041_MANAJEMEN_Meija_495

The Boston Consulting Group’s

Growth Share Matrix

Relative Market Share

Earnings: high stable, Earnings: low, unstable,
growing growing

Cash Flow: neutral Cash Flow: negative

Strategy: invest for growth Strategy: analyze to determine
whether business can be grown
Annual Real STAR into a star, or will degenerate
into a dog
Rate of Market
Growth ?

Earnings: high, stable Earnings: low, unstable
Cash Flow: high stable Cash Flow: neutral or
Strategy: milk negative
COW Strategy: divest
DOG
McGraw-Hill
© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Diversification Strategy

Type of Diversification Process of Diversification
 Acquisition and
 Concentration strategy
restructuring strategies
 Vertical integration  Acquisition
strategy  Merger
 International strategy
 Concentric
diversification strategy

 Conglomerate
diversification

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Business-Level Strategy

 Deals with how to compete in each business area
or market segment.

 Firms have two basic choices:

 Cost leadership strategy
 Differentiation strategy

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Strategy Implementation

Corporate Organizational
Entrepreneurship Structure and

and Innovation Controls

Strategic Cooperative
Leadership Strategies

Human
Resource
Strategies

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Strategic Outcomes

 Company leaders should periodically assess
whether the outcomes meet expectations.

 A firm must first and foremost cater to the desires
of its primary stakeholders.

 The firm should also consider the desires of other
stakeholders affected by its performance.

 Some of the standard measures of strategic success
includes:

 Profits

 Growth of sales/market share

 Growth of corporate assets

 Reduced competitive threats

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McGraw-Hill

Applications: Management Is Everyone’s
Business—For the Manager

 An effective manager must be proactive in responding
to evolving challenges and opportunities rather than
being overtaken by events.

 Learning to think strategically forces managers to:

 Be alert for changes in the external and internal environments.
 Modify the firm’s strategic intent, mission, and formulated strategy when

necessary.
 Effectively implement the new or redesigned strategies.

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Applications: Management Is Everyone’s
Business—For Managing Teams

 The strategic management process generally
involves teams of managers and employees from
different areas who bring their perspectives and
expertise to bear on issues facing the firm.

 A key factor is how well the firm can mobilize and
integrate the efforts of team members.

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Applications: Management Is Everyone’s
Business—For Individuals

 Individual employees are more likely to make
greater contributions to the firm if they engage in
activities that have strategic value.

 Employees can be attuned to changes in their area
of expertise and advise management on the
strategic implications of those changes.

 Employee success depends on the ability to adapt
to the firm’s strategic change.

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Chapter

8

Entrepreneurship

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Learning Objectives

After reading this chapter, you should be able to:

Distinguish between an entrepreneurship and a
small business.

Develop negotiation, networking, and leadership
skills that can help you as an entrepreneur.

Recognize why some entrepreneurships fail.

Analyze the advantages and disadvantages of the
legal forms of enterprises.

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Learning Objectives(continued)

Learn how capital is raised through debt and
equity financing and recognize the merits of each
approach.

Evaluate alternative forms of entrepreneurship,
such as franchising, spin-offs, and
intrapreneurships.

Recognize and evaluate entrepreneurship as a
career path and a source of innovation and new job
opportunities.

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Introduction

Creating a new enterprise is one of
the greatest management
challenges.

Entrepreneurs have built
successful companies by being able
to exploit unmet needs in the
market.

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What is Entrepreneurship?

The process of creating a
business enterprise capable of
entering new or established
markets.

It involves deploying resources
and people in a unique way to
develop a new organization.

An entrepreneur is an
individual who creates an
enterprise that becomes a new
entry to a market.

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Entrepreneurship Myths

Myth 1: Entrepreneurs are born, not made.

Myth 2: It is necessary to have access to money to
become an entrepreneur.

Myth 3: An entrepreneur takes a large or irrational
risk in starting a business.

Myth 4: Most successful entrepreneurs start with a
break-through invention.

Myth 5: Entrepreneurs become successful on their
first venture.

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Entrepreneurial Venture versus
Small Business Management

Small Business Entrepreneurship

 Independently owned and  Growth is one of the most
operated important goals

 Small in size  The goal is to become a
medium-sized firm of 100-
 Does not dominate its 499 employees; or
markets
 A large firm with 500 or
 Has less than 100 more employees.
employees

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The Importance of Entrepreneurship

 Job Creation

 Entrepreneurship accounts for most new jobs in
the U.S. economy.

