chapter 5 business management © 2007 prentice hall, inc. all rights reserved.5–1 bus 100

Chapter 5Chapter 5

BUSINESS MANAGEMENTBUSINESS MANAGEMENT

© 2007 Prentice Hall, Inc. All rights reserved. 5–1

BUS 100BUS 100


L E A R N I N G O B J E C T I V E SL E A R N I N G O B J E C T I V E S

After reading this chapter, you should be able to:After reading this chapter, you should be able to:

1.1. Describe the nature of management and identify the Describe the nature of management and identify the four basic functions that constitute the management four basic functions that constitute the management process.process.

2.2. Identify different types of managers likely to be found Identify different types of managers likely to be found in an organization by level and area.in an organization by level and area.

3.3. Describe the basic skills required of managers.Describe the basic skills required of managers.

4.4. Explain the importance of strategic management and Explain the importance of strategic management and effective goal setting in organizational success. effective goal setting in organizational success.


L E A R N I N G O B J E C T I V E S (cont’d)L E A R N I N G O B J E C T I V E S (cont’d)

After reading this chapter, you should be able to:After reading this chapter, you should be able to:

5.5. Discuss contingency planning and crisis management Discuss contingency planning and crisis management in today’s business world. in today’s business world.

6.6. Describe the development and explain the importance Describe the development and explain the importance of corporate culture.of corporate culture.


What’s in It for Me?What’s in It for Me?

After reading this chapter, you’ll be better After reading this chapter, you’ll be better positioned to:positioned to:

Carry out various management responsibilities Carry out various management responsibilities yourselfyourself

More effectively assess and appreciate the quality More effectively assess and appreciate the quality of management in various companies from the of management in various companies from the perspective of a consumer or investorperspective of a consumer or investor


Who Are Managers?Who Are Managers?

Good ManagersGood Managers Are responsible for business performance Are responsible for business performance

and effectivenessand effectiveness EffectiveEffective——do the right things; achieve goalsdo the right things; achieve goals EfficientEfficient—do things right; lower costs—do things right; lower costs

Are accountable to all key stakeholdersAre accountable to all key stakeholders Develop strategic plans and tactical plansDevelop strategic plans and tactical plans Analyze their competitive environments and Analyze their competitive environments and

plan, organize, direct, and control day-to-day plan, organize, direct, and control day-to-day operationsoperations


The Management Process The Management Process

LeadingLeadingGuiding and MotivatingGuiding and Motivating

LeadingLeadingGuiding and MotivatingGuiding and Motivating

ControllingControllingMonitoring PerformanceMonitoring Performance

ControllingControllingMonitoring PerformanceMonitoring Performance

PlanningPlanningSetting GoalsSetting Goals

PlanningPlanningSetting GoalsSetting Goals

OrganizingOrganizingStructuringStructuring

OrganizingOrganizingStructuringStructuring

ManagementManagement The process of planning, organizing, leading, and The process of planning, organizing, leading, and

controlling a firm’s financial, physical, human, and controlling a firm’s financial, physical, human, and information resources to achieve its goalsinformation resources to achieve its goals


PlanningPlanning

The Planning ProcessThe Planning Process Determining firm’s goalsDetermining firm’s goals Developing strategy for achieving goalsDeveloping strategy for achieving goals Designing tactical and operational plans for Designing tactical and operational plans for

implementing the strategyimplementing the strategy


OrganizingOrganizing

The Organizing ProcessThe Organizing Process Arranging resources and activities in a coherent Arranging resources and activities in a coherent

structurestructure Prepare Prepare organizational chartsorganizational charts to help everyone understand to help everyone understand

roles and reporting relationshipsroles and reporting relationships


LeadingLeading

LeadingLeading Guiding and motivating employees to meet the Guiding and motivating employees to meet the

organization’s objectivesorganization’s objectives Uniting employees in a clear and targeted manner and Uniting employees in a clear and targeted manner and

motivating them to work in the best interests of their motivating them to work in the best interests of their employeremployer


ControllingControlling

The Controlling ProcessThe Controlling Process Monitoring a firm’s performance to make sure that Monitoring a firm’s performance to make sure that

it is meeting its goalsit is meeting its goals Begins when management establishes standards, often Begins when management establishes standards, often

for financial performancefor financial performance Can serve as a basis for providing rewards or reducing Can serve as a basis for providing rewards or reducing

costscosts


The Control ProcessThe Control Process

Establish StandardsEstablish StandardsEstablish StandardsEstablish Standards

Measure PerformanceMeasure PerformanceMeasure PerformanceMeasure Performance

Does measured Does measured performance match performance match

standards?standards?

