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Concept of Business
• Business literally means a state of being busy.
• From the dawn of human civilization, human beings have always remained busy to maintain their lives for sustained existence.
• They have adopted different types of occupations having some economic bearings. However, the true meaning of the term business is given in the following definition:
• DIKSEE defined the business as the economic activities carried on with a view to earn profits.
• Human efforts directed towards the production of goods and services for self consumption though they are economic activities cannot be treated as business activities.
• Only those economic activities of the production of goods and services resulting into the marketable surplus with a view to exchange them with a profit are regarded as business activities.
Definition
Any service, trade, commerce, manufacture, design to provide goods and/or services to consumers.Businesses are predominant in capitalist economies, most being privately owned and formed to earn profit that will increase the wealth of its owners and grow the business itself.
Types of Business
1. Industry
a) Genetic Industries
b) Primary Industries
c) Extractive Industries
2. Commerce
3. Trade
a) Warehousing
b) Transportation
c) Banking and Credit services
d) Advertising and Publicity
e) Insurance
Genetic Industries.
Genetic industries are concerned with the multiplication of animal species through the reproductive system of genetics e.g., cattle breeding, poultry farm etc.
Primary Industries.
Agriculture, hunting, fishing are popular examples of primary industries. These industries are nature-oriented industries.
Extractive Industries.
The various types of mines, oils, gases are extracted from beneath of the earth. This industry is largely dependent on the availability of natural resources.
Construction Industries.
The construction industries are concerned with the construction activities like construction of buildings, dams, roads, bridges, canals etc.
Manufacturing Industries.
• Manufacturing industries convert the raw materials into finished products as desired by the consumers.
• The raw materials obtained from the mine, farm, forest, sea etc. are modified to create and enhance their form utility with the help of various manufacturing processes. Thus, manufacturing industries either create or enhance the form utility with the help of mechanical or chemical processes, e.g., cotton is converted into cloth, crude oil into various types of petroleum products etc.
2. Trade
They are concerned with the distribution of products i.e. sale, transfer, or exchange of goods to business houses as well as final consumers.
The following are the main auxiliary functions to the trade:
a. Warehousing. The time-lag between the production and consumption is adjusted through warehousing services..
b. Transportation. The inter-regional and international trade exists due to transportation facilities. It helps the flow of goods from the manufacturer to the ultimate consumer through the channel of distribution.
c. Banking and Credit Services. The trade between unknown parties and involving huge sum of money is possible only through the banking and credit facilities.
d. Advertising and Publicity. The dissemination of the information about the product, its quality, price, terms, manufacturer etc. is essential for its effective trading. Thus, the hurdle of lack of knowledge is eliminated through the advertising services.
e. Insurance. The storing, transportation etc. of the goods involve the risk of fire, accident, theft etc. The insurance services try to cover the risk incidental to such activities
f. Agents. Brokers, agents, deal order agents, forwarding agents, clearing agent, auctioneers etc. provide the essential services for effectuating the trading activities.
Industrial Sector
Textile Industry
• It is the oldest and firmly established major industry.
• Textile industry in India is the second largest employment generator. It provides one of the most fundamental necessities of the people. It accounts for 30% of the total exports.
• Indian textile industry is constituted of the following segments: Readymade Garments, Cotton
• Textiles including Handloom, Man-made Textiles, Silk Textiles, Woolen Textiles, Handicraft, Coir and Jute. India is the largest exporter of cotton fabric and ready-made garments.
• Textile industry in India has vast potential for creation of employment in the agricultural, industrial, organized and decentralized sectors and rural and urban areas particularly for women.
Engineering Sector
• It includes manufacturing industries, which may be small scale, medium scale and large scale industries, and ancillary industries.
• Following are some of the engineering industries:
Machine Tool Industry
• It is one of the most vital industries for the progress of industrialization and economical development of the country. Many machine tool industries have been set up in India after independence.
• In our country, Hindustan Machine Tools is the largest machine tool industry which manufactures large variety of machine tools including NC and CNC machines.
Petro Chemical Industry.
• Indian Petro Chemical Corporation Limited (IPCL) at Baroda was responsible for the development of Petro-chemical industry in seventh plan. Plastic is the main constituent of Petro-chemical industry.
• It covers wide range of products such as polymers, synthetic fibers, synthetic rubber, plastic, LDPE sheets etc.
Cement Industry.
• Cement production started in our country since 1914 at Porabander in Gujarat.
• There are about 20 large and 150 mini cement plants in India. The public sector ACC and Birlas and Dalmia mostly control the cement production as a centralized control.
Sugar Industry.
• India is the leading producer of sugar, it ranks fourth in the world. About 50 percent of the sugar factories are in co-operative sector.
Paper Industry.
• The availability of abundant quantity of raw-material and forests in India gave rise to the growth of paper industry.
• At present there are about 340 paper producing units in India out of which large units are only 30. The industry is mostly in private sector, except the currency rights paper manufactured at NEPA, Mysore Paper Mills and Hindustan Paper Corporation are the producers .
Electronic and Computer Industry.
Electronic industry has made a revolution in modern industrialization. The application of electronics and computer industry has a tremendous potential for the modern industries. It is used in every field from agriculture to medicine. In addition to these following are some of the leading industries:
• Automobile Industry - For example, Bajaj, Mahindra, Tata group, Maruti, TVS group, etc.
• Tata iron and steel industry. For example, Bhilai Steel plant, Tata Iron and Steel industry etc.
• Pharmaceutical Industry - For example, Cipala, Dabur, Glaxo, etc.
Service Sector
• Service sector of the economy covers a wide range of activities like trading, banking and finance, real estate, transportation, security. management, and technical consultancy among several others.
• The various sectors that combine together to constitute service industry in India are:
• Trade, Hotel and Restaurants, Railways, Banking, Insurance, Transport and Storage, Communication (Post, Telecom), Dwelling, Real Estate, Business Services, Public Administration, Defense, Personal Services, Community Services, Other Services.
