Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. CHAPTER 6 Managing the Business Enterprise

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-3 Goals and Strategies 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-5 Mission Statement Describes how the organization will achieve its purpose Clarifies who the organization serves, what it offers, and how it will be provided Purpose: the organization’s reason for being the purpose of a consulting business is primarily to seek profit the mission statement may be: “to provide affordable solutions to small and medium businesses...” HARK!

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-6 Kinds of Goals Goals are characterized by their expected time horizons Long-term five or more years Intermediate one to five years Short-term less than one year

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-7 Who Sets Goals? Purpose/mission board of directors Long-term goals Top management (with board input) Intermediate middle management (with top management input) Short-term first line management (with middle management input)

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-8 Strategy Formulation 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 6-9 Matching the Organization to the Environment Final steps in strategy formulation matching company strengths to environmental opportunities minimizing the impact of threats and company weaknesses

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Levels of Strategies Corporate-Level Strategy identifies the businesses that a company will pursue indicates how these businesses relate to each other Business-Level Strategy (competitive) identifies the ways a business will compete in its chosen line of products or services Functional Strategy identifies the basic courses of action that each department will pursue to reach the overall goals

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Corporate-Level Strategies Concentration Growth Integration Diversification Investment Reduction

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Growth Options Market Penetration Geographic Expansion Product Development

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Market Penetration Attempting to increase market share focus on existing products and services in current markets increasing current marketing efforts in the market segment(s) where the firm already has a presence

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Geographic Expansion Firm introduces its current product/service line to new market segments Can involve new geographic regions as well, including foreign markets

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Product Development The firm creates new products/services, or modifies existing products to better serve its market segments

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Integration Options Vertical integration a firm strives to gain ownership of its suppliers or its retailers Horizontal integration a firm strives to gain ownership over its competitors

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Competitive Strategies Cost Leadership Differentiation Focus

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Differentiation Striving to provide goods and services that are distinctive from its competitors product design packaging promotion

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Contingency Planning Unexpected events may occur that require quick action Identifying aspects of a business or its environment that might entail changes in strategy A “back-up” plan in case the firm’s environments change Taking stock of all possible scenarios to allow for development of potential solutions

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Crisis Management Emergency situations may arise requiring quick action Approximately half of all business firms in North America have emergency plans who will make decisions what actions must be taken who would take part in the crisis team

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc The Management Process A series of activities developed to allow businesses to achieve their goals Planning Organizing Leading Controlling

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Planning Determining organizational goals and objectives Determining how far an organization must move to achieve the goals Designing methods (plans) Implementing the plan(s) Evaluating the results

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Organizing Determining how to use existing resources to implement the plan Jobs must be arranged in a structure to create an efficient task system within the firm

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Leading Guiding subordinates to complete the tasks necessary to reach organizational objectives Managers have various responsibilities with regard to their employees The authority to provide direction and give orders The ability to guide employees The power to motivate subordinates

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Management Levels in the Firm Top Management President,CEO, CFO, Vice President,Treasurer responsible for overall performance of the firm Middle Management Plant Manager, Operations Manager, Division Manager, etc. responsible for implementing decisions of top management First-Line Managers Supervisor, Office Manager, Foreman responsible for supervising the work of employees

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Management Areas Finance Manager plan and oversee financial resources Marketing Manager get products and services to buyers Human Resources Manager hire, train, evaluate, and compensate employees Information Managers design and implement systems to collect, process, and organize information needed to make decisions Operations control production, inventory, and quality

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 employees’ needs Conceptual the ability to view problems creatively and abstractly, and to accurately analyze situations Decision-Making Time Management

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc 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 Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Corporate Culture The “feeling” or atmosphere within a firm a firm’s personality Shared experience of employees Stories, beliefs, and norms that characterize the organization Corporate culture can change over time culture can impact performance must be established and maintained by management

Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc Communicating Corporate 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