Chapter 6 – Managing the Business Enterprise
• The work of all managers involves developing strategic and tactical plans.
• Must also analyze their competitive environments and plan, organize, direct and control
day to day operations.
• The starting point for effective management is setting goals – objectives that a business
hopes and plans to achieve
• Managers must also make decisions about the actions that will not achieve its goals.
• Strategy – a broad set of organizational plans for implementing the decision made for
achieving organizational goals.
• The 4 main purposes of organizational goal setting:
1. Goal setting provides direction, guidance and motivation for all managers.
2. Goal setting helps firms allocate resources.
3. Goal setting helps to define corporate culture.
4. Goal setting helps managers assess performance.
• Mission statement- a statement of how an organization will achieve its purpose in the
environment in which it conducts its business. It should include some statement about
the company’s core values and its commitment to ethical behaviour.
• Kinds of goals:
1. Long term goals -goals set for extended periods of time typically five years or
more into the future.
2. Intermediate goals – goals set for a period of one to five years
3. Short-term goals – goals set for the very near future, typically less than one year.
• Strategy formulation – creation of a broad program for defining and meeting an
• Strategic goals – long term goals derived directly from a firm’s mission statement.
• SWOT analysis – identification and analysis of organizational strengths and weaknesses
and environmental opportunities and threats as part of strategy formation • Environmental analysis – the process of scanning the environment for threats and
• Threats are changing consumer tastes and hostile takeover offers as are ne government
regulations. More 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 strengths.
• Organizational analysis - the process of analyzing firms strengths and weakness.
• Strengths might include surplus cash, dedicated work force or ample supply of
managerial talent, technical expertise or weak competition.
• The absence of these strengths could represent important weaknesses.
• The final step in strategy formations matching environmental threats and opportunities
with corporate strengths and weaknesses. The matching process is the heart of strategy
• Matching companies with their environments lays the foundation for successfully
planning and conducting business.
• A hierarchy of plans:
1. Strategic plans – plans that reflect decision bout resource allocations, company
priorities and steps need to meet strategic goals.
2. Tactical plans – generally, short-range plans concerned with implementing
specific aspects of a company’s strategic plans.
3. Operational plans – plans setting short term targets for daily weekly or monthly
• Levels of strategies:
1. Corporate level strategy – identifies the various businesses that a company will be
in and how these businesses will relate to each other. There are different
corporate level strategies that a company might pursue including concentration,
growth, integration and diversification and investment reduction.
I. Concentration – involves focussing the company on one product or
product line. The main advantage of a concentration strategy is that the
company can focus its strengths on the one business it knows well. The main disadvantage is the risk inherent in putting all o one’s eggs into one
II. Growth – focuses on the internal activities that will results in growth.
Market penetration - boosting sales of present products by more
aggressive selling in the firm’s current markets. Product development –
developing improved products for current markets. Geographic expansion
– expanding operations in new geographic areas or countries.
III. Integration – focus on external activities that results in growth. Horizontal
integration – acquiring control of competitors in the same or similar
markets with the same or similar products. Vertical integration – owing or
controlling the inputs to the firm’s processes and/or the channels through
which the products or services are distributed.
IV. Diversification – expanding into related or unrelated products or market
segments. Related diversification means adding new but related products
or services to an existing business. Conglomerate diversification means
diversifying into products or market that is not related to the firm’s present
V. Investment reduction – reducing the company’s investment in one or more
of its lines of business. One strategy is retrenchment which means the
reduction of activity or operations. Divestment is another strategy that
involves selling or liquidating one or more of the firm’s business.
2. Business level (competitive) strategy – identifies the ways a business will
compete in its chosen line of products or services. There are three competitive
strategies: Cost leadership, differentiation and focus.
I. Cost leadership – becoming the low cost leader in an industry.
II. Differentiation strategy – a firm seeks to be unique in its industry along
some dimension that is valued by buyers.
