Chapter 5
Managing the Business Enterprise
Chapter Overview
Setting goals and formulating strategies are the starting points of effective
management. Goals – the performance targets of an organization – can be long
term, intermediate term, or short term. Strategies – the methods an organization
uses to meet its goals – are created when management reviews strategic goals,
analyzes the organization and its environment, and matches the organization with
its environment. The result is a strategic plan.
Management is the process of planning, organizing, directing, and controlling an
organization’s resources to achieve its goals. Planning means determining what
the company needs to do and how to get it done. Plans can be strategic, tactical,
and operational. Most organizations also develop contingency plans and plans for
crisis management. Organizing means determining how best to arrange a
business’ resources and the necessary jobs into an overall structure. Directing
means guiding and motivating employees to meet the firm’s objectives.
Controlling means monitoring the firm’s performance to ensure that it is meeting
its goals.
Specific managerial responsibilities vary by management level. Top managers set
policies, formulate strategies, and approve decisions. Middle managers
implement strategies, policies, and decisions. First-line managers usually work
with and directly supervise employees. To be effective, managers must develop
and exercise technical skills, human relations skills, conceptual skills, decisionmaking skills, and time management skills. Global management and technology
skills are also becoming increasingly important.
A healthy, well-defined corporate culture – the shared experiences, stories,
beliefs, and norms that characterize an organization – can influence management
styles and help a business reach its goals. Successful managers understand the
culture and communicate effectively to others. This is especially important when
an organization deems it necessary to change the corporate culture.
Chapter Objectives
1. Explain the importance of setting goals and formulating strategies as the
starting points of effective management.
2. Describe the four activities that constitute the management process.
3. Identify types of managers by level and area.
4. Describe the five basic management skills.
5. Describe the development and explain the importance of corporate
culture.
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REFERENCE OUTLINE
Opening Case: Yellow Delivers the Goods
I.
Settings Goals and Formulating Strategy
A. Types of Strategy
B. Setting Business Goals
1. Purposes of Goal Setting
2. Kinds of Goals
C. Formulating Strategy
1. Setting Strategic Goals
2. Analyzing the Organization and Its Environment
3. Matching the Organization and Its Environment
4. The Hierarchy of Plans
5. Contingency Planning and Crisis Management
II.
The Management Process
A. Planning
B. Organizing
C. Directing
D. Controlling
III.
Types of Managers
A. Levels of Management
1. Top Managers
2. Middle Managers
3. First-Line Managers
B. Areas of Management
1. Human Resource Managers
2. Operations Managers
3. Marketing Managers
4. Information Managers
5. Financial Managers
6. Other Managers
IV.
Basic Management Skills
A. Technical Skills
B. Human Relations Skills
C. Conceptual Skills
D. Decision-Making Skills
E. Time Management Skills
F. Management Skills for the Twenty-First Century
V.
Management and the Corporate Culture—Communicating the Culture
and Managing Change
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LECTURE OUTLINE
I.
Setting Goals and Formulating Strategy (Use PowerPoint 5.4,
5.5.)
Setting goals is the foundation for effective management.
A. Types of Strategy
The purpose of corporate strategy is to determine the firm’s
overall attitude toward growth and the way it will manage its
businesses or product lines. Business strategy focuses on
improving the company’s competitive position. With functional
strategy, managers in specific areas decide how best to achieve
corporate goals by being as productive as possible.
B. Setting Goals (Use PowerPoint 5.6, 5.7.)
Goals are performance targets – the means by which organizations
and their managers measure success or failure at every level.
1. Purposes of Goal Setting. An organization functions
systematically because it sets goals and plans
accordingly. The four main purposes of organizational
goal setting include: (a) providing direction and guidance
for managers at all levels; (b) helping firms allocate
resources; (c) helping to define corporate culture; and (d)
goal setting helps managers assess performance.
2. Kinds of Goals. Every firm has a purpose and a mission.
A mission statement is a statement of how the firm will
achieve its purpose in the environment in which it
operates. In addition, every firm needs long-term goals,
which look at five years or more into the future;
intermediate goals, which focus on a period of one to
five years; and short-term goals, which are set for one
year.
C. Formulating Strategy (Use PowerPoint 5.8.)
Strategy tends to be wider in scope than planning; strategy
describes what an organization intends to do. Strategy
formulation involves three basic steps: (a) setting strategic goals;
(b) analyzing the organization and its environment; and (c)
matching the organization and its environment.
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1. Setting Strategic Goals. Strategic goals are long-term
goals derived from the firm’s mission statement.
2. Analyzing the Organization and Its Environment.
Environmental analysis involves scanning the external
environment for threats and opportunities. Threats
include changing consumer tastes, hostile takeovers, and
some competitor actions. Organizational analysis
involves scanning the internal environment for strengths
and weaknesses. Strengths include surplus cash, a
dedicated workforce, technical expertise, etc.
