Summary

This document details the 7 functions of management. It provides an overview and definitions of each function, such as planning, organizing, staffing, and more. It discusses aspects of each function in a general way and includes keywords.

Full Transcript

7 FUNCTIONS OF MANAGEMENT development of individuals as capable employees. - McFarland ​ Importance of Staffing:...

7 FUNCTIONS OF MANAGEMENT development of individuals as capable employees. - McFarland ​ Importance of Staffing: 1.​ PLANNING ➔​ Filling the organizational positions. -​ Determining the long and short term ➔​ Developing competencies to challenges. objectives (ends) of the institution or unit ➔​ Retaining personnel professionalism. and the actions (means) that must be ➔​ Optimum utilization of the human taken to achieve these objectives. resources. ​ Purpose of Planning ​ Staffing Process: ➔​ It gives direction to the organization. ➔​ Analyzing manpower requirements - it is ➔​ It improves efficiency. making an analysis of work and ➔​ It eliminates duplication of efforts. estimating the manpower requirement to ➔​ It concentrates resources on important accomplish the same. services. ➔​ Recruitment - it is identifying and ➔​ It reduces guess work. attracting capable applicants for ➔​ It improves communication and employment. it ends with the submission coordination of activities. of an application by the aspirants. Establish Objectives ➔​ Selection - it is choosing the fit ➔​ Every plan has the primary purpose of candidates from the application received helping the organization succeed in the process of recruitment. through effective management. Success ➔​ Placement - this may be on probation is defined as achieving organizational and on successful completion of the objectives. These are performance same the candidate may be offered targets, the end results that managers permanent employment. seek to achieve. ➔​ Training and Development - it is Characteristics of Objectives: concerned with imparting and ➔​ Well-defined objectives have several developing specific skills for a particular characteristics. They are: purpose. ​ Specific ➔​ Performance Appraisal - systematic ​ Measurable Realistic and evaluation of personnel by superiors or Challenging others familiar with their performance so ​ Defined time period as to rank employed to ascertain their 2.​ ORGANIZING eligibility for promotions. -​ Organizing may be defined as the 4.​ COMMUNICATING arranging of component parts into -​ Transmitting information and ensuring a functioning wholes. The purpose of transparent understanding among organizing is to coordinate activities so individuals within the organization are that a goal can be achieved. crucial for effective communication. -​ The terms “planning” and “organizing” Moreover, fostering clear are often used synonymously. In the communication channels promotes managerial, planning is the collaboration, aligns goals, and determination of what is to be enhances overall organizational accomplished, and organizing is the efficiency. determination of how it will be ​ Key Activities: accomplished. However, most authors ➔​ Sharing goals, providing feedback, and still describe the two processes with facilitating open and effective considerable overlap. communication channels are vital There are six steps in the organizing process: components of successful collaboration. ➔​ Establish overall objectives. Additionally, these actions foster a ➔​ Formulate supporting objectives, collaborative environment that policies, and plans. encourages teamwork and innovation. ➔​ Identify and classify activities necessary 5.​ MOTIVATING to accomplish the objectives. -​ Motivation is an important factor which ➔​ Group the activities in light of the human encourages persons to give their best and material resources available and performance and help in reaching the best way of using them under the enterprise goals. A strong positive circumstances. motivation will enable the increased ➔​ Delegate to the head of each group and output of employees but a negative the authorities necessary to perform the motivation will reduce their performance. activities. According to Likert: ➔​ Tie the groups together horizontally and -​ “It is the core of management which vertically, through authority shows that every human being gives relationships, and information systems. him a sense of worth in face-to-face 3.