E&SU Unit 3 - Management Practices PDF

Subject Name: E&SU Unit No: 3 Subject Code: 4300021 UNIT 3 : Management Practices 1. Industry, Commerce and Business Industry focuses on the production and processing of goods. Commerce involves the exchange and trade of good...

Subject Name: E&SU Unit No: 3 Subject Code: 4300021 UNIT 3 : Management Practices 1. Industry, Commerce and Business Industry focuses on the production and processing of goods. Commerce involves the exchange and trade of goods and services. Business encompasses all activities involved in the production, distribution, and management of goods and services. ➔ Explain the concept and differences between industry, commerce and business.  Industry: Industry refers to the economic activities involved in the procurement or extraction of raw materials and the conversion of these materials into finished products that are then sold to the final customer. It involves manufacturing, production, and processing of goods using mechanical appliances and technical skills. Examples of industries include mining, agriculture, manufacturing, construction, and so on. Industry is focused on the supply side of the market , where raw materials are transformed into useful goods.  Commerce: Commerce refers to the exchange or trade of goods and services between individuals, businesses, or countries. It involves activities such as buying, selling, and distribution of goods and services. Commerce includes various activities such as transportation, warehousing, advertising, marketing, and retailing. Commerce facilitates the movement of goods from producers to consumers, ensuring that products reach their intended markets.  Business: Business is a broader term that encompasses both industry and commerce. It refers to any activity or enterprise engaged in the production or distribution of goods and services with the goal of making a profit. Business includes activities such as planning, organizing, financing, marketing, and managing operations. It can involve industry-specific operations or commercial activities, or a combination of both. Business can be conducted by individuals, partnerships, corporations, or other organizational entities. Prepared By: Department of Mechanical Engineering Page 1  Subject Name: E&SU Unit No: 3 Subject Code: 4300021 2. Types of ownership in the organization -Definition, Characteristics, Merits & Demerits  Types of Business Ownership: ★ Sole Proprietorship ★ Partnership ★ Limited Liability Company (LLC) ★ Private Corporation ★ Cooperative  Sole Proprietorship: Definition: A sole proprietorship is a business owned and operated by a single individual. The owner has complete control and responsibility for the business. Characteristics: The sole proprietor provides all the capital and resources. The owner receives all the profits and bears all the losses. The business is not a separate legal entity from the owner. Merits: Easy to start and dissolve. Complete control and decision-making power. Minimal legal formalities and low operating costs. Demerits: Unlimited personal liability for business debts. Limited capacity for raising capital. Lack of continuity in case of the owner's absence or death.  Partnership: Definition: A partnership is a business owned and operated by two or more individuals who share the profits, losses, and responsibilities. Characteristics: Partners contribute capital, skills, and resources. Profits and losses are shared according to the agreed-upon ratio. Partners have joint decision-making authority. Merits: Shared financial burden and risk. Combined skills and expertise. Relative ease of formation and dissolution. Demerits: Unlimited personal liability for partnership debts. Potential for disputes and conflicts between partners. Lack of continuity if a partner leaves or dies.  Corporation: Prepared By: Department of Mechanical Engineering Page 2  Subject Name: E&SU Unit No: 3 Subject Code: 4300021 Definition: A corporation is a legal entity separate from its owners (shareholders). It has its own rights, liabilities, and obligations. Characteristics: Shareholders own shares in the company and elect a board of directors. Limited liability for shareholders. The company has perpetual existence. Merits: Limited personal liability for shareholders. Ability to raise large amounts of capital through the sale of shares. Continuity of the business even if shareholders change. Demerits: Complex legal formalities and regulations. Double taxation (corporate and individual). Less control for individual shareholders.  Limited Liability Company (LLC): Definition : An LLC is a hybrid entity that combines elements of a corporation and a partnership. It provides limited liability to its owners (members). Characteristics: Members have limited liability for the company's debts. Flexible management structure. Pass-through taxation (profits and losses flow through to the members). Merits: Limited personal liability for members. Flexible management and operating structure. Pass-through taxation. Demerits: More complex to set up compared to a sole proprietorship or partnership. Varying regulations and requirements by jurisdiction. Potential for disputes among members.  