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BUSINESS ORGANISATION NOTES
GIPS GABORONE
LO1: BUSINESS ORGANISATION
Introduction
Organisation is the detailed arrangement of work and working conditions in order to perform the assigned
activities in an affective manner. Organisation can be compared to a human body. The human body
consists of hands, feet, eyes, ears, nose, fingers, mouth ,etc. these parts are performing their work
independently and at the same time , one part cannot be a substitute to another .The same principles can
be identified in the organisation also. The organisation consists of different departments. Each department
performs its work independently and cannot be a substitute to another.
DEFFINITION OF ORGANISATION
“Organisation is harmonious adjustment of specialized parts for the accomplishment of some common
purpose or purpose.”MC FARLAND ,
“An identified group of people contributing their efforts towards the attainment of goals is called an
organisation.”ALLEN,
“The process of identifying and grouping the work is to be performed, defining and delegating
responsibility and authority and establishing relationship for the purpose of enabling people to work most
effectively together in accomplishing objective.” MONEY AND REILY,
“Organisation is the form of every human association for the attainment of common purpose .”
CHESTER BENNARD,
“ A system of co- operative activities of two or more persons is called organisation .”
MEANING OF STAFFING
STAFFING , which is one of the managerial functions, is concerned with the assessment of the
manpower requirement , recruitment and selection of personnel , training and development of personnel
and periodic appraisal of the performance of personnel.
Organisation is a deliberately and consciously created human group . It implies that relationship between
organisation and its members is contractual .
Features of an Organisation
.PURPOSIVE CREATION : The organisation is a purpose creation , that is , all the organisation have
some objectives or set of objectives . The objective are mutually agreed upon by the members of the
group.
COORDINATION OF ACTIVITIES : In the organisation , there is a coordination of closely relevant
activities of the members. The coordination is necessary because all the members contribute to commonly
agreed
STRUCTURE : The co-ordination of human activities requires a structure wherein various individuals are
fitted . The structure provides for power centers which coordinate and control concerted efforts.
RATIONALITY: These characteristics differentiate an organisation from other social units , such as ,
community , family, clan , friendship group , etc. however , modern organisations though not all.
IMPORTANCE OF ORGANISATION
Organisation established relationship among the various persons working in the organisation , i.e.
between workers and workers ,workers and managers and managers and managers. Efficient organisation
offer several advantages not only to the organistion but also to the society at large.
OPTIMUM UTILISATION OF RESOURCES: It ensures optimum utilisation of resources – both human
and physical resources . The resources are put best possible use wastages are minimised.
CO ORDINATION:
ENSURES It facilities co –ordination . The activities of the various individuals ,and department are
combined together to accomplish to company goals. Different department works in close harmony with
each other .
FACILITATES EFFECTIVE MANAGEMENT :
A properly designed and balanced organisation facilitates effective management of the organisation. It
avoids confusion, delays and duplication of work . the work is systematically divided and grouped into
several section or units, so as to achieve desired results.
MOTIVATE PERSONNEL : A sound organisation avoids confusion, misunderstandings and overlapping
of functions , and as such employees are motivated to produce better results. This is mainly because of
good relations existing between the superiors and their subordinates in the organisation
FACILITATES DELEGATION OF OUTHORITY: Delegation of authority enable people in the
organisation to work effectively and efficiently .
A good organisation structures enables the superiors to delegate authority to the subordinates . The
superiors are in a position to delegate the proper degree of authority to the right subordinates. Without
proper delegation , it would not be possible to conduct the activities of the organisation smoothly and
quickly .
.ENCOURAGES INITIATIVE AND INNOVATION: Due to effective delegation of authority , there is
freedom of self expression. The subordinates are encouraged to show their initiative , which helps the
organisation to excel and grow . Due to division of work and specialization , There is speed , accuracy
and neatness in work . Most of all , specialization leads to innovative ideas .
TECHNOLOGICAL IMPROVEMENTS : Sound organisation have contributed to the technological
developments . Through their constant and continuous efforts in the field of research and development ,
they have come with new methods , new machines , and techniques , which are effectively introduced in
business activities
FACILITATES GROWTH: Good organisation achieves good progress .this enables the organisation to
growth and diversify. Large progressive firms are the direct outcome of the success of effective
organizing.
IMPORTANCE OF STAFFING
1.EMPHASIS ON HUMAN ELEMENT: The human force is the most important and productive asset of
any organisation which actually carries out the functions and productive activities of various departments.