​ STAFFING groups which are most important to him. -​ In the simplest terms, staffing in A supervisor should strive to treat management is “putting people to job.” individuals with dignity and a recognition -​ Staffing is the function by which of their personal worth.” managers build an organization through Motivation plays a crucial role in enhancing the recruitment, selection, and organizational performance by: ➔​ Improving Performance - motivation their best to achieve organizational boosts both the ability and willingness to goals. work, which are essential for efficiency. ➔​ Coordination - effective leaders while education and training build skills, reconcile personal interests with motivation is key to willingness, organizational goals, ensuring influencing performance more coordination and alignment for overall significantly. success. ➔​ Changing Negative Attitudes - 7.​ CONTROLLING managers use motivation to shift -​ Controlling is one of the important employees’ negative or indifferent functions of a manager. In order to seek attitudes by offering raises or praise, planned results from the subordinates, a depending on the employees’ needs manager needs to exercise effective and financial conditions. control over the activities of the ➔​ Reducing Employee Turnover - subordinates. motivation helps retain employees, -​ In other words, the meaning of reducing turnover and saving time and controlling function can be defined as costs associated with recruitment and ensuring that activities in an training. organization are performed as per the ➔​ Decreasing Absenteeism - motivated plans. Controlling also ensures that an employees are less likely to be absent, organization’s resources are being used as a positive work environment makes effectively and efficiently for the them enjoy their workplace. achievement of predetermined goals. ➔​ Reducing Resistance to Change - Process of Controlling: motivation helps employees accept and adapt to organizational changes, improving their performance and enthusiasm for new processes. 6.​ LEADING / DIRECTING -​ Leadership is a process by which an executive can direct., guide, and influence the behavior and work of others towards accomplishment of specific goals in a given situation. ​ Step I: Establishment of Standards Leadership is the ability of a manager to ​ Standards are the benchmarks or induce the subordinates to work with criteria against which actual confidence and zeal. performance is measured. -​ Leadership is a vital management ​ These standards may include financial function aimed at maximizing efficiency goals, production targets, quality levels, and achieving organizational goals. deadlines, or any other measurable ​ Characteristics of Leadership: outcomes. ➔​ It is an interpersonal process in which a ​ This step ensures clear expectations are manager is into influencing and guiding set for organizational processes. workers towards attainment of goals. Step II: Measurement of Actual Performance ➔​ It denotes a few qualities to be present ​ In this step, the actual performance of in a person which includes intelligence, individuals, teams, or departments is maturity, and personality. measured against the pre-established ➔​ It is a group process. It involves two or standards. more people interacting with each other. ​ Measurement can be done through ➔​ A leader is involved in shaping and reports, observations, feedback, or other moulding the behavior of the group data collection methods. towards accomplishment of Step III: Comparison of Actual Performance with organizational goals. Standards ➔​ Leadership is situation bound. There is ​ Here, the actual performance is no best style of leadership. It all compared to the set standards. depends upon tackling the situation. ​ The comparison identifies any ​ Importance of Leadership: deviations or gaps between what was ➔​ Initiating Action - leaders start the work planned and what was achieved. by communicating policies and plans to Step IV: Corrective Action if Necessary subordinates, initiating the work ​ If deviations are detected, corrective process. actions are taken to address and ➔​ Motivation - leaders play an incentive resolve the discrepancies. role, using economic and non-economic ​ Corrective actions could include rewards to motivate employees and changes in processes, training, ensure productivity. adjustments in goals, or disciplinary ➔​ Providing Guidance - leaders supervise actions. and instruct subordinates on how to ​ Feedback is then provided to improve perform tasks effectively and efficiently. future performance and ensure ➔​ Building Morale - leaders boost morale alignment with standards. by gaining employees’ trust and Feedback Loop cooperation, ensuring they perform at ​ Feedback connects the corrective ➔​ Universal validity - Management also contains actions and the establishment of some fundamental principles which can be standards to continuously improve the applied universally like the Principle of Unity of