INTRODUCTION TO
BUSINESS
University of Management and Technology
1901 N. Fort Myer Drive
Arlington, VA 22209 USA
Phone: (703) 516-0035
Fax: (703) 516-0985
Website: www.umtweb.edu
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-1
MGT100
PART 2
UNDERSTANDING THE
BUSINESS OF MANAGING
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-2
MGT100
Chapter 6:
Managing the Business
Enterprise
Griffin, R. W. & Ebert, R. J.
Business (7th ed.)
© 2004 Prentice Hall.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-3
MGT100
XP
Learning Objectives
Upon successful completion, the student will be able to:
Describe Who Are Managers?
Explain Setting Goals and Formulating Strategy
Define The Management Process
Describe Types of Managers
Describe Basic Management Skills
Understand Management and the Corporate Culture
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-4
MGT100
XP
Who Are Managers?
All corporations depend on effective management.
Regardless of whether they run a major international
shipping business like Yellow Freight or a small local or
regional delivery company, they perform many of the same
functions, are responsible for many of the same tasks, and
have many of the same responsibilities.
The work of all managers involves developing strategic and
tactical plans.
Along they with numerous other things, they must analyze
their competitive environments and plan, organize, direct,
and control day-to-day operations.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-5
MGT100
XP
Who Are Managers?
Remember, too, that managers bring to small organizations
much the same kinds of skills—the ability to make decisions
and respond to variety of challenges—that they bring to
large ones.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-6
MGT100
Setting Goals and Formulating
Strategy
XP
The starting point in effective management is setting goals
Goals are long-term objectives that a business hopes and
plans to achieve.
Every business needs goals.
Remember, however, that deciding what it intends to do is
only the first step for an organization.
Managers must also make decisions about actions will and
will not achieve company goals.
Decisions cannot be made on a problem-by-problem basis
or merely to meet needs as they arise.
In most companies, a broad program underlies those
decisions.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-7
MGT100
Setting Goals and Formulating
Strategy
XP
What do you believe was the cause of business failure for
players between well known rivalries.
For example:
In the 1980’s Wal-Mart was not the largest retailer in the US.
Until 1990, Kmart had greater revenues than Wal-mart, and
before that it was Sears.
In software, what happened to Lotus 123, IBM OS2,
WordPerfect, etc. In games, where is Sega?
One possibility is poor management on the one hand and
better goal setting and strategy formulation on the other.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-8
MGT100
XP
What Is Strategy?
Broad set of organizational plans for implementing the
decisions made for achieving organizational goals
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-9
MGT100
XP
Types of Strategy
The figure shows the
relationship among the three
types of strategy that are
usually considered by a
company.
Hierarchy of Strategy
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-10
MGT100
XP
Types of Strategy
Corporate strategy—Strategy for determining the firm’s
overall attitude toward growth and the way it will manage its
businesses or product lines.
Under Kenneth Chenault, AmEx corporate strategy calls for
strengthening operations through a principle of growth called
e-partnering—buying shares of small companies that can
provide technology that AmEx itself does not have.
Business (or competitive) strategy—Strategy at the
business-unit or product-line level focuses on a firm’s
competitive position.
At this level, AmEx makes decisions about how best to
compete in an industry that includes Visa, MasterCard, and
other credit card companies.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-11
MGT100
XP
Types of Strategy
Functional strategy—Strategy by which managers in specific
areas decide how best to achieve corporate goals through
productivity.
At AmEx, each business unit has considerable autonomy in
deciding how to use the single Web site at which the company
has located its entire range of services.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-12
MGT100
XP
Purposes of Goal Setting
An organization functions systematically because it sets
goals and plans accordingly. An organization commits its
resources on all levels to achieving its goals.
Specifically, we can identify four main purposes in
organizational goal setting:
Goal setting provides direction and guidance for managers at
all levels.
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.
The company allocates more resources to new projects with large
sales potential than it allocate to mature products with established
but stagnant sales potential.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-13
MGT100
XP
Purposes of Goal Setting
Goal setting helps to define corporate culture.
For years, the goal at General Electric www.ge.com has been to
push each of its divisions to first or second in its industry.
Goal setting helps managers assess performance.
If a unit sets goal of increasing sales by 10 percent in a given year,
managers in that unit who attain or exceed the goal can be
rewarded. Units failing to reach the goal will also be compensated
accordingly.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-14
MGT100
XP
Kinds of Goals
Goals differ from company, depending on the firm’s purpose and
mission. Every enterprise has a purpose, or a reason for being.
