Principles and Practices of Management 2023 PDF

PRINCIPLES AND PRACTICES OF MANAGEMENT (FOR PRIVATE CIRCULATION ONLY) 2023 PROGRAMME COORDINATOR Prof. Vijay Masarkar COURSE DESIGN AND REVIEW COMMITTEE Ms. Kaurobi Ghosh Prof. Vinod Shastri Dr. Rashmi Hebbalkar...

PRINCIPLES AND PRACTICES OF MANAGEMENT (FOR PRIVATE CIRCULATION ONLY) 2023 PROGRAMME COORDINATOR Prof. Vijay Masarkar COURSE DESIGN AND REVIEW COMMITTEE Ms. Kaurobi Ghosh Prof. Vinod Shastri Dr. Rashmi Hebbalkar Prof. Ajay Nagare Prof. Ashok Soman Dr. Saylee Gankar Dr. Vivek Sane Dr. P.P. Bawale COURSE WRITER Dr. P.P. Bawale EDITOR Mr. Yogesh Bhosle Published by Symbiosis Centre for Distance Learning (SCDL), Pune 2001 (Revision 03, 2022) Copyright © 2023 Symbiosis Open Education Society All rights reserved. No part of this book may be reproduced, transmitted or utilised in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system without written permission from the publisher. Acknowledgement Every attempt has been made to trace the copyright holders of materials reproduced in this book. Should any infringement have occurred, SCDL apologises for the same and will be pleased to make necessary corrections in future editions of this book.  PREFACE I am dedicating this work to my boss, Late Mr. S. L. Kirloskar, doyen of the Kirloskar group of industries. I could carry out a number of experiments in Management due to the opportunities he extended to me while serving. These experiments have changed my world of thought on management’s practices versus principles. I have tried to give these ideas in the shape of this publication. I have specially considered the needs of readers from developing countries. I observed two important lacunae with the management students. They consider that managerial work is only to get work done and that they need not work on their own. Similarly, there is a lack of respect to dignity of labour which creates a class structure even within management of those who manage and those who operate. Unless one is keen to make managerial career, one cannot imagine the principles of management and its application in the situation prevailing. Many skills and values must go with the knowledge to form a career. This topic has therefore, been included. The following has been provided to give you a better understanding : l Activities have been given based on your likely existing experience. l To understand practical situation, cases have been included and some direction of thinking has been established by concentrating on few questions arising out of such cases. l Whenever concepts need explanation, familiar examples have been given. l Effort has been made to incorporate latest trends in management thought. l We have supported the concepts in the form of glossary. l To take a rapid review, a summary has been given at the end of each topic. l Bibliography and Webliography at the end of the book will support your study and may make your preliminary navigation in the subject easy. I express my gratitude to the Director of SCDL, Swati Mujumdar for giving me an opportunity to write this book. Dr. P. P. Bawale iii  ABOUT THE AUTHOR Dr. P. P. Bawale has 40 years experience of working in managerial capacity from operational level to top management level. Throughout this perio he was invited to train and teach in business and management schools. Besides, being a good manager he is well read, educated manager and had a chance to work in countries like Canada, USA, Holland, England, Japan and countries like Tanzania, Kenya, Uganda, Egypt, Libiya, Iran, Iraq, Saudi Arabia, Thailand, Singapore, Vietnam, Panama, Venezuela, Jamaica, Guyana, Surinam and others. This has given him exposure to both advanced countries and developing countries. He loves business and management and its role economic development. With working in diverse managerial conditions along with teaching what he learned, he has become an accomplished manager and a teacher. He himself is a good teacher and communicator. He has established a world wide network of contacts. He worked 17 years in international marketing and then in finance with the World Bank as Financial Analyst. Thus, he holds experience in Marketing, Finance and General Management. He is Ph.D in Business Administration from Poona University after having formal degrees in Commerce, Law and Cooperation. He did a specialised program at Harvard Business School, USA in International Marketing, Management and Research. Eight Students have been awarded Ph.D under his guidance belonging to Nepal, Bangladesh, India, Iran. He uniquely combines experience of management and teaching. iv  CONTENTS Unit No. TITLE Page No. 1 Business- The Purpose of Management 1 - 22 1.1 Introduction 1.2 The Nature of Business 1.2.1 Human Needs 1.2.2 The Concept of Value 1.2.3 The Role of Business 1.2.4 Business and Economic Development 1.3 Characteristics of Business 1.3.1 Uncertainty and Risks 1.3.2 Minimising Uncertainty and Risks 1.3.3 Need for Ownership and Entrepreneurial Characteristics 1.4 Importance of a Post Graduate Diploma in Management 1.5 The Manager as a Professional 1.6 Influence of Business on Management 1.7 Initiating Resource Raising 1.8 The Influence of Scale of Business on Management 1.9 Establishing the Business Network 1.10 Social Responsibility of Business 1.11 Role of Profitability and Liquidity 1.12 The Nature of Competition 1.13 Implications of Globalization on Management 1.14 Implications of Privatisation on Management 1.15 Role of Ownership Interest in Management Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 2 Designing Organisation for Business 23 - 46 2.1. Introduction 2.2. Towards Designing Organisation 2.2.1 Designing against Competition 2.2.2 Cost Consideration 2.2.3 Division of Labour 2.2.4 Structure and Flexibility 2.2.5 Designing Living Organisation 2.2.6 Designing for Human Environment v  Unit No. TITLE Page No. 2.3 Components of Organising 2.4 Creating a Juridical Person 2.4.1 Need for Social Approval 2.4.2. Need to Legally exist 2.4.3 Extended Organisations 2.4.4 Informal Organisations 2.5 Need for Flexibility 2.5.1 Opportunities and Threats 2.5.2 Strengths and Weaknesses 2.5.3 SWOT Analysis 2.6 Built to Last 2.6.1 Duration of Survival 2.6.2 Ways to Survive 2.6.3 Managing to survive 2.6.4 Living on an Organisation 2.7 Building an Organisation Culture 2.8 Innovation & Creativity in an Organisation 2.8.1 Need for Creativity 2.8.2 Need for Democratic Organisation 2.8.3 Encouraging Creativity 2.8.4 Information-based Learning 2.9 Weaving Flexibility in an Organisation 2.10 Management of Change 2.10.1 Problem Perspective needs Change 2.10.2 Build Psyche for Change 2.11 Organisational Growth 2.12 Resource Raising & Managing as a Part of Organisation Design 2.13 Organisation & Management Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading vi Unit No. TITLE Page No. 3 Need for Managing Organisation and Business 47 - 76 3.1 Introduction 3.2 Contributors to Managerial Structure 3.2.1 Role of Entrepreneurs 3.2.2 Role of Owners 3.2.3 Role of Managers 3.2.4 Role of Non-employees 3.2.5 Role of Supervisors 3.2.6 Role of Direct Task Workers 3.3 Stakeholders in an Organisation 3.3.1 Customers 3.3.2 Society 3.3.3 Government 3.3.4 Owners and Shareholders 3.3.5 Employees 3.3.6 Business Partners 3.3.7 Stakeholders’ Network 3.4 Differing Perspectives of Management 3.4.1 Bureaucracy 3.4.2 Co-operative Establishments 3.4.3 Socio-technical View 3.4.4 Human Aspect of Organisation 3.4.5 Information System View 3.4.6 Decision-making System 3.4.7 Contingent Approach 3.4.8 System Aspect of Management 3.4.9 Interpersonal Role Perspective 3.4.10 Operation School of Process Management 3.5 General Principles of Managing Work 3.5.1 The Show must go on 3.5.2 The Invisible Nature of Management 3.5.3 Management is Value-based 3.5.4 Self control and Self-management 3.5.5 Universality of Management 3.5.6 Managing Human Relations 3.5.7 Equity amongst People 3.5.8 Limitations to Surplus 3.6 Defining Management 3.7 Analyising Definitions of Management 3.7.1 Management as a Process 3.7.2 Designing and Maintaining Environment for Performance 3.7.3 Relations Building within and Outside vii  Unit No. TITLE Page No. 3.7.4 Optimal Utilisation of all Resources including Human Resources 3.7.5 Ensuring Effective and Efficient Use of Resources 3.7.6 Attaining Business Objectives 3.7.7 Achieving Economic Surplus 3.8 Management: Science Vs Art 3.8.1 Management as an Applied Art 3.8.2 Reasons for Emergence of Fads 3.8.3 Practice based on knowledge 3.9 A Systems Approach to the Process School of Management 3.9.1 Anatomy of a System 3.9.2.Importance of Process 3.9.3.Creating Work Ethics 3.10 Place of Women in