Chapter 6 Managing the Business Enterprise PDF

CHAPTER 6 Managing the Business Enterprise Learning Objectives Describe the four functions that constitute the management process. Identify types of managers by level and area. Describe the five basic management skills. Explain the importance of setting goals and stra...

CHAPTER 6 Managing the Business Enterprise Learning Objectives Describe the four functions that constitute the management process. Identify types of managers by level and area. Describe the five basic management skills. Explain the importance of setting goals and strategic management in organizational success. Discuss contingency planning and crisis management in today’s business world. Explain the idea of corporate culture and why it is important. Who are Managers? All businesses depend on effective management and all managers perform similar functions What is the management process? Planning, organizing, leading, controlling  The Management Process Planning Leading Functions of Management Organizing Controlling The Roles of Decisional Management Informational Interpersonal 6-5 Managerial Roles Interpersonal roles. ceremonial obligations (figurehead); provide leadership to employees; build a network of relationships with bosses, peers, and employees; act as liaison to groups and individuals both inside and outside the company (such as suppliers, competitors, government agencies, consumers, special- interest groups, and interrelated work groups). Informational roles. spend a fair amount of time gathering information by questioning people both inside and outside the organization Distribute/disseminate information to employees, other managers, and outsiders. They act as spokespeople for their company Decisional roles. use the information they gather to encourage innovation, and be entrepreneurs resolve unexpected problems that threaten organizational goals (such as reacting to an economic crisis), They negotiate decide how organizational resources will be used Come up with strategies POLC: What is Planning? A manager must determine: what a business needs to do how best to achieve it Involves steps such as : Establishing goals Identifying whether a gap exists between a company’s desired and actual position Developing plans/strategies to achieve the desired objectives Implementing plans/tactics that have been decided upon Assessing the effectiveness of the plans (control) 6-7 Additional Considerations Efficiency means Effectiveness achieving the means greatest level of achieving output with a organizational given amount of goals that have input. been set. 6-8 The Planning Function: Strategic Planning A good strategic plan answers the questions: where are we going? what is the environment? how do we get there? To answer these questions managers require extensive amounts of information. They must study budgets, production schedules, industry and economic data, customer preferences, internal and external data, the competition and so on. Function 1: Planning the primary management function 1. Set goals and objectives 3. Develop action plans (tactics) 6-10 Strategy and Tactics Defined To clarify: A strategy is a blueprint, layout, design, or idea used to accomplish a specific goal. A strategy is very flexible and open for adaptation and change when needed. A tactic is the actual means used to gain an objective, while strategy is the overall plan, which may involve activities and decision- making that govern tactical execution. 6-11 Strategic Planning outline firm’s long range (2 to 5 years) organizational goals; encompass 8 major areas Market standing Physical resources Innovation Productivity Human resources Social responsibility Financial resources Financial performance 6-12 Strategies versus Tactics Strategies are long-term plans to achieve broad goals, while tactics are specific actions taken to execute the strategy. Here are a few examples: 1.Business Strategy vs. Tactic: 1. Strategy: Expand market presence in Europe over the next 5 years. 2. Tactics: Launch targeted social media campaigns, attend industry trade shows, and set up regional distribution centers. 2.Marketing Strategy vs. Tactic: 1. Strategy: Increase brand awareness among health-conscious consumers. 2. Tactics: Partner with influencers, offer product samples at fitness events, and create content around healthy lifestyle tips. 3.Personal Fitness Strategy vs. Tactic: 1. Strategy: Improve overall physical fitness by the end of the year. 2. Tactics: Follow a weekly workout schedule, track daily calorie intake, and hire a personal trainer for specific exercises. 6-13 Competitive Analysis SWOTA company can gain a competitive advantage through: Differentiation strategy Cost leadership strategy Focus strategy 6-14  Contingency Planning Contingency Planning and Identify Crisisin Management advance changes that might occur Identify ways the company can respond to changes Crisis Management Methods for dealing with emergencies +. Crisis Management Minimize Maintain damage operations Contingency Open plans communication 6-16  POLC: Organizing The Management Process Organizing determining how to use existing resources to implement the plan arranging jobs in a structure to create an efficient task system Function 2: Organizing Employee activities Facilities and equipment Decision making Supervision Resource distribution 6-18 POLC: Function 3: Leading the process of influencing and motivating people to work effectively and willingly towards company goals Influencing Influencing Motivating Motivating People People People People 6-19  The Management Process (LO 6-1) Leading guiding and motivating subordinates to meet objectives managers have various responsibilities with regard to their employees Authority to give orders Ability to guide employees Power to motivate subordinates  Autocratic Democratic Leadership Styles Laissez-faire Contingency 6-21 PLOC: Function 4: Controlling Monitoring progress Resetting the course Correcting deviations 6-22  Types of Managers Levels of Management Top Management responsible for overall performance of the firm Middle Management responsible for implementing decisions of top managers First-line Management responsible for supervising employees The Management Pyramid President, CEO, VP Make long-range plans Establish policies Top Represent the company Managers Middle Managers First-line Managers 6-24 The Management Pyramid Controller, Marketing Make decisions Manager, Sales Manager Direct first-line managers Top Implement goals Managers Middle Managers First-line Managers 6-25 The Management Pyramid Office Manager, Implement plans Supervisor, Foreman, Oversee workers Top Assist middle managers Department Head Managers Middle Managers First-line Managers 6-26 Management Skills Managers must have effective skills such as: Technical Sills Human Relations Conceptual Skills 6-27  Types of Managers (LO 6-2) Areas of Management Marketing Managers Financial Managers Operations Managers Human Resource Managers Information Managers  Basic Management Skills Conceptual skills Time Management skills Human Relations skills Decision-Making skills Technical skills  Basic Management Skills (LO 6-3) Time-Management Skills productive use of time leading causes of wasted