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Chapter 6-10

MGTA01 Chapters 6-10 Notes.doc

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) Chapter 6: Managing the Business Enterprise Setting Goals and Formulating Strategy Terms: => goals: objectives that a business hopes and plans to achieve. The Purpose of Goal Setting: - an organization functions systematically because it sets goals and plans accordingly. - an organization functions as such because it commits its resources on all levels to achieving its goals. - Four main purposes can be identified in organizational goal setting. => Goal setting provides direction, guidance, and motivation for all managers. If managers know precisely where the company is headed, there is less potential for error in the different units of the company. => 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 than it allocates to mature products with established but stagnant sales potential. => Goal setting helps to define corporate culture.An example can be seen in General Electric, which strives to push its divisions to number one or two in its industry.As a result, it encourages and maintains a competitive, often stressful environment that rewards success and has little tolerance for failure. General Electric however maintains a top spot in each of its respective industries, because of these work ethics. => 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 and/or surpass that goal can be reward. However the managers of units who fail to reach that goal will also be compensated accordingly. Kinds of Goals: => mission statement: an organization’s statement of how it will achieve its purpose in the environment in which it conducts its business. => 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. => short-term goals: goals set for the very near future, typically less than one year. Formulating Strategy: => strategy formulation: creation of a broad program for defining and meeting an organization’s goals. => strategic goals: long term goals derived directly from a mission statement. Setting Strategic Goals: => SWOT analysis: identification and analysis of organizational strengths and weakness and environmental opportunities and threats as part of a strategy formulation. The S and W refer to the capitalization of Strengths and overcoming Weaknesses. These Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) are internal to the company. The O and T refer to taking advantages of environmental Opportunity and Threats, and are more external factors. Analysing the Organization and its Environment: => environmental analysis: the process of scanning the environment for threats and opportunities. => organizational analysis: the process of analysing a firm’s strengths and weaknesses. AHierarchy of Plans: => strategic plans: plans that reflect decisions about resources allocations, company priorities, and steps needed to meet strategic goals. => tactical plans: generally, 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. Corporate-Level Strategies: -identifies the various businesses that a company will be in, and how these businesses will relate to each other. => concentration strategy: involves focussing the company on one product or product line. - companies have several growth strategies, all of whom focus on internal activities that will result 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. - there are tow basic integration strategies, both of which focus on external activities. => horizontal integration: acquiring control of competitors in the same or similar markets with the same or similar products. => vertical integration: owning or controlling the inputs to the firm’s processes and/or channels through which the products or services are distributed. => diversification: expanding into related or unrelated products or market segments. => related diversification: means adding new but relating products or services to an existing business. => conglomerate diversification: means diversifying into products or markets that are not related to the firm’s present businesses. => retrenchment: the reduction of activity or operations. => divestments: another investment reduction strategy involving seeing or liquidating one or more of a firm’s businesses. => investment reduction: reducing the company’s investment in one or more of its lines of business. Business-Level (Competitive) Strategies: => cost leadership: becoming the low cost leader in an industry. Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) => differentiation strategy: a firm seeks to be unique in its industry along some dimension that is valued by buyers. => focus strategy: selecting a market segment and serving the customers in that market niche better than competitors. Functional Strategies: - a functional strategy is the basic course of action that each department follows so that the business accomplishes its overall goals. - an example can be seen in McDonalds, who implemented its cost-leadership strategy by pursuing a functional strategy of satellite-based warehousing that drove distribution costs down to a minimum. The Management Process Terms: => 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: => planning: the portion of a manager’s job concerned with determining what the business needs to do and the best way to achieve it. - there are five steps in the planning process. - step 1: goals are established for the organization. - step 2: managers identify whether a gap exists between the company’s desire and actual position. - step 3: managers develop plans to achieve the desired objectives. - step 4: the plans that have been decided on are implemented. - step 5: the effectiveness of the plan is assessed. Organizing: => organizing: the portion of a manager’s job concerned with mobilizing the necessary resources to complete a particular task. Leading: => leading: also referred to as directing, the portion of a manager’s job concerned with guiding and motivating employees to meet the firm’s objectives. Controlling: => controlling: the portion of a manager’s job concerned with monitoring the firm’s performance, and if necessary acting to bring it in line with the firm’s goals. Type of Managers Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) Levels of Management: => top managers: managers responsible for a firm’s overall performance and effectiveness and for