Commerce
An industry deals with production of goods and services which deals with the distribution of manufactured goods and generated services among the needy consumers in the desired form, at a proper time, at a proper place and according to the terms agreeable to them.
Globalization
• It refers to the process of integration across societies and economies. The phenomenon encompasses the flow of products, services, labor, finance, information and ideas moving across national borders.
• There has been an increase of globalization since the early 1980s.
• This is true in regards to international trade growth and capital flows, as well as migration of people to America.
• A primary economic rationale for globalization is reducing barriers to trade for the enrichment of all societies.
• The betterment of societies through free trade for everyone is possible as long as each one has the freedom to produce with a comparative advantage and engage in exchanges with others.
• The factors include advances in transportation, communication, and technology to provide the necessary conduits for global economic integration.
Strengths of Globalization
• Increased free trade between nations.
• Global mass media ties the world together.
• Increased flow of communications allows vital information to be shared between individuals and corporations around the world.
• Greater ease and speed of transportation for goods and people.
• Reduction of cultural barriers increases the global village effect.
• Spread of democratic ideals to developed nations.
• Reduction of likelihood of war between developed nations.
Weaknesses of Globalization
• Increased flow of skilled and non-skilled jobs from developed to developing nations as corporations seek out the cheapest labor.
• Threat that control of world media by a handful of corporations will limit cultural expression.
• Greater chance of reactions for globalization being violent in an attempt to preserve cultural heritage.
• Greater risk of deseases being transported unintentionally between nations.
• Increase in the chances of civil war within developing countries and open war between developing countries as they vie for resources.
General Agreement on Tariff and Trade (GATT)
• The General Agreement on Tariff and Trade (GATT) was established in 1948 in Geneva.
• The objective of GATT was to develop free trade among the countries of the world with least barriers. It adhered to the policy of reduction of tariff imposed by importing countries. At present about 117 nations are its members, including India.
• Mr. Arthur Dunkel, Director General of GATT computed a very detailed document popularly known as Dunkel proposals, which was accepted on the final Act on 15th December 1993 and signed by 117 members on 15th April 1995.
• The main provisions of Dunkel Act are:
(a) Multilateral Trade Systems
(b) Market access for member countries
© Trade Related investment Measures Rights (TRIMS)
(d) General Agreement on Trade and Services
(e) Abolition of Multifibre Agreement
(g) Trade Related Intellectual Property Rights (TRIPS).
World Trade Organization
• The World Trade Organization was established in 1955 with its centre at Geneva.
• The aim of WTO is to deal with disputes of trade amongst its members, reduce trade barriers and permit free flow of goods in the world market.
• The WTO has established an institute, 'International Standard Organization' at Geneva, in order facilitate the standardization of the products and services on global scale.
• It has established standards as ISO -9000 which has a series of 9001, 9002, 9003 and 9004.
• These standards were first introduced in 1987 and are accepted worldwide as basic quality management and quality standards.
Intellectual Property Rights (IPR)
Concept
• Creation of human mind (Intellect)
• Intangible property
• Exclusive rights given by statutes
• Attended with limitations and exceptions
• Time-bound
• Territorial
It is defined as
“Intellectual Property shall include the rights relating to
– literary, artistic and scientific works,
– performances of performing artists, phonograms, and broadcasts,
– inventions in all fields of human endeavor
– scientific discoveries
– Industrial designs
– trademarks, service marks and commercial names and designations
– protection against unfair competition
and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields.”
Types of IPR are as follows
• Copyright and Related Rights
• Industrial Property
Patents
Industrial Designs
Trade Marks
Geographical Indications
Layout Designs/Topographies Integrated Circuits
Trade Secrets
Protection of new plant varieties
Management
What is management?
• Management is an art of getting work done through people, with satisfaction for employer, employees and the public.
• It is an executive function which actively directs human efforts towards common goals.
• Planning, organizing, staffing, motivation, directing, coordination and control are main functions of management.
• There are three levels of management namely, top level, middle level and lower level.
Evolution of Management
• Management is a scientific process which is understood by different approaches (schools).
• The first is a Classical approach which forms the foundation for the field of management.
• The schools for management thoughts are Scientific Management, Administrative Theory and
Bureaucratic Management.
• Scientific management is defined as “that kind of management which conducts a business or affairs by standards established, by facts or truths gained through systematic observation, experiment, or reasoning.” The major contributors are Frederick Winslow Taylor, Frank and Lillian Gillbreth and Henry L.Gantt
• F.Taylor (1878) is a“Father of scientific management” made two major managerial practices that are i) Piece-rate incentive system and ii)Time-and-motion study.
• Frank and Lillian Gillbreth (1868-1924) gives motion study which involves finding out the best sequence and minimum number of motions needed to complete a task.
• Explore new ways for eliminating unnecessary motions and reducing work fatigue.
• Henry L.Gantt is well known for Task – and - bonus system -The Gantt chart
• If the worker completed the work fast, i.e., in less than the standard time, he received a bonus.
• It is a Simple chart that compares actual and planned performances
• The Administrative theory given by Henri Fayol (1841-1925)focused on principles that could be used by managers to coordinate the internal activities of organizations.
• Bureaucratic Management given by Weber(1864-1920) focused on the important characteristics that are i) Work specification and division of labor ii) Abstract rules and regulations
iii) Impersonality of managers iv) Hierarchy of organization structure
• The Behavioral approach includes Human relations(1930) and Behavioral science(1950) involves the study of human behavior in the organization.
• The Quantitative approach includes the application of statistics, optimization models, information models and computer simulations. It focuses on achieving organizational effectiveness. It has
three main branches Management Science(1940), Operations Management(1940) and Management Information Systems(1950-1970).
• The Modern Approaches to Management includes Systems and Contingency theory. System theory focuses on understanding the organization as a system that transforms inputs into outputs while in constant interaction with its environment. Contingency theory includes applying management principles and processes as dictated by the unique characteristics of each situation.
Definitions of Management
1) Harold Koontz said,” Management is the art of getting things done through and with people in formally organized groups”.
