Chapter 5

1. Chapter 5 Business Management Prepared By Mostafa Kamel

2. Learning Objectives • Describe the nature of management and identify the four basic functions that constitute the management process. • Identify different types of managers likely to be found in an organization by level and area. • Describe the basic skills required of managers. • Explain the importance of strategic management and effective goal setting in organizational success. • Discuss contingency planning and crisis management in today’s business world. • Describe the development and explain the importance of corporate culture. Prepared By Mostafa Kamel

3. Chapter Outline • The Management Process • Planning • Organizing • Leading • Controlling • Types Of Managers • Levels of Management • Areas of Management  • Basic Management Skills • Technical Skills • Human Relations Skills • Conceptual Skills • Decision-Making Skills • Time Management Skills • Management Skills for the 21st Century • Strategic Management: Setting Goals and Formulating Strategy • Setting Business Goals • Types of Strategy • Formulating Strategy • A Hierarchy of Plans • Contingency Planning and Crisis Management • Contingency Planning • Crisis Management • Management and the Corporate Culture • Communicating the Culture and Managing Change Prepared By Mostafa Kamel

4. The Management Process All corporations depend on effective management; the principles of management apply to all kinds of organizations Prepared By Mostafa Kamel

5. The Management Process Management: is the process of planning, organizing, leading, and controlling an organization’s resources to achieve its goals. Management Functions includes: Planning • Determining what the organization needs to do and how best to get it done requires planning. • Planning has three main components: • It begins with determining the firm’s goals. • followed by develop­ment of a comprehensive strategy for achieving those goals. • Then, designing tactical and operational plans for implementing the strategy. Organizing • Organizing:involves the arranging of a firm’s people and resources into a coherent structure. • Organization charts help everyone understand roles and reporting relationships, key parts of the organizing function.   • Organizational Charts could range from simple one to too complex structures that can’t be simply drawn. Leading • Leading involves more than simply give orders and demand results. • Leading: is a management process of guidingand motivatingemployees to meet the firm’s objectives. Prepared By Mostafa Kamel

6. Controlling • Controlling:is the process of monitoring a firm’s performance to make sure that it is meeting its goals. • Managers pay close attention to aspects such as costsand performance. • Numerous performance indicators are being used according to the manager’s work • Example Indicators might be (Baggage handling errors, Number of empty seats, Food quality, etc.) The Control process… As shown in the diagram, the control process incudes: • Establishing standards. • Measuring actual performance against standards. • If the standards are met, then the organizations continues along its present course • If there is a deviation from standards, then an adjustment procedure Is needed whether in standards or the performance. Prepared By Mostafa Kamel

7. Types of Managers Although all managers plan, organize, lead, and control, not all managers have the same degree of responsibility. It is helpful to classify managers according to levels and areas of responsibility Prepared By Mostafa Kamel

8. Levels of Management • The three basic levels of management are shown the below table: • Power of managers and complexity of their duties increase as they move up the ladder. • The number of first line managers is larger than middle managers. • The number of middle managers excess the number of top managers. Prepared By Mostafa Kamel

9. Areas of Management The all preceding three levels of managers can work in a variety of areas. Areas of management includes: • Human Resource Managers.These managers hire and train employees, evaluate performance, and determine compensation. • 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. • Marketing Managers.These managers are responsible for the development, pricing, promotion, and distribution of goods and services. • Information Managers. These managers design and implement systems to gather, organize, and distribute information. • Financial Managers. These managers are responsible for the firm’s accounting functions and financial resources. - Other areas of management could include research and development managers, or public relations manager - Areas of management are limited only by the needs of the organizations. Prepared By Mostafa Kamel

10. Basic Management Skills The previous areas of management are mostly correspond to the types of basic management skills Prepared By Mostafa Kamel

11. Basic Management Skills • The success of people hold the managerial positions is a function of their skills and abilities. • Effective Managers must develop the following set of basic skills: • Technical Skills • Human Relations Skills • Conceptual Skills • Decision-making Skills • Time Management Skills. Prepared By Mostafa Kamel

