ENT 202 Introduction to Entrepreneurial Ventures_1.pdf

COURSE GUIDE ENT 202 INTRODUCTION TO ENTREPRENEURIAL VENTURES Course Team Dr. Cletus Akenbor – (Course Writer) Department of Business Administration Faculty of Management Sciences Federal University, Otuoke Prof. Bello Sabo - (Course Editor) Department of Business Administration Faculty of Administration Ahmadu Bello University, Zaria Dr. Lawal Kamaldeen A.A (H.O.D) Department of Entrepreneurial Studies Faculty of Management Sciences National Open University of Nigeria Dr. Timothy Ishola (Dean) Faculty of Management Sciences National Open University of Nigeria NATIONAL OPEN UNIVERSITY OF NIGERIA 1 National Open University of Nigeria Headquarters University Village Plot 91 Cadastral Zone Nnamdi Azikiwe Expressway Jabi, Abuja. Lagos Office 14/16 Ahmadu Bello Way Victoria Island, Lagos e-mail: [email protected] URL: www.noun.edu.ng Published by: National Open University of Nigeria ISBN: Printed: 2017 All Rights Reserved 2 COURSE GUIDE TABLE OF CONTENT Introduction Course Content Course Aims Objectives Course Materials Study Units The Modules Assignment Assessment Summary 3 INTRODUCTION ENT 202 – Introduction to Entrepreneurial Ventures is a semester course work of 2 credit units. It is available to all students taking the B.Sc Entrepreneurship programme in the Department of Entrepreneurial Studies, Faculty of Management Sciences. The course consists of 13 units which cover the concept and y of organization success. The course guide tells you what ENT 202 is all about, the materials you will be using and how to make use of them. Other information includes the self assessment and tutor-marked questions. COURSE CONTENT The course content consists of entrepreneurial ventures COURSE AIMS The aim of this course is to expose: - understand the character of ventures - explain the long-term character of venture - explain the short – term character of venture 4.0. OBJECTIVES After going through this course, you should be able to: - define and explain the terms business and social venture - understand the background of social venture - explain and understand the scope of business/social venture 4 COURSE MATERIALS  Course Guide  Study Units  Text Books  Assignment Guide STUDY UNITS UNIT 1: Scope of Business Social Ventures UNIT 2: Character of Ventures UNIT 3: Forms of Business Ownership UNIT 4: Organization and Management UNIT 5: The Marketing Function UNIT 6: Production Function UNIT 7: Finance and Accounting Function UNIT 8: Human Resource Function UNIT 9: Government and Business UNIT 10: The Social Responsibility of Business UNIT 11: International Business 5 UNIT 12: Concept of Social Goods UNIT 13: The Creation of Social Networks UNIT 14: Non-governmental Organizations and Practice in Evolving Non-profit Organization Each study unit will take at least two hours. You are expected to study each unit and answer the tutor-marked assignments. THE MODULES The course is divided into four modules. ASSIGNMENT Each unit consists of at least one assignment which you are expected to do. ASSIGNMENT TUTOR-MARKED ASSIGNMENT You are expected to apply what you have learnt in the contents of the study unit to do the assignments and send them to your tutor for grading. FINAL WRITTEN EXAMINATION This will be done at the end of the course. SUMMARY This course ENT 202 (Introduction to entrepreneurial ventures) exposes you to the forms, functions and concepts of various business and joint venture organizations. 6 MAIN CONTENT MODULE 1 UNIT 1: Scope of Business Social Ventures UNIT 2: Character of Ventures UNIT 3: Forms of Business Ownership UNIT 4: Organization and Management MODULE 2 UNIT 5: The Marketing Function UNIT 6: Production Function UNIT 7: Finance and Accounting Function UNIT 8: Human Resource Function MODULE 3 UNIT 9: Government and Business UNIT 10: The Social Responsibility of Business UNIT 11: International Business MODULE 4 UNIT 12: Concept of Social Goods UNIT 13: The Creation of Social Networks UNIT 14: Non-governmental Organizations and Practice in Evolving Non-profit Organization 7 MODULE 1 UNIT 1 SCOPE OF BUSINESS/ SOCIAL VENTURE CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Contents 3.1 Background of Social Venture 3.2 Scope of Business/Social Venture 3.2.1 Industrial Sector 3.2.2 Commercial Sector 3.2.3 Service Sector 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Reading 1.0 INTRODUCTION A business is a set of activities, which leads to the manufacturing of goods or provision of services to satisfy the consumers at a profit. In other words, any activity conducted by an individual or group of individuals which involves the accumulation of resources ( materials, capital, information, labour, equipment and tools) for the provision of goods and services to satisfy the needs felt by a consumer for a profit , is regarded as a business. On the other hand, a venture is an undertaking involving uncertainty as to the outcome, especially a risky or dangerous one. Therefore a social venture is an undertaking by a firm or organization established by a social entrepreneur that seeks to provide systemic solutions to achieve a sustainable, social objective. 8 2.0 OBJECTIVES At the end of this unit, you should be able to: - define and explain the terms business and social venture - understand the background of social venture - explain and understand the scope of business/social venture 3.0 MAIN CONTENTS 3.1 Background of Social Venture Social ventures may be structured in many forms, including sole proprietors, for-profit and not- for-profit firms, non-governmental organizations, youth groups, community organizations, and more. Typically, government organizations are not considered to be social ventures, yet even government organizations can adopt entrepreneurial practices, possibly partnering with independent organizations, to explore innovative methods for providing social services. Elkington and Hartigan (2007) define three models for social ventures: leveraged nonprofit, hybrid nonprofit and social business. In the leveraged nonprofit venture the entrepreneur uses external partners for financial support in providing a public good. On the other hand, the hybrid nonprofit venture recovers a portion of its costs through sales of its goods or services. The social business venture generates profits, but rather than return those profits to shareholders, like business ventures, it reinvests those profits to further the social venture and the resulting social benefits. The distinguishing characteristic of the social venture versus the business venture is the primacy of their objective to solve social problems and provide social benefits. The social venture may generate profits, but that is not its focus. Rather profits are a possible means to achieve sustainability in providing a social benefit. The problems addressed by social ventures cover the range of social issues, including poverty, inequality, education, the environment, and economic development. The context in which social ventures operate is very complex as they are trying to bring about solutions where markets or governments may have failed or actually impede solutions. Further, these ventures are trying to provide solutions where money is usually in short supply—often these ventures have little assurance that their services can be paid for by those they seek to serve (Martin and Osberg, 2007). These conditions necessitate that the social entrepreneur be creative, adaptable, and determined in finding new solutions to problems. 9 3.2 Scope of Business/ Social Ventures The scope of business or social venture covers all the activities related to production and distribution of goods and services from the place of production to the final consumers with an aim to earn profit. There are two types of business activities. These business activities are also known as business components, which are actually defined as the scope of business. The scope of a business entails the following: 3.2.1 Industrial Sector The word ―Industry‖ refers to that part of business activities which is apprehensive with the extraction, production or fabrication of products. The products which are raised, produced or processed by an industry may either be used by the ultimate consumer or by another concern for further production. If the goods produced by an industry are consumed by the final customers, these are named as ‗consumer‘s goods‘ e.g. clothes. If the goods are used for further production of wealth they are called producer‘s or capital goods. In case the goods produced by an industry are further processed into finished products by another concern they are known as intermediate goods. i.e Plastic. There are different types of industry. These are:  Extractive Industries Extractive industries are those industries which extract, raise or fabricate raw materials from above or beneath surface of the earth. i.e. Mining, fisheries forestry, agriculture.  Genetic Industries Those industries which are engaged in reproducing and multiplying certain species of animals and plants and selling them in the market for profit are named as genetic industries. i.e. Cattle breeding farms, poultry farms, plant nurseries.  Constructive Industries Constructive industries as the name signifies are engaged in the construction of building, canals, brides, dams, roads etc.  Manufacturing Industries 10 Manufacturing industries are those which are concerned of converting raw material or semi finished products into finished products. E.g. Shoes Company, Textiles Mills. 3.2.2 Commercial Sector The second element that comes in the scope of business is commerce. It is a very important component of business and is concerned with the buying and selling of goods. It includes all the activities which are connected to the transfer of goods from the place of production to the ultimate consumers. The whole range of commercial activities is classified as trade, which is the process of buying and selling of goods. It is the exchange of goods and services among buyers and sellers in which both parties received a benefit. Trade is classified into two types. Internal Trade The process of buying and selling of goods within the edge of a country is called internal trade. This could be wholesale trade or retail trade. Wholesale Trade: The process of purchase of goods in huge quantity from producers and their resale to retailers is known as wholesale trade. The retailer then further sells these goods to the final consumers. Retail Trade: The purchase of goods or services from the wholesalers and selling in small quantity to the ultimate consumers is known as retail trade. External Trade The purchase and sale of goods between two countries are called external trade. It is also called foreign trade. There are two types of external trade. These are import trade and export trade. Import Trade: This involves the purchase of goods from foreign countries to be sold in the home country. Export Trade: This involves the purchase of local goods to be sold in foreign countries. 