Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 6 Managing the Business Enterprise

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-2 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 StarkeCopyright © 2008 Pearson Education Canada 6-3 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 StarkeCopyright © 2008 Pearson Education Canada 6-4 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 StarkeCopyright © 2008 Pearson Education Canada 6-5 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 StarkeCopyright © 2008 Pearson Education Canada 6-6 Kinds of Goals Goals are set for various time horizons  Long-term  five or more years  Intermediate  one to five years  Short-term  less than one year

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-7 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  Internal: Strengths and Weaknesses  External: Opportunities and Threats

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-8 Formulating Strategy

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-9 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 StarkeCopyright © 2008 Pearson Education Canada 6-10 Purpose Mission Statement Strategic Plans Tactical Plans Tactical Plans Tactical Plans Tactical Plans Operational Plans Operational Plans Operational Plans Operational Plans Operational Plans Operational Plans Hierarchy of Planning

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-11 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 StarkeCopyright © 2008 Pearson Education Canada 6-12 Corporate-Level Strategies Concentration on one product/line Growth Integration Diversification Investment Reduction

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-13 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 StarkeCopyright © 2008 Pearson Education Canada 6-14 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 StarkeCopyright © 2008 Pearson Education Canada 6-15 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 StarkeCopyright © 2008 Pearson Education Canada 6-16 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 StarkeCopyright © 2008 Pearson Education Canada 6-17 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 StarkeCopyright © 2008 Pearson Education Canada 6-18 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 StarkeCopyright © 2008 Pearson Education Canada 6-19 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 StarkeCopyright © 2008 Pearson Education Canada 6-20 Business-Level Competitive Strategies Cost Leadership Differentiation Focus

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-21 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 StarkeCopyright © 2008 Pearson Education Canada 6-22 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 StarkeCopyright © 2008 Pearson Education Canada 6-23 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 StarkeCopyright © 2008 Pearson Education Canada 6-24 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 StarkeCopyright © 2008 Pearson Education Canada 6-25 The Management Process A series of activities developed to allow businesses to achieve their goals PlanningOrganizing LeadingControlling

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-26 Planning Determining what the business needs to do and the best way to achieve it 1. Establish goals 3. Develop actions for how to achieve desired 2.Find gaps between actual and desired 4. Implement actions. 5. Assess effectiveness

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-27 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 StarkeCopyright © 2008 Pearson Education Canada 6-28 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 StarkeCopyright © 2008 Pearson Education Canada 6-29 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 StarkeCopyright © 2008 Pearson Education Canada 6-30 Establish Standard Measure Performance Does performance meet desired standard/goal? YesNo Continue Current Activities Adjust performance or Change standard Steps In the Control process

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-31 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 StarkeCopyright © 2008 Pearson Education Canada 6-32 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 StarkeCopyright © 2008 Pearson Education Canada 6-33 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 and 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 StarkeCopyright © 2008 Pearson Education Canada 6-34 Management Levels and Skills

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-35 Decision-Making Skills

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-36 Time Management Skills Productive use of time  Leading causes of wasted time  Paperwork  Telephone  Meetings 

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

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-38 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 StarkeCopyright © 2008 Pearson Education Canada 6-39 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 and maintain the culture

Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 6-40 Managing Change Cultural change process 1.Environmental analysis shows need for change  Conflict and resistance 2.Management formulates vision of new company  With a focus on customer needs and competition 3.New systems of appraisal and compensation  Enforce new values