Cooperative Type Organization: Definition : A cooperative type organization is an association of individuals or businesses who voluntarily come together to pursue common economic, social, or cultural goals. In a cooperative, members pool their resources and efforts to collectively own and operate the organization. The main objective of a cooperative is to serve the mutual interests and benefit of its members rather than maximizing profits for external shareholders. Characteristics: Voluntary Association: Individuals with a common interest can join and leave the cooperative voluntarily. Prepared By: Department of Mechanical Engineering Page 3 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 Democratic Control: Members have a say in the decision-making process and participate in the management of the cooperative through voting and elected representatives. Limited Return on Investment: Cooperative members receive limited returns on their investment, usually in proportion to their participation or usage of the cooperative's services. Open Membership: Cooperatives are typically open to all individuals or businesses who can benefit from their services, without discrimination. Service Orientation: The primary focus of cooperatives is to provide goods, services, or support to meet the needs of their members. Mutual Assistance: Members collaborate and support each other, sharing risks and benefits. Distribution of Surplus: Any surplus generated by the cooperative is distributed among the members based on their level of participation or usage. Merits : Equal Participation: Members have equal voting rights and an equal say in decision-making, ensuring democratic control. Economic Benefits: Cooperatives can provide economic benefits to members through collective bargaining power, cost savings, and access to resources. Social Welfare: Cooperatives often focus on meeting the social and economic needs of their members, contributing to community development. Member Satisfaction: Members have a sense of ownership and control over the organization, leading to higher satisfaction. Risk Sharing: Members share risks and liabilities, reducing individual financial burdens. Demerits : Limited Capital: Cooperatives may face challenges in raising capital due to limited investment from members. Decision-Making Challenges: Achieving consensus among members can be time-consuming and challenging. Dependency on Members: The success of a cooperative relies heavily on member participation and engagement. Lack of Expertise: Cooperatives may face difficulties in accessing specialized skills or expertise. Potential for Conflict: Disagreements among members or conflicts of interest can arise, affecting the functioning of the cooperative. Prepared By: Department of Mechanical Engineering Page 4 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 3. Different Leadership Models Different leadership models can vary in their approach and emphasis on different aspects of leadership. Here are some examples of different leadership models: Trait-based models: These models focus on identifying specific traits or characteristics that are believed to be associated with effective leadership. Traits such as confidence, intelligence, charisma, and determination are often considered in these models. Behavioural models: These models focus on the behaviours and actions of leaders rather than their inherent traits. They examine how leaders interact with their teams, communicate, make decisions, and solve problems. The emphasis is on identifying specific behaviours that lead to effective leadership. Situation-based models: These models recognize that effective leadership may vary depending on the situation. They consider factors such as the characteristics of the followers, the nature of the task, and the context in which leadership is taking place. Models like the Hersey-Blanchard Situational Leadership Model and the Path-Goal Theory fall under this category. Transformational leadership: This model emphasises the leader's ability to inspire and motivate their followers to achieve higher levels of performance. Transformational leaders are known for their vision, charisma, and ability to create a positive and empowering work environment. Transactional leadership: This model focuses on the exchange relationship between the leader and their followers. Transactional leaders provide rewards and incentives to motivate their followers to achieve specific goals. They emphasise clear expectations, performance monitoring, and feedback. Servant leadership: This model emphasises the leader's role as a servant to their followers. Servant leaders prioritise the needs and well-being of their followers and aim to support their growth and development. Authentic leadership: This model emphasises the leader's ability to be genuine, self-aware, and true to their values. Authentic leaders inspire trust and create a sense of purpose and meaning for their followers. Distributed leadership: This model recognizes that leadership is not limited to a single individual but can be distributed across a team or organisation. It emphasises collaboration, shared decision-making, and the empowerment of team members. Prepared By: Department of Mechanical Engineering Page 5 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 4. Functions of Management- Merits & Demerits  Functions of Management 4.1 