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Chapter 6.docx

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 6  All corporations depend on effective management  Regardless of the type of business they work in, managers perform many of the same functions, are responsible for many of the same tasks, and have many of the same responsibilities.  Work involves developing strategic and tactical plans. They must analyze their competitive environments and plan, organize, direct and control day to day operations.  Managers work in; Charities, churches, social organizations, educational institutions, and government agencies.  Managers bring to small organizations many of the same kinds of skills the ability to make decisions and respond to a variety of challenges- that they bring to large ones. Setting Goals and formulating strategy  Goals: Objectives that a business hopes and plans to achieve. 1. Deciding what the business intends to do is only step one for an organization 2. Companies managers must also make decisions about actions that will and will not achieve its goals 3. Strategy is the broad program that underlies those decisions; the basic steps in formulating strategy. The purpose of Goal setting: Four main purposes in organizational goal setting: 1.Goal setting provides direction, guidance, and motivation for all managers: If a manager knows precisely where his/her business is headed, there is less potential of error in the different units of the company. 2.Goal setting helps firms allocate resources: Areas that are expected to grow will get first priority. The company allocates more resources to new projects with large sales potential then it allocates to mature products with established but stagnant sales potential. 3.Goal settings help to define corporate culture: General Electric’s goal, is to push each of its divisions to number one or number two in its industry. The result is a competitive, often stressful, environment and a culture that rewards success and has little tolerance for failure. 4. Goal setting helps managers assess performance: If a company sets a goal to increase sales by 10% in a given year, managers in units who attain or exceed the goal can be rewarded. Units failing to reach the goal will also be compensated accordingly. GE has a long-standing reputation for stringently evaluating marginal performance, richly rewarding those who excel – and getting rid of those who for not, Each year the lower 10% of GE’s managerial force are informed that either they make dramatic improvements in performance or consider alternative directions for their career. Kinds of Goals:  Businesses seek profit, and universities work to discover and transmit new knowledge, and government agencies exist to provide service to the public.  Mission statement: a statement of how it will achieve its purpose. Bell Canada`s mission, for example, is to be a world leader in helping communicate all manage information.  Two business firms can have the same purpose for example to sell watches as a profit- yet they have very different missions. Timex sells low cost, reliable watches in outlets ranging from department stores to corner drugstores. Rolex sells high quality watches, high prices watches, and high-priced fashioned watches through selected jewellery stores.  Regardless of a company`s purpose and mission, every firm needs long-term, intermediate, and short-term goals: 1. Long term goals: relate to extended periods of time- typically five years into the future. For example Master Card might set a long-term goal of doubling the number of participating merchants during the next 10 years. Similarly, sony might adopt a long- term goal to increase its share of digital SLR market by 10% during the next five years. 2. Intermediate goals: are set for a period of one to five years into the future. Companies usually have intermediate goals in several area. For example the marketing department`s goal might be to increase sales by 3% in 2 years. The production department might want to decrease expenses by 6% in four years. Human resources might seek to cut turnover by 10% in 2 years. Finance might aim for a 3% increase in return on investment in 3 years. 3. Like intermediate goals, short-term goals-which are set for one year or less- are developed for several different areas. Increasing sales by 2% this year, cutting costs by 1% next quarter, and reducing turnover by 4 percent over the next six months are all short-term goals. Formulating Strategy: A business strategy outlines how it intends to meet its goals, and includes the organizations responsiveness to new challenges and new needs. Strategy formulation: Creation of a broad program for defining and meeting an organization`s goals. Setting Strategic Goals: Strategic goals: are long-term goals derived directly from the firm`s mission statement. For example; Bernd, CEO of Volkswagen has clear strategic goals for the European automaker. When he took over, Volkswagen was only marginally profitable, was regarded as an also-ran in the industry, and was thinking of pulling out of the U.S. marker because its sales were so poor. Over the next few years, however, he totally revamped the firm and now it is making big profits. Analyzing the Organization and its environment: Environmental analysis means scanning the environment for threats and opportunities. Changing consumer tastes and hostile takeover offers are threats. More threats or from new products and new competitors. Opportunities meanwhile, are areas in which the firm can potentially expand, grow, or take advantage of existing strengths. Organization analysis: The process of scanning the environment for threats and opportunities. Strengths might include; surplus cash, a dedicated work-force, an ample supply of managerial talent, technical expertise, or weak competition. Matching the Organization and Its Environment: Matching environmental threats and opportunities with corporate strengths and weaknesses. The matching process is the heart of strategy formulation: more than any other facet of strategy, matching companies with their environments lays the foundation for successfully planning and conducting business. A Hierarchy of Plans: Consists of levels:  Strategic plans: reflects decisions about resource allocations, company priorities, and th steps
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