Does measured Does measured performance match performance match

standards?standards?

YESYES NONO

Continue CurrentContinue CurrentActivitiesActivities

Continue CurrentContinue CurrentActivitiesActivities

Adjust Performance Adjust Performance or Standardsor Standards

Adjust Performance Adjust Performance or Standardsor Standards


Types of ManagersTypes of Managers

Levels of ManagementLevels of Management

Top managers:Top managers: R Responsible for the overall performance of the firm President, vice president, treasurer, CEO, CFOPresident, vice president, treasurer, CEO, CFO

Middle managers:Middle managers: I Implement strategies and work toward goals set by top managers Plant manager, operations manager, division managerPlant manager, operations manager, division manager

First-line managers:First-line managers: W Work with and supervise employees Supervisor, office manager, project manager, group leaderSupervisor, office manager, project manager, group leader


Human Human ResourcesResources

Human Human ResourcesResources

MarketingMarketingMarketingMarketing

FinancialFinancialFinancialFinancial

OperationsOperationsOperationsOperations

InformationInformationInformationInformation

OtherOtherOtherOther

Areas of ManagementAreas of Management


Basic Management SkillsBasic Management Skills

Human Human Relations Relations

SkillsSkillsTechnical Technical

SkillsSkills

Conceptual Conceptual SkillsSkills

Time Time Management Management

SkillsSkills

Decision-Decision-Making Making SkillsSkills


Management Skills for the 21st CenturyManagement Skills for the 21st Century

Global Management SkillsGlobal Management Skills Understand foreign markets, cultural differences, Understand foreign markets, cultural differences,

and the motives and practices of foreign rivalsand the motives and practices of foreign rivals Understand how to collaborate with others around Understand how to collaborate with others around

the world on a real-time basisthe world on a real-time basis

Management and Technology Management and Technology SkillsSkills

Needed to process increasing Needed to process increasing amounts of informationamounts of information


Strategic Management: Strategic Management: Setting Goals and Formulating StrategySetting Goals and Formulating Strategy

Strategic ManagementStrategic Management The process of helping an organization maintain an The process of helping an organization maintain an

effective alignment with its environmenteffective alignment with its environment

GoalsGoals Starting point in effective strategic managementStarting point in effective strategic management Objectives that a business hopes and plans to

achieve

StrategyStrategy The broad set of action plans to achieve company The broad set of action plans to achieve company

goalgoal


Setting Business GoalsSetting Business Goals

GoalsGoals Performance targets that organizations and their Performance targets that organizations and their

managers use to measure success or failuremanagers use to measure success or failure

Mission StatementMission Statement A statement of how a business will achieve its A statement of how a business will achieve its

fundamental purposefundamental purpose

Effective organizations set goals at many Effective organizations set goals at many different levels:different levels:

Long-term goals: five years or moreLong-term goals: five years or more Intermediate goals: one to five yearsIntermediate goals: one to five years Short-term goals: one year or lessShort-term goals: one year or less


Purposes of Goal SettingPurposes of Goal Setting

Goal Setting:Goal Setting:1.1. Provides direction and guidance for managers at Provides direction and guidance for managers at

all levelsall levels

2.2. Helps firms allocate resourcesHelps firms allocate resources

3.3. Helps to define corporate cultureHelps to define corporate culture

4.4. Helps managers assess performanceHelps managers assess performance


Types of StrategyTypes of Strategy

Corporate StrategyCorporate Strategy Determines what business or businesses a Determines what business or businesses a

company will own and operatecompany will own and operate GrowthGrowth

Related diversificationRelated diversification Unrelated diversificationUnrelated diversification

RetrenchmentRetrenchment Downsizing and divestitureDownsizing and divestiture


Types of Strategy (cont’d)Types of Strategy (cont’d)

Business (or Competitive) StrategyBusiness (or Competitive) Strategy Focuses on improving the company’s competitive Focuses on improving the company’s competitive

position at the level of the business unit or position at the level of the business unit or product lineproduct line

Functional StrategyFunctional Strategy Guides managers in specific areas Guides managers in specific areas such as

marketing, finance, and operations in deciding how in deciding how best to achieve corporate goals by performing their best to achieve corporate goals by performing their functional activities most effectivelyfunctional activities most effectively


FIGURE 5.2FIGURE 5.2 Hierarchy of StrategyHierarchy of StrategyFIGURE 5.2FIGURE 5.2 Hierarchy of StrategyHierarchy of Strategy