process. Command i.e. one man, one boss. This principle ​ This loop ensures that the system is is applicable to all types of organization - dynamic and adapts to changes over business or non business. time. ➔​ Cause and Effect Relationship - The same is true for management, therefore it also MANAGEMENT AS AN ART establishes cause and effect relationship. Similarly if workers are given bonuses, fair wages they will work hard but when not treated Art implies application of knowledge and skill to trying in fair and just manner, reduces productivity of about desired results. An art may be defined as a organization. personalized application of general theoretical principles for achieving best possible results. Art has the following characters: MANAGEMENT AND ADMINISTRATION ➔​ Practical Knowledge - like any art, management requires practical application of theoretical MANAGEMENT principles. a manager must know how to apply -​ Management is the act of managing people and management principles effectively in real-life their work for achieving an organization’s goal situations beyond just academic qualifications. using its resources. ➔​ Personal Skill - management is personalized, as -​ Management is a low and mid-ranked function, it each manager has their own style based on their works for the low, medium, and top levels knowledge, experience, and personality. this organizational needs of an enterprise. leads to variations in the success and quality of -​ It mainly has control over business concerns. managers. ➔​ Creativity - management, like any art, involves ADMINISTRATION creativity. managers combine human and -​ Administration is an organized process of non-human resources innovatively to achieve administering the management of an desired outcomes and create effective solutions. organization. ➔​ Perfection through Practice - managers, like -​ Administration is a high-ranked function, it artists, become proficient through practice. entirely manages the overall management Experience and the application of management activities and demands of a company with principles over time lead to skill improvement proper planning and organizational resources. and mastery. -​ It has control over the government or national ➔​ Goal-Oriented - management, being sectors. result-oriented, focuses on achieving specific Administration and management are both a significant goals. managers utilize resources like people, function of any organization. money, materials, machinery, and methods to ➔​ Without management, no organization. promote organizational growth and success. ➔​ Without administration - no management. Thus, we can say that management is an art, therefore, it requires application of certain principles rather it is an SYSTEMS APPROACH TO MANAGEMENT art of highest order because it deals with moulding the attitude and behavior of people at work towards desired The systems approach to management is a holistic way goals. of understanding and managing an organization by viewing it as an interconnected and interdependent MANAGEMENT AS A SCIENCE system. It emphasizes that all parts of an organization must work together effectively to achieve the Science is a systematic body of knowledge pertaining to organization’s goals. a specific field of study that contains general facts which ➔​ Organization as a System explains a phenomenon. It establishes cause and effect ◆​ An organization is seen as a system relationship between two or more variables and composed of interconnected parts underlines the principles governing their relationship. (subsystems), such as departments, These principles are developed through scientific teams, and processes, which work methods of observation and verification through testing. together to achieve organizational goals. Main Characteristics: ◆​ These subsystems include the input, ➔​ Systematic body of knowledge - It cannot be process, output, and feedback denied that management has a systematic body components. of knowledge but it is not as exact as that of ➔​ Interdependence other physical sciences like biology, physics, and ◆​ All parts of the system are chemistry etc. The main reason for the interdependent, meaning a change in inexactness of science of management is that it one part affects the entire system. deals with human beings and it is very difficult to ◆​ For example, a production issue in one predict their behavior accurately. department might impact sales, ➔​ Principles are based on experiment - customer service, and overall Management principles are also based on performance. scientific enquiry & observation and not only on ➔​ Input-Output Model the opinion of Henry Fayol. They have been ◆​ Inputs: Resources like