They assert that “ If you want productivity and financial reward that goes with it, you must treat your
workers as your most important asset.
2. FACILITATES LEADERSHIP: If the staffing function is properly carried out , it will enable managers
to provide adequate leadership facilities whereby the individuals can maximize their personal goals along
with effectively contributing to the overall organisation goals.
3.FACILITATES CONTROL: Well trained staff is likely to work in accordance with plans and the
likelihood of divagation in the actual performance is, therefore, reduced. This facilitates the controlling
function being carried out by managers .
4.MOTIVATION TO WORK: Financial rewards to not always motivate a worker to work . Their
acceptance and recognition by the managers can ,at times, serve to act as better process of motivation .
5.INCREASE IN OVERALL EFFECIENCY: Since all attempts are made to place the right person, with
the right knowledge , at the right place and at the right time to perform the organisational activities .There
is a likelihood of enhancement in the overall efficiency of an organisation. If people appointed are not
competent enough to do their jobs.
6.DEVELOPMENT OF PATENTIAL MANAGERS:Recruiting and selecting people with the best
potential, compensating them and training them helps in the development of future managers and
facilitates the movement of managerial abilities from the lower to the higher levels of the organisation.
7. ENABLES THE ORGANISATIONS TO FACE COMPETITION: Modern times of globalization ,
every enterprise is facing tough competition both from local and international competitions. A well
staffed organisation can provides the management with a framework of policies and procedures suitable
for adapting itself to the competitors policies.
CONCLUSIONORGANISATION
The important steps involved in the process of are, the determination of objectives, the grouping of
activities, assignment of duties to persons, delegation of authority and creating authority relationships.
STAFFING Staffing which is one of the important managerial functions is concerned with the
assessment of the manpower requirement and selection of personnel, training and development of
personnel and periodic appraisal of the performance of the personnel . Every manager at all levels has the
responsibility for the efficient execution of staffing function. However , to assist the manager, some of the
staffing functions are assigned to a specialized agency known as personnel department.
LO2: Organization and Business
Business Drivers
A key business driver is something that has a major impact on the performance of your
specific business. A whole range of internal and external factors affects the performance of
every small business.
Business drivers are the key inputs and activities that drive the operational and financial results
of a business. Common examples of business drivers are salespeople, number of stores, website
traffic, number and price of products sold, units of production, etc. In order to make internal
choices about business strategy or build a financial model to value a company, it’s critical to gain
a solid understanding of the main drivers.
Examples of business drivers
Drivers vary significantly by industry, but they can all be determined using the same type of root
cause analysis.
Here is a list of common business drivers:
Number of stores or locations
Average size (i.e. square feet) per location
Number of products sold (volume)
Prices of products/services sold
Number of salespeople
Effectiveness of salespeople
Traffic volume to a website
Conversion rate of traffic to a website
Production rate for manufacturing
Efficiency rates and downtime
Energy and electricity costs
Rent and office space
Salaries and wages per employee
Commissions, fees, and other selling expenses
Foreign exchange rates
Commodity prices (i.e., oil, copper, pulp, rubber, etc.)
Classification of organisations
Formal Organization
Formal organization is formed on the basis of delegation of authority. Each formal organization
has its own objects and the activities are performed to achieve them. Under formal organization,
the duties and responsibilities of each employee are well designed and exhibited in the
organization chart.
Scot has defined a formal organization as,
“a system of coordinated activities of a group of people working towards a common goal under
authority and leadership”.
Features of Formal organization
The main features of formal organization are presented below:
Formal organization is consciously designed.
It provides for specialization.
It is based on delegation of authority.
The authority, responsibility, duties, policies and rules are properly well defined.
The principle of unity of command is usually observed.
It is deliberately impersonal.
It is supported by organization chart.
Merits of Formal Organization
The merits of formal organization are briefly described below:
1. There is no conflict among the employees since their respective duties and responsibilities are
clearly defined.
2. Overlapping of responsibility is easily avoided.
3. It results in the motivation of employees.
4. There is no personal bias since clear cut rules and regulations are framed and followed.
5. It makes the organization less dependent on one man.
Demerits of Formal Organization
The followings are the demerits of formal organization.
1. It reduces the spirit of initiative.
2. There is a delay in taking a decision since rules and regulations are getting importance than
situation.
