Chapter 6 – Who Are Managers:
- The work of all managers involve developing strategic and tactical plans. They must also analyze their
competitive environment and plan, organize, direct, and control day-to-day operations.
Setting goals and formulating strategy:
- The starting point in effective management is setting goals, objective that a business hopes to
achieve. Deciding what it intends to do is only step one of an organization. Action in part of
their planning and strategy is the broad program that underlies decisions.
- Goals are performance targets, that means by which organization and their managers measure
success or failure at every level.
The purpose of Goal setting:
1.) Goal setting provides direction, guidance, and motivation for all managers.
2.) Goal setting helps firms allocate resources. (expected to grow will gain priorities )
3.) Goal Setting helps to define corporate culture culture.
4.) Goal Setting helps manager assess performance.
Kind of Goals:
- Every enterprise has a purpose – a reason for being.
- Most enterprises also have a mission statement – a statement of how it will achieve its purpose.
- Mission statement should also include some statement about the company’s core value and its
commitment to ethical behavior.
- Company’s purpose and mission, every firm needs long-term, intermediate and short-term
- Long-term goals relate to the extended period of time, typically five years or more into the
- Intermediate goals – are set for a period of one to five years into the future. Companies usually
have intermediate goals in several areas.
- Short-goals – are set for one year or less – are developed for several different areas.
- A business strategy outlines how it intends to meet it goals, and include the organization
responsiveness to new challenges and new needs.
- Strategy formulation – creation of a broad program from defining and meeting organization
Setting Strategic Goals:
- Strategic goals are long-term goals derived directly from the firm’s mission statement.
- After strategic goals have been established they go through a process called a SWOT analysis as
they continue to formulate their strategy. This step also includes assessing organizational strengths and weaknesses and environmental opportunities and Threats. Weaknesses and
strength are internal and opportunities and Threats are external.
Analyzing the Organization and Its environment:
- The term environmental analysis means scanning the environment for threats and
- Important threats come from new products and new competitors. Opportunities meanwhile are
areas in which the firm can potentially expand, grow or take advantage of existing strength.
- Analysis of external factors, manager must examine internal factors. The purpose of
organizational analysis is to better understand a company strengths and weaknesses.
Matching the organization and its environment:
- The final step in strategy formulation is matching environmental threats and oppurtunities with
corporate strengths and weaknesses. This is known to be the “heart of strategy formulation” – it
lays the foundation for successfully planning and conducting business.
- In the long-term this process may also determine whether a firm typically takes risks or behaves
more conservatively. Either strategy can be successful.
A Hierarchy of Plans:
- Managerial responsibilities are defined at each level.
- Strategic plans - reflection decision about resource allocations, company priorities, and the
steps needed to meet strategic goals. Are usually set by board of directors and top
- Tactical plans – are short range plans concerned with implementing specific aspect of the
company’s strategic plans. Upper and middle management.
- Operational plans – are developed by middle – and lower – level managers set short-term
target for daily, weekly, or monthly, performance.
Levels of strategies:
- A corporate level strategy identifies the various businesses that a company will be in, and how
the businesses will relate to each other.
- Business level strategy – identifies that ways a business will compete in its chosen line of
products or services.
- Functional strategies – identify the basic courses of action that each department in the firm will
pursue so that it contributes to the attainment of business overall goals.
Corporate level strategies-
- Several different corporate – level strategies that a company might pursue, including
concentration, growth, integration, diversification, and investment reduction.
Concentration – concentration strategy – involves focusing the company on one product or product
The main advantage of a concentration strategy is that the company can focuses its strength on the one
business it knows well.
Dis – the Risk inherent in putting all of one’s egg in one basket. - Growth –focus on internal activities that will result in growth. These strategy include market
penetration )boosting sales of present product by more aggressive selling in the firm’s current
market) product development – developing improved product for current markets
- Geographic expansion – expanding operation in new geographic areas or countries.
Integration – Focus on external activities that will result in growth.
- Horizontal integration – acquiring control of competitors in the same or similar market with the
same or similar products. (buying out another companies in same field)
- Vertical integration – means owning or controlling the inputs to the firm processes/ and or
channel through which the products or services are distributed.
Diversification – means expanding into related or unrelated product or market segments.
- It helps the firm avoid the problem of having all of its eggs in one basket by spreading the risk
among several product or markets.
- Related diversification means adding new but related product or service to and exist business.
- Conglomerate diversification – means diversifying into products or markets that are not related
to the firm’s present business.
Investment reduction – investment reduction means reducing the company’s investment in one or
more of its lines of business.
- One strategy is retrenchment – which means reduction of activity or operations.
- Divestment is another investment-reduction strategy it involves selling or liquidating one or
more of a firm’s businesses.
Business – Level (competitive) strategies –
- Whatever corporate level strategy a firm de