Ch. 6: Managing the Business Enterprise
THE MANAGEMENT PROCESS
BASIC MANAGEMENT FUNCTIONS
Management: the process of planning, organizing, leading, and controlling an enterprises’s financial, physical, human, and information resources to achieve the organization’s goals
Planning
Involves five steps:
Goals are established for the organization
Managers identify whether a gap exists between the company’s desired and actual position
Managers develop plans to achieve the desired objectives
The plans have been decided upon are implemented
The effectiveness of the plan is assesed
Organizing
involves mobilizing the resources requires to complete a particular task
managers must also organize people and resources
Leading
involves the interactions between managers and their subordinates as they work to meet the firm’s objectives
goes beyond merely giving orders
leaders must also have the ability to motivate their employees to set challenging goals and to work hard to achieve them
Controlling
the process of monitoring a firm’s performance to make sure it is meeting its goals
The control process:
establish standards
measure actual performance against standards
TYPES OF MANAGERS
LEVELS OF MANAGEMENT
Top Managers
the executives who guide the fortunes of companies
responsible to the board of directors and shareholders of the firm for its overall performance and effectiveness
set general policies, formulate strategies, oversee significant decisions, and represent the company in its dealings with other businesses and government
Middle Managers
responsible for implementing the decisions made by top managers
plant manager, operations manager, and division manager
First Line Managers
spend most of their time working with and supervising the employees who report to them
supervisor, office manager, group leader
AREAS OF MANAGEMENT
Human Resource Managers
hire, train, evaluate, compensate employees, and work with labour unions
large firms may have several human resource departments
small firms may have only a single department or one person
Operations Managers
responsible for a company’s system for creating goods and services
responsible for production, inventory, and quality control
some firms typically have a vice president, plant manager. and production super visors
Information Managers
responsible for designing and implementing various systems to gather, process, and disseminate information
middle managers in information management help design information systems for divisions or plans
computer systems managers within smaller businesso or operations are first line managers
Marketing Managers
responsible for getting products and services to buyers
Financial Managers
plan and oversee its financial resources
levels of financial management may include a vp of finance, a division controller, and an accounting supervisor
Other Managers
research and development managers
public relations managers
diversity and inclusion officers or managers
MANAGEMENT ROLES AND SKILLS
MANAGEMENT ROLES
The manager’s formal authority and status gives rise to:
Interpersonal Roles
figure head - duties of ceremonial nature, such as attending a subordinates wedding
leader - being responsible for the work of the unit
liason - making contact outside the vertical chain of command
These interpersonal roles give rise to:
Informational Roles
monitor - scanning the environment for relevant information
disseminator - passing information to subordinates
spokeperson - sending information to people outside the unit
The interpersonal and informational roles allow the manager to carry out:
Decision Making Roles
entrepreneur - improving the performance of the unit
disturbance handler - responding to high pressure disturbances, such as a strike at supplier
resource allocator - deciding who will get what in the unit
negotiator - working out agreements on a wide variety of issues, such as the amount of authority an individual will be given
MANAGEMENT SKILLS
Technical Skills
allow managers to perform specialize tasks
developed through education and experience
important for first line anagers
as managers move up the corporate ladder, technical skills becomes less important
Human Relations Skills
help managers lead, motivate, communicate, and get along with their subordinates
must have good self-awareness, written and verbal communication skills, and be critical thinkers
Conceptual Skills
a person’s ability to think in abstract, to diagnose and analyze various situations, and see beyond the present situation
help managers recognize new market opportunities and threats
top managers depend on conceptual skills the most
Time Management Skills
the productive use that managers make of their time
Decision Making Skills
help managers define problems or opportunitiesand select the best course of action
Behavioural Aspects of Decision Makung
Organizational Politics: the actions that people take as they try to get what they want
Intuition
Escalation of Commitment: when a manager makes a decision and remains commited to its implementation in spite of clear evidence that it was a bad decision
Risk Propensity: how much a manager is willing to gamble when making decisions
STRATEGIC MANAGEMENT
Strategic Management: the process of effectively aligning an organization with its external environmen
starting point is setting goals
SETTING BUSINESS GOALS
The Purpose of Goal Setting
