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MGTA01H3 (583)
Chapter 6

Chapter 6 Notes

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 6 Business Strategy Notes Setting Goals and Formulating Strategy N goals : objectives that a business hopes and plans to achieve Setting Goals The Purposes of Goal Setting 1. 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. 2. Goal setting helps firms allocate resources. Areas that are expected to grow will get priority. Company allocates more resources to new projects with large sales potential than it allocates to mature products with established but stagnant sales potential. 3. Goal setting helps to define corporate culture. 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. Kinds of Goals N mission statement : organizations statement of how it will achieve its purpose in environment in which it conducts its business N regardless of a companys purpose and mission, every firm needs long term, intermediate, and short term goals N long term goals : goals set for extended period of time, typically five years or more into the future N intermediate goals : goals set for a period of one to five years N short term goals : goals set for the very near future, typically less than one year Formulating Strategy N strategy formulation : creation of a broad program for defining and meeting an organizations goals Setting Strategic Goals N strategic goals : long term goals derived directly from a firms mission statement N SWOT analysis : identification and analysis of organizational Strengths and Weaknesses and environmental Opportunities and Threats as part of strategy formulation Analyzing the Organization and Its Environment N environmental analysis : the process of scanning the environment for threats and opportunities N changing consumer tastes, hostile takeover offers, new government regulations, new products, new competitors are all threats N opportunities, meanwhile, are areas in which the firm can potentially expand, grow, or take advantage of existing strengths N organizational analysis : the process of analyzing a firms strengths and weaknesses Matching the Organization and its Environment N final step in strategy formulation is matching environmental threats and opportunities with corporate strengths and weaknesses N matching process is the heart of strategy formulation: more than any other facet of strategy, mat
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