MANAGING THE BUSINESS ENTERPRISE CHAPTER 5 Department of Business AdministrationEastern Mediterranean UniversityGaziMağusa, TRNC This slide set is prepared for use with Ebert and Griffin, Business Essentials. Fifth Edition. Prentice Hall, New Jersey. 2005.
TOPICS SUMMARY • Setting Goals and Formulating Strategy • The Management Process • Types of Managers • Basic Management Skills • Management and the Corporate Culture
INTRODUCTION Principles of management apply to all kinds of organizations -- private or public; profit or not-for-profit; service producing or goods producing. Managers work in all kinds of organizations at all levels. Regardless of the size or nature of an organization, managers are among its most important assets. In this chapter, the management process is described and the skills that are required by managers are discussed.
SETTING GOALS AND FORMULATING STRATEGY • Every business needs goals • Every manager has to start by setting goals. Goal : objective that a business hopes and plans to achieve in the future (hedef; amaç) • Managers must set goals and then carry out actions (eylemler) in order to achieve those goals
STRATEGY Strategy: The broad set of organizational plans for achieving organizational goals Types of strategy: • Corporate Strategy • Business Strategy • Functional Strategy • let’s see each one.. Taken from publisher’s slide set for Ch.6 of textbook.
STRATEGY 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. (şirket/kurum stratejisi) • Business (or competitive) strategy - strategy at the business-unit or product-line level, focusing on a firm’s competitive position (rekabet stratejisi) • Functional strategy - strategy by which managers in specific areas/departments decide how best to achieve corporate goals by being as productive (üretken) as possible (fonksiyonel strateji)
SETTING GOALS AND FORMULATING STRATEGY • A goal is an objective that a business hopes and plans to achieve.
SETTING BUSINESS GOALS • Goals are also used as performance targets; they are used as a measure of organizational success or failure. • An organization commits its resources on all levels to achieve its goals. When you set personal goals (such as attending a university to get an education), don’t you commit your resources to achieve those goals?
SETTING BUSINESS GOALS • Purposes of Goal Setting in organizations: • Goal setting provides direction (yön) and guidance (yolgösterici) for managers at all levels. • Goal setting helps firms allocate resources. • Goal setting helps to define corporate culture (kurumsalkültür) • Goal setting helps managers assess (değerlendirme, ölçme) performance.
SETTING BUSINESS GOALS • Goals depend upon the company’s purpose or mission. • Mission: overall purpose of an organization (misyon; varoluşnedeni). The mission of an organization defines its reason for existence. It asks the question “Why are we in business?”
SETTING BUSINESS GOALS The mission also includes • a definition of products and services the organization provides, • technologies used, • types of markets, important customer needs, and distinctive competencies - those characteristics or areas of expertise that sets the firm apart from others. • Mission Statement:organization’s statement of how it will achieve its purpose in the environment in which it conducts its business (Misyonun Yazılı Olarak Açıklanması)
SOME EXAMPLES OF MISSION STATEMENTS • Eastern Mediterranean University, as an institution of higher learning, is dedicated to the dissemination (yayma) of knowledge through high-quality teaching; to promoting the discovery of knowledge through scholarly research; and to the application of knowledge for the good of humanity. CLICK THE IMAGE
SETTING BUSINESS GOALS • Top management prepares and circulates mission statements. • Consider the mission statements of two companies making the same product -- watches. • Timex -- sells low cost reliable watches in department stores • Rolex -- sells high quality, high priced watches at selected jewellery stores • As a result, these two companies have very different missions.
SETTING BUSINESS GOALS • Kinds of goals Regardless of a company’s purpose and mission, every firm has three kinds of goals: • Long-term goals (uzun vadeli amaçlar) • Intermediate goals (orta vadeli amaçlar) • Short term goals (kısa vadeli amaçlar) Let us discuss each one briefly....
SETTING BUSINESS GOALS 1. Long-term goals • typically five years or more • changes from industry to industry in the computer industry “long term” might be 2 years; in the steel industry “long term” may mean 15 years • Examples: • increase market share from 20 % to 45 % in 6 years • become a world leader in communications technology in 10 years
SETTING BUSINESS GOALS 2. Intermediate goals • usually are set for a period of onetofive years • companies set intermediate goals in several functional areas such as marketing, production, finance, human resources, and R & D (research and development) • Examples: • increase sales by 5 % in two years (marketing) • reduce production cost by 10 % in one year (production) • an increase in return-on-investment (yatırımgetirisi) of 5 % in 4 years (finance)
SETTING BUSINESS GOALS 3. Short-term goals • these goals are set for lessthanone year • determined for several functional areas such as marketing, production, finance, human resources, and R & D (research and development) • same examples as in intermediate term but for a period of one year or less
FORMULATING STRATEGY • What is a strategy? It is a broad program that describes what the organization wants to do in order to achieve long term goals. • Strategy Formulation: Creation of a broad program for defining and meeting an organization’s goals.
