties even slower than it has wanted. And because of that, we suppose there is a little, but still a chance that this scenario could actually happen. Therefore, this scenarios is given 11% of likelihood.

c) Defining total optimism level. Our average percentage of optimism about the Google's future is 76%.

Veronika Goranova: In my opinion, there is 75 % of the company's future success of dealing with the complex crisis. Firstly, this firm during all these times has proven itself as successful business in almost every facet of internet and social communication and research. It is quite easy and comfortable for users to access a program, documents, info materials, photos, interesting facts, people with common beliefs, etc. Secondly, in 2012 Google has appeared in Forbes magazine as one of the world's most innovative companies. This is due to the fact that this giant business is providing more and more students with various and useful education programs (for example: computing and programming experience). Therefore, there would be a great number of loyal customers for this company. Moreover, Google contributes to the currently growing tendency of using technology in every aspect of life by supporting the next generation of computer scientists. In addition, I think that Google could deal with this complex crisis with the help of investing organizations because this company has achieved so much success in the internet, social and youth field of the contemporary world. By doing this, Google could receive significant investments and cope with the crisis. However, people could notice the growing competition and the advent of technological improvements. Consequently, it would be hard for Google to deal in the same time with the crisis, the competitors and to maintain high and innovative standards. Denitsa Marinova: As future economists we need to look at the problems from an economic perspective. Is Google Corporation strong enough to survive this double crisis and the problems, which it is facing? I would say "yes" because this is one of the most prosperous and successful companies in the world, it is incredibly customizable and has remarkable elasticity. To be a member of the Google team requires fresh and brief ideas, new interesting and efficient strategies and great dedication. Therefore, I tend to believe that all of these requirements would benefit the company and could even provide it with more and more successful results and achieved goals. I give 75% optimism that the Google Corporation will cope with the problems, and will handle the serious crisis and management staffing problem. Moreover, I will expect to see its overcome, ready to conquer the world, more competitive and ambitious than ever, with new strength and abilities. And just

to mention one crucial fact to the future of Google: millions of people around the world use this huge search engine. Martina Gardeva: As a whole, I am optimistic about the bright and prosperous future of one of the most successful and promising companies of 21-st century Google. I think that the probability of the Google Corporation to handle with the complex situation of significant crisis and management staffing problem at the same time, is around 70%. This is because Google has proven itself as one of the most flexible and adaptable companies in the world with brilliant strategies and minds. Although it has experienced some issues, I expect that it will overcome them quickly and be on top again, because this is the place that suits it the most. I believe that the company will come up with fresh ideas and resolutions to the problems and will make the comeback of the year, even stronger and more competitive than before. Moreover, in my opinion: the greater the difficulty, the greater the feeling of success. Aisel Hrlova: All in all, I am in the fond hope about the future of Google Corporation. I think that this is not the first time Google is facing such problems of crisis and like any other time, it will succeed in coping with that complex situation. If the most possible scenarios happen, it will probably enlarge the activity of Google. If the less possible ones happen, there is a chance for Google to lose even much greater amounts of money. But I believe that the some managerial factors affecting Google industry will empower the corporation in such crisis times. Such factors like regulations on products and services and control on trade practices can only affect it in a positive way. Google has proven itself worldwide and by using strategies can recover and even become more and more adaptable to changes. Another good strategy is that Google is aware of the obvious always changing and improving technology, and it has taken specific measures to make sure it does not fall behind. For example, important feature is that it selects appropriate technology to invest in. Also, the corporation focuses on technological efforts and tries to improve the productivity through automation. What is more, it has taken some specific methods in improving and also creating good competitive advantage in the race of gaining more and more users. Google can use its strength points in order to cope with times of crisis. Consequently, I think that the approximate percentage to deal with this situation successfully is around 80%.

Sylvette Mehmed: Despite all difficulties, Google is far and away the most successful search engine in the world. The main reason for Google's success is that they provide the best search results for their users. This has always been their goal and it is something that they are constantly striving to do. Google better than any other search engine has been able to ensure that the user is capable of finding what they are looking for. Furthermore, Google's search algorithm is by far the most sophisticated and it is that way due to the fact that they spend huge sums of money to make it complicated and satisfying. Google has built one of the best known brands in the world. This did not just that happen, it was the result of a concerted marketing effort and it makes it hard for others to compete with them. For all these reasons and despite all the obstacles and all the threats Google is facing and it will have to face forward, I give 80% optimism that the company will succeed in getting through these complications which hampers its way to long-standing progress.

