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BUSINESS ORGANISATION NOTES

GIPS GABORONE

LO1: BUSINESS ORGANISATION

Introduction

Organisation is the detailed arrangement of work and working conditions in order to perform the assigned

activities in an affective manner. Organisation can be compared to a human body. The human body

consists of hands, feet, eyes, ears, nose, fingers, mouth ,etc. these parts are performing their work

independently and at the same time , one part cannot be a substitute to another .The same principles can

be identified in the organisation also. The organisation consists of different departments. Each department

performs its work independently and cannot be a substitute to another.

DEFFINITION OF ORGANISATION

“Organisation is harmonious adjustment of specialized parts for the accomplishment of some common

purpose or purpose.”MC FARLAND ,

“An identified group of people contributing their efforts towards the attainment of goals is called an

organisation.”ALLEN,

“The process of identifying and grouping the work is to be performed, defining and delegating

responsibility and authority and establishing relationship for the purpose of enabling people to work most

effectively together in accomplishing objective.” MONEY AND REILY,

“Organisation is the form of every human association for the attainment of common purpose .”

CHESTER BENNARD,

“ A system of co- operative activities of two or more persons is called organisation .”

MEANING OF STAFFING

STAFFING , which is one of the managerial functions, is concerned with the assessment of the

manpower requirement , recruitment and selection of personnel , training and development of personnel

and periodic appraisal of the performance of personnel.

Organisation is a deliberately and consciously created human group . It implies that relationship between

organisation and its members is contractual .

Features of an Organisation

.PURPOSIVE CREATION : The organisation is a purpose creation , that is , all the organisation have

some objectives or set of objectives . The objective are mutually agreed upon by the members of the

group.

COORDINATION OF ACTIVITIES : In the organisation , there is a coordination of closely relevant

activities of the members. The coordination is necessary because all the members contribute to commonly

agreed

STRUCTURE : The co-ordination of human activities requires a structure wherein various individuals are

fitted . The structure provides for power centers which coordinate and control concerted efforts.

RATIONALITY: These characteristics differentiate an organisation from other social units , such as ,

community , family, clan , friendship group , etc. however , modern organisations though not all.

IMPORTANCE OF ORGANISATION

Organisation established relationship among the various persons working in the organisation , i.e.

between workers and workers ,workers and managers and managers and managers. Efficient organisation

offer several advantages not only to the organistion but also to the society at large.

OPTIMUM UTILISATION OF RESOURCES: It ensures optimum utilisation of resources – both human

and physical resources . The resources are put best possible use wastages are minimised.

CO ORDINATION:

ENSURES It facilities co –ordination . The activities of the various individuals ,and department are

combined together to accomplish to company goals. Different department works in close harmony with

each other .

FACILITATES EFFECTIVE MANAGEMENT :

A properly designed and balanced organisation facilitates effective management of the organisation. It

avoids confusion, delays and duplication of work . the work is systematically divided and grouped into

several section or units, so as to achieve desired results.

MOTIVATE PERSONNEL : A sound organisation avoids confusion, misunderstandings and overlapping

of functions , and as such employees are motivated to produce better results. This is mainly because of

good relations existing between the superiors and their subordinates in the organisation

FACILITATES DELEGATION OF OUTHORITY: Delegation of authority enable people in the

organisation to work effectively and efficiently .

A good organisation structures enables the superiors to delegate authority to the subordinates . The

superiors are in a position to delegate the proper degree of authority to the right subordinates. Without

proper delegation , it would not be possible to conduct the activities of the organisation smoothly and

quickly .

.ENCOURAGES INITIATIVE AND INNOVATION: Due to effective delegation of authority , there is

freedom of self expression. The subordinates are encouraged to show their initiative , which helps the

organisation to excel and grow . Due to division of work and specialization , There is speed , accuracy

and neatness in work . Most of all , specialization leads to innovative ideas .

TECHNOLOGICAL IMPROVEMENTS : Sound organisation have contributed to the technological

developments . Through their constant and continuous efforts in the field of research and development ,

they have come with new methods , new machines , and techniques , which are effectively introduced in

business activities

FACILITATES GROWTH: Good organisation achieves good progress .this enables the organisation to

growth and diversify. Large progressive firms are the direct outcome of the success of effective

organizing.

