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Lecture

Chapter 6 and 7 Managing the Business Enterprise.docx

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Department
Management (MGT)
Course
MGTA01H3
Professor
Chris Bovaird
Semester
Winter

Description
Chapter 6 and 7 Managing the Business Enterprise  Work of manager: o Developing strategic and tactical plans o Analyze their competitive environments and plan, organize, direct control day- to-day operations Setting Goals and Formulating Strategy  Goals: objectives that a business hopes and plans to achieve  Intends, actions and strategy used Setting Goals Purpose of goal setting  Commits tits resources on levels to achieving its goal o Provides direction, guidance and motivation for all managers  Less potential for error o Helps firms allocate resources  Allocates more to new projects with large sales potential than mature products with established but stagnant sales potential o Define corporate culture o Assess performance Kinds of Goal  Purpose: reason for being  Mission statement: an organization’s statement of how it will achieve its purpose in the environment in which it conducts its business o Include core value and its commitment to ethnical behavior  2 forms can have same purpose but different missions  The performance targets of an organization  Long term goals: goals set for extended periods of time (5 or more years)  Intermediate goals: goals set for a period of 1-5 years  Short term goals: goals set for very near future, typically less than one year  Provide direction and guidance regarding the use of resources  Purpose: maximize long-term profit o Not all purpose is maximize long term profit o e.g. charity, tax saving, education facilities The Strategic Management Model  Strategic management is a process.  It is series of activities: o Determine Mission & Objectives  Where are we going? o Analyze External Environments o Analyze Internal Environments  Where are we now? o Select the Competitive Strategy o Implement the Strategy o Evaluate & Control Performance  How do we get there?  Internal environment: current states (personal balance sheet); evaluate skills, constrains and ways to combat; what are you good at and bad at  External environment: looking at the competition, culture, political, legislative legal status (e.g. wireless phone law)  Evaluation has to be objective  Communicate mission; Clearly articulated mission and goals: o Provides direction and guidance o Helps business allocate resources o Helps managers assess performance Formulating Strategy  Creation of a board program for defining the intentions  How to meet an organization’s goals  Responsiveness to new challenges and new needs  The broad methods used to meet the organization’s goals Setting Strategic Goals:  Long term goals derived directly from a firm mission statement  SWOT analysis o Identification and analysis of organizational strengths and weakness (internal) and environmental opportunities and threats (external) as part of strategy formation Analyzing the Organization and Its Environment  Environmental analysis: process of scanning the environment for threats and opportunities o E.g. Threats include:  Changing taste, hostile takeover, new regulations, new products and competitors o Opportunities include:  Expand, grow and taking advantages of existing strength  Porter (5 Forces) Model o Assessing industry attractiveness o Assessing position of individual firms within an industry Potential Entrants Threat of new entrants Bargaining Power of Industry Bargaining Suppliers Competitors Power of Customers Suppliers customers existing rivalry Threat of substitute products Substitutes  Affecting the whole industry (both your firm and competitors)  New entry high due to low start up point, profit, merit of industry, high demand  Bargaining power of supplier is due to number of supplier  Bargaining power of costumers: number of demand, firms fear to lost costumers  influence of each force affects: o Level of success and profitability enjoyed by all businesses within an industry o Level of success and profitability enjoyed by individual firms an industry  Organization analysis: process of analyzing a firm’s strengths and weaknesses Matching the Organization and Its Environment  Final step  Matching environmental threats and opportunities with corporate strengths and weakness  Whether take risks or behave more conservatively (both can be successful) Hierarchy of Plans  Strategic plans: plans that reflect decisions about resource allocations, company priorities and steps needed to meet strategic goals o Set by board of directors and top management  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  In hierarchy because implementing plans is practical only when there is a logic flow from one level to the next Levels of Strategies Corporate-Level Strategies  Identifies the various business that a company will be in, and how these business will relate to each others  Concentration o Focusing the company on one product or product line o Adv: focus its strength on one business it knows well o Disadv: putting all egg into one basket  Growth o Focus on internal activities that will result in growth o Market penetration: boosting sales of present products by more aggressive selling in the firm’s current markets o Product development: improved products for current market o Geographic expansion: expanding operations in new geographic area  Integration o Focus on external activities o Horizontal integration: acquiring control of competitors in the same or similar markets with the same and similar products o Vertical integration: owning or controlling the inputs to the firm’s process and/or the channels through which the products or services are distributed  Diversification o Expanding into related or unrelated products or market segments o Adv: not putting all eggs in one basket o Disadv: spreading risk among several products or services o Related diversification: adding new but related products to an existing business o Conglomerate diversification: diversifying into products not related to firm present business  Investment Reduction
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