labor, materials, developed through experiments & practical information, and capital. experiences of large no. of managers. ◆​ Processes: Activities that transform UNDERSTANDING GOODS AND SERVICES inputs into outputs. -​ A good is a physical product that you can see, ◆​ Outputs: Products, services, or touch, or possibly consume. Examples of goods outcomes delivered to customers or include: oranges, flowers, televisions, soap, stakeholders. airplanes, fish, furniture, coal, lumber, personal ◆​ Feedback: Information about the computers, paper, and industrial machines. system’s performance, which helps ➔​ A durable good is a product that improve future processes. typically lasts at least three years. ➔​ Open System Perspective Vehicles, dishwashers, and furniture are ◆​ Organizations interact with their external some examples of durable goods. environment (e.g., customers, ➔​ A non-durable goods is perishable and competitors, suppliers, and regulations). generally lasts for less than three years. ◆​ Environmental factors influence the Examples are toothpaste, software, organization, and the organization shoes, and fruit. adapts to these factors to remain -​ A service is any primary or complementary competitive. activity that does not directly produce a physical ➔​ Holistic View product. ◆​ The systems approach focuses on the organization as a whole rather than SIMILARITIES BETWEEN GOODS AND SERVICES isolating individual components. 1.​ Goods and services provide value and ◆​ This helps managers identify and solve satisfaction to customers who purchase and use problems more effectively by them. understanding how different parts of the 2.​ They both can be standardized or customized to organization interact. individual wants and needs. ➔​ Dynamic Nature 3.​ A process creates and delivers each good or ◆​ Organizations are not static; they evolve service, and therefore, OM is a critical skill. based on changes in internal and DIFFERENCES BETWEEN GOODS AND SERVICES external environments. 1.​ Goods are tangible while services are intangible. ◆​ The systems approach considers this 2.​ Customers participate in many service dynamic nature and promotes flexibility processes, activities, and transactions. in management. 3.​ The demand for services is more difficult to predict than the demand for goods. CONCEPTS OF OPERATIONS MANAGEMENT 4.​ Services cannot be stored as physical inventory. 5.​ Service management skills are paramount to a successful service encounter. WHAT IS OPERATION MANAGEMENT? 6.​ Service facilities typically need to be in close -​ It is the process of planning, organizing, and proximity to the customer. controlling operations to reach objectives 7.​ Patents do not protect services. efficiently and effectively. - Aldag and Stearns -​ Operations Management (OM) is the science ➔​ Service management integrates marketing, and art of ensuring that goods and services are human resources, and operations functions to created and delivered successfully to customers. plan, create, and deliver goods and services, -​ The principles of OM help one to view a and their associated service encounters. business enterprise as a total system, in which ➔​ A service encounter is an interaction between all activities are coordinated, not only vertically the customer and the service provider. throughout the organization, but also horizontally A broader definition is: across multiple functions. ➔​ Service encounters consist of one or more Operation Management (OM) in the workplace: moments of truth - any episodes, transactions, ➔​ Planning and Budgeting - representing the or experiences in which a customer comes into plastic card production area in all meetings, contact with any aspect of the delivery system, developing annual budgets and staffing plans, however remote, and thereby has an opportunity and watching technology that might affect the to form an impression. production of plastic credit cards. ➔​ Here, a service encounter includes the ➔​ Inventory Management - overseeing the impression an empty parking lot has on whether management of inventory for items such as the customer goes into a facility or the plastic bank cards, inserts such as interaction with other customers such as while advertisements, envelopes, postage, and credit waiting in line. card rules and disclosure inserts. ➔​ Scheduling and Capacity - daily to annual HOW GOODS AND SERVICES AFFECT OPERATIONS scheduling of all resources (equipment, people, MANAGEMENT ACTIVITIES inventory) necessary to issue new credit cards ​ Forecasting and reissue cards that are up for renewal, ➔​ Goods - forecasts involve longer-term replace old or damaged cards, and ones that are time horizons. manufacturers