12. Technical Skills • Are the skills needed to perform specialized tasks • Examples could be ( Programmer’s ability to write a program, accountant ability to audit a company’s record). • Technical skills developed through education and experience. • Important for first line managers. Human Relations Skills • Skills that enable managers to understand and get along with other people. • Most important for middle managers since they much often act as bridges between top managers, first-line managers, and managers from other areas. Prepared By Mostafa Kamel

13. Conceptual Skills • Refers to a person’s ability to think in the abstract, to diagnose and analyze different situations, and to see beyond the present situation. • It helps managers recognize new market opportunities and threats. • It also helps managers analyze the probable outcomes of their decision. • Top managers depends most on conceptual skills, while first-line managers least. Decision-Making Skills. • Include the ability to define problems and to select the best course of action • It involves gathering facts, identifying solutions, evaluation alternatives, and implementing the chosen alternative. Prepared By Mostafa Kamel

14. 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 wasted time. • Paper Work • Telephone Calls • Meetings • E-mail Prepared By Mostafa Kamel

15. Management Skills for the 21st Century • “Global Management” Skills • Tomorrow’s Managers will need to understand: • Foreign markets. • Cultural differences. • The motives and practices of foreign rivals. • International Operations. • Management and Technology Skills Prepared By Mostafa Kamel

16. Strategic Management:Setting Goals and FormulatingStrategy Prepared By Mostafa Kamel

17. Strategic Management (SM) • (SM) Is the process of helping an organization maintain an effective alignment with its environment. • The starting point in effective strategic management is setting goals • Managers make decisions about what actions will and will not achieve company “goals“ • These Decisionscannot be made on a problem-by-problem basis • The broad program underlies those decisions is called a strategy • Strategy is a broad set of organizational plansfor implementing the decisions made for achieving organizational goals. Prepared By Mostafa Kamel

18. Setting Business Goals • Goals are performance targets. • Goals the means by which organizations and their managers measure success or failure at every level. Prepared By Mostafa Kamel

19. Purposes of Goal Setting 1- Provides direction and guidance for managers at all levels 2- Helps firms allocate resources 3- Helps to define corporate culture. 4 Helps managers assess performance Prepared By Mostafa Kamel

20. Kinds of Goals • Within the goals context, you MUST KNOW: • Every enterprise has a purpose, or a reason for being. • Businessesseek profits, • Universities seek to discover and transmit new knowledge, • Government agencies seek to set and enforce public policy. • Mission statements—statements of how they will achieve their purposesin the environments in which they conduct their businesses. SABIC Mission: Our mission is to responsibly provide quality products and services through innovation, learning and operational excellence while sustaining maximum value for our stake holder. Prepared By Mostafa Kamel

21. Kinds of Goals 1- Long-term goals: Relate to extended periods of time, typically 5 years or more. (increasing market share of the by 10 % in the next 8 years) 2- Intermediate goals: Are set for a period of (1-5) years. Companies usually set intermediate goals in several areas. (Human resources might seek to cut turnover by 10 % in two years) 3- Short-term goals: Are set for perhaps one year and are developed for several different areas. (Increasing sales by 2 percent this year) Prepared By Mostafa Kamel

22. After a firm has set its goals, it then focuses attention on strategies to accomplish them. Prepared By Mostafa Kamel

23. Types of Strategy There are three types of strategy that are usually considered by a company: • Corporate Strategy • Business (or competitive) strategy. • Functional Strategy Prepared By Mostafa Kamel

24. A. Corporate Strategy • The purpose of corporate strategyis to determine what business or businesses a company will own and operate. • According to corporate strategy, a company may decide to growby increasing its activities or investment or to retrenchby reducing them. • The company also may decide to Diversify : That is to operate multiple businesses in compatible industries as part of its corporate strategy. • Related Diversification . YUM! operates (KFC, Pizza Hut, and Taco Bell) • Unrelated Diversification. Samsung, which owns electronics, also operates in construction, chemicals, and catering industries. Prepared By Mostafa Kamel

25. B. Business (or competitive) Strategy • When a corporation owns and operates multiple businesses, it must develop strategies for each one. • Business (or competitive) strategy,takes place at the level of the business unit or product line and focuses on improving the company’s competitive position. Prepared By Mostafa Kamel