3.2.3 Service Sector Service sector is usually engaged in the provision of intangible products which cannot be seen or felt. The sector is made up of direct and indirect services. The direct services are those services that are provided by professionals, such as health care, teaching, legal services, etc. The indirect 11 services are those that are offered to enhance the activities of industrial and commercial sectors. In business parlance, they are called aids to trade. The aids which are compulsory for the development of trade are as follows:- Transport: The different ways of transport help in carrying goods from the places of production to centers of utilization e.g. Railways, ships, airlines etc. Insurance: Insurance is very essential aid to trade. The risk of damage of goods due to fire, flood, earthquake or other causes us covered by insurance. Warehousing: Warehousing is a kind of storeroom. Nowadays most of the goods are produce in anticipation of demand. They are stored in safe places and are released as and when demanded in the market. Warehousing thus helps in overcoming the barrier of time and creates time utility. Banking: The commercial banks play a vital role in financing the different trade activities. They are funding the traders for stock holding and transportation of goods. They also support the buyers and sellers of goods in receiving and making payments, both at the national and worldwide level. The credit facility in the form of cash credit, overdrafts and loans is provided to the traders. Advertisement: Selling of goods is the most difficult problem for the producer. Advertisement regarding the product through newspapers, magazines, radio and television has greatly helped the consumers in choosing the goods of their taste. So advertisements play a vital role in increasing sale of goods. 4.0 CONCLUSION A business is a set of activities, which leads to the manufacturing of goods or provision of services to satisfy the consumers at a profit while a social venture is an undertaking by a firm or organization established by a social entrepreneur that seeks to provide systemic solutions to achieve a sustainable, social objective. Whether as a business or a social venture the scope of activities is well defined. This scope involves the industrial sector, commercial sector, and service sector. 5.0 SUMMARY You have learnt in this unit about business and social ventures with particular emphasis on the scope, which include industrial sector (extractive, genetic, constructive, and manufacturing), 12 commercial sector ( internal trade and external trade), and service sector (professional services and aids to trade). 6.0 TUTOR-MARKED ASSIGNMENT 1. Differentiate between business and social venture 2. Explain the scope of business/social venture 7.0 REFERENCES/ FURTHER READING Elkington, J. & Hartigan, P. (2007). The power of unreasonable people: How Social Entrepreneurs Create Markets that Change the World. Boston, MA: Harvard Business School Press. Martin, R. & Osberg, S. (2007). Social entrepreneurship: The Case for Definition. Stanford Social Innovation Review, Spring:28-39. Thom-Otuya, V.C., Keme, T.A.E., & Akenbor, C.O. (2005). Introduction to business. Port Harcourt, Anclet De Austere & Co. 13 UNIT 2 CHARACTER OF VENTURES CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Contents 3.1 Long – Term Character of Ventures 3.2 Short-Term Character of Venture 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Reading 1.0 INTRODUCTION Entrepreneurial influence is no doubt strongest at the birth of a venture and may decline thereafter. For example, in his case study of the founding of a medical school, Kimberly (1997), notes that although knowledge of the entrepreneur and his values and objectives is essential for an understanding of an organization, the importance of the person at the top diminishes in explaining organization outcomes as that organization matures. Organizations do continue to reflect their entrepreneurs, while those entrepreneurs are in charge and to a degree thereafter as well. Thus it is justified to view entrepreneurs not merely as ephemeral or transient agents in an organization‘s life but as fundamentally influential actors who set the tone of activity for substantial periods of time. 2.0 OBJECTIVE At the end of this unit you should be able to: - understand the character of ventures - explain the long-term character of venture - explain the short – term character of venture 14 3.0 MAIN CONTENT 3.1 Long – Term Character of Ventures Long – term entrepreneur tends to be committed over the long run to particular ventures. The long-run success of an enterprise and the degree to which it continues to reflect its original intent appears to be directly related to the length of time that the entrepreneur remains committed to it. The entrepreneurial screening processes can be expected to differently influence the long-run stability and dependability of organizations in alternative sectors. Entrepreneurial influence diminished and ventures all seem to have suffered from the inability of the primary entrepreneurs to nurture them on a full-time or long-run basis. In most other cases, however, where entrepreneurs were able to concentrate their attentions on their ventures over a substantial period, the enterprises struggled much less and remained truer to original purposes. In a few cases, success was attributable to the stable guidance of the entrepreneur coupled with the commitment of hand-picked administrators to assume control and to carry on the original intent beyond the continued involvement of the entrepreneur. Long-term character of venture includes independents, believers, conservers, architects, and controllers. Independents Independents are essentially one-time venturers who having established their autonomous enclaves, will simply act to maintain them into the indefinite future. Believers Believers tend to create venture frameworks within which they can continue to innovate and build according to a consistent structure or idea. The believer, for example, will establish an agency or program centered on a singular idea or mission, but may continue to expand or elaborate on this theme with further ventures. The success of the mission is of paramount importance to the believer, and all his efforts go into maintaining its viability and elaborating on it. 15 Conservers Conservers are of a similar nature; having come to the rescue of a cherished institution, the conserver will also continue to exert his efforts and retain responsibility for maintaining it on an even keel. Architect The architect is especially committed to continual elaboration of his enterprise, but this requires maintenance of the structural foundations as well. Although the architect will be substantially more flexible than the believer in adjusting the rationale for ventures to suit changes in the environment, he will remain committed to a given venture as long as it maintains the potential for growth and experimentation. The pride with which the architect can trace his impact to the venture‘s roots is a fundamental source of his satisfaction. Controllers Controllers resemble independents but are somewhat less reliable in terms of long-term commitment. The controller will be tempted to move from one venture to a larger one until he arrives at one that tests his limits, sense of security, and viability of central control. At that point he resembles the independent, seeking largely to maintain that enterprise in balance. The long-term commitment to a venture‘s initial rationale or mission, compared with its economic well-being, provides a contrast not only between the believer and the architect, but also among other types as well. In particular, the independent and the controller will strive to maintain economic viability, showing flexibility of mission where necessary. To the contrary, conservers may resemble believers somewhat in their commitment to original purpose; conservers are strongly concerned about the maintenance of both mission and economic stability. 3.2 Short-Term Character of Venture Short-term venturers tend to be loosely committed to particular ventures but dedicated to enterprising as an ongoing activity. The connection between entrepreneurial commitment and short-run outcome prompts the question. Are different varieties of entrepreneur more or less likely to give short-term attention to their ventures or establish conditions under which they will 16 be competently administered and remain true to original purpose? The answer is no, the entrepreneurial types may be characterized according to their degrees of short-term commitment for a given venture. However, this venture-specific notion must be distinguished from general commitment to enterprising. Short-term venturers include income seekers, players, poets, professionals and searchers. Income Seekers and Players Income seekers and players are essentially opportunists, willing to abandon one venture for another if better opportunities arise to increase their personal wealth or power. Hence their commitments to a given venture, its integrity of purpose or its long-term economic well-being, will be precarious. So long as alternative opportunities do not call, income-seeking and power- seeking players will stress the economic growth of their enterprises, following whatever path the environment makes most lucrative (in the case of income seekers) or most socially noteworthy (in the case of players). If attractive alternative opportunities for venture arise, however, these entrepreneurial types will be quickest to move on. The income seekers will leave first. The player, as a public-oriented personality, depends heavily on keeping his reputation unblemished. He will therefore take some pains to avoid abrupt abandonment of an enterprise whose failure may be blamed on him. The player will work to establish a credible transitional arrangement that would absolve him of any culpability should the venture founder after he leaves. Professionals The professionals are short-term venturers in the sense that their attention spans for a given enterprise depend on the venture‘s level of intellectual or emotional novelty or freshness. The professional is intent on working at the frontier of current disciplinary thought and knowledge generation. His ventures tend to have an experimental or demonstration quality to them, especially in industries governed by scientific disciplines. Such ventures are kept relatively small and controlled, studied intently, described at professional conferences, and written up in the literature. Given the changing currents of disciplinary thinking, however, a particular venture is unlikely to command professional attention for very long. New schools of thought or innovative 17 ideas gradually but continually emerge, requiring the professional to move on to new forms of experimentation within a relatively short time. Poet The poet also has a relatively short attention span and a chronic need to explore new avenues of experience. Rather than key himself to the currents of disciplinary activity (like the professional), however, the poet is more of a free spirit, driven internally to move away from ventures that have reached a plateau of initial success and preferring to undertake some new experience. Of all entrepreneurial types, the poet is most likely to disdain the managerial role, preferring to coax, catalyze, and cajole others to contribute to and manage the new enterprise. If ventures require the poet to manage for a while, that responsibility will be assumed only reluctantly until a managerial team can be put into place. Professionals will also behave this way, to a more limited extent, preferring to establish, oversee, contemplate, evaluate, and publicize ventures rather than directly administer them. As a result, programs and agencies established by poets or professionals will tend to lose their initial flavor after a while. Such ventures will either founder after their entrepreneurs move on or they will shed their innovative, experimental tone as more conventional management assumes long-term responsibility. Searcher The searcher is the least predictable of entrepreneurial types in terms of his long-term commitment to venture. Two conflicting effects exist in his case. On the one hand, a searcher may undergo long periods of exploration and restlessness during which he may dabble in a number of ventures. Like the poet, a searcher in this phase cannot be depended on for long-term leadership and ventures that he establishes face an uncertain future. On the other hand, a searcher will grasp tenaciously to his venture, once having found his true calling. At this point, the searcher begins to resemble the believer or independent and may be counted on to provide long- term commitment. 4.0 CONCLUSION Organizations that attract entrepreneurs of the believer, independent, controller, conserver, or architect varieties are likely to exhibit long-term behavior consistent with original 18 entrepreneurial motivations. This behavior will consist of: agencies exhibiting long-term, relatively rigid mission orientations (believers); small to moderately sized (or decentralized) groups of stable, insulated agencies (independents and controllers); conservative, old-line, stable agencies (conservers); growing, expansive, dynamic agencies with multiple programs adaptive to the current economic environment (architects). But organizations that attract income seekers, players, poets, and professionals will exhibit more dynamic short-run behavior but less consistency and stability over the long run than organizations that attract other types. Specifically, organizations that attract income seekers and players will be faster to respond to economic opportunities, but also faster to modify and abandon ventures as the external structure of opportunities changes. Hence agencies in organizations with these types of entrepreneurs are likely to undergo substantial fluctuations of both nominal purpose and economic well-being. Organizations that attract professionals and poets will be fast to shape and develop new ideas and translate them into working programs. However, such sectors are not likely to exhibit very long- term commitments to such programs, but rather will move slowly from one set of ideas to another over time. Those entrepreneurial types with the strongest tendencies toward long-term consistent venture commitment—the believers and conservers—will gravitate to the nonprofit sector, whereas those with the strongest transient tendencies—the income seekers and power seekers—will tend to concentrate on the profit sector. However, this overall pattern is by no means rigid. 5.0 SUMMARY You have learnt in this unit about character of ventures as to whether long-term venturer or short-term venturer. Long-term character of venture could be independents, believers, conservers, architects, and controllers while short-term character of ventures could be income seekers, players, poets, professionals and searchers. Those entrepreneurial types with the strongest tendencies toward long-term consistent venture commitment—the believers and conservers—will gravitate to the nonprofit sector, whereas those with the strongest transient tendencies—the income seekers and power seekers—will tend to concentrate outside the nonprofit sector. 19 6.0 TUTOR- MARKED ASSIGNMENT 1. What character of venture is common in business enterprises? 2. Explain the major factor that determines the character of an entrepreneur? 3. Explain what you understand about the following characters of ventures: - Independents - Believers - Conservers - Architects - Controllers - Income seekers and players - Professional - Poets - Searcher 7.0 REFERNCES/FURTHER READING Kimberly, J.R. (1979). Issues in the creation of organizations: Initiation, Innovation and Institutionalization, Academy of Management Journal, December Drucker, P.F (1973). Managing the public service institution. The Public Interest, Fall. Cornuelle, R.C. (1964). Reclaiming the American dream. Westminster Md.: Random House. 20 UNIT 3 FORMS OF BUSINESS OWNERSHIP CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 Non Corporate Business 3.1.1 Sole Proprietorship 3.1.2 Partnership 3.2 Corporate Business 3.2.1 Private Corporate Business 3.2.2 Public Corporate Business 3.3 Formation of Companies 3.3.1 Memorandum of Association 3.3.2 Articles of Association 3.3.3 Prospectus 3.3.4 Incorporation 3.4 Share Subscription 3.5 Company Amalgamation 4.0 Conclusion 5.0 Summary 6.0 Tutor- marked Assignment 7.0 References/ Further Reading 1.0 INTRODUCTION Forms of business ownership refer to the legal implication of setting up and owning a business. There are different forms of business ownership. These can be classified as non corporate business and corporate business. 21 2.0 OBJECTIVES At the end of this unit, you should be able to: - understand the forms of business ownership - differentiate between corporate and non corporate business - understand the contents of a partnership deed or article of partnership - explain the process of company‘s formation - know the different forms of share capital 3.0 MAIN CONTENT 3.1 Non-Corporate Business A non-corporate business is the type of business organization that is formed without any formal authority from an existing government. It may be registered with the corporate affairs commission or relevant authority, but has no separate entity of its own. However, at the time of making contractual agreements in the course of operations, its legal requirement is imperative. A non-corporate business includes sole proprietorship and partnership. 3.1.1 Sole Proprietorship Sole proprietorship is otherwise known as one man business. It is a type of business that is formed and owned, by one man and members of his immediate family. However, the owner of this form of business is required to register the business name with the ministry of commerce, and the business premises with the local government authority in which territory the business is conducted. Sole proprietorship is the most common form of business practiced all over the world. It is found in every facet of business such as agriculture, mining, shoes making, wholesaling, retailing, warehousing, transportation, health care, legal services etc.The reasons why people may like to operate sole proprietorship are: 22 1. Psychological satisfaction of one‘s own boss - When one is the sole owner of a business, he usually has a certain pleasant feeling that he is his own boss and is responsible only to himself. 2. Decision-making is fast: - In this form of business the owner manager can act promptly in times of emergencies without consultation with others. 3. Privacy and secrecy of business: - The records of the business are not required by law to be published at the end of the accounting year. However, the accounting records of the business may be required by bankers or lenders when the owner needs to borrow money. 4. Owners‘ personal interest: - The interest of the business and the owner manager is the same. There is no conflict of interest thus goal congruence is achieved. The owner manager puts his responsibilities on his heads rather than his shoulders. 5. Ease of formation and management: - This is the easiest form of business to run. There is no special documentation involved in operating this business. Again, it requires little amount of capital. 6. There is no double taxation: - The owner pays tax for himself and not the business. In this form of business, there is avoidance of tax. 7. The owner manager has all the profit to himself: - When profit is made out of the business, it is not shared to any other person. 8. The owner manager has freedom of management. He may decide to rest at home for sometime before going to the office, and he may at times decide to over-labour himself to work over — time and close late. In spite of all these advantages enumerated above for operating a sole proprietorship, some people equally see this form of business as evil rather than good for the following reasons. 1. There is a limit to growth and expansion because of insufficient capital. 2. The sole proprietor may not have the appropriate skills and techniques required for running the business. He is a jack of all trade. Hence, there is no specialization. 23 3. Lack of perpetual existence: -. The death, permanent illness and insanity of the owner manager may lead to the termination of the business.. 4. In a welter of business failure the liability of the owner is unlimited. He may lose his personal assets to pay business debts. 5. The business owner borne all risks associated with the business alone. Since he shares profit with no body, he equally suffers all looses and other perils alone. 6. Lack of accurate stock taking and other accounting records makes it difficult for the business owner to have a true picture of the financial position of the business. 7. The principle of separate entity is non-existent hence; there is always room for drawings, which is tantamount to a business. 3.1.2 Partnership According to the English Partnership Acts of 1890, partnership is defined as ―the relationship, which subsists between persons carrying on a business in common with a view of profit‖. It is a form of business owned by a minimum of two and a maximum of twenty persons. In actual sense, partnership business exists as one of the weapons business investors could use to overcome some of the problems of sole proprietorship. Partnership, like sole proprietorship is not subject to any government authority in its formation but fundamentally an agreement of intent, which may be oral, written or implied by the conducts of the parties, has to be made. It is preferable that the agreement be in writing to avoid any possible disputes or misunderstanding arising in the future. This agreement is called the partnership deed or articles of partnership. The Partnership Deed Although the English Partnership Act of 1890 provided a model partnership agreement, each partnership is free to develop its own agreement, which may incorporate some of the clauses in the agreement provided by the act. This is called the article of partnership. It is a legal agreement and not a legal requirement, which specifies the rights, powers and interests of the members of the partnership. 24 The Partnership Deed is made up of the following;  Name and address of business  Name and address of partners  Nature of business  Duration of the agreement  Amount of capital contributed by each partner  Method of sharing profits or losses  Provision for salaries or drawings accounts of partners.  Statement of the rights and duties of partners  Procedure for the admission of a new partner  Procedure for dissolution of the partnership  Method of determining a partner‘s investment if he wishes to withdraw However, it is important to note that although the partnership business is not subject to formal authority in its formation, it must be registered with the registrar of. companies within l4days of its existence by supplying all the information in the partnership deeds. Also, the number of partners in professional business like medicine, law, banking, insurance etc. is limited to ten members. Types of Partnership There are different types of partnership recognized by law. These are — ordinary partnership, limited partnership, industrial partnership, and Joint Venture. Ordinary Partnership This is the partnership business where the liability of members is hot restricted to their investment. In the event of business failure, the creditors of the.firm will have recourse to the private property of the partners. Members of the ordinary partnership are: (1) General or Ordinary Partner: This is a partner who has an invested capital in the business and participates actively in running the affairs of the business. 25 (2) Sleeping or Dormant Partner: A partner who does not take part in the management of the business but has an invested capital in the business. (3) Nominal Partner: This is a partner who has. no invested capital in the business and is not involved in its management but lends his either as a result of his goodwill or public image. In actual sense, he is not a partner. (4) Quasi Partner: - A quasi partner is a partner who had retired from the partnership leaving his capital in the business as loan, which attracts interest varying with the profit. In real sense, he is a partner, but a deferred creditor since the loan will only be repaid after all outside creditors have been paid. Limited Partnership This is the type of partnership in which the liabilities of the partners are restricted to the business.assets in case the business fails in a welter of indebtedness. However, it is required by law that in every limited partnership, there must be. a general partner whose liability is unlimited.. A limited partner is a partner whose liability to the partnership debts and obligations is limited to the amount of capital, which he contributes. As a result of development in the business world, industrial partnership and joint venture are equally seen as part of partnership. Industrial Partnership This involves a liaison between existing private and public organizations each of which is able to contribute highly specialized services or facilities to the common enterprise, which is usually of major industrial significance. An example of industrial partnership is the arrangement between the Shell Petroleum Development Company and the Nigerian Government, which led to the establishment of Port Harcourt Refinery. 26 Joint Venture Joint venture is a form of business where two or more parties come together to undertake a particular business transaction for a common benefit. When the transaction is fully executed, the business may be terminated. In every joint venture, parties to the venture usually state the terms and conditions on which they will undertake the venture, such as capital invested the part to be played by each party, share of profit and loss, commission on sale etc. One unique advantage of joint venture is that the venturers can be engaged in other business without affecting their roles in the joint venture. More so, the parties to the joint venture may not necessarily be residing in the same city. Mr. A in Port Harcourt could be in joint venture with Mr. B in Kano. Rights and Liabilities of Partners 1. Every partner must consent to the admission of a new partner. 2. The English Partnership Act of 1890 provides that every partner is entitled to equal share of profit, unless the partnership deed states something different. 3. Every partner has the right to inspect the firm‘s book of account. 4. Every partner is entitled to interest on capital 5. All partners are liable to debts and financial obligations. 6. No partner should keep any business information secret. Such information should be declared to others. 7. Each partner is liable to the action of others. (Collective responsibilities). 8. Every partner has the right of indemnity for any injury sustained in the course of running the business. 9. Every partner has the right to shade in the partnership assets when the is terminated. 27 10. The liability of a partner ea n the retirement of the partner, provided all other partners are notified of the retirement. Advantages of Partnership 1. Ease to form and manage: Partnership unlike corporation has no much protocol in its formation. A minimum legal restriction is required to form it. 2. There is the avoidance of double taxation because partners are taxed individually rather than the business income. 3. There is secrecy and privacy, of business records because the partnership book of account is not for public inspection. 4. Every partner is an expert in his own field. Their skills and abilities are pooled together for efficiency. Hence, there is specialization, 5. There is likelihood for growth expansion because of the possibility of raising additional capital. 6. Where two or more businesses are combined as partnership, there is room for economies of scale. 7. Drawings of business resources are charged with interest, thus drawings is discouraged. 8. The losses and risks associated with the business are borne by every partner. 9. There is possibility for continuity because the death, permanent. illness or insanity of a partner may not terminate the business. 10. Since one man does not own the business; a partner may take holidays or rest due to illness without harming the business. Disadvantages of Partnership 1. Decision-making is slow because the decision committee is made up of members of the partnership, 28 2. Partners may not have personal interest in the business, hence, business affairs are carried on their shoulders not their heads. 3. There could be disagreements and clashes among the partners in the process of managing the business. 4. The profit realized from the business is not for one person rather it is shared among all the partners.. 5. There could be mistrust and dishonesty among partners and this will negatively affect the 6. The liability of the partners is unlimited to their investment, except for a Limited partner. 3.2 Corporate Business This is the form of business that.is subject to legal and government regulations before they can be formed. A corporate business is an association of individuals, artificial being, invisible, intangible and only existing in the contemplation of law. Being a creature by law, it possesses only those properties conferred on it by the charter of its creation. As the terms suggest, a corporate business has an existence and probably a legal personality distinct from, that of the men and women owning or working within it. A corporate business or corporation can on occasion make agreements, even sue and be sued in its own right rather than in the person of its owners. The interests of a corporation may therefore differ from those of the individuals associated with it. The liabilities of its members are limited. There are different ways of classifying a corporate business or corporation. A convenient one is a two-fold division with sub-divisions. Hence, we can classify corporate business. 3.2.1 Private Corporate Business These are corporations owned by members of the public. They are formed as a result of private investments made by individuals. Such corporations that are limited by shares are for profit while those that are limited by guarantee are non-governmental organizations (NGOs) such as social, religious, charitable, recreational or educational corporations are not for profit. Private 29 corporations are as well known as joint stock companies. However, there are two sub-divisions of private corporate business. There are private companies and public companies. Private Companies These are companies that are owned by minimum of two and a maximum of fifty persons, who buy shares from the company and become shareholders. In a private company, a shareholder is not permitted to transfer his share without the consent of the company and the company cannot invite the general public to subscribe for shares. In real sense, private companies are formed by sole proprietors that want, to take advantage of limited liability. These companies are designated LTD. Public Companies These are companies that enable the investing public to share from the profit of the business without necessarily participating in the management of the business. In its formation, at least seven persons must sign the various documents of registration. These companies are designated PLC. The major differences between private and public companies are the number of shareholders and the issuing of shares. While a private company has a minimum of two and maximum of fifty members, a public company has a minimum of seven and a maximum of infinity. Secondly while the public company can invite and. issue shares to the general public, the private company cannot. Advantages of Private Corporations (1) There is the possibility of perpetual existence. The death, withdrawal, or permanent illness of a shareholder may not terminate the business. (2) The capital base of this form of business is very large. (3) The liabilities of members are limited to their investments. If the business fails in a welter of indebtedness, shareholders will only loose what they have invested to settle financial claims. (4) There is economics of large-scale production; hence unit cost of production may be low. 30 (5) There is room for specialization because the companies are made up of experts in various disciplines. (6) Protection of shareholders and creditors by legal requirements. (7) There is possibility of obtaining more capital or funds when the need arises. Disadvantage of Private Corporations (1) Private corporations are very difficult to form because of the need to file documents with the appropriate government authorities. (2) There is separation of owners from managements, so there may be les drive for efficiency. (3) There may be possible clash of interest between the shareholders and workers (higher dividend as against higher wages). (4) There is no privacy and secrecy of the business since the books of account are made public. (5) There is loss of personal relationship between owners or managers and customers. (6) There is problem of double taxation. 3.2.2 Public Corporate Business Public corporate business means an entity that is created by the state to carry out public missions and services. In order to carry out these public missions and services, a public corporation participates in activities or provides services that are also provided by private enterprise. A public corporation is granted increased operating flexibility in order to best ensure its success, while retaining principles of public accountability and fundamental public policy. The board of directors of a public corporation is appointed by the President or Governor and confirmed by the legislators. A public corporate business is a corporate body created by the special Act of the parliament. Such Act defines the power, duties, privileges and pattern of management of these organisations. Such an organisation is a statutory body to serve the general public. A public corporation is clothed with the power of the government, but possessed with flexibility and initiative of private enterprises. A public corporation enjoys complete autonomy in management. 31 Characteristics of Public Corporation The followings are some of the essential characteristics of public corporation: (i) It is a corporate body created by the special act in the state or central legislature. The power and duties of these corporations are defined by this Act. (ii) It enjoys the status of a legal entity and as such it can enter into contract in its own name. (iii) It is completely owned by the government and as such no private individuals are entitled to purchase shares of these organisations. (iv) A public corporation is managed by a board of directors. The members of the board are from all walks of industry and commerce. The chairmen of these corporations are appointed by the government. (v) The entire capital is financed by the government. It was set up with a capital of its own and is entitled to borrow, use and re-use revenue from the sale of goods. (vi) A public corporation is primarily meant to render service and making profit is its secondary considerations. (vii) The employees of corporation are subject to service conditions laid down by the corporation. Civil service rules for the government do not apply to the employees of the corporation. (viii) There are no shareholders in public corporations. The funds come from the government, from government approved loans and from the private sector. Advantages of Public Corporation A public corporation enjoys a substantial advantage over other forms of public enterprises. The following are some of the advantages of public corporations: i. A public corporation is able to manage its affairs with independence, initiative because it is an autonomous set up. ii. It is relatively free to adapt to changing circumstances because of its autonomy nature. iii. It maintains continuous existence in spite of changes in the government. iv. It leads to high morale among the executives and other employees because of least government interference. 32 v. It can utilize the service of competent persons because it has its own cadres of employees. vi. The board of directors consists of experts from business, labour and consumers. So a board of director can give better advice for the operation of the corporation. vii. Since public corporations are accountable to the parliament, they are intended to render maximum service to the public instead of maximum profit. Disadvantages of Public Corporation (i) They can be difficult to manage and control. The large size of the organisations may mean that time has to be spent on meetings and communicating with staff, slowing down decision making. (ii) They may become inefficient, produce low quality products and charge relatively high prices, due to a lack of competition and the knowledge that they cannot go bankrupt. (iii) They will need to be subsidized if they are loss making. The use of tax revenue to support them has an opportunity cost. It could have been used for staff training or other activities. 3.3 Formation of Companies The full procedure for formation, registration, and filing of specific documents and returns of companies whether private or public companies in Nigeria is governed by the Companies Decree No.51 of 1968. In the formation of a company, the company has to be floated by a promoter who takes all the necessary steps to form the company before its incorporation. -A company is incorporated when its existence as a separate entity is recognized. A promoter will have to decide on the objects of the business, where it is to be carried out, as well as the name of the company and the amount of funds needed. The documents, which have to be sent.to the Registrar of companies for registration, are the memorandum of association, articles of association and prospectus. 3.3.1 Memorandum of Association The memorandum of Association regulates the powers of the company and fixes its objects in relation to the outside world. The range of activities in which it is proposed to operate will 33 usually be made quite wide so that any expansion of the firm‘s activities does not necessitate adjustments to the memorandum. The memorandum of association contains the following. (i) Name of the company, the last word of which must be limited‘. This word has to appear on all documents of the company such as orders and correspondences so that people dealing with the enterprise know that its liability is limited. The only time when the word limited is not necessary is when companies are limited by guarantee. The name chosen must be distinct from any existing company but the addition of the name of a town is sufficient to distinguish the company from others. For example, Christoe Global Resources (Port Harcourt) limited is sufficient to distinguish the company from any other Christoe Global Resources limited. (ii) The registered office-: The city or town where the head office of the company is located is usually stated. (iii) The amount of capital-: This is the amount of authorized capital. The authorized capital may not have to be raised immediately. The company could raise part to start with and the rest will be called up when needed. The capital amount must be divided into shares. For instance, if the authorized share capital is N80, 000,000 of N0.50 each, then the number of share will be 160,000,000 shares.. (iv) A brief statement that the liability of the company is limited. (v) A statement stipulating the conditions for the alteration of the memorandum, which must be for the benefit of the company. 3.3.2 Articles of Association The Articles of Association are sent to the Registrar of companies at the same time with the; Memorandum of Association. They deal with the internal organization and functioning of the company. They cover the following. 1 Meetings: Three different types of meeting are stated in the articles of association. A statutory meeting, which a new public company must call within three months of starting a business, annual general meeting (AGM), which must be called once in every calendar year: and never more than fifteen months after the last one, and an extraordinary meeting, which can be called by 34 one tenth (1/10) of the shareholders. The Articles will also include the ‗rights of members at these meetings. These rights will depend upon the type of share held in the company by the individual. 2. The procedure for the issue and transfer of shares. 3. Alteration of capital and the borrowing powers of the company... 4. Procedures for the appointment of directors. 5. Method and system of accounting and auditing. 6. The procedure for winding — up or liquidation: This refers to the process by which the assets of the business are sold and all debts paid, with the balance, if any going to the members. Generally it means the company is bankrupt and is going out of business. 3.3.3 Prospectus This is an offer of shares to the public, and must also be sent to the Registrar of Companies. It is intended as a means of getting the public interested in the company, and may contain statements by ‗experts‘ as to the profitability prospects of the company. The prospectus will be included in any advertisement in the press inviting members of the public to subscribe for shares. Careful watch is kept on the issue shares to ensure that unscrupulous operators do not issue shares in fictitious companies and then disappear with the money subscribed. It is necessary to protect the public from such activities or else the share holding habit will be discouraged, and the savings of many people will not be made available for development purposes. In Nigeria, the issue and sale of shares requires clearance from the Security and Exchange Commission, which is also concern with the implementation of the Nigerian Enterprises Promotion Decrees. The promoters of the company, who will often become the Directors, may enter into, contracts before they are incorporated, but these are not binding on the company unless later ratified. 35 3.3.4 Incorporation Having received all the necessary documents and found them to be in order, the Registrar of Companies will issue a Certificate of Incorporation. The new company has come into existence from this moment. The public company must also receive a minimum subscription from the public in respect of shares issued, and each director must pay the amount due on his qualifying shares. 3.4 Shares Subscription Shares subscription is when the general public is invited to buy shares. The shares can be offered or issued at par, premium, or discount. When shares are issued at par, it means that the shares are offered to the public at market value, but at premium it means that the shares offered are more than the market value. But when shares are issued at discount it means that the shares are offered at a price less than the market value. The share which a company offers to the public is called share capital. The share capital is of different forms. These are authorized capital, issued capital, called-up capital, paid-up capital and capital reserve. 1. Authorized Capital: This is the capital requirement of a firm by the registrar of companies or the corporate Affair of a business. It is also known as registered capital or nominal capital. It is the value of shares a firm can issue. 2. Issued Capital: The amount of capital a firm can issue might not necessarily be the value of shares issued. The actual value of shares, which a firm has offered from its authorized capital, is known as issued capita. 3. Called — Up Capita: All shares offered to the public may not necessarily be paid for before such shares are allotted to the subscribers. This is to enable a firm have a large number of shares. When shares are issued, part amount will be received for allotment while the balance is paid in future. The value of share capital that a subscriber, is called up to pay, is known as called up capital. 36 4. Paid Up Capital: The total value of shares which have actually been paid for when the subscriber was called up, is known as paid up capital. 5. Capital Reserve: The balance of share capital that is yet to be paid by a subscriber which was voluntarily made so by the firm is celled reserve capital. The subscribers are made to pay the balance according to the requirement of the firm. 3.5 Company Amalgamation Amalgamation refers to the merging of companies to form an organized whole. When companies are amalgamated the name of the company, the management of the company and probably, the structure of the company may change. There are two types of company amalgamation. These are vertical and horizontal integration Horizontal Integration This occurs where firms in the same stage of productive process come together as one: For example, where two or more furniture manufacturers come together as one. Vertical Integration This occurs where firms at different stages of productive process merged together. For example, where a timber dealer merges his business with a furniture manufacturer, there is said to be a vertical integration. 4.0 CONCLUSION In setting up a business, it is important to establish clearly and precisely who the legal owner of the business is in order to determine who is to benefit or suffer from the activities of the business. On this note, the forms of business ownership are broadly classified as non corporate business and corporate business. The non corporate business includes sole proprietorship and partnership while the corporate business is made up of private corporation and public corporation. The private corporation is formed and owned by individuals or group of individuals but public corporation is owned by the government. The choice of the form of business 37 ownership is one of the basic decisions the entrepreneur must make, which is subject to different government regulations and tax provisions. 5.0 SUMMARY In this unit, you have learnt about different forms of business ownership including their merits and demerits, how they are formed and managed, and how they are amalgamated. 6.0 TUTOR-MARKED ASSIGNMENT 1. Differentiate between corporate and non corporate business. 2. List the contents of a partnership deed or article of partnership 3. Explain the process of company‘s formation 4. What is share capital? Explain the different forms of share capital 5. Explain what you understand by company amalgamation 4 REFERENCES/FURTHER READING Anyanwu, A. & Onuoha, B.C (1999). Introduction to business administration. Owerri, Alvan Global Publications Baridam, D.M. (1995). Business: A Management Approach; Port Harcourt, Paragraphics Bowen, H.R & Greenwood, W.T (1971). Business management: A profession. In Bowen, H.R & Greenwood, W.T(Ed.) Issues in Business and Society. Boston, Houghton Mifflin Steiner, G.A. (1975). Business and society. New York, Random House. Thom-Otuya, V.C., Keme, T.A.E., & Akenbor, C.O. (2005). Introduction to business. Port Harcourt, Anclet De Austere & Co. 38 UNIT 4: ORGANIZATION AND MANAGEMENT CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Contents 3.1 Development of Organization 3.2 Management in Organization 3.3 Why Study Organization and Management 3.4 Time and Human Relations Management 3.5 The Management Process 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Reading 1.0 INTRODUCTION We are social animals with a propensity for organizing and managing our affairs. We do so in an increasingly complex and dynamic environment. Many disciplines are contributing to an eclectic body of knowledge—organization theory—which, coupled with experience, is the foundation for management practice. An organization refers to two or more people who are working together in a structured way to achieve a specific goal or set of goals. There has been the widespread notion that organizations, irrespective of the social relationships or network of relationships that exist, are basically physical structures. Pfeffer (1982) has argued that organizations are basically physical structures because they do not only wear or resemble physical entities but they, like other physical structures, assume the form of offices, buildings, factories, furniture, equipment and other tangible assets found in the workplace. Management is the process of using available resources to achieve stated organizational objective by directing and controlling the efforts of the organizational members. Management is the practice of consciously and continually shaping organizations. All organizations have people who are responsible for helping them achieve their‘ goals. These people are called managers. 39 These managers may be more obvious in some organizations than in others, but without effective management, organizations are likely to founder. 2.0 OBJECTIVE At the end of this unit, you should be able to: - understand the development of organization - know why we study organization and management - explain time and human relation management - explain the management process 3.0 MAIN CONTENT 3.1 Development of Organizations People are social by nature. The tendency to organize and cooperate in interdependent relationships is inherent. The history of the human race could be traced through the development of social organizations. The first were families and small nomadic tribes; then came permanent villages and tribal communities. The feudal system and nation states were further developments. This evolution of organizations has accelerated in recent years. Dramatic changes have occurred over the past century. We have been transformed from a predominantly agrarian society with emphasis on the family, informal groups, and small communities to a complex industrial society characterized by the emergence of large, formal organizations. Groups and organizations are a pervasive part of our current existence. Typically, we are born into a family with the aid of a medical organization, the hospital. We spend a great deal of time in educational institutions. Informal groups develop spontaneously when several people have common interests and agree (often implicitly) to pursue common goals—a picnic or a fishing trip. Work organizations account for a large part of our time, with formal or informal relationships often carrying over into the leisure-time activities such as bowling or softball teams. It is easy to see that all of us, except for hermits, are involved in a variety of groups and organizations. 40 Organizations are not distant, impersonal phenomena; they are inexorably interwoven into our daily lives. They are everywhere and they affect all of us. Ekekhen Youth Association, Super Eagle, Dangote Group of Companies, and the United Nations are all organizations. They provide goods and services that people use. We are all members of an organizational society— people cooperating in groups to accomplish a variety of purposes. Organized activity today ranges on a continuum from informal, ad hoc groups to formal, highly structured organizations. Military and religious activities were among the first to become formally organized. Elaborate systems were developed and by and large have persisted, with modifications, to the present. Business, government, and education are other spheres of activity that have developed formal organizations geared to task accomplishment. We engage in many voluntary organizations in our leisure time—some recreational, some philanthropic, and some of a crusading nature. Humans are activists. We have created and destroyed civilizations. We have developed vast technological complexes. We have utilized natural resources in ingenious ways and in the process have wreaked havoc with the ecosystem. We have even broken the umbilical cord holding us to mother earth; we have been to the moon and returned. Future generations may see us go to the planets and beyond. We are all amazed at (and probably fail to comprehend fully) the enormity of modern scientific and technological achievements. But a second thought causes us to recognize a major factor underlying these achievements— our ability to develop social organizations for accomplishing our purposes. The development of these organizations and effective management of them is truly one of our greatest concerns. The organization uses knowledge and techniques in the accomplishment of its tasks. Organization implies structuring and integrating activities, that is, people working or cooperating together in interdependent relationships. The notion of interrelatedness suggests a social system. Therefore we can say that organizations consist of the following: (1) Goal-oriented arrangements, that is people with a purpose; (2) Psychosocial systems, that is people interacting in groups; (3) Technological systems, that is people using knowledge and techniques; and 41 (4) An integration of structured activities, that is people working together in patterned relationships. It is worth reminding ourselves that management does not really exist. It is a word, an idea. Like science, like government, like engineering, management is an abstraction. But managers exist. And managers are not abstractions; they are human beings-particular and special kinds of human beings. Individuals with a special function: to lead and move and bring out the latent capabilities—and dreams—of other human beings. Managerial life seem to be the broadest, the most demanding, by all odds the most comprehensive and the most subtle of all human activities. 3.2 Management in Organization Management involves the coordination of human and material resources toward objective accomplishment. We often speak of individuals managing their affairs, but the usual connotation suggests group effort. Four basic elements can be identified: (1) toward objectives, (2) through people, (3) via techniques, and (4) in an organization. Typical definitions suggest that management is a process of planning, organizing, directing and controlling activities. Some increase the number of sub processes to include assembling resources and motivating; others reduce the scheme to include only planning and implementation. Still others cover the entire process with the concept of decision making, suggesting that decisions are the key output of managers. Management is mental (thinking, intuiting, feeling) work performed by people in an organizational system. It spans the entire organization and is the vital force that links all other subsystems. Management involves the following: Coordinating the human, material, and financial resources toward accomplishing organizational goals effectively and efficiently. Relating the organization to the external environment and responding to societal needs. Developing an organizational climate where people can accomplish their individual and collective goals. 42 Performing certain definable functions such as goal setting, planning, assembling resources, organizing, implementing, and controlling. Carrying out various interpersonal, informational, and decisional roles. Managers convert diverse resources of people, machines, material, money, time, and space into a useful enterprise. Essentially, management is the process whereby these unrelated resources are integrated into a total system for objective accomplishment. Managers get things done by working with people and physical resources in order to accomplish the objectives of the system. They coordinate and integrate the activities and work of others. However, a recurring question is the distinction between the terms management and administration. ―Administration‖ often has had the connotation of governmental or other nonprofit organizations, whereas ―management‖ has been relegated to business enterprises. However, there is considerable overlap in usage. 3.3 Why Study Organizations and Management In a world where organizations are everywhere, there are three compelling reasons for studying them and the practice of management. In each case—involving the past, present, and future— the effects of people collaborating as an organization, under the guidance of managers, can be far-reaching. Living in the Present Organizations contribute to the present standards of living of people worldwide. We rely on organizations daily for food, shelter, clothing, medical care, communications, amusement, and employment. The Red Cross, for example, is an organization that is particularly focused on the present as it offers assistance to specific groups of people in times of need. Building the Future Organizations build toward a desirable future and help individuals do the same. New products and practices are developed as a result of the creative power that can emerge when people work together in organizations. Organizations have an impact—positive or negative—on the future status of our natural environment, on the prevention and treatment of disease, and on war around the globe. In this text we will ‗discuss a number of organizations that are addressing 43 concerns about the future in their products and practices, such as Tom‘s of Maine, which produces a line of all-natural personal-care products with environmentally sensitive packaging. Remembering the Past Organizations help connect people to their pasts. Organizations can be thought of as patterns of human relationships. Every day that we work with others adds to the history of the organization and to our own history. We often define ourselves in terms of the organizations we have been a part of—whether schools, teams, political groups, or businesses. In addition, organizations maintain records and value their own history, keeping traditions alive in our minds. Often it is through the records and history of organizations that we know about the past. 3.4 Time and Human Relationships Management Management is a specialty in dealing with matters of time and human relationships as they arise in organizations. The idea about time in organizations has several elements: 1. Management is an attempt to create a desirable future, keeping the past and the present in mind. 2. Management is practiced in and is a reflection of a particular historical era. 3. Management is a practice that produces consequences and effects that emerge over time. The importance of human relationships also involves several ideas: 1. Managers act in relationships that are two-way streets; each party is influenced by the other. 2. Managers act in relationships that have spillover effects for other people, for better and for worse. 3. Managers juggle multiple simultaneous relationships. These twin themes of time and human relationships can greatly aid the learning of management. Managers think about time and human relationships all the time. And so do you. The university years, regardless of your age, are a period in your life when you envision a new or revised future for yourself. These are also years when you may develop new relationships (or modify 44 existing relationships) with spouses, friends, teachers, and employers. Since you are ―living‖ these two themes every day, we appeal to that personal experience when we define management as a specialty in time and human relationships. 3.5 The Management Process Since the late nineteenth century, it has been common practice to define management in terms of four specific functions of managers: planning, organizing, directing, and controlling. Although this framework has come under some scrutiny, it is still generally accepted. We can thus say that management is the process of planning, organizing, leading, and controlling the efforts of organization members and of using all other organizational resources to achieve stated organizational goals. A process is a systematic way of doing things. We refer to management as a process to emphasize that all managers, regardless of their particular aptitudes or skills, engage in certain interrelated activities in order to achieve their desired goals. In the rest of this section, we will briefly describe these four main management activities and how they involve relationships and time. Planning Planning is the determination of objective and the possible strategies to accomplishing it. It is the act of deciding at present what to be done in future. Planning implies that managers think through their goals and actions in advance and that their actions are based on some method, plan, or logic rather than on a hunch. Plans give the organization its objectives and set up the best procedures for reaching them. In addition, plans are the guides by which (1) the organization obtains and commits the resources required to reach its objectives; (2) members of the organization carry on activities consistent with the chosen objectives and procedures; and (3) progress toward the objectives is monitored and measured so that corrective action can be taken if progress is unsatisfactory. The first step in planning is the selection of goals for the organization. Goals are then established for each of the organization‘s subunits—its divisions, departments, and so on. Once these are determined, programs are established for achieving goals in a systematic manner. Of 45 course, in selecting objectives and developing programs, the top manager considers their feasibility and acceptability to the organization‘s managers and employees. Relationships and time are central to planning activities. Planning produces a picture of desirable future circumstances—given currently available resources, past experiences, etc. Plans made by top management charged with responsibility for the organization as a whole may cover periods as long as five or ten years. In a large organization, such as a multinational energy corporation like Shell Petroleum Development Company, those plans may involve commitments of billions of naira. On the other hand, planning in particular parts of the organization spans much shorter periods. For example, such plans may be for the next day‘s work, or for a two-hour meeting to take place in a week. Organizing Organizing is the process of arranging and all locating work, authority, and resources among an organization‘s members so they can achieve the organization‘s goals. Different goals require different structures. An organization that aims to develop computer software, for example, needs a different structure than does a manufacturer of blue jeans. Producing a standardized product like blue jeans requires efficient assembly-line techniques; whereas producing software requires organizing teams of professionals such as systems analysts and programmers. Although these professionals must interact effectively, they cannot be organized like assembly-line workers. Thus, managers must match an organization‘s structure to its goals and resources, a process called organizational design. Relationships and time are central to organizing activities. Organizing produces a structure for the relationships in an organization, and it is through these structured relationships that future plans will be pursued. Another aspect of relationships that is part of organizing is seeking new people to join the structure of relationships. This search is called staffing. Directing Directing is the process of leading and influencing the task-related activities of members of the organization. It involves leading, influencing, and motivating employees to perform essential tasks. Relationships and time are central to leading activities. In fact, leading gets to the heart of 46 managers‘ relationships with each of the people working for them. Managers lead in an attempt to persuade others to join them in pursuit of the future that emerges from the planning and organizing functions. By establishing the proper atmosphere, managers help their employees do their best. Controlling Control is the process of ensuring that actual activities conform to planned activities. The manager must be sure that actions of the organization‘s members do in fact move the organization toward its stated goals. This is the controlling function of management and it involves these main elements: (1) establishing standards of performance; (2) measuring current performance; (3) comparing this performance to the established standards; and (4) taking corrective action if deviations are detected. Through the controlling function, the manager keeps the organization on track. Increasingly, organizations are establishing new ways to build in quality to the control function. One popular approach is Total Quality Management (TQM). TQM focuses management on the continuous improvement of all operations, functions, and, above all, processes of work. Meeting the customers‘ needs is a primary concern. Relationships and time are central to controlling activities. The reason managers must worry about control is that, over time, the results of organized relationships do not always work out as planned. 4.0 CONCLUSION An organization refers to two or more people who are working together in a structured way to achieve a specific goal or set of goals. It consists of people with a purpose; people interacting in groups; people using knowledge and techniques; and people working together in patterned relationships. Management on other hand involves the coordination of human and material resources toward objective accomplishment. It is a mental work performed by people in an organization. 47 The study of organization and management contribute to the present standards of living of people worldwide. It builds toward a desirable future and help individuals do the same and it helps connect people to their pasts. Management as a process is a systematic way of doing things. It entails planning, organizing, directing, and controlling. 5.0 SUMMARY In this unit, you have learnt about development of organization, management in organization, reasons for the study organization and management, time and human relations management, and the management process. 6.0 TUTOR-MARKED ASSIGNMENT 1. Explain how organization develops 2. Explain the relationship between organization and Management 3. Why do we study organization and management 4. Explain the management process 5. What is the nexus between time and human relations management? 7.0 REFERENCES/FURTHER READING Allen, R.W. & Porter, L.W. (1983). Organizational Influence Processes. Glenview, Scott Foreman and Company. Carrol, S.J. & Glidden, D.J. (1984). The classical management functions: Are they really outdated? Proceedings of the 44th Annual Meeting of the American Academy of Management, August: 132-136. Kast, F.E & Rosenzweig, J.E (1985). Organization and management: A System and Contingency Approach. New York, McGraw Hill. Stoner, J.A.F., Freeman,R.E., & Gilbert, D.R (2007). Management. New Delhi, Prentice- Hall of India. 48 MODULE 2 UNIT 1 THE MARKETING FUNCTION CONTENTS 1.0 Introduction 2.0 Objective 3.0 Main Content 3.1 Market and Marketing Research 3.2 Marketing Concept 3.3 Product Concept 3.4 Pricing Concept 3.5 Promotion Concept 3.5 Distribution Concept 4.0 Conclusion 5.0 Summary 6.0 Tutor Marked Assignment 7.0 References/ Further Reading 1.0 INTRODUCTION Marketing has been defined in different ways by different scholars. However, we shall define marketing as the organization of a firm‘s resources to meet the needs of customers or potential customers profitably. Peter Drunker asserted that marketing is the unique and distinguishing 49 function of a business. Any business in which marketing is absent or incidental is not a business and it should not be run as if it were one. Marketing functions can be divided into three broad categories. These are exchange functions, facilitating functions, and logistic functions. Exchange function involves the buying and selling functions. Buying and selling are two of the basic marketing functions. In buying, the buyer selects the source of supply determines the quantities and qualities of goods required, selects and analyses the goods, determine the delivery time etc. The selling function is the very heart of marketing. It involves helping the consumers discover their unconscious needs and wants.. The functions include advertising, personal selling, and sales promotion. Facilitating functions are functions that facilitate the sale of goods and services. They include the provision of market information, product standardization and grading, granting of credit and risk taking, and logistic functions are functions related to physical distribution. They include transportation, storage and other activities that have to do with the physical handling of goods in their movement by rail, roads, trucks, pipelines, water and air transport. 2.0 OBJECTIVE At the end of this unit, you should be able to: - know the difference between market research and marketing research - explain the marketing concept - understand the marketing mix variables 3.0 MAIN CONTENT 3.1 Market Research and Marketing Research A market is defined as an individual or organization that has the willingness and ability to buy goods and services that have been offered for sale By this definition it means that if an individual or organization has the willingness to buy a product and the means to buy is not able such is not a market. In the same vein, if the individual has the ability to buy where there is no willingness, such cannot constitute a market. So in a market, there must be willingness and ability to buy. 50 Therefore, the marketing activity that is concern with the analysis of the market to examine and constantly monitor the consumers‘ needs and wants, preferences perception and level of satisfaction is known as market research. Marketing research on the other hand is concerned with product and customer‘s analysis. It encompasses the analysis of product quality, price, promotion, distribution and information on customers. 3.2 Marketing Concept The marketing concept is a business philosophy which states that customer‘s want satisfaction is the social and economic justification for a firm‘s existence: The success of a market- driven company lie on the marketing concept, which consists of customer orientation, market focus, integrated marketing effort and goal-oriented behaviour. 1. Customer Orientation: The business organization must recognize the fact that different customers have different wants and needs. It has to bear in mind and recognize the heterogeneity of needs, differences in taste preferences and perceptions. In order to achieve customer satisfaction, a marketer must ensure that his product has an added-value compared to competitors. 2. Market Segmentation: The needs and wants of the consumers in the market differ. Therefore to effectively satisfy the consumers, the market has to be separated into groupings with related consumers needs and wants so that the appropriate marketing programmes are designed for each group. The process of dividing a heterogeneous market into small homogeneous units is called market segmentation. Market segmentation will result to different market segments and the business firm should decide on which market segment it should serve. The market segment chosen by the firm is known as the target market. A firm may as well decide to choose more than one market segment. If the firm serves the different chosen market segments with the same marketing programme, (product, price, place, promotion), the firm is using a concentration strategy. But if it serves the different market segment with different marketing programmes, it is operating a diversification or multi-segment strategy. 51 3. Integrated Marketing Effort: This is concerned with ensuring that all categories of staff of a firm are interested in the needs and wants of the customers. The staff of the company in marketing, production, personnel, finance, research and development and even administration, should be integrated toward the attainment of marketing objec1tive. 4. Goal-Oriented Behaviour: The essence of marketing concept is to achieve the goal of the organization through customers‘ satisfaction. These goals include: profitability, corporate image, market share, and good will. 3.3 Product Concept A product is anything that can be offered to the market for attention, acquisition or consumption, including physical objects, services, personalities, organizations and desires. According to Akenbor (2002), a product is the nucleus upon which other marketing mix variables (price, promotion and distribution) rotate. A product is classified into goods and services. Goods are the tangible part of a product which can be seen, felt, handled etc: They are the physical products. Services on the other hand are intangible. They are activities or benefits offered which does not result to the physical ownership of anything examples are health care, laundry, banking etc. A physical product is further classified into consumer and industrial goods. Consumer goods are those goods for immediate consumption the group includes the following. (1) Convenience Goods: These are goods that are bought without proper planning. Purchases of these goods are very irregular and the consumption almost immediately as they are bought. Such. goods are bought with little naira. Examples are bread, biscuits, pure water, newspapers, chew- gum etc. (2) Shopping Goods: These are goods that are bought after comparison on price and quality has been made by the buyer among competitive sellers: Those goods are particularly for household use. Examples are foodstuffs, toiletries, kitchen utensils etc. 52 (3) Specialty Goods: These are goods that are ‗bought after proper planning has been mad on series of negotiations with the sellers: The cash outlay for such goods is usually high. Examples are electronics, furniture, motor vehicles etc. (4) Unsought Goods: These are those goods a buyer would not ordinarily want to buy because there is no felt need for them. The buyer may even afford to pay a price to avoid the purchase of such goods. Examples are casket, medical operations, drugs etc. Industrial goods on the other hand, are those goods that are meant for further production or for the routine operations of a business firm. These goods are not for immediate consumption. The demand for such goods is derived demand. Examples are raw materials, component parts, accessories, operating supplies etc Product Concept Level A product is made up of three different levels. These are the cores, formal and augmented. Core Product: This is the part of a product that gives utility or satisfaction to the consumer. The core product is the reason why consumer buys a product. It is the mechanical functioning of the product. For instance a woman who buys a lipstick is not buying colour but beauty. Formal Product: The formal product is the physical nature of a product upon which competition is made. The attributes of the formal product include — designs, brand name, packaging, quality and features. A manufacturer could use any of these features to differentiate his product from competitors. Product differentiation is a marketing strategy of ensuring that a firm‘s product is perceived differently from competitive brands by the consumer. This is possible when the product is different from competitors product in terms of quality, packaging. features etc. Augmented Product: This is concerned with adding services to the core and formal products. For example warranty, guarantee, installation, delivery and other after-sale services. 53 Product- Life Cycle Concept The product-life cycle concept states that a product passes through a life cycle as human beings. It‘s born, grows, matures and dies. Cundiff, Still and Govoni (1973) posit that from the time a product idea is conceived, during its development and up to its market introduction, a product is in various prenatal stages (i.e. it is going through various product development phases). Its life begins with its market introduction. It then goes through a period during which its market grows rapidly. Eventually, it reaches market maturity, afterwards its market declines, and finally its life ends‘. This is as illustrated in the graph below with different stages. Stage 1: This is the introductory stage of the product in the market. At this stage potential buyers are relatively uninformed about the product hence the cost of promotion is usually high. This period witness lo sales turn-over and profit is negative because the little sales revenue is used to recover research and development cost. Stage 2: This is the stage, which is generally characterized by rapid growth, increased sales, entry of aggressive competitors and decline in unit cost of production. Research and development cost is fully recovered t this stage making room for profit realization. ‗The strategies focus of the firm, at this stage is distribution, 54 Stage 3: This is known as the maturity stage where the product gets to its climax. The product has come to a point of no-returns in growth. Sales has saturated, it can no longer grow beyond where it is presently. There is a shakeout of marginal competitors and the product dealers are faced with the profit squeeze situation. Price reduction is a possible weapon at this state. Stage 4: This is the declining stage where there is a sharp fall in sales, and consequently profit is either low or nonexistence. At this stage, competitors start withdrawing their brands from the market and the consumers‘ interest for the product falls. At this stage, the firm can embark on product- value analysis for cost reduction. Stage 5: This is the extinction stage where the product is finally withdrawn from the market because the concerted effort of cost reduction to keep the product in the market could not yield positive result. 3.4 Pricing Concept According to Thom-Otuya and Akenbor (2003) a manufacturer is not a father christmas. He incurs costs to make goods and services available to satisfy the consumers. When he offers such product to the market he attached a value to it which has to be paid by the users of the product. Hence, price is the monetary value attached on a product. It is the cost, which has to be borne by a consumer in obtaining a product to satisfy his needs. Pricing on the other hand is the mechanisms involved in putting a price on a product. Methods of Pricing In order to determine the price of a product, researchers on pricing revealed different available methods. Some prices are based on total cost some are based on expected demand, while some are equally based on competitors‘ prices. (1) Cost—Oriented Pricing This is the technique of pricing based on the manufacturing cost and the allocated operation overheads of the product. There are two types of cost-oriented pricing. These are: 55 (a) Mark-Up Pricing: This is the pricing method whereby a predetermined percentage is added to the cost of a product in order to determine its price. This is commonly used by manufacturers, wholesalers and retailers. (b) Target Pricing: Where it is difficult to price a product in advance, an estimate of the price with considerable returns on investment is made. Where the actual cost of the product is equal to or greater than the estimated price, an adjustment could be made. This is known as target pricing. In a situation of pricing without competition, most construction companies use this pricing method. (2) Demand-Oriented Pricing This is the pricing method that calls for setting a price based on consumer perception and demand intensity of the product. There are two approaches to this pricing method. These are perceived-value and demand- differential. (a) Perceived-Value Pricing: This technique of pricing views the pricing of a product on the buyer‘s perception of the product value. Price setters using this method attempt to measure the relative perceived value of their offer and utilize this in setting the price. If‘ the perceived- value of the product is high, a high margin is set, otherwise the product price is set low. (b) Demand-Differential Pricing: Price can also be fixed on products on the basis of discriminations. This means that different prices could be fixed on the same product based on certain circumstances, such as the type of customer, the form of the product, the place where the product is to be sold and the time of selling the product. In economics, this pricing method is called price discrimination. (3) Competition-Oriented Pricing Price setters could also fix a product price on the basis of competition irrespective of cost and or demand. What is applicable here is that the seller follows the price offered by other sellers. However, it does not mean that the price of the product should exactly be at the same level with competitors. The two types of competition-oriented pricing are: 56 (a) The Going-Rate Pricing- This involves pricing a product at the average level charged in the industry. It is commonly used in pure competition and oligopolistic market where homogenous products are sold. (b) The Sealed- Pricing: This is commonly used when firms compete for jobs or contracts on the basis of bids. The method is on the expectations of how competitors will price rather than on the relation based on the firm‘s own cost or demand: This pricing method holds when a firm may like to find out what other competitive firms have quoted for a particular job before making its own quotations. The objective of the firm in, a biding situation is to get the contract and therefore it hopes to set its price lower than that set by any other bidder. Pricing Policy A new product is a product that is introduced into the market for the first time. It could equally, be regarded as an existing product, which has been modified in one form or the other. There are two possible strategies in pricing a new product. These are penetration pricing and skimming pricing. Penetration Pricing: When a firm charges a low price on its product to gain market acceptance, it is practicing penetration pricing. The aim of penetration pricing is to increase buyer‘s patronage. Skimming Pricing: This is when a firm initially charges a high price on a product and thereafter brings the price low to accommodate the price elastic segments of the market, skimming pricing is in use. Promotional Pricing A firm could also fix a product price in order to promote its entire product-line. This could be done through prestige pricing, bait and switch pricing, and discount pricing. Prestige Pricing: This is a pricing strategy whereby a high price is set on a product in order to enhance the quality or image of the product-line. Bait and Switch Pricing: This is a situation whereby a reseller who has varieties of goods advertised the price of the quality product low in order° to sell a competitive product of a lower 57 quality. When the quality product is advertised low, customers‘ traffic will increase and they will be switched over to buy the less quality product. Discount Pricing: This is a reduction in the price of a product offered to a customer as a motivation to make him actively participate in purchasing the sellers product. This is also known as trade discount. 3.5 Promotion Concept Promotion is the process of stimulating and increasing sales through market awareness and customer service. It is a catalyst that speeds up exchange transactions of goods and services. According to Strong (1992), the objective of promotion is described as AIDA A= Awareness I= Interest D= Des

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