can use stolen. physical inventory as a buffer to mitigate ➔​ Quality - embossing the card with accurate forecast errors. forecasts can be customer information and quickly getting the aggregated over larger time frames card in the hands of the customer. (months, or weeks). ➔​ Services - forecast horizons generally DIFFERENCE OF GOODS AND SERVICES are shorter, and forecasts are more variable and time-dependent. forecasting must often be done on a -​ The management processes transcribe daily or hourly basis, or sometimes even the strategy and objectives and enable more frequently. the quality approach to pilot while ​ Facility Location ensuring its continuous improvement. ➔​ Goods - manufacturing facilities can be 2.​ CORE PROCESSES (VALUE-CREATION located close to raw materials, suppliers, labor, or customers/markets. PROCESSES) ➔​ Services - service facilities must be -​ These are the primary activities that located close to customers/markets for directly contribute to the production of convenience and speed of service. goods and services and deliver value to ​ Facility Layout and Design the customer ➔​ Goods - factories and warehouses can 3.​ SUPPORT PROCESSES be designed for efficiency because few, -​ Support processes contribute to the if any, customers are present. smooth running of other processes by ➔​ Services - the facility must be designed providing them with the necessary for customer interaction. resources, both tangible and intangible. ​ Technology These processes include maintenance, ➔​ Goods - manufacturing facilities use provision of equipment or human various types of automation to produce resources, control of documentation and goods. communication, metrology, etc. ➔​ Services - service facilities tend to rely on information-based hardware and software. ​ Quality ➔​ Goods - manufacturers can define clear, physical, and measurable quality standards and capture measurements using various physical devices. ➔​ Services - quality measurements must account for customer’s perception of service quality and often must be gathered through surveys or personal contact. ​ Inventory/Capacity ➔​ Goods - manufacturers use physical inventory as a buffer for fluctuations in demand. ➔​ The Loop (Customer Wants ↔ Customer ➔​ Services - service capacity is the Benefits) - it represents a feedback cycle where substitute for inventory. customer feedback influences value creation ​ Process Design processes, improving alignment with their ➔​ Goods - because customers have no needs. participation or involvement in ➔​ Integration of Processes - general management manufacturing processes, the processes oversees all activities, ensuring they are can be more mechanistic. cohesive, while support processes provide a ➔​ Services - customers usually participate foundation for operational success. extensively in service relation and delivery, requiring more flexibility and HISTORICAL DEVELOPMENT OF OM adaptation to special circumstances. ​ Job/Service Encounter Design ➔​ Goods - manufacturing employees require strong technical skills. ➔​ Services - service employees need more behavioral and service management skills. ​ Scheduling ➔​ Goods - scheduling revolves around movement and location of materials, parts, and subassemblies and can be accomplished at the discretion and for the benefit of the manufacturer. ➔​ Services - scheduling revolves around capacity, availability, and customer needs, often leaving little discretion for 1.​ 1960s: Focus on Cost and Efficiency the service provider. ➔​ Operations focused on minimizing costs and improving efficiency. THREE GENERAL TYPES OF PROCESSES ➔​ Characteristics: ◆​ Mass production became prevalent. 1.​ MANAGEMENT PROCESSES ◆​ Emphasis on ➔​ To finance the purchase of inventory manufacturing-based ➔​ To finance the purchase of major assets technology. FINANCING DAILY OPERATIONS ◆​ Focused on producing goods for -​ The day-to-day operations of the engineering local markets. firm will require funds to take care of expenses 2.​ 1970s: Focus on Quality as they come. Money must be made available ➔​ As competition increased, businesses for the payment of the following: began prioritizing quality to differentiate ➔​ Wages and Salaries their products. ➔​ Rent ➔​ Characteristics: ➔​ Taxes ◆​ Quality control and assurance ➔​ Power and Light became integral. ➔​ Marketing Expenses ◆​ Emphasis shifted to providing ➔​ Administrative Expenses consistent, reliable products. 3.