Solve the problem situation by using various decisionmaking approaches

a) Under certainty The state which is under maximum likelihood is Scenario 1 (Advertising + increased number of users). In this case Sonny Singh is our best alternative. Therefore, our decision-making approach under certainty is as it follows:

Complex Crisis Problem

States of nature Advertising + increased number of users 24% Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 7 7 6 7 8 7 10 8

b) Under risk In this case, we should consider all of the scenarios and each of the percentages of likelihood to evaluate and differentiate our best alternative. Here, our best option is Frank Calderoni.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition 24% Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald 15% 10% 11% 23% 6% 11% Total

States of nature

1,2 1,2 1,68 1,68 1,44 1,68 1,92 1,68 2,4 1,92

1,2 1,35 1,2 1,35 1,35 1,5 1,35 0,9 1,2 1,05

0,6 0,3 0,7 0,7 0,7 0,8 0,8 0,3 0,5 0,6

0,77 0,55 0,77 0,66 0,66 0,66 0,88 0,33 0,77 0,55

0,92 1,84 2,07 1,61 2,07 2,07 2,07 1,38 2,07 2,07

0,18 0,42 0,42 0,3 0,48 0,42 0,54 0,12 0,36 0,3

0,44 0,66 0,66 0,88 0,77 0,88 0,77 0,55 0,77 0,44

5,31 6,32 7,5 7,18 7,47 8,01 8,33 5,26 8,07 6,93

c) Under risk and uncertainty Wald decision rule In this case, we will consider the smallest number in each row and out of all these, we are looking for the biggest. This time our best alternative is again Frank Calderoni.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 10 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

 Total optimistic decision rule (fool's rule) Here, firstly, we will choose the best choice of each alternative and the biggest of them would be our result. In this case, the best option turns out to be three alternatives: Michael Corbat, Frank Calderoni and Sonny Singh.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 10 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

 Hurwicz decision rule (rendering optimistic preference) In this situation, we will use our optimistic percentage. We will multiple it with the best outcome of each alternative and we will add it to the multiplication of the worst outcome with the (1-optimistic percentage). We will choose the bigger sum of the results. Here, Frank Calderoni is our best alternative.

Complex Crisis Problem

States of nature Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald Total

8*0,76+3*0,24 9*0,76+3*0,24 9*0,76+6*0,24 9*0,76+5*0,24 9*0,74+6*0,24 10*0,76+6*0,24 10*0,76+7*0,24 7*0,76+2*0,24 10*0,76+5*0,24 9*0,76+4*0,24

6,8 7,56 8,28 8,04 8,28 9,04 9,28 5,8 8,8 7,8

 Laplace decision rule (equal probabilities) Following the rules of this approach, we should sum all of the outcomes of each alternative. After that, we will divide to the total number of the outcomes. And the best result would be the biggest sum. Frank Calderoni turns out to be again our best alternative.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining Total number of + advances used number of number of number users competition and investment users users of users competition Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 10 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

5,29 6,14 7,29 7,00 7,43 7,86 8,29 4,57 7,43 6,29

 Savage decision rule (matrix of appropriateness - regret) In this case, we should make a new table considering regret. The evaluation would be according to the missed opportunities.

In this table we should find the biggest number in each of the columns.