III. Focus strategy – selecting a market segment and serving the customers in
that market niche better than competitors.
3. Functional strategies – identify the basic courses of action that each department in
the firm will pursue so that it contributes to the attainment of the business’s
overall goals. A functional strategy is the basic course of action that each
department follows so that the business accomplishes its overall goals. • Management – the process of planning, organizing, leading and controlling a business’s
financial, physical, human and information resources in order to achieve its goals.
• Planning – That portion of the manager’s job is concerned with determining what the
business needs to do and the best way to achieve it. Planning has three main
components: First is when the manager determines the firm’s goals. Second is when
they develop a comprehensive strategy for achieving those goals. Finally after strategy is
developed they design tactical and operational plans for implementing the strategy. The
planning process has five basic steps:
I. Goals are established for the organization.
II. Managers identify whether a gap exists between the company’s desire and actual
III. Manages develop plans to achieve the desired objectives.
IV. The plans that have been decided upon are implemented.
V. The effectiveness of the plan is assessed.
• Organizing – that portion of a mangers job is concerned with mobilizing the necessary
resources to complete a particular task or determining the best way to arrange a
business’s resources and activities into a coherent structure.
• Leading – the portion of manager’s job concerned with guiding and motivating
employees to meet the firm’s objectives.
• Controlling – that portions of a manager’s job is concerned with monitoring the firms
performance and if necessary, acting to bring it in line with the firm’s goals.
• Levels of Management – three basic level of management are top, middle and first line
I. Top managers – those managers responsible for a firm’s overall performance and
effectiveness and for developing long range plans for the company, (CEO, CFO,
vice president etc.)
II. Middle managers – those managers responsible for implementing the decisions,
policies and strategies made by the top managers.
III. First-line managers - those mangers responsible for supervising the work of
employees. • Areas of management – the top, middle and first line mangers work within a variety of
areas including marketing finance operations, human resources and information.
I. Marketing managers are responsible or getting products and services to buyers.
II. Financial mangers mange a firm’s finances including investments and accounting
functions important to a company’s survival.
III. Operations mangers are responsible for production control, inventory control and
quality control among other duties.
IV. Human resource managers – to provide assistance to other managers when they
are hiring employees, training them, evaluating their performances and
determining heir compensation level.
V. Information mangers – responsible for designing and implementing various
system to gather process and disseminate information.
• Basic Management skills -these include technical, human relation, conceptual, decision
making and time management skills:
I. Technical skills - skills associated with performing specialized tasks within a
firm. Especially important to first line managers.
II. Human relations kills – skills in understanding, and getting along with people.
Most important for middle managers.
III. Conceptual skills – abilities to think in the abstract, diagnose and analyze
different situation beyond the present situation. Top mangers depend most on
IV. Decision making skills - the ability to define problems and selecting the best
course of action:
a. Define the problem, gather facts, and identify alternate solutions.
b. Evaluate each alternative and select the best one.
c. Implement the chosen alternative, periodically following up and
evaluating the effectiveness of that choice.
V. Time management skills – skills associated with the productive use of time. Four
leading causes of wasted time: paperwork, the telephone, meetings and email. Chapter 7 – Organizing the Business Enterprise
• Organizational structure – the specification of the jobs to be done within a business and
how those jobs relate to one another.
• Organization chart – a physical depiction of the company’s structure showing employee
titles and their relationship to one another.
• Chief of command - reporting relationship within a business; the flow of decision-making
owner in a firm.
• The two tasks that are the basic building blocks of all business organizations:
specialization – determining who will do what; departmentalization – determining how
people performing certain tasks can best be grouped together.
• Job Specialization – the process of identifying the specific jobs that need to be done and
designating the people who will perform them. Job specialization is a natural part of
• Departmentalization: the process of grouping jobs into logical units.