2) George R. Terry said, “Management is a disconnect process consisting of planning organizing activating and controlling performed to determine and accomplish the objectives by the use of people and resources”.
3) Donald J. Cough said, “Management is the art and science of decision making and leadership”.
4) Henry Fayol said, “To manage is to forecast, to plan, to organize, to command, to coordinate, and to control”.
Importance of Management
• Management guides and controls the activities of man-power for the optimum utilization of company resources, such as men, materials, money, machines, methods etc.
• It creates a vital, dynamic and life giving force to the enterprise.
• It coordinates activities of different departments in an enterprise and establishes team-spirit among the persons.
• It provides new ideas and vision to the organization to do better.
• Management only can meet the challenge of change.
• Management provides stability to the enterprise by changing and modifying the resources in accordance with the changing environment of the society.
• Management helps personality development which raises efficiency and productivity.
Scientific Management by F.W.Taylor
• Scientific management is the result of applying scientific knowledge and the scientific methods to the various aspects of management and the problems that arise from them.
• The primary emphases of scientific management was on planning, standardizing and improving human effort at the operative level in order to maximize output with minimum input.
• Fredrick Winslow Taylor is known as the founder of Scientific Management. He got recognition as the Father of Scientific Management.
• He thought that by maximizing the productive efficiency of each worker, scientific management would also maximize the earnings of the employees and employers.
• He developed the principle of breaking a task into elements for timing the same.
• He explored the causes of efficiency and labor difficulties in the industry.
• He evolved certain principles like Investigating work on scientific basis, selecting the best worker for a task and training him further to acquire desired skill, developing co-operative spirit between management and workers, equal division of work between workers and management.
• He undertook studies on fatigue incurred by the workers and the time necessary to complete a task which is called as A Fair Day’s Task.
• He suggested that for increasing production rate, the work of each person should be planned at least one day in advance and he shall be allotted a definite work to complete by a given time using a pre-explained method.
• He developed Functional Organization in which one foreman was made in charge for each function.
• Taylor devoted maximum attention towards Time studies and he established work standards.
• He introduced and operated various costing systems.
• Taylor suggested a Wage Incentive Scheme known as Taylor’s Differential Piece Rate Plan.
Levels of Management
Management has got the following activity levels.
1. Top Management.
2. Upper Middle Management.
3. Middle Management.
4. Lower Management (Foremen etc.)
5. Operating force or Rank and File workman.
1. Top Management
It includes
a) Board of Directors.
b) Managing Directors.
c) Chief Executive.
d) General Managers.
e) Owners.
f) Share-holders/Financiers.
The functions of Top Management are
a) Setting basic goals and objectives.
b) Expanding or Contracting activities
c) Establishing policies.
d) Monitoring performance etc.
2. Upper Middle Management
It includes
a) Sales executive (Manager.)
b) Production executive.
c) Finance executive.
d) Accounts executive.
e) R & D executive.
The functions are
a) Establishment of the organization.
b) Selection of staff for lower level management.
c) Installing different departments
d) Assigning duties to their subordinates etc.
3. Middle Management
a) Superintendents.
b) Branch Managers.
c) General foremen etc.
The functions are
a) To cooperate to run organization smoothly.
b) To understand interlocking of department in major policies.
c) To conduct training for employee development.
d) To develop an efficient company team spirit.
4. Lower Management
It includes
a) Foremen.
b) Supervisors or charge hands.
c) Office superintendent.
d) Inspectors, etc
The functions are
a) Direct supervision of workers and their work.
b) Developing and improving work methods and operations.
c) To give finishing touch to the plans and policies of top management.
d) To act as link between top management and the operating force (i.e., workers).
e) To communicate feelings of workers to the top management.
5. Operating Force
It includes
Workers, rank and file workman, skilled, semi-skilled and unskilled.
The functions are
a) To do work on machines or manually, using tools, etc.
b) To work independently or under the guidance of supervisor.
Administration
• Any enterprise whether it is run for profit or not need be controlled.
• The control of the enterprise is effected thorough Administration and Management.
• Administration consists of deciding determination of the goals and policies of the enterprise.
• It is concerned mainly with decision making, policy making and making necessary adjustments.
• The three main elements of administrations are
• I) The formulation of goals,
• II) The choice of ways and means, and
• III) The direction of the people in some group purpose.
• Administration makes policies and decides the goals/targets to be achieved. It is not directly concerned with the implementation of policies.
• The functions of administration are legislative and largely determinative.
• Administration coordinates finance, production and distribution.
• It frames the organizational structure and exercises control over the enterprise.
• Administration is the master of industry. It relates to top-level management. Persons like owners or the Board of Directors are in charge of it.
• An Administrator
• a) organizes his own work and that of his subordinates;
• b) delegates responsibility and authority; and
• c) Measures, evaluates and controls position activities.
Administration and Management
• Administration determines the objectives and policies of the enterprise; Management carries out these policies to achieve objectives of the enterprise.
• Organizational structure plays very important role in administration and management as they are interrelated. For Administration and Management to function effectively, there must be proper structuring of the enterprise and this is known as organization (structure). Organization has been termed the keystone on which the entire structure of any enterprise is based.
• An administration gives proper direction; it is a directing (or direction) function. Management properly executes; it is an execution function. And, organization is effective machinery for accomplishing company objectives in team spirit.
• Thus, we can say that Management carries out the policies of Administration through the framework of the organization.
Principles of Management (14 principles of Henry Fayol)
Henry Fayol, a French mining engineer, developed 14 principles of management based on his management experiences. These principles provide modern-day manages with general guidelines on how a supervisor should organize her department and manage her staff.
• Division of work: Division of work and specialization produces more and better work with the same effort.
• Authority and responsibility: Authority is the right to give orders and the power to exact obedience. A manager has official authority because of her position, as well as personal authority based on individual personality, intelligence and experience. Authority creates responsibility.
• Discipline: Obedience and respect within an organization are absolutely essential. Good discipline requires managers to apply sanctions whenever violations become apparent.
• Unity of Command: An employee should receive order4s from only one superior.
• Unity of Direction: Organizational activities must have one central authority and one plan of action.
• Subordination of individual interest to general interest: The interests of one employee or group of employees are subordinate to the interests and goals of the organization.
• Remuneration of personnel: Salaries (the price of services rendered by employees) should be fair and provide satisfaction both to the employee and employer.
• Centralization: The objective of centralization is the best utilization of personnel. The degree of centralization varies according to the dynamics of each organization.
• Scalar chain: A chain of authority exists from the highest organizational authority to the lowest ranks.
• Order: Organizational order for materials and personnel is essential. The right materials and the right employees are necessary for each organizational function and activity.
• Equity: In organizations, equity is a combination of kindliness and justice. Both equity and equality of treatment should be considered when dealing with employees.
• Stability of tenure of personnel: To attain the maximum productivity of personnel, a stable work force is needed.
• Initiative: Thinking out a plan and ensuring its success is an extremely strong motivator. Zeal, energy and initiative are desired at all levels of the organizational ladder.
• Esprit de corps: Teamwork is fundamentally important to an organization. Work teams and extensive face to face verbal communication encourages teamwork.
Functions of Management
Management functions are classified into following categories
1. Forecasting.
2. Planning.
3. Organizing.
4. Directing.
5. Controlling.
6. Motivating.
7. Coordinating.
8. Decision making.
1. Forecasting
• It is necessary preliminary to planning.
• It estimates what should be done in future which includes Sales, Production or any other aspect of business activities.
• It begins with the sales forecast and is followed by production forecast and forecasts for costs, finance, purchase, profit or loss, etc.
2. Planning
• It is a process by which a manager anticipates the future and discovers alternative courses of action open to him.
• A plan is a blue print for goal achievement that specifies the necessary resource allocations, schedules, tasks and other actions.
• The word planning incorporates determining the organizational goals and defining the means for achieving them.
• It allows managers the opportunity to adjust to the environment instead of merely reacting to it.
• It increases the possibility of survival in business by actively anticipating and managing the risks that may occur in the future
• It is the activity that allows managers to determine what they want and how they will achieve it.
Advantages of Planning
• Gives an organization a sense of direction.
• Focuses attention on objectives and results.
• Establishes a basis for teamwork.
• Helps anticipate problems and cope with change.
• Provides guidelines for decision making.
• Serves as a prerequisite to employing all other management functions.
Types of Plans
A. Operational plans
B. Tactical plans
C. Strategic plans
D. Contingency plan.
A. Operational plans
• The specific results expected from departments, work groups and individuals are the operational goals.
• It is one that a manager uses to accomplish his or her job responsibilities.
• It is classified into two namely Single-use plans and an ongoing plan.
• Single use plans apply to activities that do not recur or repeat. For example, A budget is a single-use plan because it predicts sources and amounts of income and how much they are used for a specific project.
• Ongoing or Continuing plans are usually made once and retain their value over a period of years while undergoing periodic revisions and updates.
• For example, A policy provides a broad guideline for managers to follow when dealing with important areas of decision making. Policies are general statements that explain how a manager should attempt to handle routine management responsibilities.
B. Tactical Plans
• It is concerned with what the lower level units within each division must do how they must do it and who is incharge at each level.
• Tactics are the means needed to activate a strategy and make it work.
• These plans are concerned with shorter time frames and narrower scopes than are strategic plans.
• It is middle manager’s responsibility to take the broad strategic plan and identify specific tactical actions.
C. Strategic Plans
• It is an outline of steps designed with the goals of the entire organization as a whole in mind, rather than with the goals of specific divisions or departments.
• They look ahead over the next two, three, five or even more years to move the organization from where it currently is to where it wants to be.
• Top management’s strategic plan for the entire organization becomes the framework and sets dimensions for the lower level planning.
D. Contingency Plans
• Strong management requires a keeping all options open approach at all times that’s where contingency planning comes in.
• It involves identifying alternative courses of action that can be implemented if and when the original plan proves inadequate because of changing circumstances.
3. Organising
• It is the process by which the structure and allocation of jobs is determined.
• It involves determining activities required to achieve the established company objectives.
• It groups these activities in a logical basis for handling by subordinate (persons), managers, and finally, assigning persons to the job designed.
• The manager will delegate necessary authority to his subordinates and they will take the necessary responsibility.
• Organising means, organizing people, materials, jobs, time etc., and establishing a framework in which responsibilities are defined and authorities are laid down.
4. Staffing
• It is the process by which managers select, train, promote and retire their subordinates.
• It involves the developing and placing of qualified people in the various jobs in the organization.
• It is continuous process.
5. Directing
• It is the process by which actual performance of subordinates is guided towards common goals of the enterprise.
• It involves functions like
• a) Leadership b) Communication
• c) Motivation and d) Supervision.
• a) Leadership: It is the quality of the behavior of the persons (Managers) whereby they inspire confidence and trust in their subordinates. Get maximum cooperation from them and guide their activities in organized effort.
• b) Communication: It is the process by which ideas are transmitted, received and understood by others for the purpose of effecting desired results. It may be verbal or written orders, reports, instruction, etc.
• c) Motivation: Motivation means inspiring the subordinates to do a work or to achieve company objectives effectively and efficiently.
• d) It is necessary to ensure, i) that the work is going on as per the plan established and ii) that the workers are doing as they were directed to do.
6. Coordinating
• It means achieving harmony of individual effort towards the accomplishment of company objectives.
• It is defined as the dovetailing and harmonizing of all the company assets and employees into a coherent whole.
• Ineffective coordination between different function of a business enterprise (such as production, sales, administration, etc.).
• It involves making plans that coordinate the activities of subordinates, regulate their activities on the job and regulate their communications.
•
7. Controlling
• The manager must ensure that everything occurs in conformity with the plans adopted, the instructions issued and the principles established. This is the controlling function of management and involves three elements:
1. Establishing standards of performance.
2. Measuring current performance and performance and comparing it against the established standards.
3. Taking action to correct any performance that does not meet those standards.
• In the absence of sound control, there is no guarantee that the objectives which have been set will be realized. The management may go on committing mistakes without knowing them.
Motivation Theories
• Motivation is a complex phenomenon. Several theories attempt to explain how motivation works. The basic needs model, referred to as content theory of motivation, highlights the specific factors that motivate an individual.
• Several theorists, including Abraham Maslow, Frederick Herzberg, David McClelland and Clayton Alderfer, have provided to help explain needs as a source of motivation.
Abraham Maslow’s Hierarchy of Needs Theory
• Abraham Maslow’s defined need as a physiology or psychological deficiency that a person feels the compulsion to satisfy.
• This need can create tensions that can influence a person’s work attitudes and behaviors.
• He formed a theory based on his definition of needs that proposes that humans are motivated by multiple needs and that these needs exist in a hierarchical order.
• His theory based on the following principles
1. Deficit Principle. A satisfied need no longer motivates behavior because people act to satisfy deprived needs.
2. Progression principle. The five needs he identified exist in a hierarchy, which means that a need at any level only comes into play after a lower-level need has been satisfied.
His ideas can help managers understand and satisfy the needs of employees.
Herzberg’s Two-Factor Theory
It has two factor theory, Herzberg defines two sets of factors that impact motivation in the workplace.
1. Hygiene factors include salary, job security, working conditions, organizational policies and technical quality of supervision. Although these factors do not motivate employees, they can cause dissatisfaction if they are missing. Something as simple as adding music to the office place or implementing a no-smoking policy can make people less dissatisfied with these aspects of their work. However, these improvements in hygiene factors do not necessarily increase satisfaction.
2. Satisfiers or motivators include such things as responsibility, achievement, growth opportunities and feelings of recognition are the key to job satisfaction and motivation. For example, managers can find out what people really do in their jobs and make improvements, thus increasing job satisfaction and performance. Following Herzberg’s two-factor theory, managers need to ensure that hygiene factors are adequate and then build satisfiers into jobs.
• Alderfer’s ERG Theory
Clayton Alderfer’s ERG (Existence, Relatedness, and Growth) theory is built upon Maslow’s hierarchy of needs theory. To begin his theory, Alderfer collapses Maslow’s five levels of needs into three categories.
1. Existence needs are desires for physiological and material well-bring. (In terms of Maslow’s model, existence needs include physiological and safety needs).
2. Relatedness needs are desires for satisfying interpersonal relationships. (In terms of Maslow’s model, relatedness correspondence to social needs).
3. Growth needs are desires for continued psychological growth and developments. (In terms of Maslow’s model, growth needs include esteem and self-realization needs).
• This approach proposes that unsatisfied needs motivate behavior, and that as lower needs are satisfied, they become less important.
• Higher level needs, though, become more important as they are satisfied, and if these needs are not met, a person may move down the hierarchy, which Alderfer calls the frustration-regression principle. What he means by this term is that an already satisfied lower level need can become reactivated and influence behavior when a higher level need cannot be satisfied.
Assignment
Q.1 List any eight principles of management.(S-04, S-05, S-07)
Q.2 Why scientific management is essential? (S-04, W-05, S-06, W-06, S-07, W-07)
Q. 3 Define motivation. What are its functions? (W-04)
Q.4 Define and describe planning as a function of management. (W-04)
Q.5 Distinguish between Management & Administration. (W-04,W-05)
Q.6 What is decision making? Explain. (S-05)
Q.7 Explain the concept of optimization in scientific management. (S-05)
Q.8 Who is the father of Scientific Management? What are the fundamental principles of Scientific
Management ? (W-05)
Q. 9 What are the different objectives of Planning? (S-06)
Q.10 How scientific management principles helps in handling complexity of job? (S-06)
Q.11 What is management of a job? State the main function of Top, Middle and Lower level
management. (S-06)
Q.12 State guidelines for effective decision making. (W-06)
Q.13 Enumerate and explain in brief, the important principles of management. (W-06)
Q.14 What is management of a job? (W-06)
Q.15 Define coordination and state its need in management. (S-07)
Q.16 Planning of work is the most important function of supervisor. (S-07)
Q.17 What are the benefits of better planning and control? (S-07)
Q.18 Explain motivation of workers in the industry. (W-07)
Organizational Management
Concept of Organization
• When two or more persons work together for achieving common goal, then their activities have to be organized.
• Sound organization is very important for the success of any business.
• Organization is a mechanism or structure that enables living things to work effectively together.
• Organizing is a process of integrating, coordinating and mobilizing the activities of members of group to achieve common goals.
Definition of Organization
1. “Organizing is a process of defining and grouping the activities of the enterprise and establishing authority relation among them. In performing the organization function, the manager defines departmentalizes, and assigns activities so that they can be most effectively executed”.----Theo Haimann
2. “Organizing is a process of dividing up os activities which are necessary to any purpose and arranging them in group which are assigned to individual”.---- Urwick
Importance of Organization
• Good organization can continuously work for the growth and success of enterprise.
• The importance of organization can be judged from the following words of A. Carnagie, and American Industrialist: “Take away our factories, take away our trade, our avenues of transportation and our money. Leave nothing but our organization, and in four years we shall have re-established ourselves”.
• Good organization ensures co-ordination among the all members involved in organization.
• Sound organization allows organizational expansion.
• Proper organization facilities the effective use of the manpower and even other resources like material, money and even machines.
• Sound organization structure permits optimum use of technical and human resources.
Characteristics or Essential features of Organization
• Organization is a group of people, small or large.
• The group works under an executive leadership.
• Organization is a tool of management.
• It leads to division of work and responsibilities of employees.
• It establishes a relationship between authority and responsibility and controls the efforts of the group.
• Organization is a step towards the achievement of established goals.
Process of Organization (Steps in an Organization)
The important steps involved in the process of organization are:
1. Determination of objectives
They decide the purpose of the organization and what will be the nature of work to be accomplished through the organization.