FORMULATING STRATEGY • Strategy formulation involves three basic steps: • Setting strategic goals • Analyzing the organization and its environment • Matching the organization and its environment NOTE: In the past, strategy formulation was done exclusively by top management; today lower level managers and employees also participate in this process
Match the Organization and its Environment Strategy Formulation Analyze the Organization Formulate Strategy Set Strategic Goals Analyze the Environment Figure taken from publisher’s slide set for Ch.6 of textbook. A Well-Formulated Strategy Is Vital to a Business’s Success
FORMULATING STRATEGY Let us discuss each one briefly: 1. Setting strategic goals: Strategic goals: long-term goals derived (obtained) from an organization’s mission statement. These are goals focusing on broad organizational issues and apply to the whole company; set by top management • areas ---› market standing, innovation, human resources, financial resources, physical resources, productivity, social responsibility, and profit
FORMULATING STRATEGY 2. Analyzing the organization and its environment (Environmental Analysis) (çevre analizi) Environmentalanalysis is the process of scanning (taramak) the business environment for threats (tehditler) and opportunities (fırsatlar) • Opportunities -- new markets, new technology, new inventions (such as the SONY transistor radio story), new more favorable government regulations, etc. • Threats -- new competitors (Napster vs. record companies), new and unfavorable government regulations, changing consumer tastes and preferences, and many more.
FORMULATING STRATEGY Analyzing the Organization (also called Organizational Analysis) Managers must also examine internal (inside the organization) factors. This is the process of analyzing a company’s strengths and weaknesses (şirketin güçlü ve zayıf yönleri) Some examples of strengths: • strong financial position • a well-trained and dedicated workforce (iş gücü) • managerial talent (able managers) and technical expertise • little or no competition
FORMULATING STRATEGY Some examples of weaknesses: • poor financial position • poor workforce • not enough managerial talent • lack of technical expertise • outdated technology (eskiteknoloji) • strong competitors • shrinking (decreasing) market share
FORMULATING STRATEGY 3. Matching the Organization and Its Environment This is the final step in strategy formulation. It is the heart of strategy formulation. Environmental Threats Organizational Strengths Environmental Opportunities Organizational Weaknesses
A POPULAR TECHNIQUE FORSTRATEGY FORMULATION • SWOT ANALYSIS STRENGTHS WEAKNESSES OPPORTUNITIES THREATS NOT IN THE TEXTBOOK
FORMULATING STRATEGY • Matching companies with their environments is necessary for successful strategy formulation and then planning and conducting the business. • Matching of company strengths and weaknesses with the opportunities and threats of the environment also determines whether the firm typically takes risks or behaves more conservatively.
FORMULATING STRATEGY • A Hierarchy of Plans (Levels of Plans) • Actions are needed to achieve organizational goals. These actions must be planned in order to achieve goals. Each level of goals has a corresponding level of plans. • Plans can be viewed on three levels: • Strategic plans (uzun vadeli stratejik planlar) • Tactical plans (orta vadeli taktik planlar) • Operational plans (kısa vadeli işletme planları) Let us see what these plans are....
FORMULATING STRATEGY • StrategicPlans -- plans that include decisions about resource allocations, company priorities, and steps needed to meet strategic goals. Determined by board of directors and top management. • TacticalPlans -- “shorter range” plans that are concerned with implementing the strategic plan in the intermediate term. Usually prepared by upper and middle management. • OperationalPlans -- plans which set short-term targets for daily, weekly, or monthly performance
FORMULATING STRATEGY • Contingency Planning and Crisis Management • contingency plannig : identifying aspects of a business or its environment that might entail (require) changes in strategy • a protection against unexpected changes that might take place • it is planning for change
FORMULATING STRATEGY • Crisis Management • organization’s methods for dealing with emergencies (kriz yönetimi) • “love-bug” computer virus • earthquakes (countries) • any unexpected event that might cause big problems if not dealt with effectively
THE MANAGEMENT PROCESS • What is management? It is the process of planning, organizing, directing, and controlling an organization’s • financial • physical • human • information resources in order to achieve its goals.
THE MANAGEMENT PROCESS • Managers in all organizations perform the same set of functions: 1. Planning 2. Organizing 3. Directing (now called Leading) 4. Controlling Each one is discussed in the following slides...
THE MANAGEMENT PROCESS • Planning is done in order to determine what an organization needs to do and how best to get it done (planlama) • establishing objectives and goals for the organization and determining the best ways for achieving them • all other functions depend on planning Goals Strategy Tactical & Oper. Plans
THE MANAGEMENT PROCESS • Organizing is the process of determining how best to arrange an organization’s resources and activities into a coherent structure (örgütleme) • Directing is the process of guiding and motivating employees to meet the organization’s goals and objectives. Today the term “leading” (liderlik) is more common.