provides direction, guidance, and motivation for all managers
helps firms allocate resources
helps define corporate culture
helps managers assess performance
Kinds of Goals
goals differ from each company depending on the firm’s mission and vison
most organizations have a mission statement of how they will achieve their purpose
Regardless of a company’s purpose and mission, it must set:
long term goals
intermediate goals
short term goals
FORMULATING STRATEGY
Strategy Formulation: involves three basic steps
setting strategic goals
analyzing the organization and its environment
matching the organization and its environment
Setting Strategic Goals
long term goals that come directly from the firm’s mission statement
Analyzing the Organization and Its Environment
SWOT Analysis: involves identifying organizational strengths and weaknesses, and identifying the firms environmental opportunities and threats
Strengths and weaknesses are factors internal to the firm and are assesed using organizational analysis
strengths may include - surplus of cash, dedicated workforce, managerial talent, and technical expertise
weaknesses may include - cash shortage, aging factories, poor public image
Opportunities and threats are factors external to the firm and assesed using environmental analysis
opportunities include - market demand for product, favourable government legislatiob, or a shortage of a raw material that a company requires
threats include - new competitor products, unfavourable government regulations, and changes in customer tastes
Matching the Organization and its Environment
attempt to leverage strengths to capitalize on opportunities and counteract threats
attempt to shield weakness, or at least not allow them to hurt other activities
LEVELS OF STRATEGY
Corporate Level Strategy: identifies the various businesses a company will be in and how they will relate to each other
Business Level Strategy: identifies the ways a business will compete in its chosen line of products or services
Functional Strategies: identify the basic cources of action each department will pursue so that it contributes to the business’s overall goals
Corporate Level Strategies
Concentration
focusing the company on one product or product line it knows very well
Growth
Market Penetration: boosting sales of present products by more agressive selling in the firm’s current markets
Geographic Expansion: expanding operations into new geographic areas
Product Development: developing improved products for current market
Integration
Horizontal Integration: acquiring control of competitors in the same or similar markets with the same or similar products
Vertical Integration: owning or controlling the inputs the firm’s processes or the channels through where the products or services are distributed
Diversification
helps the firms avoid having their eggs in one basket by spreading risk among seeral products or market
Related Diversification: adding new but related products or servies to an existing business
Conglomerate Diversification: diversifying into producrs or markets that are not related to the firm’s present business
Investment Reduction
reducing the company investments in one or more of its lines of business
Retrenchment: reduction of activity or operations
Divestment: selling or liquidating one or more of a firm’s businesses
Business-Level Strategies
Whatever a corporate level strategy a firm decides on, it must also have a competitive strategy
Competitive Strategy: a plan to establish profitable and sustainable competitive position
Three Competitive Strategies
Cost Leadership: being the low cost leader in the industry (Ex: Walmart)
Differentiation Strategy: tries to be unique in its industry along some dimension that’s valued by buyers
Focus Strategy: selecting a market segment and serving customers in that niche better than its competitors
Functional Strategies
the basic course of action each department follows so the business follows its overall goals
CONTINGENCY PLANNING AND CRISIS MANAGEMENT
CONTINGENCY PLANNING
identifying in advance changes that might occur that would affect a business and developing a plan to respond to such changes
assesing the costs and benefits and other options ahead help managers cope with problems when they arise
CRISIS MANAGEMENT
dealing with an emergency that demands an immediate response
emergency may be self-inflicted or imposed by forces outside a company’s control
Crisis management plans outline:
who will be in charge in different kinds of circumstances
how the organization will respond
the plans that exist for assembling and deploying crisis management teams
MANAGEMENT AND THE CORPORATE CULTURE
Corporate Culture: the shared experiences, stories, beliefs, and norms that characterize it
strong corporate culture guides everyone toward the same goals and helps newcomers learn accepted behaviours
Important factors in developing a strong corporate culture
create careers, not just jobs
lead by example
tailor the workplace to meet employee needs
emphasize the mission
explicitly tell employees what behaviours are unacceptable
COMMUNICATING THE CULTURE AND MANAGING CHANGE
Communicating the Culture
managers must have a clear understanding of the culture
they must transmit the culture to others in the organization
managers can maintain culture by rewarding and promoting those who understand and work towards maintaining it