​ 1980s: Focus on Customization and Design FINANCING THE FIRM’S CREDIT SERVICES ➔​ Customers started demanding products -​ It is oftentime unavoidable for firms to extend tailored to their preferences. credit to customers. If the engineering firm ➔​ Characteristics: manufactures products, sales terms vary from ◆​ Mass customization emerged, cash to 90-day credit extensions to customers. blending mass production with Construction firms will have to finance the individual customization. construction of government projects that will be ◆​ Companies focused on paid many months later. innovative designs and FINANCING THE PURCHASE OF INVENTORY flexibility. -​ The maintenance of adequate inventory is 4.​ 1990s: Focus on Time crucial to many firms. The purchase of adequate ➔​ Speed and responsiveness to market inventory, however, will require sufficient funding changes became a priority. and this must be secured. ➔​ Characteristics: FINANCING THE PURCHASE OF MAJOR ASSET ◆​ Just-in-time (JIT) production and lean manufacturing became -​ When top management decides on expansion, popular. there will be a need to make investments in ◆​ Reduction of lead times and capital assets like land, plant, and equipment. It quick delivery were is obvious that the financing of the purchase of emphasized. major assets must come from long-term 5.​ 21st Century: Focus on Service and Value sources. ➔​ The focus shifted from products to services and delivering overall value to THE SOURCES OF FUNDS customers. ➔​ Characteristics: To finance its various activities, the engineering firm will ◆​ Value maximization became have to make use of its cash inflows coming from critical. various sources, namely: ◆​ Integration of information-based ➔​ Cash sales technologies (e.g., ERP ➔​ Collection of Accounts Receivables systems). ➔​ Loans and Credits ◆​ Shift towards global markets ➔​ Sale of Assets and customer-centric a ➔​ Ownership Contribution ➔​ Advances from customers FINANCE FUNCTION SHORT-TERM SOURCES OF FUNDS -​ Short-term sources of funds are those with The finance function is an important management repayment schedules of less than one year. responsibility that deals with the “procurement and Collaterals are sometimes required by administration of funds with the view of achieving the short-term creditors. objectives of business.” If the engineer manager is Advantages of Short-Term Credits: running the firm as a whole, he must be concerned with ➔​ They are easier to obtain. the determination of the amount of funds required, when ➔​ Short-term financing is often less costly. they are needed, how to procure them, and how to ➔​ Short-term financing offers flexibility to the effectively and efficiently use them. borrower. The Finance Function: A Process Flow Disadvantages of Short-Term Credits: ➔​ Short-term credits mature more frequently. ➔​ Short-term debts may, at times, be more costly than long-term debts. Supplies of Short-Term Funds: ➔​ Trade Creditors DETERMINATION OF FUND REQUIREMENTS ➔​ Commercial Banks ➔​ Commercial Paper Houses Any organization, including the engineering firm, will ➔​ Finance Companies need funds for the following specific requirements: ➔​ Factors ➔​ To finance daily operations ➔​ Insurance Companies ➔​ To finance the firm’s credit services LONG-TERM SOURCES OF FUNDS -​ There are instances when the engineering firm b.​ Since repayments are done more often, will have to tap the long-term sources of funds. the risk of defaulting is greater. After the amount required is determined, a INCOME decision has to be made on the type of source to -​ The various sources of funds, when availed of, be used. will have their own individual effects in the net Long-term sources of funds are classified as follows: income of the engineering firm. When the firm ➔​ Long-term debts borrows, it must generate enough income to ➔​ Common stocks cover the cost of borrowing and still ve left with ➔​ Retained earnings sufficient returns for the owners. It is possible Long-term debts are sub-classified into term “loans” and that the owners were enjoying higher rates of “bonds.” return on their investment before borrowing was ➔​ Term Loans - a term loan is a commercial or made. industrial loan from a commercial bank. term loans have maturities of 2 to 30 years. CONTROL ➔​ Bond Loans - a bond is a certificate of -​ When new owners are taken in because of the indebtedness issued by a corporation to a need for additional capital, the current group of lender. It is a marketable security that the firm owners may lose control of the firm. If the sells to raise funds. since the ownership of current owners do not want this to happen, they bonds can be transferred to another person, must consider other means of financing. investors are attracted to buy them. TIMING TYPES OF BONDS: -​ The financial market has its ups and downs. ➔​ Debentures - no collateral requirement This means that there are times when certain ➔​ Mortgage Bond - secured by real estate means of financing provide better benefits than ➔​ Collateral Trust Bond - secured by stocks and other times. The engineer manager must bonds owned by the issuing corporation therefore choose the best time for borrowing or ➔​ Guaranteed Bond - payment of interest or selling equity. principal is guaranteed by one or more OTHER FACTORS individuals or corporations A.