Business seek profits and government agencies seek to set and
enforce public policy.
Many enterprises also have missions and Mission Statement—
organization’s statement of how it will achieve its purpose in the
environment in which it conducts its business.
A company’s mission is usually easy to identify, at least at a basic
level.
Businesses often have to rethink their missions as the competitive
environment changes.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-15
MGT100
XP
Kinds of Goals
Determining a successful company’s basic mission is usually
fairly simple, since marketing promotion typically stems
directly from the mission.
“Think” (IBM)
IBM Mission: We strive to lead in the creation, development,
and manufacture of the industry’s most advanced information
technologies, including computer systems, software,
networking systems, storage devices, and microelectronics.
We translate these advanced technologies into value for our
customers through our professional solutions and services
businesses worldwide. (Source: www.ibm.com)
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-16
MGT100
XP
Kinds of Goals
“Think Different”
Apple Computer: Apple is committed to bringing the best
personal computing experience to students, educators, creative
professionals, and consumers around the world through its
innovative hardware, software, and Internet offerings. (Source:
www.apple.com)
“Just do it”
Nike: Nike is committed to serving the athlete.
“Committed to Building Futures”
UMT
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-17
MGT100
XP
Kinds of Goals
Regardless of a company’s purpose and mission, however, every
firm has long-term, intermediate, and short-term goals:
Long-term goals are set for an extended time, typically 5 years or
more into the future.
For example, American Express might set a long-term goal of doubling
the number of participating merchants during the next 10 years.
Intermediate goals are set for a period of 1 to 5 years.
For example, the marketing department’s goal might be to increase
sales by 3 percent in two years.
Short-term goals are set for the very near future, typically less than
1 year.
Increasing sales by 2 percent this year, cutting costs by 1 percent next
quarter, and reducing turnover by 4 percent over the next six months
are examples of short-term goals.
Short-term goals are often called objectives.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-18
MGT100
XP
Formulating Strategy
Planning is often concerned with the nuts and bolts of setting
goals, choosing tactics, and establishing schedules.
In contrast, strategy tends to have a wider scope. It is by
definition a broad program that describes an organization’s
intentions.
A business strategy outlines how the business intends to
meet its goals and includes the organization’s
responsiveness to new challenges and new needs.
Because a well-formulated strategy is so vital to a business’s
success, most top managers devote substantial attention
and creativity to this process.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-19
MGT100
XP
Formulating Strategy
Formulating Strategy—The creation of a broad program for
defining and meeting an organization’s goals.
Strategy formulation involves the three basic steps summarized in
the figure.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-20
MGT100
XP
Setting Strategic Goals
Described as long-term goals, strategic goals are derived
directly from a firm’s mission statement.
For example, Ferdinand Piëch, CEO of Volkswagen
www.vw.com, has clear strategic goals for the European
carmaker.
When he took over 1993, Volkswagen was only marginally
profitable, was regarded as an also-ran in the industry, and was
thinking about pulling out of the U.S. market altogether because
its sales were so poor.
Over the next few years, however, Piëch totally revamped the
firm and has it making big profits. Volkswagen is now a much
more formidable force in the global automobile industry.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-21
MGT100
XP
Setting Strategic Goals
SWOT Analysis
After strategic goals have been established, organizations
usually go through a process called a SWOT analysis as they
continue to formulate their strategy.
This process involves assessing organizational strengths and
weaknesses (the S and W) and the environmental opportunities
and threats (the O and T).
In formulating strategy, they then attempt to capitalize on
organizational strengths and take advantage of environmental
opportunities.
During this same process, they may seek ways to overcome or
offset organizational weaknesses and avoid or counter
environmental threats.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-22
MGT100
Analyzing the Organization and
Its Environment
XP
Scanning the environment for threats and opportunities is
often called environment analysis.
Changing consumer tastes and fighting hostile takeover offers
are threats, as are new government regulations that will limit a
firm’s opportunities.
Even more important threats come from new products and new
competitors. Opportunities, meanwhile, are areas in which the
firm can potentially expand, grow, or take advantage of existing
strengths.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-23
MGT100
Analyzing the Organization and
Its Environment
XP
In addition to performing an environmental analysis, which is
an analysis of external factors, managers must also examine
internal factors.
The purpose of organizational analysis is to better
understand a company’s strengths and weaknesses.
