1. Chapter 5 BUSINESS MANAGEMENT © 2007 Prentice Hall, Inc. All rights reserved.5–1 BUS 100

2. © 2007 Prentice Hall, Inc. All rights reserved.5–2 L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to: 1. Describe the nature of management and identify the four basic functions that constitute the management process. 2. Identify different types of managers likely to be found in an organization by level and area. 3. Describe the basic skills required of managers. 4. Explain the importance of strategic management and effective goal setting in organizational success.

3. © 2007 Prentice Hall, Inc. All rights reserved.5–3 L E A R N I N G O B J E C T I V E S (cont’d) After reading this chapter, you should be able to: 5. Discuss contingency planning and crisis management in today’s business world. 6. Describe the development and explain the importance of corporate culture.

4. © 2007 Prentice Hall, Inc. All rights reserved.5–4 What’s in It for Me? After reading this chapter, you’ll be better positioned to:  Carry out various management responsibilities yourself  More effectively assess and appreciate the quality of management in various companies from the perspective of a consumer or investor

5. © 2007 Prentice Hall, Inc. All rights reserved.5–5 Who Are Managers? Good Managers  Are responsible for business performance and effectiveness  Effective—do the right things; achieve goals  Efficient—do things right; lower costs  Are accountable to all key stakeholders  Develop strategic plans and tactical plans  Analyze their competitive environments and plan, organize, direct, and control day-to-day operations

6. © 2007 Prentice Hall, Inc. All rights reserved.5–6 The Management Process Leading Guiding and Motivating Controlling Monitoring Performance Planning Setting Goals Organizing Structuring Management  The process of planning, organizing, leading, and controlling a firm’s financial, physical, human, and information resources to achieve its goals

7. © 2007 Prentice Hall, Inc. All rights reserved.5–7 Planning The Planning Process  Determining firm’s goals  Developing strategy for achieving goals  Designing tactical and operational plans for implementing the strategy

8. © 2007 Prentice Hall, Inc. All rights reserved.5–8 Organizing The Organizing Process  Arranging resources and activities in a coherent structure  Prepare organizational charts to help everyone understand roles and reporting relationships

9. © 2007 Prentice Hall, Inc. All rights reserved.5–9 Leading Leading  Guiding and motivating employees to meet the organization’s objectives  Uniting employees in a clear and targeted manner and motivating them to work in the best interests of their employer

10. © 2007 Prentice Hall, Inc. All rights reserved.5–10 Controlling The Controlling Process  Monitoring a firm’s performance to make sure that it is meeting its goals  Begins when management establishes standards, often for financial performance  Can serve as a basis for providing rewards or reducing costs

11. © 2007 Prentice Hall, Inc. All rights reserved.5–11 The Control Process Establish Standards Measure Performance Does measured performance match standards? YESNO Continue Current Activities Activities Adjust Performance or Standards

12. © 2007 Prentice Hall, Inc. All rights reserved.5–12 Types of Managers Levels of Management  Top managers: R  Top managers: Responsible for the overall performance of the firm  President, vice president, treasurer, CEO, CFO  Middle managers: I  Middle managers: Implement strategies and work toward goals set by top managers  Plant manager, operations manager, division manager  First-line managers: W  First-line managers: Work with and supervise employees  Supervisor, office manager, project manager, group leader

13. © 2007 Prentice Hall, Inc. All rights reserved.5–13 Human Resources MarketingMarketing FinancialFinancial OperationsOperations InformationInformation OtherOther Areas of Management

14. © 2007 Prentice Hall, Inc. All rights reserved.5–14 Basic Management Skills Human Relations Skills Technical Skills Conceptual Skills Time Management Skills Decision- Making Skills

15. © 2007 Prentice Hall, Inc. All rights reserved.5–15 Management Skills for the 21st Century Global Management Skills  Understand foreign markets, cultural differences, and the motives and practices of foreign rivals  Understand how to collaborate with others around the world on a real-time basis Management and Technology Skills  Needed to process increasing amounts of information

16. © 2007 Prentice Hall, Inc. All rights reserved.5–16 Strategic Management: Setting Goals and Formulating Strategy Strategic Management  The process of helping an organization maintain an effective alignment with its environment Goals  Starting point in effective strategic management   Objectives that a business hopes and plans to achieveStrategy  The broad set of action plans to achieve company goal

