CHAPTER 6 Managing the Business Enterprise Business Sixth

2 Learning Objectives Explain the importance of setting goals and formulating strategies as the starting points of effective management Describe the four activities that constitute the management process Identify types of managers by level and area Describe the five basic management skills Describe the development and explain the importance of corporate culture Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

3 Goals and Strategies Goals are performance objectives that a firm plans to achieve The starting point of successfully managing a business The planned method of reaching a goal is the “strategy” Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

4 Purpose of Setting Goals Provides direction, guidance and motivation Assists in allocating resources Helps to define corporate culture Helps managers assess performance Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

5 Mission Statement Describes how the organization will achieve its purpose (reason for being) Clarifies who the organization serves, what it offers, and how it will be provided include core values and ethical commitment Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

6 Kinds of Goals are set for various time horizons <Long-term t five or more years <Intermediate tone to five years <Short-term tless than one year Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

7 Formulating Strategy Strategic goals <long-term goals based on the mission statement SWOT analysis is an evaluation technique <Analyse an organization and its environment by identifying t. Internal: Strengths and Weaknesses t. External: Opportunities and Threats Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

8 Formulating Strategy Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright ©

9 Matching the Organization to the Environment Final step in strategy formulation <matching company strengths to environmental opportunities <minimizing the impact of threats and company weaknesses Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

10 Hierarchy of Planning Purpose Mission Statement Strategic Plans Tactical Plans Operational Plans Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Tactical Plans Operational Plans Copyright © 2008 Pearson Education Canada

11 Levels of Strategies Corporate-Level Strategy <What businesses will we pursue? <How do these businesses relate to each other? Business-Level Strategy (competitive) <How will we compete in our chosen area? Functional Strategy <What actions can our department pursue to reach the overall goals? Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

12 Corporate-Level Strategies Concentration on one product/line Growth Integration Diversification Investment Reduction Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

13 Growth Options Market Penetration < Increase sales in current markets Product Development < Develop improved products for current market Geographic Expansion < Expand into new locations Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

14 Market Penetration Attempting to increase market share <focus on existing products and services in current markets <increasing current efforts in the market segment(s) where the firm already has a presence Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

15 Geographic Expansion Firm introduces its current product/service line to new market segments Can involve new geographic regions as well, including foreign markets Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

16 Product Development The firm creates new products/services, or modifies existing products to better serve its market segments Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

17 Integration Options Vertical integration <a firm strives to gain ownership of its suppliers or its retailers Horizontal integration <a firm strives to gain ownership of its competitors Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

18 Diversification Options Related diversification <a firm adds new related products or services to its line Conglomerate diversification <a firm adds new, and unrelated, product or services to its line Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

19 Investment Reduction Retrenchment <Reducing activity or operations <Retreat to core businesses Divestment <Selling or liquidating one or more businesses Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

20 Business-Level Competitive Strategies Cost Leadership Differentiation Focus Business, Sixth Canadian Edition, by Griffin,

21 Cost Leadership Striving to have the lowest costs in the industry Permits the firm to lower prices to gain customers or to respond to the competition’s pricing policies Useful in industries that are price sensitive Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

22 Differentiation Striving to provide goods and services that are distinctive from its competitors < product design < packaging < promotion Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

23 Focus Serving a particular market segment May involve the use of one of the other generic strategies to serve the needs of the market niche more effectively <Cost leadership <Differentiation Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

24 Contingency Planning and Crisis Management Contingency Planning <Identify in advance changes that might occur <Identify ways the company can respond to changes Crisis Management <Methods for dealing with emergencies Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

25 The Management Process A series of activities developed to allow businesses to achieve their goals Planning Leading Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Organizing Controlling Copyright © 2008 Pearson Education Canada

26 Planning Determining what the business needs to do and the best way to achieve it 1. Establish goals gaps between actual and desired 2. Find 3. Develop actions for how to achieve desired 4. Implement actions. 5. Assess effectiveness Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

27 Organizing Determining how to use existing resources to implement the plan Jobs must be arranged in a structure to create an efficient task system Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

28 Leading Guiding and motivating subordinates to meet the firm’s objectives Managers have various responsibilities with regard to their employees < The authority to give orders < The ability to guide employees < The power to motivate subordinates Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

29 Controlling Managers monitor the firm’s performance <determine if goals have been met <determine what actions were most effective in achieving goals <understanding what went wrong and how to fix it Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

Establish Standard 30 Steps In the Control process Measure Performance Does performance meet desired standard/goal? Yes Continue Current Activities Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke No Adjust performance or Change standard Copyright © 2008 Pearson Education Canada

31 Levels of Management Top Management < President, CEO, CFO, Vice President, Treasurer < responsible for overall performance of the firm Middle Management < Plant Manager, Operations Manager, Division Manager, < responsible for implementing decisions of top managers First-Line Managers < Supervisor, Office Manager, Foreman < responsible for supervising employees Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

32 Areas of Management Marketing Managers < get products and services to buyers Financial Managers < plan and oversee financial resources Operations Managers < control production, inventory, and quality Human Resource Managers < hire, train, evaluate, and compensate employees Information Managers < design and implement systems to collect, process, and organize information needed to make decisions Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

33 Management Skills Technical < the ability to do specialized tasks such as keyboarding, artwork, accounting, marketing etc. Human Relations < “people skills” that enable managers to understand get along with others Conceptual < the ability to view problems creatively and abstractly, and to accurately analyze situations Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

34 Management Levels and Skills Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke

35 Decision-Making Skills Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright ©

36 Time Management Skills Productive use of time <Leading causes of wasted time t. Paperwork t. Telephone t. Meetings t. Email Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

37 21 st Century Management Skills Global management < understanding foreign markets & international operations < awareness of cultural differences < practices of foreign competitors Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Management and Technology < understanding communications & information technology < computer networks < effects of easy access to information on decision-making < understanding of teamwork Copyright © 2008 Pearson Education Canada

38 Corporate Culture A firm’s personality < shared experience of employees < stories, beliefs, and norms that characterize the organization < culture can direct employee’s efforts Forces shaping culture < Top management values < History, shared experiences < Stories and legends < Strong behavioural norms Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

39 Communicating the Culture Make sure new and existing managers understand the culture Develop a clear mission statement for the firm Communicate the culture to employees Reward those who understand maintain the culture Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

40 Managing Change Cultural change process 1. Environmental analysis shows need for change t Conflict and resistance 2. Management formulates vision of new company t With a focus on customer needs and competition 3. New systems of appraisal and compensation t Enforce new values Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada