Principles of Business Administration BBA year 3.pptx

Principles of Business Administration Lecture Notes BBA Year What is Business • Brown et al (1997) says Business is all of the activities of an individual or group of individuals in producing and distributing goods and services to customers. Business wants to know your needs, wants, goals, values...

Principles of Business Administration Lecture Notes BBA Year What is Business • Brown et al (1997) says Business is all of the activities of an individual or group of individuals in producing and distributing goods and services to customers. Business wants to know your needs, wants, goals, values etc. before they can sell their goods to you. Business therefore is involved in the following activities Producing Goods and Services: Goods : Handset, Cloth, Computer, Radio, House etc. Services: Education ,Doctor attending to you, Traveling by air, Lodging in a hotel What a Business Does • A lot of activities happen before goods and services get to your door step. A product is not just made in a day and finds its way to the store. These are some of the activities that are performed by business. • Organizing - within a company some one will be in charge to organize people and machines as to provide products. • Manage - if there is no one to manage finance, human resources and production, the company can't go on smoothly. • Production - it is the responsibility of a business to produce those physical item you are using i.e. radio, wrist watches etc. • Marketing - business is involved in advertising, distributing and selling those products produced. Resources Business Use • Human Resources - salesmen, accountants, manager. – • Materials - building offices, stores, raw materials for production. Characteristics of Business • 1. Exchange sale or transfer of goods and services. For every business there must be exchange of goods and services for money. • 2. Profit motive. For every business activities it is for profit making. But profitable organizations and some corporation they are established to provide services. • 3. Dealing in goods and services. For every organization that is business oriented, it must produce goods and services (refer to 3.3.1) • 4. Uncertainty and risk bearing. Every business undertaking must take risk and there is always uncertainty. Uncertainty may arise as a result of competition, wrong decisions unethical. • 5. Continuity and regularity. A business undertaking must always be in business and not on and off. Objectives of Business • Profit. The aim of an organization is to make profit • 2. Survival. Every business must have as a goal to continue to survive or exist. • 3. Growth. A business must not only survive, but it must have as goal to be the biggest. • 4. Market share. Every business concern must be able to carry out its market share to control, aid sale its product to. • 5. Productivity. It must continue to produce. • 6. Innovation. Business must try to see that it's the first and best to bring up new ideas. • 7. Employee's welfare. Business must maximally want to take care of its workers. • 8. Service to consumer. Consumers are well satisfy as another objective of any business concern. • 9. Social responsibility. Apart from doing 1-8 it must do to other things that people around the business must benefit. You and the Business World • Directly or indirectly, you affect a business. If a company produces soft drink in your locality, your decision to buy or not to buy has an effect on the business. If you decide not buy any product, you have made business decision. You as a consumer, citizen or a wage earner, business and you have a relationship • Your Role as a Consumer : Consumers are always referred to as a king. If you make purchases of a company's product you are telling the company that you like their company. If you continue to buy, you increase the company‟ profit. If you don't buy a company's product, the company can stop production and fold up to relocate. Your role as a consumer is to continue to patronize the company so that the company can grow • Your Role as a Wage Earner :As a wage earner you earn some income, there is need for you to develop your career. Your thinking is what you will get and what will be your contribution. As a wage earner, you may want to gain   Recognition  Respect  A great deal of money Your contribution to the business will be dependent on the following factors  Skills  Job market  Personality  Your interest As a wage earner, you have a great deal to contribute to a business. Your Role as a Citizen • As a citizen the first in mind is that I will be law abiding, pay my tax. A lot of you have forgotten that you are suppose to participate in running of government and make important policy decision affecting the public. The people you elect into leadership position affects business activities of a country. • Brown et al (1997) concluded that business plays an important role in your life today and will play an increasingly important role in the future. Likewise, you affect what business does now and will do in the future. Its important to know business tricks and how you can relate to the business world. Who Benefits from a Business Business as we now include production of goods and service those consumers want. Business tries to find out what is good for the consumer, so that businesses will reach out to each other. Because of these, business produce goods and services not only quality goods, they do the following to benefit others. Business Owners Employees Government General Society. CONCEPT OF BUSINESS MANAGEMENT AND ADMINISTRATION Administrative Organisation • It can be define as an organization in which the jobs or functions to be carried out are clearly defined in order to achieve the target. The responsibilities and authorities at various levels of managerial positions are clearly defined. Hartzell (2000 • Line Organisation : Line organisation structure is one in which authority flow from the top to the bottom vertically in a straight line manner and responsibility and accountability flows in an opposite but equally direct vertical manner. • Line and Staff Organisation : A line and staff organisation is one that has line managers with direct, vertical relationships between different levels in the organisation in addition to the specialists responsible for advising and assisting the line managers. Staff specialists/experts are