3. It does not give any importance to sentiments and values of employees.
4. It reduces the free flow of communication.
5. It creates the problems of co-ordination.
Informal Organization
Informal organization refers to the informal relationships develop among the group of employees
in an organization. These groups fulfill their needs which are largely personal in nature by
creating informal relationships. Relationships are created during breaking hours of an office (say
coffee or tea break, lunch hour etc.) and in sometimes even outside the office.
One cannot predict the time of formation of such informal organization. At the same time, the
informal organization can be dissolved at any time by itself. The group members of the informal
organization may be consisting of not only from the same department but also from the several
other departments and cut across the status boundaries. Generally, these groups members are
having same type of taste, opinions, views and expectations.
Features of Informal Organization
The features of informal organization are given below:
An informal organization arises spontaneously.
It is based on personal attitudes, emotions and likes and dislikes.
It provides social satisfaction to its members.
It is an integral part of a total organization and the management cannot eliminate it.
It has no place in the formal chart.
It is a network of personal and social relations.
It has its own rules and traditions.
It is indefinite and has no structure.
Merits of Informal Organization
The followings are the merits of informal organization.
1. The informal organization overcomes deficiency and fills up the gaps of the formal
organization.
2. The flow of communication is very fast.
3. The motivation of employees is very easy.
4. Decisions are taken very quickly.
Demerits of Informal Organization
The demerits of informal organization are presented below.
1. It ruins the morality among the employees.
2. It acts according to mob psychology.
3. There is no evidence available for the information received under informal organization.
4. It spreads rumor among the employees regarding the attitude or approach of top management
unnecessarily.
Types of industries
Industries are part of the secondary activity. Secondary activities or manufacturing converts raw
material into products of more value to people. Industry refers to economic activities concerned
with the production of goods, extraction of services and provision or services. Hence we can say
that Industries are concerned with:
Production of good (steel energy)
Extraction of minerals (coal mining)
Provision for services (tourism)
There are also Emerging Industries: ‘Sunrise Industries’
Classification of Industries
Small-scale industries: Small-scale industries have less capital and technology invested in
them. There is often manual labour noticed here. Example, Basket weaving, pottery, and
handicrafts.
Large-scale industries: Largescale industries are the exact opposite of small-scale industries.
Here the capital invested is large and advanced technology is in use here. Example,
Automobiles and Heavy Machinery.
Ownership
Private sector: Private industries are businesses that are owned and operated by an individual
or group of individuals.
Public sector: Public industries are owned and managed by the government.
Joint sector industries: These industries are jointly operated by the state and individuals.
Cooperative sector industries: Cooperative industries are operated by the suppliers,
producers or workers of raw material.
Publicly owned company
A public limited company ('PLC') is a company that is able to offer its shares to the public.
They don't have to offer those shares to the public, but they can.
Well over 95% of limited companies in the UK are "private" – it is by far the most common form
of limited company.
However, you also need to know about "public" limited companies.
There are some specific requirements for a PLC which must be met:
The minimum number of shareholders must be two (a private limited company
only needs one shareholder)
Accounts must be filed within 6 months of the year end (the limit is 9 months for
a private company)
The Company Secretary must be a qualified person (in a private company the
secretary does not need to be qualified)
The minimum number of Directors is two (just one needed for a private company)
Advantages are as follows-
Large Capital - Public Limited Company can raise a huge amount of capital as there is no upper limit
on the number of owners (shareholders) that a public limited company can have. So even if every
shareholder invests a small amount of money still the company can create a large capital base.
Growth Opportunities - As the company has a large capital base growth opportunities are also
enormous, especially in case of a public limited company. Even after the company has commenced
the business, if a public limited company requires more capital, it can always issue more shares.
Democratic Management - Public Limited Companies have a large number of shareholders. The
company is run by the Board of Directors. And the Board of Directors is appointed by the
shareholders.
Limited Liability - The owners of Joint Stock Company have limited liability. In case the company
becomes insolvent/bankrupt and is unable to pay off business liabilities out of business assets, the
personal assets of the owners/shareholders cannot be used to repay the liabilities of the company.
Professional Management - Since Public limited companies have access to large financial resources,
it is possible for a public limited company to appoint professionals who are experts in different areas.
Availability of experts of different areas results in better decision making and increased efficiency in
the operation of business activities
Perpetual Existence - Joint Stock Company has a separate legal identity from its owners. It has a
separate legal status, which means in the eyes of the law the joint stock company is different from its
owners. Death, Insolvency or Insanity of any of the owners doesn't result in the closure of the
company.
