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MGTA01H3 (583)
Chapter 6

Chapter 6

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 6 Managing the Business EnterpriseSetting Goals and Formulating Strategy Termsgoals objectives that a business hopes and plans to achieveThe Purpose of Goal Settingan 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 settingGoal 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 ethicsGoal 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 andor surpass that goal can be reward However the managers of units who fail to reach that goal will also be compensated accordingly Kinds of Goalsmission statement an organizations statement of how it will achieve its purpose in the environment in which it conducts its businesslongterm goals goals set for extended periods of time typically five years or more into the futureintermediate goals goals set for a period of one to five yearsshortterm goals goals set for the very near future typically less than one yearFormulating Strategystrategy formulation creation of a broad program for defining and meeting an organizations goalsstrategic goals long term goals derived directly from a mission statementSetting Strategic GoalsSWOT 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 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
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