THE MANAGEMENT PROCESS • Controlling is the process of monitoring (izlemek) an organization’s performance at all levels to ensure that it is meeting its goals and objectives. (denetleme) • costs • quality of product or service • productivity • market performance • cash position are just a few areas for control.
THE MANAGEMENT PROCESS THE CONTROL PROCESS Establish Standards(goals) Measure Performance NO YES Performance = Standards? Continue Take Action
TYPES OF MANAGERS • All managers plan, organize, direct, and control. • But not all managers have the same degree of responsibility for these activities. • Thus we will classify managers according to levels and areas of responsibility.
TYPES OF MANAGERS • Levels of Management • The three basic levels of management are top, middle, and first-line. • Top Managers -- those who are responsible to the board of directors and stockholders for a firm’s overall performance and effectiveness. (üstyönetim) • president, vice president, treasurer, chief executive officer (CEO), chief financial officer (CFO)
TYPES OF MANAGERS • MiddleManagers -- managers responsible for implementing (uygulamak) the strategies, policies, and decisions made by top managers (orta düzey yönetim) • plant manager (fabrika müdürü), operations manager (işletme müdürü), division manager
TYPES OF MANAGERS • First-Line Managers -- managers responsible for supervising the work of employees (alt düzey yönetim) • supervisor (şef), office manager, group leader, project manager (proje yöneticisi), site manager (şantiye müdürü veya şefi)
TYPES OF MANAGERS • Areas of Management Top, middle, and first-line managers work in a variety of areas. These are the following: • Human Resource Managers (İnsan Kaynakları Yöneticileri) • recruit, hire and train employees; evaluate performance; determine compensation (ödeme) • One department or several departments may be present in companies
TYPES OF MANAGERS • Operations Managers (Üretim veya İşletme Yöneticileri) Operations (işlemler; işletme) are systems by which a firm produces goods and services • production (üretim); inventory (stok); quality control (kalitekontrolu); transportation (ulaştırma) • vice-president for operations (top); plant managers (middle); production supervisors (first-line)
TYPES OF MANAGERS • Marketing Managers (PazarlamaYöneticileri) Marketing is the development, pricing, promotion, and distribution of goods and services. Marketing managers are responsible for getting products from producers to consumers. • vice president for marketing (pazarlamadan sorumlu genel müdür yardımcısı); regional marketing managers (pazarlama bölge müdürü), district sales managers (semtsatış müdürü) in large cities
TYPES OF MANAGERS • InformationManagers (Bilgi Sistemleri Yöneticileri) Information managers design, and implement systems to gather, organize, and distribute information. This is a new type of manager because of the huge increase in all kinds of information and the need for it to be managed effectively. • chief information officer (bilgisistemlerimüdürü)
TYPES OF MANAGERS • FinancialManagers (FinansalYöneticiler) Financial managers are responsible for planning and supervising accounting functions and financial resources. • chief financial officer; vice president for finance; division controller; accounting supervisor • Other Managers • public relations managers; research & development managers; legal affairs managers; etc.
BASIC MANAGEMENT SKILLS Managementskills (yönetsel beceriler) Irrespective of the type or size of the organization, managers employ (use) five basic kinds of skills: 1. Technical skills 2. Human relations skills 3. Conceptual skills 4. Decision-making skills 5. Time-management skills
BASIC MANAGEMENT SKILLS • Technical Skills (teknikbeceriler) • Skills needed to perform specialized tasks; ability and knowledge to perform the mechanics of a particular job • operate a drill press (matkap); operate a commercial laundry machine; prepare a balance sheet; use Excel to prepare an income statement; use MINITAB to perform statistical analysis, fill out an order form correctly, etc.) • developed through education, training and experience • especially important for first-line supervisors
BASIC MANAGEMENT SKILLS • Human Relations Skills (İnsanilişkileribecerileri) • skills required to understand other people and to interact effectively (to get along) with them; get people to work effectively as a team. (to inspire trust in people and encourage them to try new things and to offer new ideas) • important at all levels of management; especially for middle managers, who must act as bridges between top managers, first-line managers and managers from other areas of the organization.
BASIC MANAGEMENT SKILLS • ConceptualSkills (kavramsalbeceriler) • abilities to think in the abstract (soyut), diagnose and analyze different situations, and see beyond the present situation; “ability to see the whole picture” • conceptual abilities help managers to recognize (see) new market opportunities and threats. They help them analyze the probable outcomes (olasısonuçlar) of their decisions • most important for top managers; least for first-line supervisors