Transferability of Shares - Shares of a public limited company are listed on the stock exchange and
are easily transferable. A shareholder who wants to sell his/her share can do so through a stock
exchange
Economies of Large-Scale Operations - Since public limited companies have large-scale operations,
they enjoy economies of the scale (Low cost due to the high volume of business). They have a better
bargaining power than other form of business organizations.
Disadvantages of Joint Stock Company are as follows-
1. Difficulty in Formation - Formation of a joint stock company, especially public limited company
involves a lot of legal procedures. It is time-consuming and expensive too.
2. Slow Decision Making - The company is run by the Board of Directors. The decisions are taken
jointly by the Board of Directors. Also in taking certain decisions, they have to seek shareholders
approval by calling a meeting of shareholders. Since there are a lot of people involved in decision
making, the process of decision making takes time
3. Low Motivation - The ownership and management of public limited companies are different. The
company is run by the Board of Directors who are people appointed by the owners (shareholders). It
is the Board of Directors who run the company, but profit belongs to all the shareholders of the
company. Hence there is no direct relationship between efforts and rewards. There is no incentive for
the Board of Directors to work hard.
4. Lack of Secrecy - In case of a public limited company, there is lack of secrecy. The companies
have to publish their financial details/accounts on a regular basis as per law. This means a lot of
information can also be viewed by anyone (including competitors).
5. Excessive Government Control - There are a lot of rules and regulations that have to be followed
while running the business. This also reduces the flexibility in doing the business.
L03: Nature of a company
Types of business organisations
A sole proprietorship is a business owned by one person. This is the simplest type of business to start and
is the least regulated form of organization.
Advantages
Ease of formation and dissolution.
low start-up costs and low operational overhead.
Ownership of all profits
Sole Proprietorships are typically subject to fewer regulations.
Disadvantages
Unlimited liability. Owners who organize their business as a sole proprietorship are personally
responsible for the obligations of the business, including actions of any employee representing
the business.
Limited life. if a business owner dies, the business dies as well.
It may be difficult for an individual to raise capital. It's common for funding to be in the form of
personal savings or personal loans.
Partnerships
A partnership is a business owned by two or more persons who contribute resources into the entity. The
partners divide the profits of the business among themselves.
Advantages
Synergy. There is clear potential for the enhancement of value resulting from two or more
individuals combining strengths.
Partnerships are relatively easy to form, however, considerable thought should be put into
developing a partnership agreement at the point of formation.
Partnerships may be subject to fewer regulations than corporations.
There is stronger potential of access to greater amounts of capital.
Disadvantages
Unlimited liability. General partners are individually responsible for the obligations of the
business, creating personal risk.
Limited life. A partnership may end upon the withdrawal or death of a partner.
There is a real possibility of disputes or conflicts between partners which could lead to dissolving
the partnership. This scenario enforces the need of a partnership agreement.
CORPORATION
A corporation is a legal “person” separate and distinct from its owners, and it has many of the rights,
duties, and privileges of an actual person. Public corporations are owned by shareholders who elect a
board of directors to oversee primary responsibilities.
The owners (stockholders) enjoy limited liability but have limited involvement in the company's
operations.
Forming a corporation involves preparing articles of incorporation (or a charter) and a set of bylaws. The
articles of incorporation must contain a number of things, including :
the corporation's name,
its intended life (which can be forever),
its business purpose, and
the number of shares that can be issued.
This information must normally be supplied to the state in which the firm will be incorporated.
The bylaws are rules describing how the corporation regulates its existence
Advantages
Unlimited commercial life. The corporation is an entity of its own and does not dissolve when
ownership changes.
Greater flexibility in raising capital through the sale of stock.
Ease of transferring ownership by selling stock.
Limited liability. This limited liability is probably the biggest advantage to organizing as a
corporation. Individual owners in corporations have limits on their personal liability.
Disadvantages
Regulatory restrictions. Corporations are typically more closely monitored by governmental
agencies. Complying with regulations can be costly.
Higher organizational and operational costs.
Double taxation. The possibility of double taxation arises when companies declare and pay taxes
on the net income of the corporation, which they pay through their corporate income tax returns.
Cooperative
A cooperative is a business organization owned by a group of individuals and is operated for their mutual
benefit. The persons making up the group are called members. eg: water and electricity (utility)
cooperatives, cooperative banking, credit unions, and housing cooperatives.