Strengths might include surplus cash, a dedicated workforce,
an ample supply of managerial talent, technical expertise, or
little competition.
A cash shortage, aging factories, a heavily unionized
workforce, and a poor public image can all be important
weaknesses.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-24
MGT100
Analyzing the Organization and
Its Environment
XP
The final step in strategy formulation is matching
environmental threats and opportunities against corporate
strengths and weaknesses.
This matching process is at the heart of strategy formulation.
More than any other facet of strategy, matching companies
with their environments lays the foundation for successfully
planning and conducting business.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-25
MGT100
XP
A Hierarchy of Plans
The plans can be views on three levels: strategic, tactical,
and operational. Managerial responsibilities are defined at
each level.
The levels constitute a hierarchy because implementing
plans is practical only when there is a logical flow from one
level to the next level
Strategic plans reflect decisions about resource allocations,
company priorities and steps needed to meet strategic goals
Tactical plans are shorter-range plans for implementing specific
aspects of the company’s strategic plans
Operational plans set short-term targets for daily, weekly or
monthly performance
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-26
MGT100
Contingency Planning and Crisis XP
Management
Because business environments are often difficult to predict
and because the unexpected can create major problems,
most managers recognize that even the best-laid plans
sometimes simply do not work out.
Managers prepare for these situations with contingency
planning and crisis management.
Contingency Planning—recognizes the need to find solutions to
specific aspects of a problem by seeking to identify in advance
important aspects of a business or its market that might
change.
Crisis Management—describes an organization’s methods for
dealing with emergencies.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-27
MGT100
XP
The Management Process
The process of planning, organizing, directing, and
controlling an organization’s resources to achieve its goals.
The four functions of management are not discrete. They
overlap and influence one another.
To transform a vision into a successful business, managers
must perform the functions of planning, organizing, leading,
and controlling.
Planning—management process of determining what an
organization needs to do and how best to get it done.
Yahoo’s creation of partnership agreements with firms like
Reuters, Standard & Poor’s, and the Associated Press for the new
coverage it provides it users represent a form of operational
planning.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-28
MGT100
XP
The Management Process
Organizing—management process of determining how best to
arrange an organization’s resources and activities into a
coherent structure.
Hewlett-Packard’s realignment into an integrated, centralized firm,
rather than a corporate confederation of individual businesses, has
served its comeback strategy well.
Directing—management process of guiding and motivating
employees to meet an organization’s objectives.
Gordon Bethune, CEO of Continental Airlines, has turned around
morale and performance through his leadership skill, listening to
and rewarding employees to guide the company back on track.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-29
MGT100
XP
The Management Process
Controlling—management process of monitoring an
organization’s performance to ensure that it is meeting its
goals.
Bethune of Continental instituted a variety of performance
indicators including on-time arrivals, baggage-handling errors,
number of empty seats per plane, and surveys of customer and
employee satisfaction.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-30
MGT100
XP
The Management Process
The figure illustrates
the control process that
begins when
management
establishes standards,
often for financial
performance.
The Control Process
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-31
MGT100
XP
Levels of Management
Top Managers—managers responsible to the board of
directors and stockholders for a firm’s overall performance
and effectiveness. They set strategic goals, make longrange plans, establish major policies, and represent the
company to the outside world.
Middle Managers—managers responsible for implementing
the strategies, policies, and decisions made by top
managers. They may function as team leaders, acting as
consultants who must understand every department’s
function and are granted more decision-making authority,
previously reserved for high-ranking executives.
First-line Managers—managers responsible for supervising
the work of employees.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-32
MGT100
XP
Types of Managers
Why has the traditional pyramidal organization structure
been changing over the past few years? Is it still effective
today?
Many organizations are eliminating layers of middle
management in an effort to make their organizations more
responsive to changes in the environment.
The three levels of management are still the basis of the
structure of most organizations, but many are using teams to
work on projects, solve problems, and improve quality.
Today’s workforce is better educated and more diverse. They
prefer to have more control over their work.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-33
MGT100
XP
Areas of Management
Human Resources—responsible for hiring and training
employees, evaluating performance, and determining
compensation.
Operations—responsible for the production system,
inventory and inventory control, and quality control.
Marketing—responsible for the development, pricing,
promotion, and distribution of goods and services.
Information Managers—responsible for designing and
implementing systems to gather, organize, and distribute
information.
