mgm101 sep 14-11 (1)

Introduction To Management Functions

Instructor: David SwanstonSeptember 14, 2011

MGM101

• Collect Expectations Forms• Announcements• Finish Management & Leadership• Markets and the Economic Environment• Analyzing Industries and Business Ownership

Today’s Agenda

September 14, 2011 2MGM101

Managers’ Roles Are EvolvingNew Approaches: Why?

• Global Competition

• Business Scandals

• Constant Change

• Better Educated Workers

• Downsizing/Rightsizing


Management

Managers Roles Are Evolving

• Managers must practise the art of getting things done through organizational resources.

• Resources is a general term that incorporates: – human resources (e.g., employees) – natural resources (e.g., raw materials)– financial resources (e.g., money)


Management

Management Challenges• Talent• Diversity• Globalization• Technology• Ethics• Careers


Management

Organizations–A collection of people working together to achieve a common purpose.–Organizations provide useful goods and/or services that return value to society and satisfy customer needs.

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Management

September 14, 2011

Organizations are open systems– Composed of interrelated parts that function

together to achieve a common purpose.– Interact with their environments.– Transform resource inputs into product outputs

(goods and services).– Environmental feedback tells organization how

well it is meeting the needs of customers and society.

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Management

September 14, 2011

Organizational performance– “Value creation” is a very important notion for

organizations.– Value is created when an organization’s

operations adds value to the original cost of resource inputs.

– When value creation occurs:• Businesses earn a profit.• Nonprofit organizations add wealth to society.

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Management

September 14, 2011

The general environment — all of the background conditions in the external environment of the organization including:– Economic – health of the economy– Legal-political – norms, customs, social values– Socio-cultural – philosophy/objectives of political

party running the government– Technological – development and availability of

technology– Natural environment – nature and conditions of

environment

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Management

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Competitive advantagea core competency that clearly sets an organization apart from competitors and gives it an advantage over them in the marketplace.

Companies may achieve competitive advantage in many ways, including:

• Cost efficiency• Higher quality• Better delivery• Greater flexibility

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Management

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Environmental uncertainty

a lack of complete information regarding what exists and

what developments may occur in the external

environment.

Two dimensions of environmental uncertainty:– Degree of complexity

– Rate of change

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Management

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Management FunctionsManagement: The process used to

accomplish organizational goals through: • Planning

- Strategic- Tactical- Operational- Contingency

• Directing (leading)• Organizing• Controlling people and other

organizational resources.September 14, 2011 12MGM101

Management

Managers: A DefinitionPDOC

Planning • A management function that includes

anticipating trends and determining the best strategies and tactics to achieve organizational GOPST:Goals, Objectives, Plans, Strategies and Tactics.


Management


Directing (Leading) • Creating a vision for the organization and

guiding, training, coaching, and motivating others to work effectively to achieve the organization’s goal and objectives.


Management


Organizing • A management function that includes

designing the structure of the organization and creating conditions and systems in which everyone and everything works together to achieve the organization’s goals and objectives.


Management


Controlling • Involves establishing clear standards to

determine whether an organization is progressing toward its goal and objectives

• rewarding people for doing a good job• taking corrective action if they are not


Management

Planning: Create Vision

Set vision, goals,

objectives

Vision/Mission: why

organization exists,

purpose of

organization

Goals: broad, long-term aims

Objectives: specific, short-term statements

Continuous process (SWOT)


Management

Planning Strategies


Management

Decision Making: Process

DefineDefine DescribeDescribe Develop Develop AlternativesAlternatives

Develop Develop AgreementAgreement

DoDo

DetermineDetermine

DecideDecide


Management


Organizing

Management


ManagementOrganizing

Required Management Skills


Management

StakeholdersStakeholders include customers, employees,

suppliers, dealers, environmental groups, and the surrounding communities.

The consensus seems to be that smaller organizations are more responsive than larger organizations.

Therefore, many large firms are being restructured into smaller, more customer-focused units.


Management

In business literature there is a trend toward separating the notion of management from that of leadership.

Good leaders motivate workers and create the environment for workers to motivate themselves.

Management is the carrying out of the leadership’s vision


Provide an example of a great leader

Management

LeadingLeaders are motivated by intrinsic values: needs, desires, motive and will power,as opposed to extrinsic values:rewards and recognition.


Management

Successful Leadership

Vision

Communicate

Corporate Values and Ethics

Don’t Fear Change


Management

Leadership Styles

• Autocratic

• Participative (Democratic)

• Free-rein


Management

Managing Knowledge

Knowledge Management• Finding the right information, keeping the

information in a readily accessible place, and making the information known to everyone in the firm.