​ Collateral Values - are these assets available as ➔​ Subordinated Debentures - with an inferior claim collateral? over other debts B.​ Floatation Cost - how much will it cost to issue ➔​ Convertible Bonds - convertible into shares of bonds or stock? common stocks C.​ Speed - how fast can the funds required be ➔​ Bonds with Warrants - warrants are options raised? which permit the holder to buy stock of the D.​ Exposure - to what extent will the firm be issuing company at a stated price exposed to other parties? ➔​ Income Bonds - pays interest only when earned THE FIRM’S FINANCIAL HEALTH THE BEST SOURCE OF FINANCING In general, the objectives of engineering firms are as As there are various fund sources, the engineer follows: manager, or whoever is in charge, must determine which ➔​ To make profits for the owners source is the best available for the firm. To determine the ➔​ To satisfy creditors with the repayment of loans best source, Schall and Haley recommends the following plus interest factors must be considered; ➔​ To maintain the viability of the firm so that FLEXIBILITY customers will be assured of a continuous -​ Some fund sources impose certain restrictions supply of products or services, employees will on the activities of the borrowers. An example of be assured of employment, suppliers will be a restriction is the prohibition on the insurance of assured of a market, etc. additional debt instruments by the borrower. INDICATORS OF FINANCIAL HEALTH -​ As some fund sources are less restrictive, the -​ Tree basic financial statements that used in flexibility factor must be considered. In general, financial health of an engineering firm: however, short-term fund sources offer more 1.​ Balance Sheet flexibility than long-term sources. This is 2.​ Income Statement because after setting the debt, short-term 3.​ Statement of Changes in Financial borrowing may shift to other types of financing. Position Long-term borrowers are given this opportunity only after a longer period of waiting. CONCEPT OF MARKETING RISK -​ When applied to the determination of fund sources, risk refers to the chance that the WHAT IS THE MARKETING CONCEPT? company will be affected adversely when a -​ Marketing is a group of activities designed to particular source of financing is chosen. facilitate and expedite the selling of goods and -​ Generally, short-term debt “subjects the services. borrowing firm to more risk than does financing -​ The marketing concept states that the engineer with long-term debt.” This happens because of must try to satisfy the needs of his clients by two reasons; means of a set of coordinated activities. When a.​ Short-term debts may not be renewed clients are satisfied with what the company with the same terms as the previous offers. They continually provide business. one, if they can be renewed at all. MARKETING PRACTICES ➔​ Establishing franchises in selected areas and manufacturing companies Why use the Market Oriented Approach? can choose or adapt all of the above -​ It recognises the importance of all functional mentioned option areas. -​ Service companies like construction firms adapt -​ It lowers the risk of new G&S failing due to the modified versions. An example is the effective market research. engineer manager of a construction firm who -​ It is customer oriented as the product is viewed gives commission to whoever could negotiate a from a customer's perspective. construction contract for the firm. -​ Ongoing customer research and feedback is sought to ensure a product and when time is PROMOTION right to extend, remove or update a product. -​ Promotion is “communicating information MARKETING between seller and potential buyer to influence attitudes and behavior.” (McCarthy and -​ The business focuses on satisfying the needs of Perreault) the customer rather than on selling a product or -​ When engineer managers have products or service. services to sell they will have to convince their -​ “Customer comes first” buyers to buy from them. Before the buyer -​ This approach is based on 4 factors: makes the purchasing decision, however, he ➔​ Customer satisfaction must first be informed, persuaded, and ➔​ A total or integrated effort is required by influenced. The activity referred to, in this case, the organisation is called promotion. ➔​ Objectives are set ➔​ KPI’s that indicate whether objectives have been achieved PROMOTIONAL TOOLS AVAILABLE FOR PROMOTION THE ENGINEER AND THE FOUR P’S OF MARKETING 1.