Financial Managers—responsible for the firm’s accounting
functions and financial resources.
Other Managers—other specialized managers include public
relations, research & development, etc.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-34
MGT100
XP
Basic Management Skills
Whatever the type or size of the organization, managers
employ basic kinds of skills.
As they rise through the hierarchy, managers need to
strengthen one or more of these skills.
Technical Skills—skills needed to perform specialized tasks
such as writing computer code, drawing animated characters,
or auditing a company’s records.
Human Relations Skills—skills in understanding and getting
along with people, such as communicating and motivating.
Conceptual Skills—abilities to think in the abstract, diagnose
and analyze different situations, and see beyond the present
situation to recognize future market opportunities and threats.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-35
MGT100
XP
Basic Management Skills
Decision-Making Skills—skills in defining problems and
selecting the best course of action.
Basic steps in decision making:
define the problem, gather facts, and identify alternative
solutions
evaluate each alternative and select the best one
implement the chosen alternative, periodically following up and
evaluating the effectiveness of that choice
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-36
MGT100
XP
Basic Management Skills
The figure illustrates the following basic steps in decision making
The Decision-Making Process
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-37
MGT100
XP
Basic Management Skills
Time Management Skills—refer to the productive use that
managers make of their time.
To manage time effectively, managers must address four
leading causes of waste time:
Paperwork: Some managers spend too much time deciding
what to do with letters and reports.
Telephone: Experts estimate that managers get interrupted by
the telephone every five minutes.
Meetings: Many managers spend as much as four hours a day
in meetings.
Email: Increasingly, managers are relying on e-mail and other
forms of electronic communication.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-38
MGT100
Management Skills for the
21st Century
XP
Global Management Skills—special tools, techniques, and
skills necessary to compete in a global environment.
Managers need to understand foreign markets, cultural
differences, and the motives and practices of foreign rivals as
well as understanding international operations.
Management and Technology Skills—abilities to process,
organize, and interpret a plethora of data and information.
Information now flows to everyone in the organization
simultaneously, decisions are made more quickly, and more
people are involved.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-39
MGT100
Management and the Corporate XP
Culture
Corporate Culture—The shared experiences, stories, beliefs,
and norms that characterize an organization.
A strong corporate culture directs employees’ efforts and helps
everyone work toward the same goals and helps newcomers
learn accepted behaviors.
Culture either originates with the company’s founders (as at
Walt Disney Co, Wal-Mart, and JC Penney) or is forged over a
long period guided by a constant, focused business strategy
(as at PepsiCo).
Some cultures are best described as “countercultures,” such as
Apple’s self-styled image as the alternative to staid competitors
in the computer industry.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-40
MGT100
Communicating the Culture
and Managing Change
XP
Corporate culture influences management philosophy, style,
and behavior.
Managers, therefore, must carefully consider the kind of
culture they want for their organizations and then work to
nourish that culture by communicating with everyone who
works there.
Wal-Mart, for example, is acutely conscious of the need to
spread the message of its culture as it opens new stores in new
areas.
One of the company’s methods is to regularly assign veteran
managers to lead employees in new territories.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-41
MGT100
XP
Communicating the Culture
To use a firm’s culture to its advantage, managers must
accomplish several tasks, all of which hinge on effective
communication.
First, managers themselves must have a clear understanding of
the culture.
Second, they must transmit the culture to others in the
organization.
Thus, communication is one aim in training and orienting
newcomers. A clear and meaningful statement of the
organization’s mission is also a valuable communication tool.
Finally, managers can maintain the culture by rewarding and
promoting those who understand it and work toward
maintaining it.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-42
MGT100
XP
Managing Change
Organizations must sometimes change their cultures and
also communicate the nature of the change to both
employees and customers.
The process has three stages:
Analysis of the company’s environment highlights change as
the most effective response to its problems
Top management begins to formulate a vision of a new
company.
The firm sets up new systems for appraising and compensating
employees who enforce the firm’s new values.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-43
MGT100
XP
Summary
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.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-44
MGT100
XP
Summary
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’s
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.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-45
MGT100
XP
Summary
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, decision-making
skills, and time management skills.
Global management and technology skills are also becoming
increasingly important.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-46
MGT100
XP
Summary
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 it effectively to others.
This is especially important when an organization deems it
necessary to change the corporate culture.
© 2005 UMT
Version: 09-13-05
Visit UMT online at www.umtweb.edu
6-47
MGT100