developing long-range plans for the company. Common titles include president, vice-president, treasurer, chief executive officer (CEO) and chief financial officer (CFO). => middle managers: managers responsible for implementing the decisions made by top managers. Common titles include plant managers, operations managers and division managers. => first-line managers: managers responsible for supervising the work of employees. Common titles for supervisors, office managers and group leaders. Areas of Management: => marketing managers: market managers are responsible for getting a product or service to buyers. Marketing includes the development, pricing, promotion and distribution of a product or service. => financial managers: financial managers are responsible for planning and overseeing its financial resources. Management of a firm’s finances, including its investments and accounting functions, is extremely important to its survival. => operation managers: operations managers are responsible for production control, inventory control and quality control, among other duties.Afirm’s operations are the systems by which it creates goods and services. => human resource managers: human resource managers are responsible for providing assistance to other managers when they are hiring employees, training them, evaluating their performances, and determining their compensation level. => information managers: information managers are responsible for designing and implementing various systems to gather, process and disseminate information. - other specialised managers include research and development managers (found working for chemical companies) and public relations managers, although the list can be endless. Basic Management Skills Technical Skills: => technical skills: skills associated with performing specialized tasks within a firm. - developed through education and experience. - considered to be of great importance to first-line managers, although the importance diminishes further up the corporate ladder. Human Relations Skills: => human relations skills: skills in understanding and getting along with people. - considered to be of high importance to middle managers, who must often act as bridges between top managers and first-line managers. Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) Conceptual Skills: => conceptual skills: abilities to think in the abstract, diagnose and analyze different situations and see beyond the present situation. - help managers recognize new market opportunities or threats, and analyze the probable outcomes of their decisions. - top managers require conceptual skills the most, as they are the ones who are in charge of the main decision-making in the company. Decision-making Skills: => decision making skills: skills in defining problems and selecting the best course of action. - three basic steps in decision making: - step 1: define the problem, gather facts, and identify alternative solutions. - step 2: evaluate each alternative and select the best one. - step 3: implement the chosen alternative, periodically following up and evaluating the effectiveness of that choice. Time Management Skills: => time management skills: skills associating with the productive use of time. - there are four leading causes of wasting time: - paperwork: too much time deciding what to do with letters and reports. - telephones: interruptions by telephones. - meetings: managers spent at least four hours per day on meetings. - email: more and more managers rely too heavily on email and other forms of electronic communication. Chapter 7: Organizing the Business Enterprise What is Organizational Structure? Terms: => organizational structure: the specification of the jobs to be done within a business and within a business and how these jobs relate to one another. The Chain of Command Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) Terms: => organization chart: a physical depiction of the company’s structure showing employee titles and their relationship to one another. => chain of command: reporting relationships within a business; the flow of decision making power in a firm. Specialization: - determining who will do what => job specialization: the process of identifying the specific jobs that need to be done and designating the people who will perform them. - a large task, such as manufacturing and selling cars is split into small tasks (developing the car frame, creating tires, building engines, advertising the product, etc), with each task assigned to a different individual. - has certain advantages such as high efficiency in job performance, easy to replace anyone who leaves the organization, and easier to learn the task. - however if job specialization is carried too far and jobs become too narrowly defined, people get bored and derive less satisfaction from their jobs, as well as losing sight of how their contributions contribute into the overall organization. Departmentalization: => departmentalization: the process of grouping jobs into logical units => profit centre: a separate company unit responsible for its own costs and profits. - departmentalized companies benefit from the division of activities. - control and coordination are narrowed and made easier; and top managers can see more easily how various units are performing. - it also allows the firm to treat a department as a profit centre - by assessing profits from sales in a particular area, Sears can decided whether to expand or curtail promotions in that area. - managers do not group jobs randomly, but logically via some common thread or purpose (consumer, functional, geographic and/or process) Establishing the Decision-Making Hierarchy Assigning Tasks: => assigning tasks: determining who can make decisions and specifying how they should be made. => responsibility: is the duty to perform an assigned task. => authority: the power to make the decisions necessary to complete the task. => distributing authority: determining whether the organization is to be centralized or decentralized. Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) Performing Task: => performing task: implementing decisions that have been made. => 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. How to Delegate: => there are four things to keep in mind when delegating: - tip #1: decide on the nature of the work to be done - tip #2: match the job with the skills of the subordinates. - tip #3: make sure the person chosen understands the objectives he or she is supposed to achieve - tip #4: make sure subordinates have the time and training necessary to do the task. Problems in Small Business Delegation: => experts pinpoint that managers (particularly those in small business) have trouble delegating effectively due to: - the feeling that employees can never do anything as well as they can - the fear that something will go wrong if someone else takes over a job - the lack of time for long ranging planning because they are bogged down in day-to-day operations - the sense of being in the dark about industry trends and competitive products because of the time they devote to day-to-day operations. Problems in Large Company Delegation: => some managers also face similar problems in delegation due to: - the fear that subordinates don’t really know how to do the job - the fear that a subordinate might “show the manager up” in front of others by doing a superb job - the desire to keep as much control as possible over how things are done - a simple lack of ability as to how to effectively delegate to others Distributing Authority Terms: => centralized organization: top managers retain most decision-making rights for themselves. Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) => decentralized organization: lower and middle-level managers are allowed to make significant decisions. Tall and Flat Organizations: => flat organization structure: an organization with relatively few layers of management (example: for a law firm, chief partner > partners > associates) => tall organization structure: an organization with many layers of management. (example: for the Canadian forces, general > colonels > majors > captains and lieutenants > warrant officers > sergeants > corporals > privates) Span of Control: => span of control: the number of people managed by one manager - if lower level managers are given more authority in terms of making decisions, then the supervisors will have less work to handle, thus allowing a large span of control since those managers can also oversee and coordinate the work of more subordinates. => downsizing: the planned reduction in the scope of an organization Basic Organizational Structures Functional Structure and its Advantages and Disadvantages: => functional structure: various units are included in a group based on functions that need to be performed for the organization to reach its goals. => Advantages: - focuses attention on key activities that must be performed - expertise develops within each function - employees have clearly defined career paths - the structure is simple and easy to understand - eliminates duplication of activities => Disadvantages: - conflicts may arise among functional areas - no single function responsible for overall organizational performance - employees in each functional area have narrow view of organization - decision making slowed because functional areas must get approval from top management for variety of reasons - coordinating highly specialized functions may be difficult Divisional Structure and its Advantages and Disadvantages: => divisional structure: divides the organization into divisions, each of which operates as a semi-autonomous unit. => Advantages: - accommodates change and expression - increases accountability Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) - develops expertise in various divisions - encourages training for top management => Disadvantages: - activities may be duplicated across divisions - lack of communication among divisions may occur - adding diverse divisions may blur focus of organization - company politics may affect allocation of resources Organizational Design for the 21 Century Terms: => team organization: relies almost exclusively on project-type teams, with little to no underlying functional hierarchy. => virtual organization: closely related to the team organization, it consists of a handful of permanent employees, very small staff and modest administration, and has little or not formal structure. => learning organization: works to integrate continuous improvement with continuous employee learning and development. The Informal Organization Terms: => informal organization: a network of personal interactions and relationships among employees unrelated to the firm’s formal authority structure. => organizational grapevine: an informal communications network that carries gossip and other information throughout an organization. Chapter 8: Managing Human Resources The Foundations of Human Resource Management Terms: => human resource management: set of organizational activities directed at attracting, developing and maintaining an effective workforce. Human Resource Planning Terms: => job analysis: a detailed study of the specific duties in a particular job and the human qualities required for that job. => job description: the objectives, responsibilities and key tasks of a job; the condition under which it will be done; its relationship to other positions; and the skills needed to Business Volume 1: Custom 2 Edition Textbook Notes (MGTA01 2013) perform it. => job specification: the specific skills, education, and experiences needed to perform a job. Forecasting HR Demand and Supply: Terms: => forecasting internal supply: the number and type of employees who will be in the firm at some future date. => forecasting external supply: the number and type of people who will be available for hiring from the labour market at large. => replacement charts: a human resources technique that lists each important managerial position, who occupies it, how long he or she will probably stay in it before moving on, and why (by name) is now qualified or soon will be qualified to move into it. => employee information system (skills inventories): computerized systems that contains information on each employee’s education, work experience and career aspirations. Matching HR Supply and Demand: - after comparing future demand and internal supply, managers can make plans to manage predicted shortfalls or overstaffing. - if a shortfall is predicted, new employees can be hired, present employees can retrained and transferred into understaffed areas, individuals planning for retirement can be convinced to stay on, or labour-saving o
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