IB Business Management PDF

Introduction and history of business thinking In business administration, firms are the focus. They are complex identies, and they are seen as a system. These organizations are open systems, as there are intractions between their elements and the organization itself and its environment. There are tw...

Introduction and history of business thinking In business administration, firms are the focus. They are complex identies, and they are seen as a system. These organizations are open systems, as there are intractions between their elements and the organization itself and its environment. There are two aspects of business administration: Disciplines: Branches of knowledge that feed business administration 1. Engineering studies 2. Mathematics 3. Economics 4. Sociology 5. Psychology 6. Law Areas: Functional areas such as 1. Operations 2. Marketing 3. Human resource management 4. Accounting and financing processes 5. Innovation The business in context model It is a model created to portray the relationship between business activities and the context (dynamic). It is divided in three levels: STRATEGIC LEVEL In this level they are examined the management decisions, and the influence on those decisions, that determine the direction of business activities. ORGNISATIONAL LEVEL In this level they are examined issue grouped under the following headings: goals structure ownership size organizational or corporate culture ENVIRONMENTAL LEVEL In this level they are examined 5 factors that take place within the context of globalization: the economy the state technology labour cultural and istitutional differences Brief history of business development About 200 years ago most of the population (80%) lived and worked in the countryside and the remaining 20% lived in the cities. All the production relied on animals and human power. As a consequence of this groundbreaking event, the whole production system changed. The use of machine lead to a huge production growth and better living conditions. For this reason, many people moved from the countryside to the cities and strarted working in the factiories. This changed forced people to organize and new ways of business developed: Bureaucratic management Scientific management Human realtions System theory Network theory Overall, business thinking swings back and forth between emphasizing structural elements of organising or emphasizing behavioural elements of organising Bureacucratic management --> Max Weber Considered the father of bureaucracy, he analyzed the changes in the society due to the industrial revolution. Many things were different, but Weber noticed that a traditional authority kept alive. This concept of traditional authority included: Relationships Kinship (family) Tradition He stated that the traditional authoritive and the leadership concept did not change because it was always been that way. Overall, Weber criticizes the abuse of traditional authority: religion, race, sex, relation, family connection are all harmful features for the growth of any firms because each workers could not perform at his best. This particular behaviour, when decisions are guided by personal, family or group interests rather than universal principles or rules, is called particularism or favouritism. To tackle this rising issues, Weber displayed a more rational way of leadership and decision making named BUREAUCRATIC MANAGEMENT made up of 6 prininciples: Formal rules Hierarchy Authority linked to position (not to tradition) Division of labour Systematic pay/promotion system based on merit rather than connections Separation of work life and personal life The bureaucratic management received many critics over the years: "Rules for the sake of rules" --> people become too overwhelmed with rules that they forget the real companies goals Inflexibility of the rules --> when the context changes it hard to change the rules accordingly Bureaucratic management gives space for an informal covert particularism To sum up, bureaucracies are amongst the most inefficient organisational forms due to their tendency to apply RED TAPE, which is a symbol of inflexibility and covert particularims. A bureaucraitc approach fits routine tasks and an organic approach fits well with non-routine tasks Scientific management --> Frederick Taylor Frederick Taylor is considered the world's first management consultant. Industralization leaded to: Increase of scale of production Growth of overall production complexity Need for smarter management His worked focused on analysing the actual way of producing goods and he understood that employees did not work as efficiently as they could. For this reason the costs for the company were higher. To tackle this problem, Taylor developed the concept of SCIENTIFIC MANAGEMENT. In this system he presented the figure of the Homo Economicus (workers) --> is a rational calculating machine, who is narrowly self-interested, desires to posses wealth and he is mainly motivated by money. Features of Taylor's system: EFFICIENCY Standardisation of tasks Specialisation of tasks (managers included) Salary related to the worker's production SEPARATION OF THINKING AND DOING Planning and procedures Implemented via a management hierarchy Discipline of workers SCIENCE Scientific analysis of work Scientific selection of workers How the scientific management actually works: 1. Divide the work into simple movements 2. Study how the most skilled workers make the movements 3. Use the stopwatch to select the quickest method 4. Describe and record any movement with its time One of the greatest example of scientific management is the case of the workers Schmidt who decided to follow the Taylor's system. By doing so, he was able to increase his productivity and his salary accordingly. Moreover, the car industry decided to rely on this method. For istance, the company FORD improved production efficiency both using the assembly line and the scientific management. Some assuptions within the scientific managements are that men are rational and money is their main motivator. Therefore, as the wage increases the motivation follows increasing the efficiency (more work, more money). There are several disadvantages of this method: Less motivation of workers Physical limits of the things you can do Less experience of managers Less performance Human relations --> Elton Mayo Mayo admired Taylor's work but he found out many negative aspects that made people turned over. For istance the work was too repetitive, to solve this issue he introduced the rest breaks. He also conducte experiments to understand how light affects workers production and the result was very weird: all workers, indipendently from the brightness of presence of the light, improved their performance. The outcome of this experiment was --> it was not found any relations between light and productivity, but when employees were examined (observed) their productivity increased (Hawthorne effect). What increase productivity according to Mayo's experiment? Informal relations Social groups Effective informal leadership Participation Team spirit Overall, according to Mayo's theory motivation comes from social relationship a person has at work. Hence, humans are HOMO SOCIOLOGICUS instead of HOMO ECONOMICUS, as money is only a secondary motivator. Elton Mayo described organizations as social systems. However, other studies proved that the Hawthorne Effect was not valid as the behaviour of workers when they are observed or analyzed is not natural and, in most of the cases, more efficient. Systems theory --> Katz and Kuhn Katz and Kuhn displayed the complexity of organizations because of the influence of outside forces (contingency theory) and the organization growth itself. They saw organization as an open living organism that need to adapt to a changing environment. Feedback allows organization to grow The system approach: SYSTEM ----> THROUGHPUTS -----> OUTPUT Principle of system theory: PERMEABILITY information flow in and out through the boundaries of the organizations organizations have to be open because of the dynamic environment organizations have to be open in order to survive HOLISM (organizations have to be seen as a whole) organizations are more than the sum of tiny parts (as the scientific management stated) the different parts have to interact with each other to give feedbacks the whole organization system is made up of interconnected subsystems ENTROPY organizations have to mantain a certain balance, equilibrum (homeostatis). It refers to the notiont that a system tends to deteriorate, run down, move toward disorganization. EQUIFINALITY there is more than one best way to do things The contingency theory has no one-sided approach (it means that the theory does not prescribe a single universla method or strategy to manage or lead effectively) and has a broader persepctives than the scientific management. It argues that the environment determine's a firm's structure, and there must be a fit between the two. If the environment determines everything, then no managers would be needed. Network theory --> Mark Granovetter, Ron Burt This theory believes that organizations are network and not pyramid. It states that trust and culture keeps the network together, not procedures. It originated when demand for heterogenity increased, leading to growing international competition, turbulance and uncertainty. The firms that follows this theory are able to respond to changes in consumer demand due to higher flexibility. NETWORKS innovativeness manager facilitate trust (culture) horizontal relations PYRAMIDS efficiency managr direct bureaucratic rules vertical relations WEAK and STRONG bonds Kaizen and Keirutsu stand for the internal and external network of firms.