Management 3.11 Effect of Advances in Technology on Management 3.11.1 Evolving Man-Machine Interface 3.11.2 Mathematical Approach 3.11.3 More based on Worldwide Knowledge 3.11.4 Specialised Functions and General Management 3.11.5 Application Specialisations 3.11.6 Increase in Managerial Load 3.11.7 Recognition to Processes 3.11.8 Customer Satisfaction-oriented Work Practices 3.11.9 Days of Competitive Alliance 3.12 Result Orientation in Management Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 4 Management of Standard Functions 77 - 104 4.1 Introduction 4.2 Marketing as a Functional Specialisation 4.2.1 Importance 4.2.2 Major Sections of Activities 4.2.3 Marketing Staff Characteristics 4.3 Finance as a Functional Specialisation 4.3.1 Importance 4.3.2 Major Sections of Activities 4.3.3 Finance Staff Characteristics viii Unit No. TITLE Page No. 4.4 Materials as a Functional Specialisation 4.4.1 Importance 4.4.2 Major Sections of Activities 4.4.3 Materials Staff Characteristics 4.5 Operations as a Functional Specialisation 4.5.1 Importance 4.5.2 Major Sections of Activities 4.5.3 Characteristics of Operation Staff 4.6 Human Resource Management as a Functional Specialisation 4.6.1 Importance 4.6.2 Major Sections of Activities 4.6.3 HRM Staff Characteristics 4.7 Information as a Functional Specialisation 4.7.1 Importance 4.7.2 Major Sections of Activities 4.7.3 Information Staff Characteristics 4.8 Projects as a Functional Specialisation 4.8.1 Importance 4.8.2 Major Sections of Activities 4.8.3 Projects Staff Characteristics 4.9 Administrations as a Functional Specialisation 4.9.1 Importance 4.9.2 Major Sections of Activities 4.9.3 Administrations Staff Characteristics 4.10 Levels in Organisation 4.11 Scale of Organisation 4.12 General Management 4.13 Process Orientation Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading ix  Unit No. TITLE Page No. 5 Managing Resources 105 - 120 5.1 Introduction 5.2 Materials – As a Resource 5.2.1 Importance 5.2.2 Application 5.3 Manpower – As a Resource 5.3.1 Importance 5.3.2 Application 5.4 Money – As a Resource 5.4.1 Importance 5.4.2 Application 5.5 Machinery – As a Resource 5.5.1 Importance 5.5.2 Application 5.6 Information – Knowledge as a Resource 5.6.1 Importance 5.6.2 Application 5.7 Services - As a Resource 5.7.1 Importance 5.7.2 Application 5.8 Time – As a Resource 5.8.1 Importance 5.8.2 Application 5.9 Scarcity of Resources Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading x Unit No. TITLE Page No. 6 Planning 121 - 148 6.1 Introduction 6.2 Planning as a First Step in the Management Process 6.3 Significance of Time 6.4 Performance –Result Orientation 6.5 The Cost of Planning 6.6 The Planning Process – Types of Plans 6.6.1 Planning Hierarchy 6.6.2 Conceptual Planning 6.6.3 The Plan Document 6.6.4 The Programme 6.7 Steps in Planning 6.8 Guidelines for Planning 6.8.1 Navigational Tool 6.8.2 Performance Standard 6.8.3 Tool to Establish Synergy 6.8.4 Tool to Define Jobs 6.8.5 Bridge Gap Present with Future 6.8.6 Method to Evaluate Activities 6.8.7 Implementing Tool for SWOT 6.8.8 Link with Business 6.8.9 Opportunity to Establish Consistency 6.8.10 Result Orientation 6.8.11 Flexibility 6.8.12 Method to Enable Resource Planning 6.9 Planning Aids 6.9.1 Computer Assistance 6.9.2 Gantt Charts 6.9.3 PERT (Program Evaluation and Review Technique) 6.9.4 CPM (Critical Path Method) 6.9.5 Statistical Methods 6.9.6 Graphs and Charts 6.9.7 Scenario Building 6.9.8 Management by Objectives (MBO) 6.9.9 Research Methodology 6.9.10 Budgeting 6.9.11 Forecasting 6.9.12 Balanced Score Card xi  Unit No. TITLE Page No. 6.10 Strategic Planning 6.11 Analysing Strategies 6.12 Reasons for Failure of Plans Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 7 Decision-Making 149 – 170 7.1 Introduction 7.2 Nature of Decision-Making 7.2.1 Making Decisions 7.2.2 Using Decisions for Action Orientation 7.2.3 Connecting Decisions to Values 7.2.4 Keeping Time Factor in Mind 7.2.5 Ease in handling Decisions 7.2.6 Applying Creativity and Innovation 7.2.7 Posing the Right Problem 7.2.8 Relating Decisions to Resource Availability 7.2.9 Connecting Decisions with Objectives 7.2.10 Taking Risks 7.2.11 Managing Change 7.2.12 Handling Associated Problems 7.2.13 Synchronising Decisions 7.2.14 Choosing between Alternatives 7.2.15 Being Open to Surrounding Issues 7.3 The Process of Decision-Making 7.3.1 Premising 7.3.2 Understanding Limiting Factors 7.3.3 Developing Alternatives 7.3.4 Evaluating Alternatives 7.3.5 Handling Decisions 7.3.6 Taking Feedback, Reviewing and Revising xii Unit No. TITLE Page No. 7.4 Types of Decisions and their Implications for Managing 7.4.1 Proactive and Reactive Decisions 7.4.2 Prescriptive Decisions 7.4.3 Structured and Unstructured Decisions 7.4.4 Policy Decisions 7.4.5 Rules 7.4.6 Procedural Decisions 7.4.7 Strategic Decisions 7.4.8 Normative Decisions 7.4.9 Quantitative and Qualitative Decisions 7.4.10 Group Decisions 7.4.11 Short Term and Long Term Decisions 7.4.12 Technical Decisions 7.5 Assisting Techniques in Decision-Making 7.5.1 Marginal Analysis 7.5.2 Cost Benefit Analysis 7.5.3 Experimentation 7.5.4 Research and Analysis 7.5.5 Risk Analysis 7.5.6 Decision Tree 7.5.7 Preference Theory 7.5.8 Decision Support System 7.5.9 Management Information System Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading xiii  Unit No. TITLE Page No. 8 Organising 171 – 202 8.1 Introduction 8.2 Importance of Human Resource 8.3 Major Principles involved in organising 8.3.1 Division of Labour 8.3.2 Principle of Work Specialisation 8.3.3 Principle of Departmentation 8.3.4 Principle of Authority Levels 8.3.5 Principle of Span of Control 8.3.6 Scalar Principle of Management 8.3.7 Principle of Unity of Purpose 8.3.8 Principle of Navigation 8.3.9 Principle of Authority and Responsibility Delegation 8.3.10 Principle of Unity of Command 8.3.11 Principle of Synergy 8.3.12 Principle of Team Spirit 8.4 Types of Organisations 8.4.1 Formal Organisation 8.4.2 Informal Organisation 8.4.3 Matrix Organisation 8.4.4 Project Organisation 8.4.5 Virtual Organisation 8.5 Forms of Juridical Organisations 8.5.1 Sole Trading Concern or Proprietorship 8.5.2 Partnership 8.5.3 Joint Stock Companies with Limited Liability 8.5.4 Co-operatives 8.5.5 Societies and Trusts 8.6 Delegation and Empowerment 8.6.1 Delegation 8.6.2 Empowerment 8.6.3 Delegation of Power 8.7 Centralisation and Decentralisation 8.7.1 Centralisation of Authority 8.7.2 Decentralisation of Authority 8.8 Types of Organisational Authority 8.8.1 Line Authority 8.8.2 Staff Authority 8.8.3 Functional Authority xiv Unit No. TITLE Page No. 8.9 Levels of Authority and their Effect on Management 8.9.1 Organisation Levels 8.9.2 Vertical Organisations 8.9.3 Horizontal or Flat Organisation 8.9.4 Circular Organisations 8.10 Concept of Departmentation 8.10.1 Departmentation 8.10.2 Benefits of Departmentation 8.11 Culture, Work Ethos and Morale in Organisation 8.11.1 Culture 8.11.2 Work Ethos 8.11.3 Morale 8.12 Reasons for Degeneration of Organisations 8.13 Tools Assisting Organisations 8.13.1 Organisation Chart 8.13.2 Organisation Manual 8.13.3 Position Description 8.13.4 Organisation Performance Audit 8.14 Increasing Organisational Efficiency Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 9 Staffing 203 – 224 9.1 Introduction 9.2 Understanding Human Resource 9.2.1 Nature of Human Resource 9.2.2 Variations in Rationality, Emotions and Perspectives 9.2.3 Variations in Levels of Satisfaction 9.2.4 Variations in Reactions 9.2.5 Variations in Backgrounds 9.2.6 Variations in Needs as per Levels and Positions 9.2.7 Need for Group Work 9.2.8 Need for Companionship and Leadership 9.2.9 Personal Role and Organisational Role 9.2.10 Absence of Team Spirit 9.2.11 Staffing Considerations xv  Unit No. TITLE Page No. 9.3 The Nature of Jobs 9.3.1 Specialisation and Authority 9.3.2 Position and Job Description 9.3.3 Job Satisfaction 9.4 Steps in Staffing 9.4.1 Manpower Planning 9.4.2 Advertising 9.4.3 Interviewing 9.4.4 Appointing 9.4.5 Inducting 9.4.6 Giving Orientation 9.5 Appraising Staff Members 9.5.1 Appraising Career Progression 9.5.2 Training and Development 9.5.3 Promotion 9.5.4 Salary and Wages 9.5.5 Maintaining Human Relations 9.5.6 Separation 9.6 Making Staffing More Meaningful 9.6.1 Social Planning 9.6.2 Legal Approval 9.6.3 Building a Learning Organisation 9.6.4 Career Management 9.6.5 Building Teams 9.6.6 Contribution to Work Ethos and Culture Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading xvi Unit No. TITLE Page No. 10 Leading: Directing | Communicating 225 – 240 10.1 Introduction 10.2 Theories and their Implications on Leadership 10.3 Managerial Role and Leadership Role 10.3.1 Leadership 10.3.2 Managership 10.3.3 Managerial Function of Leading 10.4 Bridging the Gap – Using the Tool of Communication 10.4.1 Conceiving the Message 10.4.2 Framing the Message 10.4.3 Choosing Appropriate Mode of Communication 10.4.4 Using Appropriate Language 10.4.5 Overcoming Barriers to Communication 10.4.6 Synchronising Time, Cost, Effect and Process 10.4.7 Using Multimedia to Communicate 10.4.8 Nature of Modern Communication Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading xvii  Unit No. TITLE Page No. 11 Controlling 241 – 262 11.1 Introduction 11.2 Principles of Controlling 11.2.1 Establishing Measurable Goals 11.2.2 Establishing Standards 11.2.3 Establishing Economical Controls 11.2.4 Selecting Critical Points 11.2.5 Creating a Proper Feedback System 11.2.6 Using Discipline and Flexibility 11.2.7 Reflecting Organisation Structure through Control 11.2.8 Developing Controls Objectively 11.2.9 Making Corrections using Controls 11.3 Types of Controls 11.3.1 Direct or Preventive Controls 11.3.2 Feed Forward Controls 11.3.3 Feed Backward Controls 11.3.4 Real Time Controls 11.3.5 Automation in Controls 11.4 Designing Control System 11.4.1 Fixing Objectives of Control System 11.4.2 Design Essentials 11.5 Control Techniques 11.5.1 Budgeting Techniques 11.5.2 Activities Network Control 11.5.3 Statistical Data Control 11.5.4 Personal Observations 11.5.5 Social Controls 11.5.6 Systems and Procedures 11.5.7 Management by Objectives 11.6 Understanding Control Philosophy 11.6.1 Meant for making Corrections 11.6.2 Self Control and Self Correction 11.6.3 Increase in Ability to perform 11.6.4 Controls as Part of Planning System 11.6.5 Management Values and Organisation Culture xviii Unit No. TITLE Page No. 11.7 Automation in Controls 11.7.1 Computers 11.7.2 Communication Tools 11.7.3 Software Development 11.8 Concept of Governance Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 12 Coordinating (Synchronising) 263 – 290 12.1 Introduction 12.2 Coordination and Synchronisation 12.2.1 Coordination as a Function 12.2.2 Multiple Players and Multiple Activities 12.2.3 Lopsided Planning of Managerial Functions 12.2.4 Overtoning and Undertoning 12.2.5 Lack of Uniform and Ready Resource Supply 12.2.6 Decision-making 12.2.7 Balancing Situations and Decisions 12.2.8 Growth Orientation 12.2.9 Synergising 12.3 Personal Level Coordination 12.4 Organisation Level Coordination 12.5 Environment of an Organisation and Support to Coordination 12.5.1 Degree of Centralisation 12.5.2 Spirit of Team Work 12.5.3 Primacy of Business 12.5.4 Scale of Business 12.5.5 Stability and Growth Orientation 12.5.6 Work Ethos and Culture 12.5.7 Quality of Leadership 12.5.8 Overall Resource Supply Position 12.5.9 Extent of Automation 12.5.10 Organisational Discipline 12.6 Tools for Coordination xix  Unit No. TITLE Page No. 12.7 Managerial Techniques for Coordination 12.7.1 Use of Work Manuals 12.7.2 Streamlining Systems and Procedures 12.7.3 Well Organised Group Structure 12.7.4 Good Information and Feedback System 12.7.5 Code of Conduct and Discipline 12.8 FlexiTime 12.9 Work from Home Practices Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 13 Evolution of Management Thought 291 - 330 13.1 Introduction 13.2 Large Organised Creations 13.2.1 The Armed Forces 13.2.2 The Church 13.2.3 State Administrators 13.2.4 Monumental Creations 13.2.5 Industrial Revolution 13.3 Slow Development of Management Thought 13.3.1 Focus on Creation 13.3.2 Undermining Business as a Profession 13.3.3 Undermining Money Making 13.3.4 Political Economy 13.3.5 Sociology 13.3.6 Management as an Art 13.3.7 Businessmen and Managers 13.3.8 Indian View 13.4 Beginning of Scientific Management 13.5 Operational Theory of Management 13.6 Human Aspect of Management 13.6.1 Emergence of Behavioural Sciences 13.6.2 Human Group Behaviour 13.6.3 Chester Bernard 13.6.4 Peter Drucker 13.7 Peeping in Future 13.7.1 Lessons of the Past 13.7.2 Effect of changing Environment 13.7.3 Looking at New Knowledge xx Unit No. TITLE Page No. 13.8 Looking at Future Management 13.8.1 Scale of Business 13.8.2 Stress on Business than Management 13.8.3 Stress of Knowledge Worker 13.8.4 Days of Worker Manager 13.8.5 Change in Organisational Forms 13.8.6 Change in Management Education 13.8.7 Understanding Global Culture 13.8.8 Composition of Managers 13.9 Green Management 13.10 Technology in Management Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading 14 Pursuing Management as a Career 331 – 356 14.1 Introduction 14.2 Understanding Career making 14.2.1 Career is making a living 14.2.2 Managing: Getting Work done from Others 14.2.3 Business: An Essential Prerequisite for a Career 14.3 The Concept of Managerial Work 14.4 Becoming a Worker Manager 14.4.1 Becoming a Self Worker 14.4.2 Coaching 14.4.3 Understanding Work to understand Workers 14.4.4 Thinking and Analysing 14.4.5 Assisting others move forward 14.4.6 Building Self Confidence 14.4.7 Accepting New Positions and Jobs 14.5 Parallel Managerial Functions 14.6 Discipline as a Viewer of Imbalance 14.7 Process of Learning 14.7.1 Experience 14.7.2 Understanding Humans 14.7.3 Changing Business Environment 14.7.4 Alertness as a Result of Learning 14.8 Showmanship 14.9 Job Hopping and Career 14.10 Nature of Employment 14.11 Physical Work Orientation 14.12 Physical Fitness 14.13 Work Stress & Strain xxi  Unit No. TITLE Page No. 14.14 Some Lessons in Human Relations 14.14.1 Relations with Owners 14.14.2 Relations with Bosses 14.14.3 Relations with Colleagues 14.14.4 Relations with Subordinates 14.14.5 Relations with Outsiders 14.15 Importance of Some Work Habits 14.16 Duration of a Job Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading xxii Business- The Purpose of Management UNIT 1 Structure: 1.1 Introduction 1.2 The Nature of Business 1.2.1 Human Needs 1.2.2 The Concept of Value 1.2.3 The Role of Business 1.2.4 Business and Economic Development 1.3 Characteristics of Business 1.3.1 Uncertainty and Risks 1.3.2 Minimising Uncertainty and Risks 1.3.3 Need for Ownership and Entrepreneurial Characteristics 1.4 Importance of a Post Graduate Diploma in Management 1.5 The Manager as a Professional 1.6 Influence of Business on Management 1.7 Initiating Resource Raising 1.8 The Influence of Scale of Business on Management 1.9 Establishing the Business Network 1.10 Social Responsibility of Business 1.11 Role of Profitability and Liquidity 1.12 The Nature of Competition 1.13 Implications of Globalization on Management 1.14 Implications of Privatisation on Management 1.15 Role of Ownership Interest in Management Case Study Summary Keywords Self-Assessment Questions Answers to Check your Progress Suggested Reading Business - The Purpose of Management 1  Notes Objectives ---------------------- After going through this unit, you will be able to: ---------------------- Describe the nature, role and characteristics of business ---------------------- Explain the importance of a diploma in management ---------------------- Assess the manager as a professional ---------------------- State the impact of scale of business on management ---------------------- Discuss the social responsibility of business Specify the roles of liquidity and profitability on management ---------------------- Describe the role of competition on management ---------------------- State the impact of privatization and globalization on management ---------------------- ---------------------- 1.1 INTRODUCTION ---------------------- Management is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. ---------------------- Management comprises planning, organising, staffing, leading or ---------------------- directing and controlling an organisation (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. ---------------------- Resourcing encompasses the deployment and manipulation of human ---------------------- resources, financial resources, technological resources and natural resources. In order to manage, there must be a business or an enterprise, hence, let ---------------------- us first understand the basic concept of business. ---------------------- 1.2 THE NATURE OF BUSINESS ---------------------- ---------------------- The Nature of Business ---------------------- ---------------------- Business and The Concept of The Role of Human Needs Economic Value Business Development ---------------------- Fig. 1.2: Nature of Business ---------------------- 1.2.1 Human Needs ---------------------- The starting point of any business is human needs. Human beings have ---------------------- physiological needs such as air, water, physical needs such as clothing, shelter, medicine and social needs such as love, affection, affiliation which need to ---------------------- be fulfilled to live in a group. A higher order human has needs such as work ---------------------- satisfaction, self-achievement and self realization. To satisfy these needs, he has to work and earn a decent living. When the higher level needs are satisfied, 2 Principles and Practices of Management we call it a higher standard of living. Business contributes to human beings by Notes providing work opportunity and satisfies his needs by making available goods and services. These goods and services are made available by a mechanism ---------------------- we call a market, a place where such goods and services are exchanged. The primary job of business is to provide goods and services which are required ---------------------- (and which may be required) by human beings. ---------------------- 1.2.2 The Concept of Value ---------------------- Human beings have to pay value for goods and services. They must see worth paying value in the goods and services. If you do not require a haircut, ---------------------- even if a shop is available, you will not go for it. Business aims at increasing ---------------------- value of their goods and services. The mechanism through which we recognize value and pay for it is called price. Value and price need not be the same all ---------------------- the time. Value also depends upon the intensity of need, availability of goods and services and availability of money to pay for such services. Money is a ---------------------- common resource made available to people to receive and pay price. In barter ---------------------- transaction, instead of exchanging through medium of money, we do it through goods and services. However, money has now become an approved medium of ---------------------- exchange and prices are being expressed in terms of money. When we ask the price of, say, vegetables we ask in terms of money and decide its value for us. ---------------------- Thus value, money and price are inter related. Business may be defined as the ---------------------- exchange of value in terms of goods and services for consideration. 1.2.3 The Role of Business ---------------------- Satisfaction of human needs is the basis of business. If there is no human ---------------------- need, business will fail to survive. The production of goods and services and its distribution is a business activity. Formerly, such activities which were ---------------------- paid for by the customers were described as business activity and those for ---------------------- which customer did not pay were called non business activities. From the management point of view, it does not make any difference as to who pays. ---------------------- All activities which produce and distribute goods and services, whether or not paid directly by customer are business activities. Whether in public, private or ---------------------- social sector, all are businesses which exchange goods and services for value. ---------------------- In the public sector, may be paid goods service is by the government and in the social sector by someone as a charity. All these business activities need ---------------------- building organisations and, therefore, need management. The role of business is, therefore, exchanging goods and services for value, whether paid directly by ---------------------- customer or paid indirectly through government or charitable funds. ---------------------- 1.2.4 Business and Economic Development ---------------------- We are so much engrossed in the relation of business and profits that we neglect the major part it plays in economic development. It is found that ---------------------- countries that have a good business class contribute to development of a country. Business adds not only to the economic development but it renders social ---------------------- services, making living more tolerable. Business involves value addition at ---------------------- every stage of working. It has to add value to make money. Thus, it is constantly looking for bettering its goods and services and converting its value to price. ---------------------- Business - The Purpose of Management 3  Notes This it does by producing new goods and services, in terms of time and areas. Umbrellas are manufactured the whole year and then made available in rainy ---------------------- season. Business, makes apples in Kashmir available in Mumbai by creating the need of packing services and transportation. Thus, business adds to utility and ---------------------- its value. Business locates human needs and then marches to service it through ---------------------- production and distribution of goods and services. Take a neighbourhood grocery store that collects many items from different sources and then make it ---------------------- available at one place. Imagine what running around and cost would have been involved, if we had to go to manufacturer of these one by one to satisfy one’s ---------------------- needs. ---------------------- Another aspect we must appreciate is that each of the business activity provides employment. Increase in business leads, adds to increase in an ---------------------- organisation and increase in organisations needs increase in managerial ---------------------- personnel. Business requires resource mobilization such as money, people, equipment etc. and thus work for developing these resources. Through ---------------------- mobilizing resources, it also adds to economic development. ---------------------- Check your Progress 1 ---------------------- ---------------------- State True or False. 1. All activities which produce and distribute goods and services, ---------------------- whether or not paid directly by customer are business activities. ---------------------- 2. Business may be defined as the exchange of value in terms of goods and services for consideration. ---------------------- 3. Business adds only to the economic development of a country. ---------------------- 4. Money is a common resource made available to people to receive and ---------------------- pay price. ---------------------- ---------------------- Activity 1 ---------------------- 1. Find out about Maslow’s hierarchy of Human Needs. ---------------------- 2. Identify the shops at which you buy most of your groceries and satisfy your daily needs. What are the services provided at this store, which ---------------------- make it your preferred choice? ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- 4 Principles and Practices of Management 1.3 CHARACTERISTICS OF BUSINESS Notes ---------------------- Uncertainty and Risks ---------------------- ---------------------- ---------------------- Characteristics of Minimising Uncertainties ---------------------- Business and Risks ---------------------- ---------------------- Need for Ownership and Entrepreneurial ---------------------- Characteristics ---------------------- Fig. 1.2: Characteristics of Business ---------------------- 1.3.1 Uncertainty and Risks ---------------------- The ultimate success of business depends upon the customers who are ---------------------- willing to use their purchasing power to meet their needs and competitive and alternating suppliers available in the market. Most of these factors are outside ---------------------- business organisation and more directed by situational factors. This situation is further complicated by the fact that the supplier has to keep his products and ---------------------- serviceability ready to offer when an opportunity arises. It necessarily means ---------------------- that he has to act in anticipation of sales. It involves risk taking since he is not sure whether his goods will be sold or services will be accepted. Take the small ---------------------- business of a cobbler. He keeps his instruments ready along with leather pieces so that any time a customer walks in for shoe repair he gets a ready service. He ---------------------- invests in space, time, equipment and skills first and then he can expect to get ---------------------- some business. All these decisions which he has taken to invest may prove a risk and he may not get any return. ---------------------- Business is done with uncertainties and risks. Technological change such ---------------------- as use of canvass shoes instead of leather ones, may not give him the same scope to repair and with this change his business may shrink. He can only forecast ---------------------- business but is never assured of its outcome. ---------------------- 1.3.2 Minimising Uncertainty and Risks Business will always try to minimise known uncertainties and risks. It ---------------------- does so by keeping to minimum the scale of operation. It has to find a scale of ---------------------- operation which will meet the cost and earn some excess to either grow business or act as insurance for uncertain future income. The scale of operation is not ---------------------- entirely a businessman’s choice. He has to see how a competitor is organized and may have to take decisions depending on the competitive scale of business ---------------------- operations. You will find big super stores and small neighbourhood shops ---------------------- dealing almost with identical goods or services. Thus, scale of business is a very Business - The Purpose of Management 5  Notes important consideration in establishing and running business with minimum overheads. ---------------------- You may find that bigger business companies may offer better scales of ---------------------- pay but they will also demand much hard and smart work. Business will always try to reduce impact of business overhead by getting it compensated through ---------------------- hard and smart work. An average businessman works longer hours, more days in a year. It needs more flexibility to face changing circumstances and demand ---------------------- and supply position in the market. ---------------------- 1.3.3 Need for Ownership and Entrepreneurial Characteristics ---------------------- Either an individual or a group must play a role of an owner in any business. This is the only way to safeguard continuance and growth of business. ---------------------- Decisions in business are such as what to exchange, at what price it is to be exchanged and how exchange price is to be recovered are very basic. This is not ---------------------- only done once but almost daily. Every day is different in business. Conditions ---------------------- change so fast that you have to take decisions in response to such changes and in fact have to forecast changes and pro-actively act on it. It is expected that ---------------------- they carry risks and uncertainties of business. The need to remain profitable all the time requires a calculating brain and capacity to view business in totality. ---------------------- We can compare this with what mothers feel about a child - a feeling of being a ---------------------- part of one body. Managers may leave the job if conditions worsen but owners cannot. They can only liquidate at a cost; that too as the last unpleasant act and ---------------------- a great social cost. ---------------------- To plan for business and its implementation one has to go through so many hurdles that one requires a high achievement motivation and single purpose ---------------------- devotion (less emotional affiliation with people). This is more true when the ---------------------- business idea is new to the market. Such a person is a pioneer in the market and has to find his way out as one does in trekking when one does not know the way. ---------------------- The entrepreneurial activity here is that of trying out a new business activity (not formerly established in the market). ---------------------- In an established market, when there is not enough possibilities for new ---------------------- entrant in a similar business, he must come out with a new product or service, or a new concept in functioning business so that he can find an entry and later ---------------------- opportunity to grow. Entrepreneurs not only take a business risk but a risk of ---------------------- introducing non traditional product, service or business concept. One day we may find the market for mobile phone so competitive that we can sell mobile ---------------------- phones as in a vegetable market- in heaps and varieties to choose by customers on their own. ---------------------- One who is a pioneer in a business is called an ‘entrepreneur businessman’ ---------------------- and the others who follow the same idea ‘businessmen’. ---------------------- In entrepreneurship, the innovative way of doing something stands first as a business proposition. Here not only business is done but the pioneering ---------------------- of a new avenue to do business is opened. It, in turn, gives the market another avenue for development. In Pune, one medical doctor established a hair cutting ---------------------- 6 Principles and Practices of Management business and gave it a health angle instead of merely cutting hair. He can be Notes termed as an entrepreneur. Managing business is the purpose of management of business and managing an organisation is a tool for implementing business. ---------------------- The large-scale American business pioneered the concept of blending ---------------------- business and management calling it business administration, leaving business concept and its development to owners of business. If business does not survive, ---------------------- administration cannot. Now business is competitive and if managers only ---------------------- administer without caring for business, both will have their last day. The worst is that business dictates the organisation design and managers try to work within ---------------------- organisation design. This has made ‘business’ and its management a part of overall management. We do not consider management as only ‘administration’ ---------------------- anymore. ---------------------- Check your Progress 2 ---------------------- ---------------------- State True or False. 1. Managing an organisation is the purpose of management of business and ---------------------- managing the actual business is a tool for implementing business. ---------------------- 2. Entrepreneurs not only take a business risk but a risk of introducing nontraditional product, service or business concept. ---------------------- 3. Decisions in business are such as what to exchange, at what price it is to ---------------------- be exchanged and how exchange price is to be recovered are very basic. ---------------------- This is mostly a onetime event conducted once in every few months. 4. One who is a pioneer in a business is called an ‘entrepreneur businessman’ ---------------------- and the others who follow the same idea ‘businessmen’. ---------------------- ---------------------- Activity 2 ---------------------- Which of the following can be classified as ‘business’ problems and ---------------------- ‘management’ problems? ---------------------- i. The owner is feeling he should not have gone into business of readymade garments. ---------------------- ii. Our product quality is lacking we must improve it. ---------------------- iii. Workers’ morale is very down. ---------------------- iv. We must kill competition. ---------------------- 1.4 IMPORTANCE OF A POST GRADUATE DIPLOMA ---------------------- IN MANAGEMENT ---------------------- Here is the right place to understand the implications of certification of MBA. Originally, it was supposed to be a Post Graduate Diploma and not a ---------------------- Business - The Purpose of Management 7  Notes degree. Degree is more knowledge based and less skill based. Management education being a practicing art, learners were not only supposed to know basic ---------------------- knowledge but were required to be practicing managers. ---------------------- The US industry when it started expanding after 1920, began facing acute problem of supply of managers. Entrepreneurs, who originally started ---------------------- businesses, felt the need to have administrative managers. It was thought that entrepreneurs will take business decisions but the administrative work which ---------------------- requires constant presence and supervision will be handled by administrative ---------------------- managers. Since the basic policy and the strategy of business was to be handled by entrepreneurs/business owners, the others who would work in the ---------------------- organisation were implementers and therefore, administrators. ---------------------- The course was then called Master Diploma of Business Administration. The word ‘business’ stood for indicating the field of operations and not for ---------------------- learning business. The students were not expected to know business at that stage. You will thus find lack of the subject ‘business’ in most of the syllabi of ---------------------- PGDBM and what in many places is named MBA. ---------------------- In a democracy there is a legislature which makes law and gives direction to the government, the executive wing. The government which is the executive ---------------------- wing is expected to administer decisions taken by the legislature. The executive ---------------------- body only administers decisions and is responsible for implementation. Thus, there is bifurcation between planning and execution. ---------------------- It will be logical here to distinguish between management and administration: ---------------------- Table 1.1: Differences between Management and Administration ---------------------- Manager/ Management Administrator/ Administration ---------------------- Deals with totality of the business Deals with unit of operation system ---------------------- Both business and administration Looks after administration only ---------------------- Both inside and outside organisation Only within organisation ---------------------- Strives profitability, liquidity, Stress on efficiency and effectiveness efficiency and effectiveness ---------------------- Orientation -planning, organizing and Thrust - command and control ---------------------- implementation ---------------------- Thrust - development and growth Overall policy decisions are outside the structure ---------------------- The Salient Features of the above notes are: ---------------------- 1. The job satisfaction is now looked as a more meaningful and responsible ---------------------- work and therefore, this distinction is not adhered to. 2. Since business has become more competitive, more eyes and ears are ---------------------- being needed to run business organisation, so everyone is welcome to ---------------------- contribute to business. It now requires a total view and a total coordination. 8 Principles and Practices of Management 3. The flat structures are increasing the span of management. It is also Notes reducing cost of levels in the organisation. The strategic considerations are entering all levels and interpretation of business is required at all levels in ---------------------- management. You must have knowledge of competitive environment and business to be a good manager. A manager faces problems arising out of ---------------------- business and administration. He must understand as to which a business ---------------------- problem is and which an administrative problem is. Managers who are trained to only administer do not even think of a problem in terms of ---------------------- business. For example, if there is no demand in the market for a particular product, the problem may be one related to business. But the solutions ---------------------- may be searched by managers, they may look out for solutions within the ---------------------- administration. ---------------------- Management is a part of the business system and must be treated as such. In fact it is possible to give everyone a role in business to his capacity to start ---------------------- making him think of business so that some of them may mature as business leaders. We see that managers are more proud of organisation than business ---------------------- they do. ---------------------- 1.5 THE MANAGER AS A PROFESSIONAL ---------------------- Let us first enumerate the distinguishing characteristics of a professional. ---------------------- We call an auditor, a pleader or a doctor a professional. The reason is that their practice is based on education received. Moreover, their conduct is governed by ---------------------- their professional association which has the right to terminate their profession, if ---------------------- they misbehave. Their profession is governed by their professional association. These we can call approved professions. ---------------------- However, management training is not a condition to become a manager. ---------------------- Many managers may not be qualified in this sense. Managerial profession covers so many disciplines and sizes of organisations that one may find it difficult to ---------------------- standardise the profession. Efforts have been made in the directions but these ---------------------- have not been accepted. Thus, in the sense of legal sanctity and as a knowledge base, management is not standardised. ---------------------- Even though people are being formally educated and given certification ---------------------- to this effect, it is not necessary that all these trained people can be called managers unless they manage and prove their skills. But professionalism which ---------------------- indicates pride, discipline and dedication to any work will always be there and managers will remain professional to that limit. We need not call ourselves ---------------------- professionals but can act as one. Let managers take pride as professionals ---------------------- without being recognized by law or any controlling professional body. They are to spread out and be varied, perform in all walks of life. Many of them prefer ---------------------- to get attached to specialized bodies such as those associated with materials, manpower, engineering, quality control than a very general body. Besides the ---------------------- fact that professional education is not necessarily a precondition to become ---------------------- a manager, management in a way can be said as liberal art- a profession in disguise. ---------------------- Business - The Purpose of Management 9  Notes 1.6 INFLUENCE OF BUSINESS ON MANAGEMENT ---------------------- Let us discuss the influence that business exercises on management: ---------------------- The longevity of management is decided by longevity of business. If business does not exist, there is nothing left for managing. Managers can ---------------------- reduce longevity of business by changing the business itself or merging it with some other business. Thus, the nature of business must be changed ---------------------- to make the business survive. By not managing properly and not keeping ---------------------- the business sufficiently competitive, the life of business can be reduced. We see many businesses failing against prematurely. ---------------------- Besides the longevity, the stability of management is also important ---------------------- upon threats and opportunities offered by environment. Acute shortage or great price rise in petroleum products may have an adverse effect on ---------------------- the automobile industry and transport business. It is a condition which is beyond any individual management. ---------------------- The interest of various stakeholders may also create pressure on ---------------------- management. Labour strike may paralyze management. Shortsighted ownership may not work in the interest of continuity of business and, ---------------------- therefore, its management. ---------------------- Improper and untimely resource availability may affect management. There may not be capital available to purchase the latest competitive ---------------------- technology. ---------------------- The other important factor that affects management is competitive pressures that may develop from time to time. One cannot learn business ---------------------- just by seeing one's resources but one also needs to watch comparative competitors and their resources. When demand was assured and increased ---------------------- as during the period 1976 to 1990, business planning was only seeing ---------------------- how one can mobilise resources. But now we have to think more of competition and see what we can do to survive and grow. From the supply ---------------------- side planning we have now entered into strategic planning. Planning is now no more how to produce goods and services but is how to plan tactics ---------------------- and overall strategies to compete with others supplying such goods and ---------------------- services. The globalisation of business has increased the possibilities to meet supply ---------------------- to the world needs and at the same time face competition even in the local ---------------------- market. Products can now be imported. Thus business requires a global vision. The role of the government in producing goods and services is slowly being ---------------------- reduced and is being given to private hands. This has increased competition. ---------------------- ---------------------- ---------------------- ---------------------- 10 Principles and Practices of Management  Notes Check your Progress 3 ---------------------- Multiple Choice Multiple Response. ---------------------- 1. Management: ---------------------- i. Deals with the totality of the business system ---------------------- ii. Strives for profitability, liquidity, efficiency and effectiveness iii. Deals with unit of operation ---------------------- 2. Administration: ---------------------- i. Looks after functions only within the organisation ---------------------- ii. Looks after administration and management both ---------------------- iii. Strives for implementation ---------------------- 3. Business influences management in the following ways: i. Competitive pressures that develop every five years are likely ---------------------- to impact the management ---------------------- ii. Improper and untimely resource availability may affect management ---------------------- iii. Labour strikes may paralyze management ---------------------- ---------------------- Activity 3 ---------------------- ---------------------- Read the newspapers and write an example of a company whose functions have been paralyzed due to labour strikes. What role has the management ---------------------- played in arriving at a solution? ---------------------- ---------------------- 1.7 INITIATING RESOURCE RAISING ---------------------- Whether an owner or an entrepreneur, when he starts business, he not only has to create a business concept but give it a shape as an organisation by ---------------------- providing resource to begin with. Organisation cannot operate without resource. ---------------------- It will require capital to provide for men, money, machinery, materials, space, facilities etc. And only then can management start working. Thus, besides ---------------------- having the concept of business, for implementation one would require raising resources. The small business of a vegetable vendor on the street too requires ---------------------- someone to provide vegetables, a street corner, weights and measures, some ---------------------- working cash (say, change) before starting business. The word organisation denotes a structure but it must be remembered that ---------------------- this structure cannot work without resources. Most of the managers expect that ---------------------- Business - The Purpose of Management 11  Notes it is someone else’s job to provide resources and that managers only have to manage it. Over a period of time, resource raising has become a management ---------------------- job. Knowledge of resource availability and its behaviour then becomes an important part of management. Thus, in practice, ownership qualities, ---------------------- entrepreneurial qualities and managerial qualities almost become integrated ---------------------- and success in business depends on its integration. ---------------------- 1.8 THE INFLUENCE OF SCALE OF BUSINESS ON ---------------------- MANAGEMENT ---------------------- When we talk of organisations and its levels, we will discuss more about scale of business operations. As a rule of thumb, bigger the business, more ---------------------- of managing is required and it becomes more complex. Simpler the business, simpler would be the management. When a vendor manages a tobacco shop ---------------------- (like the Panwala in India), his management is confined to a small place (may ---------------------- be one square meter). He has his stock before him; he himself operates the shop and therefore, knows his customers. Agents approach him and supply him with ---------------------- whatever he requires. He almost attends the shop singly for 16 hours. Thus, his management is in his hands under his physical observation all the time. He has ---------------------- to imagine less and has, therefore, less number of human problems of getting ---------------------- work done from others. He has no holidays and he works for the entire week. In short, he controls management through direct observation and self work. Thus, ---------------------- his problems are limited. ---------------------- On the other hand, a big multinational company, which has plants in 17 countries, provides goods to many countries through a distribution channel ---------------------- of many dealers and distributors. In fact, the management handles everything indirectly and cannot physically observe the market it serves. It has complex ---------------------- resource problems. Management in such a case will not be simple. More the ---------------------- indirect management (not being observed by its managers) more organized it will have to become and more complex it will be for managing everything. ---------------------- Thus, business size (scale of operations) decides complexity of management. ---------------------- 1.9 ESTABLISHING THE BUSINESS NETWORK ---------------------- Human factor is very dominant in the business. The owner or the ---------------------- entrepreneur who conceives and implements business is human. It is only human being who can think of business. Since it is the exchange of goods and services ---------------------- for value, a number of persons are needed to make it a success. We require ---------------------- suppliers; business facilitators such as bankers, venture capitalists, insurance companies, transport companies, packers; legal authorities; workers and ---------------------- managers, distributors and dealers, customers, beneficiaries and all constituents of the supply chain (of which we will speak later on) and people providing us ---------------------- with opportunities and threats. Thus, in business we deal with a great majority ---------------------- of people than only those directly controlled by organisation and most of these are outside the organisation. Relations with them and their co-operation will ---------------------- decide the outcome of business. Even a rikshawala (auto three wheeler driver) 12 Principles and Practices of Management depends on petrol dealers, tire shops, loaning institutions extending loans, Notes rickshaw dealers, garage mechanics, rickshaw passing authorities, customers. ---------------------- Thus, business requires very wide public relation. These relations are to be networked so that they can individually and collectively involve a businessman ---------------------- (in this case, the rikshawala). Thus, the business involves relationship with a number of people and the more networked one is, better is one’s business. ---------------------- A manager, therefore, has to establish a business network of people. Since ---------------------- management is working for business, it has to create and work within the ambit of a business network. ---------------------- Check your Progress 4 ---------------------- ---------------------- Fill in the Blanks. ---------------------- 1. Business involves relationship with a number of people and the more _______________ one is, better is one’s business. ---------------------- 2. The owner or the entrepreneur who conceives and implements ---------------------- business is ________________. ---------------------- 3. Business requires very wide ________________________. ---------------------- 4. Bigger the business, more of managing is required and it becomes more ________________. ---------------------- ---------------------- ---------------------- Activity 4 ---------------------- A business manager in a leading company has contacts with the following: ---------------------- Employees, Marketing Manager, Receptionist, Distributors, Dealers, Outside Branch Staff, Suppliers, Walk In Customers, Dealers, Customers ---------------------- Which of the above are direct and indirect contacts? ---------------------- ---------------------- 1.10 SOCIAL RESPONSIBILITY OF BUSINESS ---------------------- Business is a social activity. Any activity which is related to human beings ---------------------- is called a social activity. Business is not possible without having people as customers and a social network as outlined above. The very fact that business ---------------------- is for a society, it also has a moral responsibility towards the society. Thus, the very nature of business makes it a social responsibility. Though business ---------------------- is done by individuals and their organisation for its own survival, it cannot do ---------------------- so by going against the interest of society. In principle, that which goes against interest of society is evading social responsibility. ---------------------- The first social responsibility is to supply goods and services which are qualitatively appropriate. ---------------------- Business - The Purpose of Management 13  Notes The second is towards the various stake holders such as owners, shareholders, employees, creditors etc. Who form a part of business. To ---------------------- give the stakeholders adequate moral satisfaction and to work for their growth and continuity becomes a business responsibility. ---------------------- Business organisations are corporate citizens and as such have the ---------------------- responsibility that citizens have towards nation, fellow citizens and thus must act in a responsible manner. ---------------------- Business is a profit motivated activity and has a number of opportunities ---------------------- to make profit which may at times be at social cost. Balancing thus is the moral responsibility of a business organisation. ---------------------- Moreover, all business houses are human organisations and have the ---------------------- responsibility to carry their business in such a way that all people who make it remain overall satisfied with its working. ---------------------- Being citizens, these people also carry various legal responsibilities and ---------------------- must adhere to the law applicable to it. Business can also support non-business social activities which it feels ---------------------- promote a social good cause. People look for their assistance. In a ---------------------- broader sense, they contribute to economic development and participate in development activity. ---------------------- Business citizenship is primarily moral behaviour but those activities ---------------------- which put financial burden on business should be done only to the extent that basic health of business is not affected. After all, keeping ---------------------- business healthy is a bigger social service and this should be the primary responsibility of any business. ---------------------- It is primarily through its business that an organisation serves the society ---------------------- and this should be its first priority. ---------------------- 1.11 ROLE OF PROFITABILITY AND LIQUIDITY ---------------------- Many people blame business for its attitude to earn disproportionate profit ---------------------- and as a net draw on society. Business is taking risks in anticipation of demand and facing uncertainty due to changing environmental factors. When you are in such a ---------------------- situation you look for insuring your risk through profit opportunities. Thus, business ---------------------- has a natural tendency to reap benefits when conditions are favourable sometimes even against the interest of the society. As human beings business succumb to the ---------------------- same motivations as any other human being. That is why even in country such as the United States of America, there are monopoly restrictions in the nature of anti- ---------------------- trust laws. If business is to be kept away from weighing its self interest in opposition ---------------------- to social interest, it must have a competition. It is to foster this competition that there are monopoly restrictions. These chances further get reduced if there is an adequate ---------------------- supply of products and services in the market. Profitability is the business test to see that you earn more than what you spend. ---------------------- Since it is the social obligation of business to honour all its commitment ---------------------- in terms of expenses, business has to be liquid (that is one having cash). 14 Principles and Practices of Management Business has to have every day liquidity to meet its outgoing cash commitment Notes and this becomes one of the important management aspect of business. Any business management has to worry about its profitability and liquidity. Very few ---------------------- managers think this as a part of their management objectives. ---------------------- 1.12 THE NATURE OF COMPETITION ---------------------- It is felt that fostering of competition is essential for keeping business ---------------------- social conduct under check. At the same time, it must be remembered that it takes away business stability and increase environmental uncertainty and attendant ---------------------- risks. Natural competition arises out of competitive industry, substitute industry, ---------------------- composite industry, input and process industries. In country such as India where petroleum products are required to import on a big scale, any increase in the ---------------------- price of petroleum affects the price of private and public transport. An increase in the price of petroleum will affect the business of manufacturing vehicles ---------------------- and then transport business itself. Mangoes will become expensive if packing ---------------------- material for it becomes expensive. People have cell phones (mobile phones) with camera and thus independent demand for cameras, may go down. Thus, ---------------------- any change in technology will affect the sale of the products that are dependent on that technology. Low cost saree market is disappearing from the metropolitan ---------------------- cities because young generation do not prefer to wear sarees. Such changes go ---------------------- on taking place every day directly or indirectly related to product and services and thus create threat to existing businesses. ---------------------- Management must take an overall view of the changing environment to ---------------------- understand the nature of competition which apparently is not only restricted to similar products but also to non similar products. As already mentioned ---------------------- globalization and privatization have increased the intensity of this competition. In future, business will thus face increased competition, increased risks and ---------------------- uncertainties. ---------------------- 1.13 IMPLICATIONS OF GLOBALISATION ON MANAGEMENT ---------------------- The term globalisation refers to free and unrestricted flow of products ---------------------- and services all over the world. The first impact of globalisation as we will soon ---------------------- see is that unregulated world markets influence almost all businesses directly or indirectly. Management will thus have to raise its vision to global level in ---------------------- resource utilization. ---------------------- Due to competitive conditions, there will be a competitive pressure on the downward trend in prices and increase in quality and productivity in general. ---------------------- Economic development will be accelerated in all parts of the world. ---------------------- Even business will be looked to as an agency of economic development and people will watch it carefully in terms of development. ---------------------- Business will become more service oriented. ---------------------- ---------------------- Business - The Purpose of Management 15  Notes Free flow of technology will make it possible to increase the use of technology in business and, therefore, influence the scale of businesses in ---------------------- human terms. All such developments will influence management. ---------------------- 1.14 IMPLICATIONS OF PRIVATISATION ON MANAGEMENT ---------------------- Privatisation will generally lead to an increase in the number of small ---------------------- scale businesses and, therefore, there will be a higher number of business organisations. Existing big business too, through business process outsourcing ---------------------- (BPO), will try to split itself in number of small units. Contracting out services in business will increase. Managers will be more Self employed than employed ---------------------- and a class of business managers will be on the increase. In order to control ---------------------- overheads in terms of competition, business will be divided into manageable units. As in automobile industry, there will be perhaps large scale assembling. ---------------------- Thus, we will be talking managing smaller business than large scale businesses. ---------------------- There would be disproportionate increase in service industries as compared to manufacturing industries. Supply chains will compete with other ---------------------- supply chains in the market and thus there will be an effort to establish business ---------------------- alliances of innumerable types and its management. Management under one roof will become secondary as against extended organisations not working ---------------------- under one roof or even under one management. It also means that organisation changes will take place and effect its management. ---------------------- ---------------------- 1.15 ROLE OF OWNERSHIP INTEREST IN MANAGEMENT ---------------------- Historically, people preferred to bifurcate ownership interest from management. The owners whose major role was to make capital available were ---------------------- not interested in its day to day management and therefore, people with more knowledge and specialization were chosen as managers. But it is now being ---------------------- realised that both supplying capital and taking business risk cannot be bifurcate