3. Matching the Organization and Its Environment.
This step in strategy formulation involves matching a
firm’s strengths and weaknesses to its opportunities and
threats. This step is credited as the foundation for
successful planning.
4. The Hierarchy of Plans. Usually set by the board of
directors and top management, strategic plans focus on
steps needed to meet strategic goals. Usually involving
upper and middle managers, tactical plans are concerned
with implementing certain aspects of the strategic plans;
tactical plans are short-range plans. Operational plans,
geared toward short-term goals, are developed by middle
and lower-level managers.
5. Contingency Planning and Crisis Management.
Contingency planning is planning for change; it
identifies ways in which a company will respond to
change. Crisis management involves an organization’s
methods for dealing with emergencies.
Notes:
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II.
The Management Process (Use PowerPoint 5.9.)
Management is the process of planning, organizing, directing, and
controlling an organization’s financial, human, and information
resources to achieve its goals.
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A. Planning
Planning includes a hierarchy of activities which involves
determining what an organization needs to do and how to get it
done. Planning begins with determining the firm’s goals, followed
by development of a comprehensive strategy, and designing
tactical and operational plans.
B. Organizing
Organizing involves the arranging of a firm’s resources into a
coherent structure.
C. Directing
With the firm’s objectives in mind, managers need to guide and
direct employees.
D. Controlling (Use PowerPoint 5.10.)
Controlling involves the manager’s monitoring of the firm’s
performance to assure the firm is meeting its goals.
Notes:
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III.
Types of Managers
Managers’ responsibilities depend upon the level of management a
manager functions.
A. Levels of Management (Use PowerPoint 5.11.)
The three basic levels of management are top, middle, and firstline.
1. Top Managers. This level is responsible for the firm’s
overall performance and effectiveness. Top managers set
general policies and formulate strategies, approve all
significant decisions, and represent the company in
dealing with stockholders, the board of directors, other
businesses, and government.
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2. Middle Managers. This level is responsible for
implementing the strategies, policies, and decisions made
by top managers.
3. First-Line Managers. Duties of managers at this level
depend on the job, though first-line managers spend most
of their time supervising the employees who report to
them.
B. Areas of Management (Use PowerPoint 5.12.)
1. Human Resource Managers. These managers hire and
train employees, evaluate performance, and determine
compensation.
2. Operations Managers. These managers are responsible
for the production system in which a firm produces goods
and/or services, inventory and inventory control, and
quality control.
3. Marketing Managers. These managers are responsible
for the development, pricing, promotion, and distribution
of goods and services.
4. Information Managers. These managers design and
implement systems to gather, organize, and distribute
information.
5. Financial Managers. These managers are responsible
for the firm’s accounting functions and financial
resources.
6. Other Managers. Some firms employ various types of
specialized managers, such as public relations managers.
Notes:
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IV.
Basic Management Skills (Use PowerPoint 5.13.)
Effectiveness in management results from the development of a
variety of skills among managers.
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A. Technical Skills
Technical skills are the skills needed to perform specific tasks.
These skills are developed through a combination of education and
experience. Technical skills are especially important for first-line
managers who spend most of their time with the day-to-day
operations of the production system.
B. Human Relations Skills
Absolutely necessary for managerial success, human relations
skills are skills in understanding and getting along with people.
These skills are important at all management levels.
C. Conceptual Skills
Especially prevalent among top managers, conceptual skills
involve the ability to diagnose and analyze different situations and
to see beyond the present situation.
D. Decision-Making Skills
Decision-making skills include the ability to define problems and
to select the best course of action. Decision-making steps include:
(1) defining the problem, gathering facts, and identifying
alternative solutions; (2) evaluating each alternative and selecting
the best one; (3) implementing the chosen alternative; and, (4)
following up and evaluating the effectiveness of that choice.
E. Time Management Skills
Time management skills involve the productive use that
managers make of their time. Leading causes of wasted time are
paperwork, the telephone, and meetings.
F. Management Skills for the Twenty-First Century (Use
PowerPoint 5.14.)
Competing globally and managing technology are two major
challenges facing managers as they prepare for the 21st century.
1. Global Management. Businesses will demand managers
who can understand cultural differences and the motives
and practices of foreign competitors.
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2. Management and Technology. New forms of
technology increase the manager’s need to process,
organize, and interpret a plethora of information.
Notes:
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V.
Management and the Corporate Culture (Use PowerPoint 5.15.)
Corporate culture – the shared experiences, stories, beliefs, and
norms that characterize an organization – greatly influences
management philosophy, style, and behavior, and must be understood
by management to be effectively communicated to others in the
organization.
A. Communicating the Culture and Managing Change
1. Communicating the Culture. This involves having an
understanding of the culture, transmitting the culture to
others in the organization, and maintaining the culture.
2. Managing Change. This involves an analysis of the
company’s environment, the formulating of a vision of a
new company, and the setting up of appraisal and
compensation systems for employees who enforce the
new values.
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