time paperwork telephone meetings email  Basic Management Skills (LO 6-3) Decision-Making Skills Recognize and define the decision situation Identify alternatives Evaluate the alternatives Select the best alternative Implement the chosen alternative Follow up and evaluate the results  Setting Goals and Formulating Strategy (LO 6-4) Strategic Management process of aligning the organization with its external environment Strategic Goals performance objectives that a firm plans to achieve  Setting Goals and Formulating Strategy (LO 6-4) Purpose of Setting Goals Provides direction, guidance, and motivation Assists in allocating resources Helps to define corporate culture Helps managers assess performance Setting Goals and Formulating Strategy (LO 6-4) Kinds of Goals Long-term five or more years Intermediate one to five years Short-term less than one year  Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Mission Statement how the organization will achieve its purpose (reason for being) clarifies who the organization serves, what it offers, and how it will be provided includes core values and ethical commitment Mission Statement While companies may have the same purpose, their mission may be different. Example: 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...” Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Setting strategic goals long-term goals based on the mission statement Analyzing the organization and its environment (SWOT) Matching the organization to its environment Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Analyzing the Organization and Its Environment Internal External Strengths Opportunities SWOT Analysis Internal External Weaknesses Threats Let’s Apply SWOT In the short time you have been at Vanier, give your views on the school’s strengths and weaknesses, threats and opportunities…. Then use this information to write up a SWOT analysis for the school. 6-42 Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Matching the Organization and Its Environment Final step in strategy formulation Matching company Minimizing the strengths to impact of threats environmental and company opportunities weaknesses  Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Levels of Strategies Corporate-level strategy what businesses will we pursue? how do these businesses relate to each other? Business-Level (competitive) strategy how will we compete in our chosen area? Functional strategy what actions can our department pursue to reach the overall goals? Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Corporate-Level Strategies Concentration Growth Integration Diversification Investment reduction Corporate Level Strategies 1. Corporate-level strategies—Identifies the various businesses that a company will be in. a. Concentration—Focusing the company on one product or product line b. Growth—Several specific strategies are available (e.g., market penetration, geographic expansion, and product development)-see next slide 6-46  Growth Option Strategies b.1 Market Penetration Increase sales in current markets b.2 Geographic Expansion  Expand into new locations b. 3 Product Development Develop improved products for current market 6-47  Copyright © 2012 Pearson Canada Inc. Corporate Level Strategies C. Integration— Horizontal integration means acquiring control of competitors in the same or similar markets with the same or similar products. Vertical integration means owning or controlling the inputs to the firm’s processes or the channels through which its products and services are distributed.  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 6-49 Vertical Integration Strategy Apple and Levi’s, for example, operate their own retail stores and compete directly with dealers who also distribute their products. Levi Apple Sony Strauss Apple Stores Sony Stores Levi Stores Levi Strauss also owns many manufacturing facilities in the Far East. Horizontal Integration Strategy A corporation operates many companies at the same level of the channel. (i.e: restaurant chain operates Harvey’s and Swiss Chalet ) Swiss Chalet Cara Harvey’s Operations Kelsey’s Montana’s Milestones Cara offers different menus at different price points to reach different targets. 51 Corporate Lavel Strategies d. Diversification—means expanding into related (related diversification) or unrelated products or market segments (conglomerate diversification). e. Investment reduction—Means reducing the company’s investment in one or more of its lines of business (see following slide for examples).  Investment Reduction or Divestment Divestment/Investment Reduction/retrenchment – Some companies decide to exit some of the businesses they have been involved in; typically, they are now unprofitable divisions of the company. Jean Coutu acquired Eckerd Drugs (U.S.) in 2004 and sold it in 2006. Molson retreated to beer by selling interests in retailing, chemicals and sports. Unilever sold off more than 100 brands over a three year period and became a more profitable 53  Strategic Management: Setting Goals and Formulating Strategy (LO 6-4) Business-Level (Competitive) Strategies- how to establish a profitable and competitive position against the forces that determine industry competition. Cost Leadership Differentiation Focus Cost Cost Leadership Cost Leadership Organizations that pursue cost leadership gain a competitive advantage by reducing operating costs to a level below the industry average. Business owners then pass these savings on to their customers with low-priced merchandise or services or maintain average pricing to increase their profit margin. 6-55 Differentiation Differentiation Companies that leverage a differentiation business-level strategy win market share and defend higher pricing by offering a unique product or service features that are valued by their customers. 6-56  Focus Level Strategy Focus strategies involve achieving cost leadership or differentiation within niche markets in ways broadly- focused players can not. You apply focus cost or differentiation strategies in the same ways described above, but for a small portion of the market (buyers with unique needs). Known as “niche market” Ex: hotel that offers many activities for children (or without) 6-57 Functional Strategies Functional level strategies are the actions and goals assigned to various departments that support your business level strategy and corporate level strategy. specify the outcomes you want to see achieved from the daily operations of specific departments (or functions) of your business. Ex: Financial strategy, marketing strategy, production strategy, human resources strategy (personnel strategy) and research and development strategy. Often they concern specifics such as resource allocation, operating expense efficiencies and product improvement etc 6-58 Contingency Planning and Crisis Management (LO 6-5) Contingency Planning identify in advance changes that might occur identify ways the company can respond to changes Crisis Management methods for dealing with emergencies  Management and Corporate Culture (LO 6-6) Corporate Culture a firm’s personality shared experience of employees stories, beliefs, and norms that characterize the organization culture can direct employee’s efforts