 Innovation

 Entrepreneurships are responsible for
introducing a major proportion of new and
innovative products and services into market.

Opportunities for Diverse People

 People of diverse background can improve their
economic status by becoming entrepreneurs.

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Key Characteristics of Entrepreneurs

High need for achievement
Internal locus of control
Willingness to take risks
 Self-confidence

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Entrepreneurial Skills

Negotiation skills

 Ability to obtain resources that are
controlled by other individuals.

Networking skills

 Gather information and build alliances

 Personal network
 Business network

Leadership skills

 Provide a shared vision

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Starting and Managing an
Entrepreneurship

New Ideas come from:

newspapers, magazines, and trade journals
inventions or discoveries
trade shows and exhibitions
 hobbies
 family members
business school classes

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Why Entrepreneurships Fail

 Lack of capital
Poor knowledge of the market
Faulty product design
Human resource problems
Poor understanding of the

competition

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Business Plan

Once an entrepreneur conceives a
good idea for a new venture, next
critical step is to prepare a business
plan.

It is a blueprint that maps out the
business strategy for entering markets.

It explains the business to potential
investors.

It develops strategies and tactics to
minimize risk of failure.

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Key Components of the
Business Plan

 Description of the product or service
 Analysis of market trends and potential competitors
 Estimate for pricing the product or service
 Estimate for the time it will take to generate profits
 Plan for manufacturing the product
 Plan for growth and expansion of the business
 Sources of funding
 Plan for obtaining financing
 Organizational and management plan

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Legal Forms of Entrepreneurship

 Proprietorship – business owned by an individual

 Partnership – association of two or more

persons acting as co-owners of a business

 Corporation – legal entity separate from the

individuals who own it

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Proprietorship

Advantages Disadvantages
 Easy to create Unlimited liability
Owner keeps all profits Harder to obtain credit
 Owner makes all
and capital
decisions

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Partnership

Advantages Disadvantages

 Ease of formation  Unlimited liability for firm’s
 Direct share of profits debt

 Division of labor and  Limited continuity of life of
management responsibility enterprise

 More capital available than in  Difficulty in obtaining capital
a sole proprietorship
 Partners share responsibility
 Less governmental control for other partners’ actions.
and regulation

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Corporation

Advantages Disadvantages

 Owners’ liability for the  Extensive government
firm’s debt limited to their regulation of activities
investment
 High corporation fees
 Ease of raising large amounts
of capital  Corporate capital, profits,
dividends, and salaries
 Ease of transfer of ownership double-taxed
through sale of stock
 Activities limited to those
 Life of enterprise distinct stated in charter.
from owners

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Sources of Financial Resources

Debt Financing – obtaining a

commercial loan setting up a plan to repay
the principal and interest

Equity Financing – raising money by

selling part ownership of the business to
investors

 Private investors
 Venture capitalists
 Public offerings of stock

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Managing Growth

Entrepreneurs need to manage business
growth by establishing benchmarks based
on:

 Market data
 A thorough analysis of the firm’s ability to handle

increased demand without sacrificing quality

The business plan is a way for planning
growth targets and managing to them.

Too much growth can strain operations.

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Problems of Growing Too Quickly

Cash flow crisis as a result of spending most
available cash on expansion and not meeting
obligations to creditors.

Employees are likely to experience stress from
rapid changes and growth.

Accounting and information systems are not
adequate for the larger business.

Growing so quickly that control is lost

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McGraw-Hill Alternative Forms of
Entrepreneurship

Intrapreneurship

Spin-Offs

Franchises

© 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Innovation

Exploring and developing
new technologies and new
ways of doing things

Vital for the future viability
of an organization

Innovation is a key to long-
term success

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Innovation: Five C’s

Capability
Culture
Cash and Recognition
Customer Orientation
Cut Losses

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Applications: Management is Everyone’s
Business—For the Manager

As an entrepreneurship grows, the owner must
learn how to manage a growing and increasingly
complex enterprise.

A key success factor is the entrepreneur’s ability to
delegate responsibilities and duties to others.

As the firm grows, the entrepreneur must
incorporate the role of manager.