2. Deciding various activities
• To achieve the objectives, the process of organization is divided into functions, sub-functions and further sub-functions to be performed by and individual.
• This avoids duplication, confusion and wastage of men, machine, money and material.
3. Grouping of activities
• Activities of similar nature are grouped under departments, sections or divisions.
• These may be grouped on the basis of use, coordination, policy and control etc.
• There may be different departments in an enterprise like Personnel, Finance, Purchase, Production, Sales etc.
4. Assignment of responsibilities of definite persons
• Specific job assignments are made to different subordinates for ensuring a certainty of work performance. Right man is put on the right job.
5. Delegation of Authority
It allows a person to work responsibly and gets freedom for decision making in critical stages. This increases the performance of the individual.
6. Providing physical facilities and proper environment
• Physical facilities can be machines, tools or any other equipment which helps to work. Good conditions of machines and tools motivate worker or other employees to work in proper time and methods.
• The second factor is proper environment. This includes proper arrangements of lighting, ventilation and heating or cooling.
Principles of Organization
The common principles of organization are
1. Consideration of objectives.
2. Relationship among basic components of the organization.
3. Responsibility and authority.
4. Span of Control.
5. Dividing and grouping work (including coordination).
6. Effective delegation.
7. Communication.
8. Line and staff relationships.
9. Balance, stability and flexibility.
Organizational Structure
• Any organization cannot work without people. Organization structure is the systematic arrangement of the people, working for the organization in order to achieve predecided goals.
• It is concerned with the establishment of positions (persons) and the relationships between positions.
• The structure provides an appropriate framework for authority and responsibility relationships between various positions.
• It is generally shown on an organization chart.
• The structure has two dimensions i.e. horizontal and vertical.
• The horizontal dimension defines the basic deparmentation. Departmentation is the process of division of the enterprise into different parts i.e. production, marketing etc.
• The vertical aspects of the structure relate to the creation of hierarchy of superiors and subordinates, leading to the establishment of managerial structure.
Types of Organization
There are different types of organization which are dependent on the following factors
i) Size of the organization.
ii) Nature of the product being manufactured.
iii) Complexity of the problems being faced.
Basically there are different types of organizational structures are available. Out of that few are listed below
1. Line, military or scalar organization.
2. Functional organization.
3. Line and staff organization.
4. Project Organization
1 Line, military or scalar organization
• It is the simplest form of organization structure
• It was called military organization because it resembled to olden military organizations.
• It is based upon relative authority and responsibility.
• The authority flows from Works Manager (WM) to Superintendent to foremen and from them to workers.
• It is direct and people at different level know to whom they are accountable.
• The immediate superior gives orders to the subordinates, assigns duties, dismisses and takes disciplinary action against them.
Advantages
• It is simple and easy to understand.
• It is flexible, easy to expand and contract.
• It makes clear division of authority.
• It encourages speedy action.
Disadvantages
• It neglects specialists.
• It requires a high type of supervisory personnel to meet the challenges imposed in the absence of specialists as advisors.
• Due to lack of specialization perhaps there is more wastage of materials and man-hours.
Application
Automatic and continuous process industries such as paper, sugar, textile, etc.
Functional Organization
• In the line organization, it is difficult to find all round persons qualified to work at middle management levels. Thus F.W.Tayolr suggested functional organization.
• It is also a line type organization with the difference that instead of one foreman there are eight functional foremen.
• Four of them located on the shop floor and remaining four in the office. But everyone having direct and equal authority over the workers.
• Each functional foreman who is specialist in an activity is incharge of one function, e.g.
1. Route Clerk or order of work and route clerk was incharge of issuing work orders and routing the jobs.
2. Instruction clerk would issue specifications and instructions related to jobs to the workers.
3. Time and cost clerk keeps records pertaining to the time(the workers have spent in doing work) and cost(i.e., worker’s wages etc.)
4. Disciplinarian keeps personal records of the workers and handles cases of insubordination.
5. Gang boss has the charge of the preparation of all work up to the time that the work piece is set in the machine.
6. Speed boss ensures that proper cutting tools are being used, cut is started at right place in the workplace and the optimum speeds, feeds and depths of cut are being employed.
7. Repair boss is responsible for adequate repairs and maintenance of equipment and machinery.
8. Inspector or Inspection boss looks after and is responsible for the quality of the product.
Advantages
Since a foreman is responsible for one function, he can perform his duties in a better manner.
It makes use of specialists to give expert advice to workers.
Expert guidance reduces the number of accidents and wastage of materials, man and machine hours.
Disadvantages
Coordination of the efforts of various functional foremen is difficult.
It is difficult to maintain discipline as each worker is responsible to eight foremen.
It is very difficult to fix up the responsibility to any one foreman in case something goes wrong.
Workers always remain confused about the authority and activity of each foreman.
Line and Staff Organization
The line organization gradually developed to shape as the line and staff organization.
As the industry grew in size and complexity, the line executives could not perform properly all other functions such as R & D, planning, distribution, legal public relations, etc. Thus, special executives are required to assist line executives and they were known as staff.
The line executives retain supervisory authority and control over the work of their subordinates. The staff executives relieve line executives of certain specialized work and advise them on matters referred to them.
The final decision whether to accept and implement the recommendations of the staff executive remain in the hands of the line executive.
Advantages
Line executives are relieved of some of their loads and are thus able to devote more attention towards production.
Less wastage of material, man and machine hours.
Quality of product is improved.
Line executives can be made use of expert advice from specialist staff executives.
Disadvantages
Product cost will increase because of high salaries of staff executives.
There is confusion in case of functions are not clear.
Project Organization
• When an already existing organization finds it difficult to cope up with the new situations, then it decides to launch a project organization.
• In order to accomplish the project goals a separate division is created for each project.
• This organization is created when the project is big in size & subject to high standards of performance.
• It is solely responsive to thr planning, design, development, and production, evaluation of support of a single system or product.