IMPORTANCE OF STAFFING

1.EMPHASIS ON HUMAN ELEMENT: The human force is the most important and productive asset of

any organisation which actually carries out the functions and productive activities of various departments.

They assert that “ If you want productivity and financial reward that goes with it, you must treat your

workers as your most important asset.

2. FACILITATES LEADERSHIP: If the staffing function is properly carried out , it will enable managers

to provide adequate leadership facilities whereby the individuals can maximize their personal goals along

with effectively contributing to the overall organisation goals.

3.FACILITATES CONTROL: Well trained staff is likely to work in accordance with plans and the

likelihood of divagation in the actual performance is, therefore, reduced. This facilitates the controlling

function being carried out by managers .

4.MOTIVATION TO WORK: Financial rewards to not always motivate a worker to work . Their

acceptance and recognition by the managers can ,at times, serve to act as better process of motivation .

5.INCREASE IN OVERALL EFFECIENCY: Since all attempts are made to place the right person, with

the right knowledge , at the right place and at the right time to perform the organisational activities .There

is a likelihood of enhancement in the overall efficiency of an organisation. If people appointed are not

competent enough to do their jobs.

6.DEVELOPMENT OF PATENTIAL MANAGERS:Recruiting and selecting people with the best

potential, compensating them and training them helps in the development of future managers and

facilitates the movement of managerial abilities from the lower to the higher levels of the organisation.

7. ENABLES THE ORGANISATIONS TO FACE COMPETITION: Modern times of globalization ,

every enterprise is facing tough competition both from local and international competitions. A well

staffed organisation can provides the management with a framework of policies and procedures suitable

for adapting itself to the competitors policies.

CONCLUSIONORGANISATION

The important steps involved in the process of are, the determination of objectives, the grouping of

activities, assignment of duties to persons, delegation of authority and creating authority relationships.

STAFFING Staffing which is one of the important managerial functions is concerned with the

assessment of the manpower requirement and selection of personnel, training and development of

personnel and periodic appraisal of the performance of the personnel . Every manager at all levels has the

responsibility for the efficient execution of staffing function. However , to assist the manager, some of the

staffing functions are assigned to a specialized agency known as personnel department.

LO2: Organization and Business

Business Drivers

A key business driver is something that has a major impact on the performance of your

specific business. A whole range of internal and external factors affects the performance of

every small business.

Business drivers are the key inputs and activities that drive the operational and financial results

of a business.  Common examples of business drivers are salespeople, number of stores, website

traffic, number and price of products sold, units of production, etc. In order to make internal

choices about business strategy or build a financial model to value a company, it’s critical to gain

a solid understanding of the main drivers.

Examples of business drivers

Drivers vary significantly by industry, but they can all be determined using the same type of root

cause analysis.

Here is a list of common business drivers:

Number of stores or locations

Average size (i.e. square feet) per location

Number of products sold (volume)

Prices of products/services sold

Number of salespeople

Effectiveness of salespeople

Traffic volume to a website

Conversion rate of traffic to a website

Production rate for manufacturing

Efficiency rates and downtime

Energy and electricity costs

Rent and office space

Salaries and wages per employee

Commissions, fees, and other selling expenses

Foreign exchange rates

Commodity prices (i.e., oil, copper, pulp, rubber, etc.)

 Classification of organisations

Formal Organization

Formal organization is formed on the basis of delegation of authority. Each formal organization

has its own objects and the activities are performed to achieve them. Under formal organization,

the duties and responsibilities of each employee are well designed and exhibited in the

organization chart.

Scot has defined a formal organization as,

“a system of coordinated activities of a group of people working towards a common goal under

authority and leadership”.

Features of Formal organization

The main features of formal organization are presented below:

Formal organization is consciously designed.

It provides for specialization.

It is based on delegation of authority.

The authority, responsibility, duties, policies and rules are properly well defined.

The principle of unity of command is usually observed.