Management

ControllingControlling consists of five steps:1. Establishing clear performance standards.2. Monitoring and recording actual performance3. Comparing results against plans and standards.4. Communicating results and deviations to the

employees involved.5. Taking corrective action when needed and

providing positive feedback.


Management

How Economic Issues Affect Business

Economic Environment

How Economic Conditions Affect Business

If you want to understand the underlying situation and conditions in which Canadian businesses operate, it is essential that you:

• have some grasp of economics, • be aware of the impact of the global

environment, and • understand the role of the federal and

provincial governments in Canada.


Economics

There are two major branches of economics:

• Macroeconomics looks at the operation of a nation’s economy as a whole.

• Microeconomics looks at the behaviour of people and organizations in particular markets.

• Example: Macroeconomics looks at how many jobs exist in the whole economy; microeconomics examines how many people will be hired in a particular industry or in a particular region of the country.


Economic Links to Business

• “Economics is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.” (p. 44 of text)

• these resources (land, labour, capital goods, entrepreneurship, and knowledge) are called factors of production.


• The Wealth of Nations in 1776 defined capitalism as a system of rights and freedoms:

• He believed that people will work hard if they have incentives for doing so—that is, if they know that they will be rewarded.

Economic Theory of Wealth Creation: Adam Smith


Economic Theory of Wealth Creation: Adam Smith

• The Wealth of Nations – Right to Make a Profit– Right to Private Property– Right to Buy or Sell– Freedom to Compete– Freedom from Government Interference


Capitalism Today

Giving back• Today, more businesspeople are

becoming concerned about social issues and their obligation to return to society some of what they’ve earned.


Three Economic Systems

CommunismCommunism

SocialismSocialism

CapitalismCapitalism

(Highly Controlled(Highly Controlled)) (Little Control)

MixedMixed

Different Economic Systems

• Capitalism: individuals seeking profits produce goods and services. – Goods and services are sold in a free market to those

who can pay for them.• Communism: the government decides what will

be produced and who will consume the results of that production.

• Socialism: some free market and some government allocation.

• Most countries have a mixed economy.


Capitalism Defined

• an economic system in which all or most of the factors of production and distribution (e.g., land, factories, railroads, stores) are privately owned (not owned by the government) and are operated for profit.

• Capitalism is the popular term used to describe free-market economies.


Capitalism: Free-market Economies

The free market is one in which decisions about what to produce and in what quantities are made by the market.

—that is, by buyers and sellers negotiating prices for goods and services.

No country is purely capitalist; no market is truly free.


The Foundations of Capitalism

• How a free market works • - Many buyers and sellers trading freely

determine the prices at which they will exchange goods and services.

• How prices are determined • - The constant interplay between supply and

demand determines an equilibrium price at which a transaction will occur.


The Foundations of Socialism

• Socialism is an economic system based on the premise that some, if not most, basic businesses, such as steel mills, coal mines, and utilities, should be owned by the government so that the profits can be evenly distributed among the people.


The Foundations of CommunismCommunism is an economic and political system

in which the state (the government) makes almost all economic decisions and owns almost all of the major factors of production.

Communism affects personal choices more than socialism does.

Some communist countries have not allowed their citizens to practise certain religions, change jobs, or move to the town of their choice.


Recent Economic Trends

• Canada: We have a mixed economy, as the government has always played a major role in the Canadian economy.

• Communist countries: They have moved to capitalist forms of economies to improve their standards of living.

• Socialist countries: They have reduced government’s role in their economies.


Recent Economic Trends

• Socialism and communism, for their part, haven’t always created enough jobs or wealth to keep economies growing quickly enough.

• As a consequence, communist governments are disappearing and socialist governments have been cutting back on social programs and lowering taxes for businesses and workers.


The Economic Concept of Supply and Demand

Supply refers to the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time.

Generally speaking, the amount supplied will increase as the price increases because sellers can make more money with a higher price.


• Demand refers to the quantity of products that people are willing to buy at different prices at a specific time.

• Generally speaking, the quantity demanded will increase as the price decreases.



The place where quantity demanded and supplied meet is called the equilibrium point.

The Economic Concept of Supply and Demand: The Equilibrium Point


Market price, then, is determined by supply and demand.


In the long run, that price would become themarket price.


Competition Within Free Markets

Four different degrees of competition exist: (1) perfect competition(2) monopolistic competition(3) oligopoly(4) monopoly



Perfect competition exists when there are many sellers in a market and no seller is large enough to dictate the price of a product.



Monopolistic competition exists when a large number of sellers produce products that are very similar but are perceived by buyers as different.