17. © 2007 Prentice Hall, Inc. All rights reserved.5–17 Setting Business Goals Goals  Performance targets that organizations and their managers use to measure success or failure Mission Statement  A statement of how a business will achieve its fundamental purpose Effective organizations set goals at many different levels:  Long-term goals: five years or more  Intermediate goals: one to five years  Short-term goals: one year or less

18. © 2007 Prentice Hall, Inc. All rights reserved.5–18 Purposes of Goal Setting Goal Setting: 1. Provides direction and guidance for managers at all levels 2. Helps firms allocate resources 3. Helps to define corporate culture 4. Helps managers assess performance

19. © 2007 Prentice Hall, Inc. All rights reserved.5–19 Types of Strategy Corporate Strategy  Determines what business or businesses a company will own and operate  Growth  Related diversification  Unrelated diversification  Retrenchment  Downsizing and divestiture

20. © 2007 Prentice Hall, Inc. All rights reserved.5–20 Types of Strategy (cont’d) Business (or Competitive) Strategy  Focuses on improving the company’s competitive position at the level of the business unit or product line Functional Strategy  Guides managers in specific areas in deciding how best to achieve corporate goals by performing their functional activities most effectively  Guides managers in specific areas such as marketing, finance, and operations in deciding how best to achieve corporate goals by performing their functional activities most effectively

21. © 2007 Prentice Hall, Inc. All rights reserved.5–21 FIGURE 5.2Hierarchy of Strategy

22. © 2007 Prentice Hall, Inc. All rights reserved.5–22 Formulating Strategy Step 1:Setting Strategic Goals  Strategic goals are derived from a firm’s mission statement Step 2:Analyzing the Organization and the Environment: SWOT Analysis  Assessing internal strengths and weaknesses and external opportunities and threats   Environmental analysis   Organizational analysis Step 3:Matching the Organization and Its Environment  Matching environmental threats and opportunities against corporate strengths and weaknesses

23. © 2007 Prentice Hall, Inc. All rights reserved.5–23 FIGURE 5.3Strategy Formulation

24. © 2007 Prentice Hall, Inc. All rights reserved.5–24 A Hierarchy of Plans Strategic Plans  Reflect decisions about resource allocations, company priorities, and the steps needed to meet strategic goals Tactical Plans  Shorter-term plans for implementing specific aspects of the company’s strategic plans Operational Plans  Mid-level and lower-level managers set short-term targets for daily, weekly, or monthly performance

25. © 2007 Prentice Hall, Inc. All rights reserved.5–25 Contingency Planning and Crisis Management Contingency Planning  Planning for change  Seeks to identify in advance important aspects of a business or its market that might change and the ways in which a company will respond to changes Crisis Management  Involves an organization’s methods for dealing with a crisis—an unexpected emergency requiring immediate response

26. © 2007 Prentice Hall, Inc. All rights reserved.5–26 Management and the Corporate Culture Corporate Culture  Is the shared experiences, stories, beliefs, and norms that characterize an organization  Helps define the work and business climate that exists in an organization Communicating the Culture  Managers must understand the culture  Managers must transmit the culture to others in the organization  Managers can support the culture by rewarding and promoting those who understand it and work toward maintaining it

27. © 2007 Prentice Hall, Inc. All rights reserved.5–27 Managing Change in the Culture Stages in the Change Process 1. At the highest level, analysis of the company’s environment highlights extensive change as the most effective response to its problems. 2. Top management begins to formulate a vision of a new company. 3. The firm sets up new systems for appraising and compensating employees who enforce the firm’s new values.

28. © 2007 Prentice Hall, Inc. All rights reserved.5–28 K E Y T E R M S business (or competitive) strategy conceptual skills contingency planning controlling corporate culture corporate strategy crisis management decision-making skills leading environmental analysis first-line manager functional strategy goal human relations skills intermediate goal long-term goal management middle manager mission statement organizational analysis organizing operational plan planning short-term goal strategic goal strategic management strategic plan

29. © 2007 Prentice Hall, Inc. All rights reserved.5–29 K E Y T E R M S (cont’d) strategy strategy formulation SWOT analysis tactical plan technical skills time management skills top manager