It is deliberately impersonal.

It is supported by organization chart.

Merits of Formal Organization

The merits of formal organization are briefly described below:

1. There is no conflict among the employees since their respective duties and responsibilities are

clearly defined.

2. Overlapping of responsibility is easily avoided.

3. It results in the motivation of employees.

4. There is no personal bias since clear cut rules and regulations are framed and followed.

5. It makes the organization less dependent on one man.

Demerits of Formal Organization

The followings are the demerits of formal organization.

1. It reduces the spirit of initiative.

2. There is a delay in taking a decision since rules and regulations are getting importance than

situation.

3. It does not give any importance to sentiments and values of employees.

4. It reduces the free flow of communication.

5. It creates the problems of co-ordination.

Informal Organization

Informal organization refers to the informal relationships develop among the group of employees

in an organization. These groups fulfill their needs which are largely personal in nature by

creating informal relationships. Relationships are created during breaking hours of an office (say

coffee or tea break, lunch hour etc.) and in sometimes even outside the office.

One cannot predict the time of formation of such informal organization. At the same time, the

informal organization can be dissolved at any time by itself. The group members of the informal

organization may be consisting of not only from the same department but also from the several

other departments and cut across the status boundaries. Generally, these groups members are

having same type of taste, opinions, views and expectations.

Features of Informal Organization

The features of informal organization are given below:

An informal organization arises spontaneously.

It is based on personal attitudes, emotions and likes and dislikes.

It provides social satisfaction to its members.

It is an integral part of a total organization and the management cannot eliminate it.

It has no place in the formal chart.

It is a network of personal and social relations.

It has its own rules and traditions.

It is indefinite and has no structure.

Merits of Informal Organization

The followings are the merits of informal organization.

1. The informal organization overcomes deficiency and fills up the gaps of the formal

organization.

2. The flow of communication is very fast.

3. The motivation of employees is very easy.

4. Decisions are taken very quickly.

Demerits of Informal Organization

The demerits of informal organization are presented below.

1. It ruins the morality among the employees.

2. It acts according to mob psychology.

3. There is no evidence available for the information received under informal organization.

4. It spreads rumor among the employees regarding the attitude or approach of top management

unnecessarily.

Types of industries

Industries are part of the secondary activity. Secondary activities or manufacturing converts raw

material into products of more value to people. Industry refers to economic activities concerned

with the production of goods, extraction of services and provision or services. Hence we can say

that Industries are concerned with:

Production of good (steel energy)

Extraction of minerals (coal mining)

Provision for services (tourism)

There are also Emerging Industries: ‘Sunrise Industries’

Classification of Industries

Small-scale industries: Small-scale industries have less capital and technology invested in

them. There is often manual labour noticed here. Example, Basket weaving, pottery, and

handicrafts.

Large-scale industries: Largescale industries are the exact opposite of small-scale industries.

Here the capital invested is large and advanced technology is in use here. Example,

Automobiles and Heavy Machinery.

Ownership

Private sector: Private industries are businesses that are owned and operated by an individual

or group of individuals.

Public sector: Public industries are owned and managed by the government.

Joint sector industries: These industries are jointly operated by the state and individuals.

Cooperative sector industries: Cooperative industries are operated by the suppliers,

producers or workers of raw material.

Publicly owned company

A public limited company ('PLC') is a company that is able to offer its shares to the public.

They don't have to offer those shares to the public, but they can.

Well over 95% of limited companies in the UK are "private" – it is by far the most common form

of limited company.

However, you also need to know about "public" limited companies.

There are some specific requirements for a PLC which must be met:

The minimum number of shareholders must be two (a private limited company

only needs one shareholder)

Accounts must be filed within 6 months of the year end (the limit is 9 months for

a private company)

The Company Secretary must be a qualified person (in a private company the

secretary does not need to be qualified)

The minimum number of Directors is two (just one needed for a private company)

Advantages are as follows-

Large Capital - Public Limited Company can raise a huge amount of capital as there is no upper limit

on the number of owners (shareholders) that a public limited company can have. So even if every

shareholder invests a small amount of money still the company can create a large capital base.

