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Chapter 6

RSM 100 - Chapter 6 - Summary Notes

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University of Toronto St. George
Rotman Commerce
John Oesch

RSM 100Y – Chapter 6: Managing the Business Enterprise Purposes of Goal Setting 1. Provides direction, guidance and motivation for all managers a. Measurable benchmarks, mitigates errors, provides focus 2. Helps firms allocate resources a. More resources to growing parts of business 3. Define corporate culture a. External goals = Internal actions to achieve the goal 4. Helps managers asses performance a. Success or failure of measurable benchmarks Mission Statement: Organizations statement of how it will achieve its purpose Types of Goals 1. Long-Term Goals ----- 5 Years+ 2. Intermediate Goals --- 1 to 5 Years 3. Short-Term Goals ----- <1 Year Strategy Formulation Step 1: Setting Strategic Goals (Long term goals derived from mission statement) Step 2: SWOT Analysis (Internal = SW vs. External Environment = OT)  Strengths, Weaknesses, Opportunities, Threats Step 3: Match Organization and Environment  Over the long term it determines the conservatism vs. riskyness of firm Hierarchy of Plans Strategic Plans Determines resource allocation/company priorities for STEP1: Strategic Goals Tactical Plan Short-range plans concerned with implementation specific aspects of strategic plans Operational Plan Developed by lower management for short-term targets (daily, weekly, monthly) Levels of Strategy Corporate Level – Determines type of business a company will be in/how they relate Business Level – How the business will compete in their chosen line of products Functional Level – Identifies actions each part of a firm will take to achieve overall goal Corporate Level Strategies Concentration: Focus the company on one product or product line (Eg. McDonalds) Growth: Focus on internal activities to grow through Market Penetration (aggressively selling in current markets), product development, and geographic expansion Integration: Horizontal (Absorb Competitors) vs. Vertical (Phases of production) Diversification: Conglomerates  Expand into other industries Investment Reduction: Reducing investment in a line of business  Retrenchment = Slowing down activities or operations  Divesting = Selling off a part of a business Business Level Strategies Cost Leadership: Low cost leader in an industry (Wal-Mart) Differentiation: Uniqueness in firm or its products/services vs. competitors (Apple) Focus: Concentrate on a certain market niche and serve them better than others Functional Strategies Each business level strategy is transformed into functional strategies for each department to pursue to implement the entire business level strategy Risk and Contingency Contingency Planning Planning for things to go wrong, specific solutions to future problems Crisis Management Dealing with problems/emergencies NOW --- Disruption Management  Stresses self-reliance in planning for external problems Management Process Management = Process of planning, organizing, leading and controlling a business Planning: Determining what the business needs to do and how to do it (3 Components)  Determine Firm’s goals  Develop strategy to achieve the goals  Design tactical and operational plans to implement strategy Planning Process 5 Steps 1. Establish goals
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