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Lecture

MGTA03 CHAPTER 6.docx


Department
Management (MGT)
Course Code
MGTA01H3
Professor
H Laurence

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MGTA03 CHAPTER 6 12/11/2011 6:49:00 PM
The work of all managers involves developing strategic and tactical plans,
analyzing their competitive environments, and planning, organizing,
directing, and controlling day-to-day operations
An organization functions systematically because it sets goals, plans
accordingly, and commits resources on all levels to achieving its goals
Goals: objectives that a business hopes and plans to achieve the starting
point in effective management
Means by which organizations and their managers measure success
or failure at every level
The Purposes of Goal Setting
1. Goal setting provides direction, guidance, and motivation for all managers
If the managers know where the company is headed, there is less
potential for errors in the different units of the company
2. Goal setting helps firms allocate resources
Areas that are expected to grow will get first priority (e.g. new
projects with large sales potential)
3. Goal setting helps to define corporate culture
GE’s goal is to push each of its divisions to number one 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
Each firm has a purpose: a reason for being
o E.g. businesses seek profit, universities discover and transmit
new knowledge
Mission statement: an organization’s statement of how it will achieve its
purpose in the environment in which it conducts its business
Should also include some statement about the company’s core
values and its commitment to ethical behaviour

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MGTA03 CHAPTER 6 12/11/2011 6:49:00 PM
Firms may have the same purpose but have different missions
Every firm needs long-term goals, intermediate goals, and
short-term goals
Long-term goals: goals set for extended periods of time, typically five
years or more into the future
Intermediate goals: goals set for a period of one to five years; companies
might have multiple intermediate goals in different areas (e.g. marketing,
HR, and production might have different goals)
Short-term goals: goals set for the very near future, typically less than one
year; these are developed by different areas (e.g. increasing sales, cutting
costs, reducing turnover)
STRATEGY FORMULATION: creation of a broad program for defining and
meeting an organization’s goals; has three steps
1. Setting Strategic Goals
Strategic goals: long-term goals derived directly from a firm’s mission
statement; e.g. Volkswagen going from nearly pulling out of the U.S. sales
industry to becoming a formidable force
SWOT analysis: identification and analysis of organizational strengths and
weaknesses and environmental opportunities and threats as part of strategy
formulation; after strategic goals have been established
Strengths and weaknesses internal to the company
Opportunities and threats external (in the environment)
In formulating strategy, companies attempt to capitalize on
organizational strength and take advantage of environmental
opportunities
At the same time, they seek ways to overcome organizational
weaknesses and cope with environmental threats
2. Analyzing the Organization and its Environment
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MGTA03 CHAPTER 6 12/11/2011 6:49:00 PM
Environmental analysis: the process of scanning the environment for
threats and opportunities external factors
Changing consumer tastes, hostile takeover offers, new products,
new competitors, and new government regulations are threats
Opportunities are areas in which the firm can potentially expand,
grow, or take advantage of existing threats
E.g. Virgin Atlantic: began firm at age 17, now has over 200
companies
o Opportunities: ecommerce firm
Organizational analysis: the process of analyzing a firm’s strengths and
weaknesses internal factors
Strengths may be surplus cash, a dedicated workforce, an ample
supply of managerial talent, technical expertise, or weak
competition (the absence of any of these strengths could represent
an important weakness)
E.g. Virgin Atlantic: began Virgin Mobile because saw current
operations as traditional businesses that might be at future risk
from new forms of business and competition
o Strengths: name recognition, selling 49% of shares to
Singapore Airlines, allowing him to retain control while
gaining funds for new venture
3. Matching the Organization and Its Environment
Matching environmental threats and opportunities with corporate
strengths and weaknesses lays foundation for successfully
planning and conducting business
Over long term, this process may also determine whether a firm
takes risks or behaves conservatively
THREE LEVELS OF PLANS:
1. Strategic plans: plans that reflect decisions about resource allocations,
company priorities, and steps needed to meet strategic goals
Usually set by board of directors and top management
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