• A project team is created consisting of specialists from different department of the existing organization. The activities of the project team are coordinated by the project manager.
Advantages
• It does not interfere with the existing organization.
• It provides concentrated attention that a complex project demands.
• It allows maximum use of specialists available in the enterprise.
Disadvantages
• Project manager has to deal with persons of varied nature and interest.
• Every one working in the existing organization is attracted to the projects.
• Decision-making is very difficult because there are unusual pressures from specialists from diverse fields.
• There may be conflicts among the specialists.
Departmentation
• When the size of an enterprise grows, the number of employees also increases. There is a limitation on the number of persons an enterprise can manage directly. Thus enterprise uses the device of departmentation.
• Departmentation is the process of breaking down an enterprise into various departments.
• Is very essential process because it limits the number of subordinates to be supervised by a manager. Otherwise it would have been very difficult to manage a team of large number of subordinates by a single superior.
• A department is a work group combined together for performing certain functions of similar nature.
• Thus, the process of division of the enterprise into different parts is broadly called departmentation or departmentalization.
Advantages
• Since everyone knows precisely his duties and authority, the efficiency of the enterprise increases.
• As jobs are well defined and responsibilities well clarified, it is easy to fix accountability for the results.
• It provides a basis on which top manatgement can coordinate the activities of different departments.
Methods of Departmentation
There are two methods of Departmentation namely
a) By function and b) By product
a) By Function
• In this method the activities of the organization are divided into the primary fuctions to be performed- manufacturing, marketing, engineering, research and development, employee relations and finance.
• This arrangement has the advantage of the specialization and concentration of similar activities within a departmental unit.
• Examples are, Hospitals, government agencies.
b) By Product
• It is important for large and complex organizations.
• Under this category, large organizations have major product divisions with substantial autonomy.
• In departmentalization by product, product lines are segregated and each product line has its own manager, its own manufacturing, selling etc.
• For example, an automobile industry.
Advantages
• Each product division could be considered as a viable profit center for accountability purposes. It is easier to evaluate the performance of each product line.
• The problem of coordination as present in departmentalization is removed here.
Disadvantages
• It increases management cost.
• High cost of operation prevents the small and medium size concerns.
C) By Customers or Markets
• Sales is the exclusive field of its applications.
• Sales activities are often splits into several parts.
• When the products are offered to an extensive markets through numerous channels and outlets, it has the special merit of supplying goods according to the peculiar needs of customers.
D) Departmentalization by Process
• The manufacturing activities may be sub-divided on the basis of their process of production.
• Similar machines such all lathes, all drilling machines, all shapers etc. are grouped into separate sections. Each kept at one place as use for a distinct operation on the job.
• This arrangements works already for job order and is unsuitable mass production.
Authority and Responsibility
Authority:
• “Authority is a right to give orders and power to exact obedience.”-Henry Fayol
• “Authority is the power to command others, to act or not to act in a manner deemed by the possessor of the authority to further enterprise or departmental purpose”.- Koontz O, Donnell.
• “Right to decision and command”-Davis.
Characteristics of Authority
It is a set of rights given to the managers to facilitate them in discharging there responsibility.
Authority originates from the top and it travels down the line through the process of delegation.
It is a key to managerial functions.
It creates relationship of superior and subordinate.
It may be centralized or decentralized.
Three Kinds of Authority
Rational-Legal Authority-Legal authority is derived by a position holder from rules, regulations, policies, practices and norms laid down for the systematic functioning of organization.
Traditional authority- Derived from tradition and not obtained by competence. For example, the eldest son of a king will succeed to the throne because of age old tradition.
Charismatic Authority – It depends upon the special or exceptional powers or qualities of individual leaders.
Delegation of Authority
The most important of all the skills a manager must possess is delegation. It is the ability to get results through others.
It is defined as the entrustment of responsibility and authority to another and the creation of accountability for performance.
Principles of Delegation
Authority and Responsibility must be equal.
Responsibility should be specific on a specific person.
Any kind of communication like work orders, instructions flow to a subordinate from a single particular executive only
Duties and responsibilities should not overlap.
Responsibility
Responsibility means accountability. It is the obligation of a subordinate to his boss to do a work given to him.
Lines of responsibility should be made very clear in order to facilitate ready flow of communication and control.
Authority and responsibility must go together if the goals of the organization are to be achieved efficiently and effectively.
Whenever an employee is made responsible to accomplish a particular task, he must be given due authority also to control and direct efforts towards completing the task.
When an employee is authorized to take up a job, he is held responsible for its performance also.
Centralization
In this organization all decision making authority is retained by top management.
Henry Fayol defined it as “everything that goes to increase importance of subordinate’s role is decentralization, everything which goes to reduce it is centralization.”
Centralization of authority facilitates unified and single minded direction for activities performed by the employees.
Advantages
Unified and single minded direction.
Simple organizational structure with only two broad levels.
More powerful top management.
Effective leadership by top management.
Disadvantages
Extra burden of work on the top management.
Ineffective use of authority by the top management.
Unbalanced structure of the organization
Low motivation and morale.
Decentralization
It is contrast to Centralization. In decentralized organization, authority is partially pushed down through the line of authority up to supervisory level.
It implies delegation of power and authority from higher to lower levels of the organization.
In such organization the top management retains adequate authority for making strategic planning, directing and controlling.
It implies centralize planning and control with decentralized operations and performance.
Advantages
Reduction in top management work load.
prompt decisions and actions.
effective communication
High motivation and morale.
Disadvantages
Reduced top management control.
Increased cost.
Lack of Coordination.
Communication gap.
Lack of proper balance between centralization.
Span of Control or Management
It refers to that number of subordinates whose work can be managed by the superior at a time efficiently.
It can also be defined as the number of subordinates who report directly to the managers.
An executive should not have more subordinates looking to him for guidance than he can reasonably be expected to serve.
If the span is small, an executive may tend to over supervise and may do even spoon feeding to his subordinates.
If the span is large, the executive may not be able to supervise his subordinates efficiently.