Growth Opportunities - As the company has a large capital base growth opportunities are also

enormous, especially in case of a public limited company. Even after the company has commenced

the business, if a public limited company requires more capital, it can always issue more shares.

Democratic Management - Public Limited Companies have a large number of shareholders. The

company is run by the Board of Directors. And the Board of Directors is appointed by the

shareholders.

Limited Liability - The owners of Joint Stock Company have limited liability. In case the company

becomes insolvent/bankrupt and is unable to pay off business liabilities out of business assets, the

personal assets of the owners/shareholders cannot be used to repay the liabilities of the company.

Professional Management - Since Public limited companies have access to large financial resources,

it is possible for a public limited company to appoint professionals who are experts in different areas.

Availability of experts of different areas results in better decision making and increased efficiency in

the operation of business activities

Perpetual Existence - Joint Stock Company has a separate legal identity from its owners. It has a

separate legal status, which means in the eyes of the law the joint stock company is different from its

owners. Death, Insolvency or Insanity of any of the owners doesn't result in the closure of the

company.

Transferability of Shares - Shares of a public limited company are listed on the stock exchange and

are easily transferable. A shareholder who wants to sell his/her share can do so through a stock

exchange

Economies of Large-Scale Operations - Since public limited companies have large-scale operations,

they enjoy economies of the scale (Low cost due to the high volume of business). They have a better

bargaining power than other form of business organizations.

Disadvantages of Joint Stock Company are as follows-

1. Difficulty in Formation - Formation of a joint stock company, especially public limited company

involves a lot of legal procedures. It is time-consuming and expensive too.

2. Slow Decision Making - The company is run by the Board of Directors. The decisions are taken

jointly by the Board of Directors. Also in taking certain decisions, they have to seek shareholders

approval by calling a meeting of shareholders. Since there are a lot of people involved in decision

making, the process of decision making takes time

3. Low Motivation - The ownership and management of public limited companies are different. The

company is run by the Board of Directors who are people appointed by the owners (shareholders). It

is the Board of Directors who run the company, but profit belongs to all the shareholders of the

company. Hence there is no direct relationship between efforts and rewards. There is no incentive for

the Board of Directors to work hard.

4. Lack of Secrecy - In case of a public limited company, there is lack of secrecy. The companies

have to publish their financial details/accounts on a regular basis as per law. This means a lot of

information can also be viewed by anyone (including competitors).

5. Excessive Government Control - There are a lot of rules and regulations that have to be followed

while running the business. This also reduces the flexibility in doing the business.

L03: Nature of a company

Types of business organisations

A sole proprietorship is a business owned by one person. This is the simplest type of business to start and

is the least regulated form of organization.

Advantages

Ease of formation and dissolution.

low start-up costs and low operational overhead.

Ownership of all profits

Sole Proprietorships are typically subject to fewer regulations.

Disadvantages

Unlimited liability. Owners who organize their business as a sole proprietorship are personally

responsible for the obligations of the business, including actions of any employee representing

the business.

Limited life. if a business owner dies, the business dies as well.

It may be difficult for an individual to raise capital. It's common for funding to be in the form of

personal savings or personal loans.

Partnerships

A partnership is a business owned by two or more persons who contribute resources into the entity. The

partners divide the profits of the business among themselves.

Advantages

Synergy. There is clear potential for the enhancement of value resulting from two or more

individuals combining strengths.

Partnerships are relatively easy to form, however, considerable thought should be put into

developing a partnership agreement at the point of formation.

Partnerships may be subject to fewer regulations than corporations.

There is stronger potential of access to greater amounts of capital.

Disadvantages

Unlimited liability. General partners are individually responsible for the obligations of the

business, creating personal risk.

Limited life. A partnership may end upon the withdrawal or death of a partner.

There is a real possibility of disputes or conflicts between partners which could lead to dissolving

the partnership. This scenario enforces the need of a partnership agreement.

CORPORATION

A corporation is a legal “person” separate and distinct from its owners, and it has many of the rights,

duties, and privileges of an actual person. Public corporations are owned by shareholders who elect a

board of directors to oversee primary responsibilities.