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 7 7 6 7 8 7 10 8

8 9 8 9 9 10 10 6 8 7

6 3 7 7 7 8 8 3 5 6

7 5 7 6 6 6 8 3 7 5

4 8 9 7 9 9 9 6 9 9

3 7 7 5 8 7 9 2 6 5

4 6 6 8 7 8 7 5 7 4

And now we will create a new table - regret matrix. It is as it follows:

In this table, we should consider the biggest number in each row and the smallest one of them would be our result (min-max Wald decision rule)

Complex Crisis Problem

Investors' Bad Investors' Advertising Well-used refusal + Advertising Advertising investment refusal + + increased investment technological + well+ constant + declining declining number of + advances used number of number of number users competition and investment users users of users competition Kwon Oh-hyun Cathie Lesjak Clarence Otis Dina Dublon Jay Rasulo Michael Corbat Frank Calderoni Kimberly Casiano Sonny Singh Bruce McDonald

5 5 3 3 4 3 2 7 0 2

2 1 2 1 1 0 0 4 2 3

2 5 1 1 1 0 0 5 3 2

1 3 1 2 2 2 0 5 1 3

5 1 0 2 0 0 0 3 0 0

6 2 2 4 1 2 0 7 3 4

4 2 2 0 1 0 1 3 1 4

Our Final Choice

By summarizing all the information and results from the various decision rules, we could report that Frank Calderoni was our best alternative in 6 out of 7 decision-making approaches. In general, these different decision rules has more or less its advantages and disadvantages. However, the truth is somewhere in all these numbers, strategies and information. In the beginning, we would like to focus on the first two decision rules under certainty and under risk. In the first case, we quite disagree with the given approach because in very rare, extremely rare, cases economists are sure about the certainty of an event. It is quite difficult to predict, oversee an upcoming economic scenario because there is a wide range of external and internal factors influencing the behavior of an event. Consequently, the situation "under risk" requires some percentages of probability. We believe that these predictions are quite abstract, inaccurate and subjective. However, may be this is more close to the truth than the first approach because it is not so entirely optimistic and sure about the upcoming environment events. On the other hand, we situated five various decision-making approaches in the condition "under risk and uncertainty". This specific state is more attractive to us because we are aware of the range anxiety of the contemporary world and economy. But still some of the decision rules are not sufficient and accurate. However, there is one decision-making approach which mostly attracts our attention. This is Savage decision rule. This matrix of appropriateness (regret) seems to be more complicated that the others and moreover, it requires an additional table considering the opportunity loss. Certain decisionmaking approaches have developed earlier in 19th century as well as the Theory of probability and its applications. But most of them appeared as not so rational and mature. As a consequence of this, Savage decision rule has developed since 1954. This work has influenced a great number of theoretical findings and strategies during 20th century. It turns out that probability is in some economic situations quite useful for predicting and modeling but mostly it is ambiguous interpreted notion. Therefore, Leonard Jimmie Savage (19171971) concerned the regret and opportunity loss as factors of the economic environment and its consequences. In his approach of making decisions there is

not any percentage of likelihood of the states of nature. Here, economists focus on the maximum benefit of each scenarios which is considered together with the rest of the outcomes for this specific condition. All these leads to the creation of new table - Opportunity Loss Table where all the numbers present the difference between the best outcome and the specific one of the alternatives. This shows the possible regret of taking some actions in the future or in other words - opportunity loss is a result of the difference between the best possible payoff and each of the payoffs. That is defined by the pessimistic approach. We would like to point out the opportunity cost is one of the main core concepts of the economics theories and it is very important to bear it in mind before make a decision or take an action. In general, the new table provides the economists with the potential regret of choosing various alternatives. After the creation and exploration of this new table, searching the maximum possible regret in each of the rows follows. Then, we should choose the minimum of the maximum results which would lead us to our best alternative. We mostly rely on Savage decision rule because its role is to minimize the worst-case regret. The objective of this criterion is to be as much possible as it could be to the reality and to the real numbers and factors. Furthermore, one of its advantages is that Savage approach does not consider and it is not dependent on the probabilities of each state of nature that is extremely hard to forecast. In conclusion, all of the decision rules could be applicable to various economic situations or crisis. But still they, all together, are applied in limited economic fields and divisions. Human behavior, as one of the main factors for economy and all kind of businesses and organizations, is absolutely difficult to predict and to put it in some limitations of a table. Moreover, in most of the cases human thinking and actions contradict to the economic theories and rules. Therefore, these specific decision-making approaches could help us in some calculations and predictions but a professional economist and analyst should bear in mind that these rules are not so reliable. Then, economists should do their best by not only explore these decisional rules, but evaluate all factors as much as possible, especially the human behavior - the most unique and contradicting with the agreed standards economic factor.