An oligopoly occurs when a few sellers dominate a market. • Oligopolies exist in industries that produce products in the areas of oil and gas, tobacco, automobiles, aluminum, and aircraft.



Oligopoly: One reason some industries remain in the hands of a few sellers is that the initial investment required to enter the business is tremendous – like the airline industry.


Competition Within Free MarketsA monopoly occurs when there is only one seller for a good or service, and that one seller controls the total supply of a product and the price. • Traditionally, monopolies were common in areas such as water, electricity, and telephone services that were considered essential services.


The Canadian EconomyKey Economic Indicators• GDP: gross domestic product • Unemployment rate• Housing starts• Commodity prices• Stock markets

• Price indexes: Consumer Price Index (CPI), Producer Price Index (PPI)

• Another important statistic is the increase or decrease in productivity.


Economics and Business

Gross Domestic Product (GDP): the total goods and services produced by the economy. This is how we measure how well the economy is doing! • A major influence on the growth of GDP is how productive the workforce is—that is, how much output workers create with a given amount of input.


The Canadian Economy

Standard of living • refers to the amount of goods and services

people can buy with the money they have.Quality of life • refers to the general well-being of a society in

terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy.


Productivity in Canada

• Productivity is measured by dividing the total output of goods and services of a given period by the total hours of labour required to produce them.

• An increase in productivity means that a worker can produce more goods and services in the same period of time than before, usually through the use of machinery or other equipment.


Productivity in Canada

• Productivity and technology• Productivity has gone up in recent years because

computers and other technology have made the process of production faster and easier for many workers.

• The higher productivity is, the lower costs are in producing products, and the lower prices can be.

• Since Canada is a service economy, productivity is an issue because firms are so labour-intensive.


Unemployment

• Frictional unemployment • refers to those people who have quit work because they didn’t like the job, the boss, or the working conditions, and who haven’t yet found a new job.

• Structural unemployment • refers to unemployment caused by the restructuring of firms.


Unemployment

• Cyclical unemployment • occurs because of a recession or a similar downturn in the business cycle.

• Seasonal unemployment• Occurs when demand varies during the year.


Canadian Unemployment


Inflation and the CPI

• Consumer Price Index (CPI) is the index economists use to measure the effects of inflation.

• Inflation refers to a general rise in the prices of goods and services over time.

• Disinflation describes a condition where price increases are slowing (i.e., the inflation rate is declining).

• Deflation means that prices are actually declining.


The Business CycleBusiness cycles (also known as economic cycles) are the periodic rises and falls that occur in economies over time.•An economic boom is just what it sounds like—business is booming.•Recession is two or more consecutive quarters of decline in the GDP.•A depression is a severe recession usually accompanied by deflation.


Forms of Business Ownership

Business Ownership

• One person owning and operating a business, without forming a corporation.

• In a sole proprietorship, the business and the owner are a single entity.

• As noted in Figure 6.1, almost 24% of all registered businesses in Canada fall under this form of ownership.

Sole Proprietorship

Business Ownership

Sole Proprietorship

• Ease of start/end

• Be your own boss

• Pride of ownership

• Leave legacy

• Retain profit

• No special taxes

• Fewer regulations

• Unlimited liability• Limited financial

resources• Difficulty in mgmt.• Time commitment• Few fringe benefits• Limited growth• Limited life span

AdvantagesAdvantages DisadvantagesDisadvantages

Business Ownership

LiabilityLiability is often just another word for debt, but it also has a wider and important meaning.

For a business, it includes the responsibility to pay all normal debts.

Business Ownership

Unlimited LiabilityWhen you work for others, it is theirproblem if the business is not profitable.When you own your own business, you andthe business are considered one. You have unlimited liability; that is, any debts or damages incurred by the business are your debts, and you must pay them.

When you have a sole proprietorship, you have unlimited liability.

Business Ownership

There are several main types of partnerships:

PartnershipPartnership

•General Partnership•Limited Partnership•General Partner•Limited Partner

Business Ownership


General PartnershipA partnership in which all owners share in operating the business and in assuming liability for the business’s debts.

Limited Partnershipa partnership with one or more general partners and one or more limited partners.

Business Ownership


General PartnerAn owner (partner) who has unlimited liability and is active in managing the firm.

Limited PartnerAn owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.

Business Ownership


• More financial resourcesMore financial resources

• Shared mgmt.Shared mgmt.

• Longer survivalLonger survival

• No special taxesNo special taxes

• Unlimited liabilityUnlimited liability

• Division of profitsDivision of profits

• Disagreements among Disagreements among partnerspartners

• Difficult to terminateDifficult to terminate


Business Ownership

New Forms of Partnerships

• Master Limited Partnership– traded publicly– taxed as a partnership

• Limited Liability Partnership

Business Ownership

Corporations

Although the word corporation makes people think of big businesses such as the Bank of Montreal or Irving Oil, it is not necessary to be big to incorporate (i.e., start a corporation).