Advantages
Easy to form:
The procedure involves in the registration of a cooperative society is very simple and easy. No
legal formalities are required for the formation of cooperative society.
No obstruction for membership:
Unless and otherwise specifically debarred, the membership of cooperative society is open to
everybody.
Limited liability:
In most cases, the liabilities of the members of the society is limited to the extent of capital
contributed by them. Hence, they are relieved from the fear of attachment of their private
property, in case of the society suffers financial losses.
Democratic management:
Every member has equal rights through its single vote but can take active part in' the formulation
of the policies of the society.
Stability and continuity:
A cooperative society cannot be dissolved by the death insolvency, permanent incapability of the
members
Disadvantages
Limited resources:
Financial strength depends on the capital contributed by its members. The membership fee is
limited for which they are unable to raise large amount of resources as their members belong to
the lower and middle class.
Inefficient management:
A cooperative society is managed by the members only. They do not possess any managerial and
special skills.
Lack of secrecy:
The cooperative society does not maintain any secrecy in business because the affairs of the
society is openly discussed in the meetings
Types of companies
A private company means a company which by its articles of association:
(i) Restricts the right to transfer its shares
(ii) Limits the number of its members to fifty (at least 2-50) and
(iii) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.
(iv) Where two or more persons hold one or more shares in a company jointly, they are treated as a single
member.
There should be at least two persons to form a private company and the maximum number of members in
a private company cannot exceed 50.
A private limited company is required to add the words “Private Ltd” at the end of its name.
Public Company
A company, which is not private, is known as public company. It needs minimum seven persons for its
registration and maximum to the limit of its registered capital.
There is no restriction on issue or transfer of its shares and this type of company can invite the public to
purchase its shares and debentures.
Consequences of incorporation
Incorporation
Is a method by which individuals are voluntarily united into a new entity through the creation of an
artificial, intangible, and legal person called corporation.
When a company becomes a corporation, it functions as a separate entity, meaning it takes on an identity
of its own.
Instead of one or two people dictating how a company will run, a board of directors manages the affairs
of a corporation. In turn, the company's stockholders become the actual owners of the company and they
elect its board of directors.
Liability Factors
Company is liable for its own debts -The shareholders are not liable for the debts and liabilities of the
company and cannot be sued by the company’s creditors.
Incorporation distances the owners of a company from its affairs. This protects owners from financial
liability if a company fails or is sued. As a corporate entity, any financial losses that occur come out of
the company's assets and not the owners' personal assets
Tax Structures
Any business must pay state and federal taxes on a certain percentage of its earnings. The effects of
incorporation subject a company and its owners to double taxation. This occurs at the corporate level and
again at the shareholder or owners level.
Income Options
As a separate entity, a corporation can enter into lease agreements, which enables owners to reduce the
amount of taxes paid. Owners can lease assets, such as equipment, to a corporation, which allows them to
charge rental fees.
Company Property
A company owns its own property - the shareholders have no direct right to this or any share of it.
Person who no longer wishes to be a member is only entitled to whatever price he can get for his shares
Limited Liability
The fact that the company is a separate person from its shareholders makes limited liability possible.
Legality
Legality can be defined as an act, agreement, or contract that is consistent with the law or state of being
lawful or unlawful in a given jurisdiction.
Conversion of a Private Limited Company into a Public Limited
1. Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the
Companies Act, 2013, for convening a meeting of the Board of Directors
2. Issue of EGM Notice: Issue Notice of the Extra-ordinary General meeting (EGM) to all Members,
Directors and the Auditors of the
3. Holding of Extra Ordinary General Meeting: Hold the Extra-ordinary General meeting (EGM) on
due date and pass the necessary Special Resolution, to get shareholders’ approval for Conversion of
Private Company into a Public company along with alteration in articles of association under section 14
for such conversion.
4. ROC Form filing: For alteration in Article of Association for conversion of Private Company into a
Public company under section 14, few E-forms will be filed with concerned Registrar of Companies at
different stages
5. SCRUTINY OF DOCUMENTS BY ROC
As per Section 18, after receiving the documents for conversion of a Private Company into a Public
Company, ROC shall satisfy itself that the Company has complied with the requisite provisions for
registration of company. If so satisfied, ROC shall close the former registration and issue fresh certificate
of incorporation, after registering the documents submitted for change in class of company.