 Being more systematic in dealing with business issues.

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Applications: Management is Everyone’s
Business—For Managing Teams

Many entrepreneurships are started by founding
teams of two or more people.

Teams can bring more ideas, creativity, and
competencies to a new venture.

Entrepreneurs in teams must learn how to share
power and authority with partners and develop
ways to settle conflicts.

 Advisory board can provide counsel.

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Applications: Management is Everyone’s
Business—For Individuals

Entrepreneurs must temper overconfidence.
Overconfidence occurs when decision makers have

overly optimistic assessments and fail to examine
all available information.

 Advisory board can provide perspective.

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Chapter

9

Managing the Structure and
Design of Organizations

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

After reading this chapter, you should be able to:

 Identify the vertical and horizontal dimensions of organization
structure.

 Develop coordination across departments and hierarchical levels.

 Differentiate between authority, responsibility, and
accountability.

 Recognize when structural characteristics of centralization, span
of control, formalization, and chain of command should be used.

 Apply the three basic approaches – functional, divisional, and
matrix – to departmentalization.

 Use organization structure and the three basic organization
designs – mechanistic, organic, and boundaryless – to achieve
strategic goals.

 Anticipate key strategic events likely to trigger a change in the
structure and design of an organization.

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Organizing

The deployment of resources to achieve strategic
goals. It is reflected in:

 The organization’s division of labor that forms jobs and
departments.

 Formal lines of authority.
 The mechanisms used for coordinating diverse jobs and roles

in the organization.

Strategy indicates what needs to be done.
Organizing shows how to do it.

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Organization Structure

Formal system of relationships that determine:

 Lines of authority – who reports to whom.
 Tasks assigned to individuals and units – who does what

tasks and with which department.

Dimensions of organization structure:

 Vertical dimension
 Horizontal dimension

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The Vertical Dimension of
Organization Structure

 Unity of Command – a
subordinate should have only
one direct supervisor.

 A decision can be traced back
from the subordinates who
carry it out to the manager who
made it.

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The Vertical Dimension of
Organization Structure (continued)

Authority – The formal right of a manager to make
decisions, give orders, and expect the orders to be
carried out.

 Line Authority

 Staff Authority

Responsibility – the manager’s duty to perform an
assigned task.

Accountability – the manager (or other employee)
with authority and responsibility must be able to
justify results to a manager at a higher level in the
organizational hierarchy.

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The Vertical Dimension of
Organization Structure (continued)

 Line Authority

 entitles a manager to directly control the
work of subordinates by hiring, discharging,
evaluating, and rewarding them

 line managers hold positions that contribute directly to the
strategic goals of the organization

 part of the chain of command

 Staff Authority

 the right to provide advice, recommend, and
counsel line managers and others in the organization

 staff managers direct line managers

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The Vertical Dimension of
Organization Structure (continued)

Span of control – the feature of vertical structure
that outlines:

 The number of subordinates who report to a manager.

 The number of managers.

 The layers of management within an organization.

Smaller span – fewer employees supervised by a
manager – creates a tall vertical organizational
structure

Larger span – greater number of employees
supervised – creates a flat organizational structure

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The Vertical Dimension of
Organization Structure (continued)

Centralization – the location of decision authority at
the top of the organization hierarchy.

Decentralization – the location of decision authority
at lower levels in the organization.

Formalization – the degree of written
documentation that is used to direct and control
employees.

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The Horizontal Dimension of
Organization Structure

The organization structure element that is the basis
for:

 Dividing work into specific jobs and tasks.
 Assigning jobs into units such as departments or teams.

 Departmentalization:

 Functional
 Divisional
 Matrix

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Functional Departmental Structure

President

Engineering Production Marketing Finance

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Advantages and Disadvantages of
the Functional Approach

Advantages Disadvantages

 Decision authority is  Communication barriers
centralized at the top of the
organization hierarchy  Conflict between departments

 Career paths foster  Coordination of products and
professional identity with the services is difficult
business function
 Diminished responsiveness to
 High degree of efficiency customers’ needs

 Economies of scale help  Employees identify with
develop specialized expertise functional department goals and
in employees not organization goals or needs
of the customer

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Divisional Organization Structure

President

Computer Software Consulting
Division Division Source
Division

Production Production Production

Marketing Marketing Marketing

Finance Finance Finance

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