1. Managing the Business Firm
Chapter 6
Managing the Business
Firm

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
These learning objectives are based upon those at the beginning of the chapter. For a review of learning objectives, see the summary at the end of the chapter, as well as the list of key terms.
Objectives: p.156.
Summary: p

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”
Discussed on pages
The text gives an ideal discussion of goals. It is important that students are able to describe what a goal (or objective) is and how it helps to operationalize the visions of management in deciding on the future of the organization.
Activities:
Students may make lists of their own personal goals, particularly those that have led to them taking the course. A class discussion may be held to allow students to compare personal goals and discuss how their goals define and direct the decisions they have made. This must be related to the business planning process.

4. Purpose of Setting Goals
Provides direction, guidance and motivation
Assists in allocating resources
Helps to define corporate culture
Helps managers assess performance
Discussed on pages

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..”
Discussed on page 159.

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
Discussed on page 159.

7. Who Sets Goals? Purpose/mission Long-term goals Intermediate
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)
Discussed on page 159.

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
Discussed on page
Activities:
Review Questions, #7.

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
Discussed on page 161.

10. Hierarchy of Plans Strategic plans Tactical plans Operational plans
Plans that reflect decisions about resource allocations, company priorities, and steps needed to meet strategic goals
Tactical plans
Short-range plans concerned with implementing specific aspects of a company’s strategic plans
Operational plans
Plans setting short term targets for daily, weekly, or monthly performance
Discussed on page 161.

11. Hierarchy of Planning Purpose Mission Statement Tactical Tactical
Strategic Plans
Strategic Plans
Discussed on page
Activities:
Provide a hypothetical organization concept to the class. Have students working in small groups determine a mission statement. Develop the exercise to the strategic and operational planning levels. For an optional second round of the exercise, have the groups exchange their work with each other. Let them work out new strategies for the other groups’ mission statement. Let the students understand the differences that the mission statement makes in the planning process.
Tactical
Plans
Tactical
Tactical
Tactical
Plans
Plans
Plans
Operational
Plans
Operational
Plans
Operational
Plans
Operational
Plans
Operational
Plans
Operational
Plans

12. Levels of Strategies Corporate-level strategy
Identifies the businesses that a company will pursue
Indicates how these businesses relate to each other
Business-level (competitive) strategy
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
Discussed on page
Activities:
Review Questions, #8

13. Corporate-Level Strategies
Concentration
Growth
Integration
Diversification
Investment Reduction
Discussed on page This is a title slide. Individual topics are discussed in greater detail on the slides which follow.
Concentration options involve focusing the company on one product line or product. This allows the company to focus its strengths.
Growth options include steps to increase revenue. Market penetration (marketing more aggressively); market development (finding new markets for existing products); product development (developing new products to market to customers).
Integration options include takeovers of various types of organizations, either horizontal (competitors) or vertical (suppliers or retailers).
Diversification options include adding new elements to the existing business, including: concentric (new but related products) or conglomerate (new and unrelated products).
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.
Review Question #8

14. Growth Options Market penetration Geographic expansion
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
Geographic expansion
Firm introduces its current product/service line to new market segments
Can involve new geographic regions as well, including foreign markets
Discussed on page 162.
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.

15. Growth Options Product development
The firm creates new products/services, or modifies existing products to better serve its market segments
Discussed on page 162.
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.

16. Integration Options Vertical integration Horizontal integration
A firm strives to gain ownership of its suppliers or its retailers
Horizontal integration
A firm strives to gain ownership over its competitors
Discussed on page 162.
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.

17. 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
Discussed on page 162.
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.

18. Competitive Strategies
Cost leadership
Differentiation
Focus
Discussed on page 163.
Activities:
Have students provide names of companies fro m media clippings that are pursuing one of the above strategies.
Analysis question #8

19. 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
Discussed on page 163.
Activities:
Have students provide names of companies from media clippings that are pursuing one of the above strategies.
Analysis question #8

20. Differentiation
Striving to provide goods and services that are distinctive from its competitors
Product design
Packaging
Promotion
Discussed on page 163.
Activities:
Have students provide names of companies fro m media clippings that are pursuing one of the above strategies.
Analysis question #8

21. Focus
Selecting a market segment and serving the customers in that market niche better than competitors
May involve the use of one of the other generic strategies to serve the needs of the market niche more effectively
Cost leadership
Differentiation
Discussed on page 163.
Activities:
Have students provide names of companies fro m media clippings that are pursuing one of the above strategies.
Analysis question #8

22. 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
Discussed on page

23. Crisis Management
Emergency situations may arise requiring quick action
Who will make decisions
What actions must be taken
Who would take part in the crisis team
Discussed on page
Activities:
Have students develop a crisis plan to deal with the threatening situations a firm may face. Students may develop their own threatening scenarios as well, or they may use actual situations which have faced firms: the Exxon Valued oil spill, the chemical leak in the Union Carbide plant in India.

24. The Management Process
A series of activities developed to allow businesses to achieve their goals
Planning
Organizing
Leading
Controlling
Discussed on pages
Activities:
Review Questions: #1,2,3,9.

25. 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
Discussed on pages
Activities:
Review Questions: #1,2,3,9.

26. 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
Discussed on page 167.
Activities:
Review Questions: #1,2,3,9.

27. 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
Discussed on page
Activities:
Review Questions: #1,2,3,9.

28. 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
Discussed on page 168.
Activities:
Review Questions: #1,2,3,9.

29. Steps In the Control Process
Establish Standard
Steps In the Control Process
Measure Performance
Does performance meet
desired standard/goal?
Yes No
Continue
Discussed on page This is a reproduction of Figure 6-2.
Activities:
Have students apply the control process depicted in the slide to their exam writing performance.
Review Questions: #1,2,3,9.
Current
Adjust
Activities
performance or
Change
standard

30. 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
Discussed on page
Activities:
Analysis Questions: #4,9.

31. Management Areas Finance manager Marketing manager
Plan and oversee financial resources
Marketing manager
Responsible for developing, pricing, promoting, and distributing goods and services to buyers
Discussed on page
Activities:
Analysis Questions: #4,9.

32. Management Areas Human resources manager Information managers
Hire, train, evaluate, and compensate employees
Information managers
Design and implement systems to collect, process, and organize information needed to make decisions
Operations managers
Control production, inventory, and quality
Discussed on page
Activities:
Analysis Questions: #4,9.

33. Management Skills Technical Human relations Conceptual Decision-making
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
Discussed on pages
Activities:
Review Questions: #1,2.

34. 21st 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
Discussed on page
Activities:
Let students develop a list of changes that have affected workplace technology in the last ten years. Then have the students list ways that the changes would affect managers’ responsibilities. Finally, have the students indicate the possible changes which could occur in the next ten years, and how those changes could affect managers.

35. 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
Discussed on pages
Activities:
Review Questions: #6,10.

36. 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
Discussed on pages
Activities:
Review Questions: #6,10.