Differences between Partnership and companies
BASIS FOR
COMPARISONPARTNERSHIP FIRM COMPANY
Meaning When two or more persons agree to
carry on a business and share the
profits & losses mutually, it is known
as a Partnership firm.
A company is an association of persons
who invests money towards a common
stock, for carrying on a business and
shares the profits & losses of the
business.
How it is created? Partnership firm is created by mutual
agreement between the partners.
The company is created by incorporation
under the Companies Act.
Registration Voluntary Obligatory
Minimum number
of persons
Two Two in case of private company and
Seven in case of public company.
Maximum number
of persons
20 in trading business and 10 in
banking business.
50 in case of a private company and a
public company can have unlimited
number of members.
Audit Not Mandatory Mandatory
Management of the
concern
Partners itself. Directors
Liability Unlimited Limited
BASIS FOR
COMPARISONPARTNERSHIP FIRM COMPANY
Insolvency/Death a partnership ceases to exist if any
partner retires, dies or is declared
insolvent.
Insolvency or death of a shareholder
does not affect the existence of a
company.
Minimum capital No such requirement More capital needed
Use of word limited No such requirement. Must use the word 'limited' or 'private
limited' as the case may be.
LO4.FUNCTIONAL AREAS AND ACTIVITIES
Functional areas are teams of employees who have similar skills and expertise. Management is
the ‘brain’ of your business operations. Functional management is focused on the execution of a
specific organizational task within functional areas, through organizing and leading an
organization’s talent.
Functional managers have a high level of technical knowledge and skills relative to the area they
manage and focus their efforts on achieving best practices. There are five main functional areas
of management:
Human resource management:
Human resource development or personnel management or manpower management is concerned
with obtaining and maintaining of a satisfactory and satisfied work. It is a specialized branch of
management concerned with ‘man management’.
The recruitment, placement, induction, orientation, training, promotion, motivation, performance
appraisal, wage and salary, retirement, transfer, merit-rating, industrial relations, working
conditions, trade unions, safety and welfare schemes of employees are included in personnel
management. The object of personnel management is to create and promote team spirit among
workers and managers.
Production management:
Production management refers to planning, organization, direction, coordination and control of
the production function in such a way that desired goods and services could be produced at the
right time, in right quantity, and at the right cost. Some authors treat material, purchase and
inventory management as part of production management. Production management involves the
following functions:
Product planning and development,
Plant location, layout and maintenance,
Production systems and machines,
Management of purchase and storage of materials,
Ensuring effective production control.
Office management:
Office management can be defined as, “the organization of an office in order to achieve a certain
purpose and to make the best use of the personnel by using the most appropriate machines and
equipment, the best possible methods of work and by providing the most suitable environment.’’
The main topics of office management are; office accommodation, layout and environment,
communication, handling correspondence and mail, typing and duplicating, record management
and filing, indexing, forms and stationary and machines etc.
Financial management:
Financial management can be looked upon as the study of relationship between the raising of
funds and the deployment of funds. The subject matter of financial management is: capital
budgeting cost of capital, portfolio management, dividend policy, short and long term sources of
finance. Financial management involves mainly three decisions pertaining to:
Investment policies:
It dictates the process associated with capital budgeting and expenditures. All proposals to spend
money are ranked and investment decisions are taken whether to sanction money for these
proposed ventures or not.
Methods of financing:
A proper mix of short and long term financing is ensured in order to provide necessary funds for
proposed ventures at a minimum risk to the enterprise.
Dividend decisions:
This decision affects the amount paid to shareholders and distribution of additional shares of
stock.
Marketing management:
Marketing as a social and managerial process by which individuals and group obtain what they
need and want through creating and exchanging products and values with others. The course
content of marketing management generally includes; marketing concept, consumer behavior,
marketing mix, market segmentation, product and price decisions, promotion and physical
distribution, marketing research and information, international marketing etc.
MANAGEMENT FUNCTIONS
Management is the art of getting things done through and with people in formally organized
groups.(Haimann, T.)
Management is simply the process of decision-making and control over the actions of human
beings for the express purpose of attaining predetermined goals.(Vance S.)
Management is a social process entailing responsibility for the effective and economical
planning and regulations of the operations of an enterprise in fulfillment of a given purpose
or task (Brech E. F., 1957).
Characteristics of Management:
To further enhance our understanding of the term management, we shall now examine some of its
major characteristics.
(i) Management is an activity.
Management is an activity that concerns the effective use of all resources both human and
non-human. It is the driving force that inspires an undertaking. It creates the conditions
and relationships that bring about the full use of resources.