​ ADVERTISING -​ Nylen defines advertising as “a paid PRODUCT message that appears in the mass media for the purpose of informing or -​ Product includes tangible or intangible items and persuading people about particular its capacity to satisfy its specific needs. products, services, beliefs of action.” -​ The services provided by the engineer manager -​ The mass media referred to include will be evaluated by the client on the basis of television, radio, magazines, and whether or not his or her exact needs are met. newspapers. If the engineer manager When a competitor comes into the picture and wants to reach a large number of sells the same type of service, the pressure to people, he may use any of the mass improve the quality of the service sold will be media depending on his specific needs felt. When improvements are not possible and his budget. Each of the public “extras” or “bonuses” are given to clients. advertising carriers has their own PRIZE specific audiences and careful analysis -​ Prize refers to the money or other must be made if the engineering considerations exchanged for the purchase or manager wants to pick the right one. use of the product, idea, or service. Some 2.​ PUBLICITY companies use price as a competitive tool or as -​ The promotional tool that publishes a means to convince the customer to buy. news or information about a product, -​ When products are similar in quality and other service, or idea on behalf of a sponsor characteristics, price will be a strong factor on but is not paid for by the sponsor is whether or not a sale will be made. This does called publicity. The mass media is also not hold true, however, in the selling of services the means used for publicity. If the and ideas. This is because of the uniqueness of engineer manager knows how to use it, every service rendered or every idea plenerated. publicity is a very useful promotional PLACE tool. His message may be presented as -​ If every factor is equal, customers would prefer a news item, helpful information, or an to buy from firms easily accessible to them. If announcement. time is of essence, the nearest firm will be 3.​ PERSONAL SELLING patronized. It is very important for companies to -​ A more aggressive means of promoting locate in places where they can be easily the sales of a product or service is reached by their customers. Not every place is called personal selling. It refers to the the right location for any company. “oral representation in a conversation -​ When a company cannot be near the customers, with one or more prospective it uses other means to eliminate or minimize the purchasers for the purpose of making a effects of the problem some of these means are: sale.” ➔​ Hiring sales agent to cover specific -​ Personal selling may be useful to the areas marketing efforts of the engineer ➔​ Selling to dealers in particular areas manager. If, for instance, he is the ➔​ Establishing branches where customers general manager of a firm are located manufacturing spare parts, he may assign some employees to personally seek out spare parts dealers and big trucking companies to carry their product lines. 4.​ SALES PROMOTION -​ Any paid attempt to communicate with the customers other than advertising, publicity, and personal selling, may be considered sales promotion. This includes displays, contests, sweepstakes, coupons, trading stamps, prizes samples, demonstrations, referral gifts, etc. STRATEGIC MARKETING FOR ENGINEERS Companies, including those managed by engineer managers, must serve markets that are fitted to their capabilities. Under this set-up, the following steps are made: ➔​ Selecting a Target - A market consists of individuals or organizations, or both, with the desire and ability to buy a specific product or service. To maximize sales and profits, a company has the option of serving entirely or just a portion of its chosen market. Within the markets are segments with common needs and which will respond similarly to marketing action steps. ➔​ Selecting a target - An analysis of the various segments of the chosen market will help the company make a decision on whether to serve all or some of the segments. The segment or segments chosen become the target market. In selecting a target market, the following steps are necessary. 1.​ Divide the total market into groups of people who have relatively similar product or service needs. 2.​ Determine the profit potential of each segment. 3.​ Make a decision on which segment.

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