Planning 4.2 Company’s Organization Structure 4.3 Directing 4.4 Controlling 4.5 Staffing- Recruitment and management of talent. Planning: Planning means figuring out what the organization wants to achieve and how to do it. It involves setting goals, analyzing the current situation, and making plans to reach those goals. Company's Organization Structure: This refers to how the company is set up. It determines who does what and how they work together. It's like a map that shows who reports to whom and how tasks are divided. Directing: Directing involves guiding and motivating employees to do their best work. It means providing clear instructions, giving feedback, and creating a positive work environment. Controlling: Controlling means checking if things are going as planned and taking action if they're not. It involves measuring performance, comparing it with goals, and making corrections if necessary. Staffing : Recruitment and Management of Talent: Staffing is about finding and managing the right people for the organization. It includes hiring new employees, training them, and making sure they have the skills and support they need to succeed.  Merits & Demerits of Functions of Management  Planning: Merits: Provides a roadmap for achieving organizational goals. Helps in coordinating and aligning efforts across different departments. Enhances decision-making by considering various factors and alternatives. Demerits: Can be time-consuming and may lead to overplanning. Plans may become irrelevant in dynamic and unpredictable environments. Limited flexibility to quickly adapt to changes. ➔ Company's Organization Structure: Merits: Clarifies roles, responsibilities, and reporting relationships. Facilitates efficient communication and coordination. Prepared By: Department of Mechanical Engineering Page 6 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 Enhances specialization and division of labor. Demerits: Can lead to bureaucracy and slow decision-making. May create insulation among staff and hinder collaboration. Difficult to change and adapt in a rapidly changing environment. ➔ Directing: Merits: Provides guidance and motivation to employees. Facilitates effective communication and feedback. Helps in aligning individual and organizational goals. Demerits: Overemphasis on control and micromanagement. Lack of empowerment and autonomy for employees. Ineffective leadership styles can demotivate employees. ➔ Controlling: Merits: Ensures that activities are in line with plans and goals. Facilitates performance evaluation and improvement. Helps in identifying and addressing deviations and problems. Demerits: Excessive control can stifle creativity and innovation. Overemphasis on control may lead to a negative work environment. Difficult to measure and control intangible aspects like employee morale. ➔ Staffing - Recruitment and Management of Talent: Merits: Attracts and selects the right candidates for the organization. Builds a diverse and skilled workforce. Enhances employee engagement and retention. Demerits: Recruitment process can be time-consuming and expensive. Challenges in finding the right fit for specific roles. Managing a diverse workforce requires effective communication and cultural sensitivity. Prepared By: Department of Mechanical Engineering Page 7 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 5. Financial organization and management Financial Organization and Management ○ Financial organization and management involves the planning, organizing, directing, and controlling of financial resources within an organization to achieve its financial goals and objectives. It encompasses various activities related to the acquisition, allocation, and utilization of funds in order to maximize profitability and ensure financial stability.  Objectives of Financial Management The objectives of financial management can vary depending on the organization, but they generally include the following: Availability of Sufficient Funds: Financial management aims to ensure that the organization has access to adequate funds to meet its operational and investment requirements. This involves managing cash flow, optimizing working capital, and securing external financing when needed. Maximizing Shareholder Wealth: Financial management focuses on maximizing the value of the organization for its shareholders. This includes increasing profitability, enhancing the return on investment, and making sound investment decisions. Financial Control: Financial management involves establishing control systems to monitor and evaluate the financial performance of the organization. This includes setting financial targets, implementing budgetary controls, and conducting financial analysis and reporting. Risk Management: Financial management aims to identify and mitigate financial risks faced by the organization. This includes managing liquidity risk, credit risk, market risk, and operational risk. It also involves implementing risk management strategies and financial safeguards to protect the organization's assets and interests.  