26. C. Functional Strategy • At the level of functional strategy, managers in specific areas such as Marketing, Finance, and Operations decide how best to achieve corporate goals by performing their functional activities most effectively. Prepared By Mostafa Kamel

27. Formulating Strategy • A well-formulated strategy is so vital to a business’s success. • Most top managers devote substantial attention and creativity to this process of strategy formulation. • Strategy formulation involves the three basic steps summarized in this Figure Prepared By Mostafa Kamel

28. Steps of Strategy Formulation Strategy formulation involves the three basic steps: Prepared By Mostafa Kamel

29. Step 1: Setting Strategic Goals • Strategic goals are derived directly from a firm’s mission statementas discussed earlier. Prepared By Mostafa Kamel

30. Step 2: Analyzing the Organization and the Environment After strategic goals have been established, managers usually attempt to assess both their organization and its environment. • SWOT is a common framework for this assessment. • This process involves assessing organizational Strengths and Weaknesses and environmental Opportunities and Threats. • In formulating strategy, managers 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. Prepared By Mostafa Kamel

31. Step 3: Matching the Organization and Its Environment • The final step in strategy formulation is matching environmental Threats and Opportunities against corporate Strengths and Weaknesses. • This matching process involves: • Afirm should attempt to increase its Strengths so as to capitalize on opportunities and counteract threats. • A firm should attempt to shield its weaknesses, or at least not allow them to derail other activities. Prepared By Mostafa Kamel

32. A Hierarchy of Plans • The final step in formulating strategy is translating the strategy into more operational language. • This process generally involves the creation of actual plans. • Planscan be viewed on three levels: • Strategic • Reflect decisions about resource allocations, company priorities, and the steps needed to meet strategic goals. • They are usually created by the firm’s top management team • Tactical • After a strategic plan has been created, managers then develop shorter-term plans to guide decisions so they are consistent with the strategic plan. • They typically involve upper and middle management • Operational • Which are developed by mid-level and lower-level managers, • Set short-term targets for daily, weekly, or monthly performance Prepared By Mostafa Kamel

33. Contingency Planning and Crisis Management Prepared By Mostafa Kamel

34. The Need for Contingency Planning and Crises Management • Because business environments are often difficult to predict and because the unexpected can create major problems, most managers recognize that even the best plans sometimes simply do not work out. • Two common methods of dealing with the unknown and unforeseen are • contingency planning. • crisis management. Prepared By Mostafa Kamel

35. a. Contingency Planning • Contingency planning seeks to identify in advance important aspects of a business or its market that might change. • It also identifies the ways in which a company will respond to these changes. Prepared By Mostafa Kamel

36. b. Crisis Management • A crisis: is an unexpected emergency requiring immediate response. • Crisis Management: involves an organization’s methods for dealing with emergencies. • Seeing the consequences of poor crisis management after the terrorist attacks of September 11, 2001, and the hurricanes that hit the Gulf Coast in 2005, many firms today are working to create new and better crisis management plans and procedures. Prepared By Mostafa Kamel

37. Management and the Corporate Culture Prepared By Mostafa Kamel

38. Corporate Culture • Just as every individual has a unique personality, every company has a unique identity. • Acorporate culture: the shared experiences, stories, beliefs, and norms that characterize an organization. • This culture helps define the work and business climate that exists in an organization. • A strong corporate culture serves several purposes. • it directs employees’ efforts and helps everyone work toward the same goals. • corporate culture helps newcomers learn accepted behaviors • Some cultures, for example, stress financial success to the extreme, whereas others focus more on quality of life. Prepared By Mostafa Kamel

39. Sources of Corporate Culture • Emanates from the days of the founder. • Forged over a long period of time by a constant and focused business strategy. Google has a sort of “work hard, play hard” culture stemming from its constant emphasis on innovation and growth coupled with Lavish benefits and high pay. Prepared By Mostafa Kamel

40. Communicating the Culture • 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. • To effectively communicate the corporate culture: • Managers themselves must have a clear understanding of the culture. • Managers must transmit the culture to others in the organization. How? • Managers can maintain the culture by rewarding and promoting those who understand it and work toward maintaining it. Prepared By Mostafa Kamel