• Departmentalization allows the firm to treat a department as a profit centre – a separate
company unit responsible for its own costs and profits departmentalization may occur
along functional, customer, product, geographic or process lines.
• On deciding who makes what decision we turn to the decision making hierarchy:
1. Assigning tasks – determining who can make decision and specifying how they
should be made.
2. Performing tasks: implementing decisions that have been made.
3. Distributing authority – determining whether the organization is to be centralized
or decentralized. • Assigning tasks: responsibility – the duty to perform an assigned task. Authority is the
power to make the decision necessary to complete a task.
• Performing tasks: delegation – assignment of a task, a responsibility, or authority by a
manager to a subordinate. Accountability – liability of subordinates for accomplishing
tasks assigned by managers.
• Effective managers surround themselves with a team of strong subordinates and then
delegate sufficient authority to those subordinates to get the job done.
• Four things to keep in mind when delegating:
1. Decide on the nature of the work to be done.
2. Match the job with the skills of subordinates.
3. Make sure the subordinate have time and training necessary.
• Big companies don’t delegate as much or as well as they should:
1. They fear that subordinate don’t really know how to do the job.
2. The fear that a subordinate might ‘show the manager up’ in front of others by
doing a superb job.
3. The desire to keep as much control as possible over how things are done.
4. A simple lack of ability as to how to effectively delegate others.
• Centralized organization – top managers retain most decision making rights for
• Decentralized organization – lower and middle level are allowed to make significant
• Reducing top-heavy bureaucracies is also a common goal of decentralization.
• Flat organizational structure – an organization with relatively few layers of management.
• Tall organizational structure – an organization with any layers of management.
• Tall structures are prone to delays in information flow.
• Span of control – the number people managed by one manager. • Employee’s abilities and the supervisor’s managerial skills help determine whether span
of control is wide or narrow.
• Similarly when several employees perform either the same simple tasks or a group of
interrelated tasks, a wide span of control is possible and often desirable.
• In contrast, when jobs are more diversified or prone to change, a narrow span of control
• Downsizing – refers to the planned reduction in the scope of an organization activity. It
usually means cutting substantial numbers of managers and workers.
• Basic organizational structures include functional, divisional, project and international.
• Functional structure – various units are included in a group on functions that need to be
performed for the organization to reach its goals. Look at the advantages and
disadvantages of a functional structure page 121.
• Divisional structure – divides the organization into divisions, each of which operates as a
• Other divisionalized companies are free to buy, sell, create and disband divisions without
disrupting the rest of their operations.
• Project organization – an organization that uses teams of specialist to complete specific
• **Note sure if needed** - matrix organization – a project structure in which the project
manager and the regular line manager share authority until the project is concluded.
• Team organization relies almost exclusively on project-type teams.
• A virtual organization has little or no formal structure.
• Learning organization work to integrate continuous improvement with continuous
employee learning and development.
• Informal organization – a network of personal interactions and relationships among
employee unrelated to the firm’s formal authority structure.
• Grapevine – an informal communications network that carries gossip and other
information throughout an organization. Chapter 8 – Managing Human Resources
• Human resource management (HRM) set of organizational activities at attracting,
developing and maintaining an effective workforce.
• Job analysis - a detailed study of the specific duties in a particular job and the
human quantities required for that job.
• Job description – the objectives, responsibilities, and key tasks of a job, the
conditions under which it will be done; its relationship to other positions; and the
skills needed to perform it.
• Job specification – the specific skills, education, and experience needed to
perform a job.
• Forecasting the supply of labour involves two task:
1. Forecasting internal supply – the number and type of employee who will
be in the firm at some future date.
2. Forecasting external supply – the number and type of people who will be
available for hiring from the labour market at large.
• Replacement chart – an HR technique that lists each important managerial
position, who occupies it, how long he or she will probably stay in it before
moving on, and who (by name) is now qualified or soon will be qualified to move
• Employee information systems (skills inventories) – computerized systems tha