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Chapter 6

CHAPTER 6-Managing the Business Enterprise

Rotman Commerce
Course Code
Michael Szlachta

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Who are managers?
- work of managers: developing strategic and tactical plans, analyze competition, plan, organize,
direct and
control daily operations
- principles of management applies to all organization including education, non profit, social,
religious etc
- major skill of a manager is the ability to make decisions and respond to challenges
Setting Goals and Formulating Strategy
- starting point is to set a goal, an objective that a business hopes and plans to achieve
- manager must decide what a business intends to do (set the goal) and then the subsequent
actions that
will/will not achieve the goal
- strategy underlies all these decisions
Setting Goals
- goals are performance targets
THE PURPOSE OF GOAL SETTING: for an organization to function systematically, it needs to
set goals and
plan accordingly
- an organization commits its resources to achieve its goals
- 4 main purposes of goal setting:
1) provides direction, guidance and motivation for all managers - by knowing where the company
is headed,
there is less potential for error. The goal informs the managers of the firms priorities
2) Helps firms allocate resources - if the priority of the firm is to expand, then the resources must
go towards
opening new stores.
3) helps to define corporate culture - by knowing what the goal is (ie to be the #1 firm in the
industry), the
work environment becomes competitive in order to achieve that goal.
4) Helps managers assess performance - if the goal is to increase sales, then the manager who
is successful
at achieving the goal can get rewarded. The manager who does not achieve the goal also gets
compensated accordingly
KINDS OF GOALS: depending on a firms purpose, the goals of a firm differ.
- every firm, depending on its type (ie profit seeking business or an educational university) has a
purpose, a reason for existing
- most enterprises have a mission statement = organizational statement of how it will achieve its
- mission statements should include a statement about the firms core values and its commitment
to ethical behaviour
- businesses can have the same purposes but they have different missions ie Timex vs Rolex
- every company needs long term, short term and intermediate goals
- long term - set for extended periods of time, usually 5+ years
- intermediate - goals set for a period of 1-5 years
- short term - very near future (1 year or less)
Formulating Strategy
- planning = choosing tactics and establishing schedules

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- strategy = a broad program that describes an organizations intentions. A business strategy is
meant to
outline HOW the firm will meet its goals and include the firms responsiveness to new challenges
and new
- strategy formulation is the creation of a strategy. 4 steps:
1) set strategic goals - these are long term goals derived directly from a firms mission statement.
After strategic goals have been established, organizations go through a process called SWOT
analysis, which is the identification and analysis of organizational strengths and weaknesses and
environmental opportunities and threats. The involves assessing: S (strengths) & W (weaknesses)
within the company and O (opportunities) & T (threats) which are external to the company.
2) analyze the organization and the environment - this involves environmental analysis which is
the process of
scanning the environment for OT - opportunities and threats. IE changes in consumer taste, new
competition (= threats) and areas that the company can expand (= opportunity). The
environmental analysis is of external factors. Organizational analysis is of internal factors, which
is the process of analyzing a firms strengths and weaknesses - SW.
3) match the organization and environment - here the firm needs to match environmental threats
and opportunities with corporate strengths and weaknesses. This is the core part of strategy
formation, it lays the foundation for successfully planning and conducting business.
4) formulate strategy
A HIERARCHY OF PLANS: there are 3 levels of plans: Strategic, tactical and operational.
- strategic plans = plans that reflect decisions about resource allocations, company priorities and
steps needed to meet strategic goals. usually people in top management set these plans
- tactical plans = short range plans concerned with implementing specific aspects of a companys
strategic plans. For example, the firms decision to increase sales is a tactical plan, usually
decided upon by uppermid management
- operational plans = plans with short term targets for daily, weekly, or monthly performance,
usually carried out by middle and lower managers. For example, when McDonalds decides how
the burgers will be cooked.
Levels of Strategies
1) corporate level strategies - these identify the businesses that a company will be in and how
businesses will relate to each other.
2) business level (competitive) strategy - this identifies the ways a business will compete in its
chosen line of
3) functional strategies identify the basic course of action that each department in the firm will
pursue so that
it contributes to the attainment of the businesss overall goals.
CORPORATE LEVEL STRATEGIES: a company pursues corporate level strategies such as:
- concentration: strategy that involves focussing the company on one product. The company can
focus its
strengths on the one business it knows well and focuses solely on that one product
- growth: growth strategies are internal to the company. Example of strategies, market
penetration which includes boosting sales of present products by more aggressive selling in the
firms current marke; product development (improving your product); geographic expansion
(expanding in other countries)
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