• Obviously, many corporations are big; however, incorporating may also be beneficial for small businesses.

Business Ownership

CorporationCorporation

• More money for More money for investmentinvestment• Limited liabilityLimited liability• Separation of Separation of ownership/mgmt.ownership/mgmt.• Ease of ownership Ease of ownership changechange• Perpetual lifePerpetual life• SizeSize

• Initial costInitial cost• PaperworkPaperwork• Two tax returnsTwo tax returns• Termination difficultTermination difficult• Stockholder and board Stockholder and board conflictconflict•Double taxationDouble taxation


Business Ownership

Types of Corporations• Private: not traded on any stock exchange

– limited to 50 or fewer stockholders.

• Public: shares are traded on one or more stock exchanges

• Non-Profit: performs public service, has special tax considerations to encourage formation

Chapman’s Ice Cream isa private corporation,started in 1973 by Davidand Penny Chapman.

Business Ownership

Other Types of Corporations • Professional Corporations• Non-resident: has its head

office outside of Canada• Personal Services: for an

athlete or entertainer to take advantage of corporate tax rates

• Non-profit: universities, hospitals, charities, etc.

Business Ownership

Business Ownership

How Owners How Owners Affect Affect

ManagementManagement

Corporate Governance

Corporate governance refers to the process and policies that determine how an organization interacts with its stakeholders, both internal and external.

• Corporate governance is necessary because of the evolution of public ownership.

Business Ownership

Corporate GovernanceAs a result of corporate scandals, board members are under increasingscrutiny to ensure that they are effectively fulfilling their roles andresponsibilities to their stakeholders.

Be aware that those who serve on boards (both for-profit and non-profit) may be held personally liable for the misconduct of the organization.

Business Ownership

Business Regulations

• Companies that wish to operate in Canada must follow federal and provincial business laws and regulations.

• Among other things, this applies to registration and to reporting and information.

Business Ownership

Business Regulations

Articles of incorporation• A legal authorization from the federal or

provincial/territorial government for a company to use the corporate format.

Business Ownership

Corporate Expansion: Mergers and Acquisitions

• What’s the difference between mergers and acquisitions?

• A merger is the result of two firms forming one company.

• An acquisition is one company’s purchase of the property and obligations of another company.

Business Ownership

Why Mergers Don’t Work

• Companies overpay to acquire another firm• Acquiring company overestimates cost

savings and synergies• After merger, managers disagree about

integrating operations• After merger, cost cutting obsession hurts

business, costing top employees and customers

Business Ownership

Leveraged Buyout

A leveraged buyout (LBO) is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing. The funds borrowed are used to buy out the stockholders in the company.

Business Ownership

Franchises

Some people are not comfortable starting their own business from scratch. They would rather join a business with a proven track record through a franchise agreement.

A franchise agreement is an arrangement whereby someone with a good idea for a business (the franchisor) sells the rights to use the business name and to sell a good or service (the franchise) to others (the franchisee) in a given territory.

Business Ownership

Franchises

+Management and marketing assistance

+Personal ownership

+Recognized name

+Financial advice & assistance

+Lower failure rate

- High start-up costs

- Shared profit

- Management regulation

- Coattail effects

- Restrictions on selling

- Fraudulent franchisors


Business Ownership

Franchise ContractFranchisor, IncFranchisor, Inc..

FranchiseeFranchisee

Branded Branded Product/ServiceProduct/Service

PerformancePerformance

MonitoringMonitoring

$$$$$$$$$$

Business Ownership

Franchisor

Assigns territory

May provide financial aid/advice

Offers merchandise/ supplies at competitive prices

Provides training/support

Business expansion using

OPM

Business Ownership

FranchiseePays upfront costsMakes monthly payment to franchisorRuns business by franchisor’s

rules/proceduresBuys materials from franchisor/approved

supplier

Business Ownership

Franchising & E-Commerce

• Technology: faster customer service

• Access to international markets

Business Ownership

Co-operatives

• Owned by the members• Pay no income taxes• Profits are shared amongst

the members• Co-workers, farmers,

fishermen, consumers, etc. band together to form “co-ops”

Mountain Equipment Co-op is Canada’s largestretailer co-operative.

Business Ownership

• Analyzing the External Environment• Begin Marketing

Next Week


mgm101 sep 14-11 (1)

Documents

mgm101 introduction

organization s goals

purpose of organization

organization s operations

organizational resources

conditions of environment

organizational goals

economic environment