the persons or department who provide technical advise or service to the line managers. • Functional Organisation : Functional organisation structure is one in which line authority is channelized through the staff specialists. In such an organisation structure, line authority runs through many functional experts who have authority to issue orders in their respective areas of specialization. Assignment • 1. What are the advantages and disadvantages of the Line, Line and Staff and Functional Organisation • 2. What is a line functional authority Types and Functions of Management • Management type can be classified according to level of responsibility and range of activities they are responsible to. They are classified as: Junior or First-Line Management – These are set of managers at a lower level, they are in charge of other workers. Example of junior manager is a foreman who is in charge of builders, senior driver in charge of other drivers. Senior Management - You take titles like Chairman, Managing Director, Chief Executive, Rector, Vice Chancellor, etc. They are charge with a lot of responsibilities which include strategy formulations • Wilkson et al (1994) sees a functional manager as responsible only for a single area of activity, such as production, finance or personnel. • Before now human beings were leaving on their own, the history of barter is still fresh in your memory. People were operating in groups; this came as a result of the extension of family and tribes. As the society develops, and things become more complex, there is need for managers. Technological development leads to rapid industrial revolution, this lead to:  Specialization  Division of labour  Systematic approved to managers Business and organization become the order of the day, factories were growing, the question was how to manage human and natural resources. How to manage responsibilities. This in fact led to theories of management. The various approaches to management can be divided into the following major schools • The Classical Approach : • (i) Scientific Management Approach : F.W. Taylor(1900 – 1930) • (ii) Administrative or Functional Approach : Henry Fayol (1916 • – 1940). • (iii) Organisational Theory Approach : Max Weber, C. I. • Bernard, H. A. Simon. • Neo Classical Approach : • (i) Human Relations Approach : George Elton Mayo (1924 • 1932). • (ii) Behavioral Science Approach : Herzberg, Fred Fiedler, • McClelland, Likert etc. (1950 -1970) • Modern Approach : • (i) Quantitative or Management Science Approach : (1950 • 1960). • (ii) System Approach : Ludwig Von Bertalanffy (1960 onwards). • (iii) Contingency Approach : Tosi and Hammer (1970 onwards). • (iv) Management Roles Approach: Henry Mintzberg. • (v) Excellent Companies Approach: Peter and Waterman Assignment • 3. Assess the contribution of Scientific Management to the development of Management thought. • Classical Theories of Management • These theories include Specialization and the division of labour. A professor of mathematics known as Charles Babbage (1792-1971), who invented the first mechanical calculator which lead to today computer, believe that application of scientific method of production could head to increase in output and reduction in cost. He therefore advocated for division of labour. He believes that workers could specialize on a specific job, by so doing, he may require less training. This thinking has led to today modern assembly line method of production Scientific Management • Scientific Management Fredrick Taylor, whose study on how to improve productivity of workers was carried out in Midvale Steel Company in Philadelphia and Simonds Rolling Machines and Bethelen Steel. He rose to a management position in a rolling mill at age 31. • Scientific management approach is also known as the productivity or efficiency approach. The credit for pioneering and developing scientific management approach is primarily given to F. W. Taylor. He is recognised as the father of scientific management. The other individuals who contributed to this school of management thought are Frank Gilbreth, Lillian Gilbreth, Henry Gantt and Harrington Emerson. Scientific management school concentrates on the process of finding one best way of doing a thing in order to achieve maximum production and efficiency • Scientific management school concentrates on the process of finding one best way of doing a thing in order to achieve maximum production and efficiency. Philosophy and Principles of Taylor : • Develop a science to replace rule of thumb • Labour–Management Cooperation • Maximization of output or production • Equal division of responsibility • Job specialization • Scientific selection, training and development of workers. • Planning and scheduling of work • Standardisation • Wage incentives • Mental Revolution • Mechanism of Scientific Management : In order to blend philosophy and principles of scientific management into practice, Taylor developed the following techniques or mechanism :• (1) Scientific Task Setting : The task of every worker for everyday should be determined through scientific investigation. • 2. Experimentation or Work Study : Work Study means organised systematic and objective analysis and assessment of the operational efficiency of all the elements connected with the work. The main areas of work study are as follows :- • i)Method Study : Survey of production process. • (ii) Motion Study : The study of movement of a worker or a • machine in doing a job. • (iii) Time Study : Find out a standard time for doing the job. • (iv) Fatigue Study : Fatigue study is the study of the reduction of • human energy in doing his job. • 3)Planning : Planning function should be separated from the doing function. • (4) Scientific Selection and Training of Worker. (5) Specialization : Allocate the task according to their specialization. • (6) Standardisation : Taylor advocated for standardisation of material, • tools equipment, method etc.. • (7) Efficient Costing System : To control cost of production and • pricing. • (8) Incentive Wage Plan : Worker is to receive a bonus in addition to • his wages if he completed his jobs before the standard fixed time. • (9) Congenial Atmosphere of Work : The environment must also be • cheerful and psychologically satisfactory. • (10) Functional Foremanship: In order to ensure specialization at • supervisory level Taylor suggested functional foreman ship. • ORGANIZATION THEORY • This theory is attributed to Henry Taylor (1841-1925), who sees his success as a mining engineer with a French coal and Iron company because of his application of management principle, rather than personal • qualities. The five functions include: • - Planning • - Organizing • - Commanding • - Coordinating • - Controlling Taylor expanded his principles into fourteen (14): • i:Division of work • ii. Authority and responsibility: the right to command others • iii. Discipline: firm but fair • iv. Unity of command: an employee received order from one superior only • v. Unit of declaration: everyone pulls the same way • vi. Subordination of individual interest to general interest • vii. Remuneration: the pay must be fair • viii. Centralization: the extent to which authority is delegated through departments • viii. Chain of authority: ranging from ultimate authority to lower levels. • ix. Order: there must be a place for every employee. • X. Equity: treating employees well, foster loyalty • xi. Stability of tenure of staff: job security • xii. Initiative: thinking out a plan and executing actions • xiii. Esprit de corps: team work and harmony build up the strength of the organization. Behavioral Theories of Management • Hugo Mitsberg and Eltin Mayo undertook a study: having in mind that psychology and sociology has developed rapidly and that it has effect in a worker than the environment as such they could be used in selecting, training and motivating worker. The use of lightening to measure the effect of worker productivity was inclusive, because the productivity improves when and there was no lightening. It means therefore that there are other factors that affect workers rather than the artificial condition. Some of the things that workers care for include: •  Sympathetic supervision and care about their welfare •  Group pressure at work •  Relationship at home. Management Science • The statutory of management science can be traced back to after the Second World War. Operational research teams were set up consisting of mathematicians, physicists and other scientists, who pooled their knowledge together to solve problems. They try to solve problem that could not be solved by conventional means with the development of scientific means i.e. computers problem could be solved fast. • Management science is more useful in planning and control 1. Capital budgeting 2. Production scheduling 3. Control of stocks 4. Scheduling of bus, transportation etc. This scientific method has little or no effect with people. Management science differs from other schools because management science depends on overall planning and decision making process.  it advocates the use of computers and mathematical models in planning.  evaluation of the effectiveness of models. Assignment • 4. What is Systems Approach to Management • 5 What are the Advantages and Disadvantages of the System Theory of Management • 6. What are the advantages and disadvantages of the different modes of transportion Types of Business • Producers: A producer is that person who is involve in producing those goods and services for distribution. Producers are more involve in producing goods that we can refer to as raw materials. • Processors: These are business for any man that may not be able to produce product from their natural form, what they do is to add value to such product in order to sell it to another buyer • Manufacturers: Manufacturer therefore turns raw or processed goods into finished goods. Finished goods are those products that are produced and ready for the market. Manufactures are business set up to carry out the activities involved in making finished goods out of processed goods Brown (1997). Intermediaries • The function of intermediaries is for them to transport and distribute goods. An intermediary is a business that moves goods from one business to another. These intermediaries are mostly wholesalers and retailers. • Marketing Intermediaries in the Distribution Channel • A distribution channel is made up of marketing intermediaries, or organizations that assist in moving goods and services from producers to end users and consumers. Marketing intermediaries are in the middle of the distribution process, between the producer and the end user. The following marketing intermediaries most often appear in the distribution channel: • Agents and brokers: Agents are sales representatives of manufacturers and wholesalers, and brokers are entities that bring buyers and sellers together. Both agents and brokers are usually hired on commission basis by either a buyer or a seller. Agents and brokers are go-betweens whose job is to make deals. They do not own or take possession of goods. • Industrial distributors: Industrial distributors are independent wholesalers that buy related product lines from many manufacturers and sell them to industrial users. They often have a sales force to call on purchasing agents, make deliveries, extend credit, and provide information. Industrial distributors are used in such industries as aircraft manufacturing, mining, and petroleum. • Wholesalers: Wholesalers are firms that sell finished goods to retailers, manufacturers, and institutions (such as schools and hospitals). Historically, their function has been to buy from manufacturers and sell to retailers. • Retailers: Retailers are firms that sell goods to consumers and to industrial users for their own consumption. The entire producer takes decision on either to sell directly or through an intermediary. • There are four main methods. • i. Direct from the producer to the customers;- Is the system mostly used by mail order companies • ii. The traditional method is via a wholesale‟s to a retailer outlets and then to the consumer • iii. Many companies deal directly with retailers particularly large retail chain • iv. Manufacturers that produce goods for tradesmen usually distribute them via a specialist merchan As a manufacturer you decide on the best method of transporting goods. This will depend on • The distance involved • - Types of goods • - Urgency • - Cost • - The customer The modes of transport include • he modes of transport include various types of factors or methods to transfer the goods or product from one place to another place. The modes are:1.Roadways Transportation. 2.Railways Transportation. 3.Water Transportation. 4.Air Transportation. 5.Pipelines Transportation.