Functions of Financial Management Financial management encompasses several key functions, including: Financial Planning: This involves forecasting and estimating the financial requirements of the organization and developing strategies to meet those requirements. It includes creating financial budgets, cash flow projections, and long-term financial plans. Capital Budgeting: Capital budgeting involves evaluating and selecting investment projects that will yield the highest returns for the organization. It includes analyzing potential investments, estimating their profitability, and determining their feasibility. Financial Analysis: Financial analysis involves assessing the financial performance of the organization through the interpretation of financial statements, ratio analysis, and other financial indicators. It helps in identifying strengths, weaknesses, and areas for improvement. Prepared By: Department of Mechanical Engineering Page 8 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 Working Capital Management: Working capital management focuses on managing the organization's short-term assets and liabilities to ensure smooth operations. It includes managing cash flow, inventory, accounts receivable, and accounts payable to optimize working capital efficiency. Risk Management: Risk management involves identifying and mitigating financial risks faced by the organization. This includes assessing and managing risks associated with investments, financing, and market fluctuations. Financial Reporting and Control: Financial reporting and control involve preparing and presenting financial statements, conducting internal audits, and ensuring compliance with financial regulations and accounting standards. It also includes implementing internal controls and procedures to prevent financial fraud and mismanagement. 6. Differences between Management and Administration  Management and Administration Management refers to the process of planning, organizing, directing, and controlling resources (including people, finances, and materials) within an organization to achieve specific goals and objectives. It involves coordinating and overseeing the day-to-day operations, making decisions, and ensuring the efficient use of resources. Administration, on the other hand, refers to the process of setting the overall direction and policies of an organization. It involves making strategic decisions, formulating plans, and establishing broad objectives. Administrators provide leadership, guidance, and vision to the organization, and they are responsible for allocating resources and making decisions that shape the long-term success of the organization. In summary, management focuses on the implementation and execution of plans and policies, while administration is concerned with strategic decision-making, policy formulation, and providing overall guidance to the organization.  Differences between Management and Administration Scope: Management focuses on the implementation of plans and policies, ensuring efficient and effective use of resources, and achieving specific objectives within the organization. Administration, on the other hand, is concerned with strategic decision-making, policy formulation, and setting the overall direction of the organization. Level of Activity: Management operates at the business and functional level, dealing with day- to-day operations and tasks. Administration operates at a higher level, overseeing the entire organization and making decisions that shape its long-term goals and direction. Prepared By: Department of Mechanical Engineering Page 9 Subject Name: E&SU Unit No: 3 Subject Code: 4300021 Responsibilities: Managers are responsible for supervising employees, coordinating activities, and ensuring the smooth functioning of their departments. They focus on executing plans and policies set by the administration. Administrators are responsible for formulating policies, setting goals, allocating resources, and providing overall guidance and direction to the organization. Hierarchy: Management represents the middle and operational levels of the organization's hierarchy, while administration represents the top layer. Administrators are typically owners, business partners, or high-level executives who make strategic decisions and provide overall leadership. Skills and Focus: Managers require skills such as leadership, communication, problem- solving, and decision-making to oversee day-to-day operations and achieve specific goals. Administrators require skills such as strategic thinking, visioning, policy development, and long-term planning to guide the organization and shape its future. Nature: Management is more focused on the implementation of plans and policies, dealing with operational issues, and achieving specific targets. Administration is more concerned with setting the overall direction, formulating policies, and making decisions that affect the organization's long-term success. ASSIGNMENT : UNIT 3 Q 1. Explain the concept and differences between industry, commerce and business. Q 2. Types of ownership in the organization and explain any three in detail. Q 3.Write short note on Cooperative Type Organization. Q 4.Explain Different Leadership Models. Q 5. Give a list of Functions of Management and define all of them. Q 6. Write Merits & Demerits of controlling. Q 7.what are the Objectives of Financial Management ? Q 8.Give Differences between Management and Administration. Prepared By: Department of Mechanical Engineering Page 10