Span of control even for the same nature of job varies from executive to executive and depends upon his capacity to guide and work.
Ownership
To start a business enterprise, it required the capital.
If it is provided by single individual then it is Individual Ownership, or Individual Proprietorship
If it is supplied by two or more persons, it refers to partnership organization.
I it is provided by many persons in the form of shares to an institute with a legal entity, then it is Joint stock company
Ownership when applied to an industrial enterprise means title to and possession of the assets of the enterprise, the power to determine the policies of operation and the right to receive.
Types of Ownership
Single ownership (Private undertaking)
Partnership
Joint Stock Companies
Cooperative organization
State and central Government owned
Single Ownership
When an individual exercises and enjoys the rights in his own interest then it is a single ownership.
A business owned by one man is called as single ownership.
e.g. Printing press, auto repair shop, wood working plant, service industries and small engineering firms.
Advantages
1. Simplicity of organization.
2. Owner is free to make all decisions.
3. The owner enjoys all the profit.
Disadvantages.
1. The owner is liable for all obligations and debts of the business.
2. The business may not be successful if the owner has limited money.
3. Generally single ownership firm has limited life
Parternership
The individual owner may wish to associate with him more persons who have either capital to invest, or possess special skill and knowledge to make the existing business still more profitable. such a combination of individual traders is called partnership.
It is defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Kinds of Partner
Active partners who take active part in the management of the business enterprise.
Sleeping partners who do not take any active part in the conduct of the business
Types
General Partnership
Limited Partnership
General Partnership
In this each partner has full agency powers and may bind the partnership by any act i.e. each partner may act as an individual Proprietor.
As the partner grows or personnel changes occur, additional partners can be had with the consent of all old partners.
Advantages
Large capital is available to the firm.
The firm possesses much better talents, judgment and skills.
Incentive for success is high.
Partners have full control of the business and possess full rights to all profits.
Disadvantages
Each partner has unlimited liability for the debts of the firm.
Authority being divided among the partners.
All partners suffer because of the wrong steps taken by one partner.
Applications
Law firms, Retail trade organization, medical clinics, small engineering firms, etc
Limited Partnership
It is an association of one or more general partners who manage the business and one or more limited partners have their liabilities limited to the amount of their investment.
It is easy and less costly to form and personal incentive to succeed is retained
Joint Stock Company
It is an association of individuals, called shareholders, who join together for profit and agree to supply capital divided into shares that are transferable for carrying on a specific business.
It consists of more than twenty persons for carrying any business other than the banking business.
These persons give a name to the company, mention the purpose for which it is formed, and state the nature and the amount of capital to be issued etc.
The managing body of a joint stock company is the Board of Directors elected by the share holders
Types
1. Private limited Company.
2. Public limited company.
1 Private limited Company
The capital is collected from the private partners; Some of them may be active while others being sleeping
The number of members is between 2 and 50, excluding employee and ex-employee shareholders.
The company need not circulate the Balance Sheet, Profit and Loss Account, etc among its members, but it should hold its annual general meeting and place such financial statements in the meeting.
A private company must get its accounts audited.
2. Public Limited Company
The capital is collected from the public by issuing shares having small face value
The number of shareholders should not be less than seven, but there is no limit to their maximum number.
This company has to issue a prospectus to the public.
There is no restriction on the transfer of shares.
Directors of the company are subject to rotation.
Advantages of Joint stock Company
A huge sum of money can be raised.
Shares are transferable.
Company’s life is not affected by the life of shareholders.
Risk of loss is divided among many shareholders.
Disadvantages
Company is managed by big shareholders only.
People can commit frauds with the company.
Board of directors and managers who remain familiar with the financial position of the company may sell or purchase shares for their personal profits.
Applications
Steel mills, Fertilizer factories and Engineering concerns, etc.
Cooperative Organization (OR Societies)
It is a form of private ownership which contains features of large partnership as well as some features of the corporation.
The main aim of the cooperative is to eliminate profit and provide goods and services to the members of the cooperative at cost.
There are shareholders, a board of directors and the elected officers similar to the corporation.
Different Forms:
1. Consumer’s Cooperatives, in retail trade and services.
2. Producer Cooperatives, for group buying and selling such items as dairy products, grain, fruit, etc.
3. Cooperative farming for more and good quality yield from the farms.
4. Cooperative housing for constructing and providing houses to the members of the association at relatively lesser rates.
5. Cooperative credit society, to provide loans to the needy individuals.
Advantages
Daily necessities of life can be made available at lower rates.
It promotes cooperation, mutual assistance and the idea of self help.
No one person can make huge profit.
Common man is benefited by cooperatives.
Disadvantages
Since the members of the cooperative manage the whole show, they may not be competent enough to make it a good success.
Conflict may arise among the members on the issue of sharing responsibility and enjoying authorities.
Members who are in position may try to take personal advantages.
Public Sector
A public enterprise is one that is Owned by the state, Managed by the state, or Owned and managed by the state.
The sector of public enterprises is popularly known as the Public Sector.
They are controlled by the Government either solely or in association with private enterprises.
They are controlled and operated by the Government to produce and supply goods and services required by the society.
Objectives of Public Sector
To provide basic infrastructure facilities for the growth of economy.
To have balanced regional development and even dispersal of economic activity throughout the country.
To avoid concentration of economic power in few hands.
To create employment opportunities on an increasing scale.
Merits
It helps in the growth of those industries which require huge amount of capital and which cannot flourish under the private sector.
It encourages industrial growth of under developed regions in the country.
Profits earned by public sector may be used for general welfare of the community.
It offers equitable employment opportunities to all.
Demerits
It can rarely attain the efficiency of a private enterprise.
Due to heavy administrative expenses, stat enterprises are mostly run at a loss leading to additional burden of taxation on the people.
Delay in decisions is a very common phenomenon in public enterprises.
Incompetent persons may occupy high levels.
Private Sector
It serves personal interests and is non government sector.
Profit is the main objective.
It constitutes mainly consumer’s good industries where profit possibilities