Formulating StrategyFormulating Strategy

Step 1:Step 1: Setting Strategic GoalsSetting Strategic Goals Strategic goals are derived from a firm’s mission Strategic goals are derived from a firm’s mission

statementstatement

Step 2:Step 2: Analyzing the Organization and the Environment: Analyzing the Organization and the Environment: SWOT AnalysisSWOT Analysis Assessing internal strengths and weaknesses and Assessing internal strengths and weaknesses and

external opportunities and threatsexternal opportunities and threats Environmental analysis Organizational analysis

Step 3:Step 3: Matching the Organization and Its EnvironmentMatching the Organization and Its Environment Matching environmental threats and opportunities Matching environmental threats and opportunities

against corporate strengths and weaknessesagainst corporate strengths and weaknesses


FIGURE 5.3FIGURE 5.3 Strategy FormulationStrategy FormulationFIGURE 5.3FIGURE 5.3 Strategy FormulationStrategy Formulation


A Hierarchy of PlansA Hierarchy of Plans

Strategic PlansStrategic Plans Reflect decisions about resource allocations, Reflect decisions about resource allocations,

company priorities, and the steps needed to meet company priorities, and the steps needed to meet strategic goalsstrategic goals

Tactical PlansTactical Plans Shorter-term plans for implementing specific Shorter-term plans for implementing specific

aspects of the company’s strategic plansaspects of the company’s strategic plans

Operational PlansOperational Plans Mid-level and lower-level managers set short-term Mid-level and lower-level managers set short-term

targets for daily, weekly, or monthly performancetargets for daily, weekly, or monthly performance


Contingency Planning Contingency Planning and Crisis Managementand Crisis Management

Contingency PlanningContingency Planning Planning for changePlanning for change Seeks to identify in advance important aspects of a Seeks to identify in advance important aspects of a

business or its market that might change and the business or its market that might change and the ways in which a company will respond to changesways in which a company will respond to changes

Crisis ManagementCrisis Management Involves an organization’s methods for dealing with Involves an organization’s methods for dealing with

a crisisa crisis——an unexpected emergency requiring an unexpected emergency requiring immediate responseimmediate response


Management and the Corporate CultureManagement and the Corporate Culture

Corporate CultureCorporate Culture Is the shared experiences, stories, beliefs, and Is the shared experiences, stories, beliefs, and

norms that characterize an organizationnorms that characterize an organization Helps define the work and business climate that Helps define the work and business climate that

exists in an organizationexists in an organization

Communicating the CultureCommunicating the Culture Managers must understand the cultureManagers must understand the culture Managers must transmit the culture to others in the Managers must transmit the culture to others in the

organizationorganization Managers can support the culture by rewarding and Managers can support the culture by rewarding and

promoting those who understand it and work toward promoting those who understand it and work toward maintaining itmaintaining it


Managing Change in the CultureManaging Change in the Culture

Stages in the Change ProcessStages in the Change Process

1.1. At the highest level, analysis of the company’s At the highest level, analysis of the company’s environment highlights extensive change as the environment highlights extensive change as the most effective response to its problems.most effective response to its problems.

2.2. Top management begins to formulate a vision of a Top management begins to formulate a vision of a new company. new company.

3.3. The firm sets up new systems for appraising and The firm sets up new systems for appraising and compensating employees who enforce the firm’s compensating employees who enforce the firm’s new values. new values.


K E Y T E R M SK E Y T E R M S

business (or competitive) business (or competitive) strategy strategy

conceptual skills conceptual skills

contingency planning contingency planning

controlling controlling

corporate culture corporate culture

corporate strategy corporate strategy

crisis management crisis management

decision-making skills decision-making skills

leading leading

environmental analysis environmental analysis

first-line manager first-line manager

functional strategy functional strategy

goal goal

human relations skills human relations skills

intermediate goal intermediate goal

long-term goal long-term goal

management management

middle manager middle manager

mission statement mission statement

organizational analysis organizational analysis

organizing organizing

operational plan operational plan

planning planning

short-term goal short-term goal

strategic goal strategic goal

strategic managementstrategic management

strategic plan strategic plan


K E Y T E R M S (cont’d)K E Y T E R M S (cont’d)

strategy strategy

strategy formulation strategy formulation

SWOT analysis SWOT analysis

tactical plan tactical plan

technical skills technical skills

time management skills time management skills

top manager top manager

chapter 5 business management © 2007 prentice hall, inc. all rights reserved.5–1 bus 100

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