(ii) Management is Purposeful and goal-oriented.
The main concern of management is the achievement of clearly defined goals or
objectives. Management is said to be successful only to the extent to which these
objectives are achieved.
(iii) Management is a Social Process
Organizations are social entities, as they are constituted of people. As such,
management has to control, organize and motivate people and create a favourable
climate for their development.
(iv) Management is getting things done.
A manager does not usually do the operating work himself, but gets the work done with
and through people. A manager has to direct people, harness talents through training and
procure technical, human, and psychological skills (intellectual capital).
(vi) Management is an intangible force.
Though intangible, management is not abstract but a social skill which is evident
by the quality of the organization in terms of the efficiency and effectiveness of
its operations.
(vii) Management is an Integrating Process.
Management brings together people, machines and materials to carry out the
operation of the organization and achieve a set of given objectives. It is a result-
oriented process.
(viii) Management is separate from ownership.
Management and ownership may be the same in small family or individual or sole
proprietorship businesses, but in modern enterprises or corporations, a vast number of
shareholders own the business enterprise or organization, while management is in the
hands of qualified, professional and competent managers, who normally do not
posses any ownership interest.
(ix) Management is a Universal Activity
The techniques and tools of management are universally applicable. Managers
perform the same functions regardless of their position in the management hierarchy,
type of enterprise or location of enterprise.
(x) Management is a social science
The science of management is universally accepted as a distinct discipline. It has assumed professional
character, hence requiring the use of specific knowledge, skill and practice. It utilizes certain fundamental
concepts, theories, tools and techniques that constitute the subject matter of management. It therefore
satisfies all the conditions of a profession.
The basic functions of management
The job of management is to help an organization make the best use of its resources to achieve
its goals. They do so by performing essential managerial functions which include:
Planning
Organizing
Directing
Staffing
Controlling
Planning: It is the process of setting goals and objectives and showing how these goals and
objectives will be accomplished.
Organizing: This refers to the process of establishing a structure of working relationships. It
involves grouping people into departments according to specific tasks performed and deciding
how best to coordinate organizational resources.
Directing: This is the process of communicating what has been planned by leading and
motivating the efforts of people towards attainment of goals
Staffing: This function refers to the process of filling positions with the right kind of people in
the right job at the right time.
Controlling: This refers to the process of evaluating how well an organization is achieving its
goals and how to maintain and improve performance.
Figure 1 below illustrates the relationships among these functions. It indicates that all the
functions are interdependent.
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Figure 1: Interdependence among managerial functions
III. Organizing Charts
Learning objective 1
Explain the purpose of an organization chart. (Text pages 202-203)
A. An organization chart uses a series of boxes connected with one or more lines
to graphically represent the organization’s structure.
B. The chart gives an overall picture of how the entire organization fits together.
factors affecting organization
Describe factors and changes that affect an organization’s structure. ()
A. Strategy
Planning
Organizing
Directing
Staffing
Controlling
1. An appropriate structure helps the
organization reach strategic goals.
2. The organization’s structure clarifies strategy through delegation of
authority and responsibility.
3. Alfred D. Chandler’s study of organization strategy describes a repeating pattern.
a. Changing strategy led to decline in performance, then revised structure, and improvement.
b. Chandler concluded that changes in strategy ultimately led to changes in the organization’s
structure.
4. There are many variables to consider matching structure to strategy.
B. Size
1. The most common measures of
organization size are sales volume and number of employees.
2. Small organizations tend to be less specialized.
3. Larger organizations tend to be more specialized.
C. Environment
1. A study by Tom Burns and G. M. Stalker found a relationship between organization and
characteristics of the external environment.
a. Mechanistic systems are characterized by:
i. a rigid definition of functional duties
ii. precise job descriptions
iii. fixed authority and responsibility
iv. a well-developed organizational hierarchy
b. Organic systems are
characterized by:
i. less formal job descriptions
ii. greater emphasis on adaptability
iii. more participation
iv. less fixed authority
2. They found that successful firms in stable and established industries tend to be mechanistic in
structure.
Successful firms in dynamic industries tend to be organic.
4. Another study by Paul Lawrence and Jay Lorsch reached similar conclusions.
a. Firms operating in a dynamic
environment needed a relatively flexible structure.
b. Firms in a stable environment needed a more rigid structure.
c. Firms operating in an intermediate environment needed a structure somewhere between.