The owners (stockholders) enjoy limited liability but have limited involvement in the company's

operations.

Forming a corporation involves preparing articles of incorporation (or a charter) and a set of bylaws. The

articles of incorporation must contain a number of things, including :

the corporation's name,

its intended life (which can be forever),

its business purpose, and

the number of shares that can be issued.

This information must normally be supplied to the state in which the firm will be incorporated.

The bylaws are rules describing how the corporation regulates its existence

Advantages

Unlimited commercial life. The corporation is an entity of its own and does not dissolve when

ownership changes.

Greater flexibility in raising capital through the sale of stock.

Ease of transferring ownership by selling stock.

Limited liability. This limited liability is probably the biggest advantage to organizing as a

corporation. Individual owners in corporations have limits on their personal liability. 

Disadvantages

Regulatory restrictions. Corporations are typically more closely monitored by governmental

agencies. Complying with regulations can be costly.

Higher organizational and operational costs.

Double taxation. The possibility of double taxation arises when companies declare and pay taxes

on the net income of the corporation, which they pay through their corporate income tax returns.

Cooperative

A cooperative is a business organization owned by a group of individuals and is operated for their mutual

benefit. The persons making up the group are called members. eg: water and electricity (utility)

cooperatives, cooperative banking, credit unions, and housing cooperatives.

Advantages

Easy to form:

The procedure involves in the registration of a cooperative society is very simple and easy. No

legal formalities are required for the formation of cooperative society.

No obstruction for membership:

Unless and otherwise specifically debarred, the membership of cooperative society is open to

everybody.

Limited liability:

In most cases, the liabilities of the members of the society is limited to the extent of capital

contributed by them. Hence, they are relieved from the fear of attachment of their private

property, in case of the society suffers financial losses.

 Democratic management:

Every member has equal rights through its single vote but can take active part in' the formulation

of the policies of the society.

Stability and continuity:

A cooperative society cannot be dissolved by the death insolvency, permanent incapability of the

members

Disadvantages

Limited resources:

Financial strength depends on the capital contributed by its members. The membership fee is

limited for which they are unable to raise large amount of resources as their members belong to

the lower and middle class.

 Inefficient management:

A cooperative society is managed by the members only. They do not possess any managerial and

special skills.

Lack of secrecy:

The cooperative society does not maintain any secrecy in business because the affairs of the

society is openly discussed in the meetings

Types of companies

A private company means a company which by its articles of association:

(i) Restricts the right to transfer its shares

(ii) Limits the number of its members to fifty (at least 2-50) and

(iii) Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

(iv) Where two or more persons hold one or more shares in a company jointly, they are treated as a single

member.

There should be at least two persons to form a private company and the maximum number of members in

a private company cannot exceed 50.

A private limited company is required to add the words “Private Ltd” at the end of its name.

Public Company

A company, which is not private, is known as public company. It needs minimum seven persons for its

registration and maximum to the limit of its registered capital.

There is no restriction on issue or transfer of its shares and this type of company can invite the public to

purchase its shares and debentures.

Consequences of incorporation

Incorporation

Is a method by which individuals are voluntarily united into a new entity through the creation of an

artificial, intangible, and legal person called corporation.

When a company becomes a corporation, it functions as a separate entity, meaning it takes on an identity

of its own.

Instead of one or two people dictating how a company will run, a board of directors manages the affairs

of a corporation. In turn, the company's stockholders become the actual owners of the company and they

elect its board of directors. 

Liability Factors

Company is liable for its own debts -The shareholders are not liable for the debts and liabilities of the

company and cannot be sued by the company’s creditors.

Incorporation distances the owners of a company from its affairs. This protects owners from financial

liability if a company fails or is sued. As a corporate entity, any financial losses that occur come out of

the company's assets and not the owners' personal assets

Tax Structures

Any business must pay state and federal taxes on a certain percentage of its earnings. The effects of

incorporation subject a company and its owners to double taxation. This occurs at the corporate level and

again at the shareholder or owners level.

Income Options

As a separate entity, a corporation can enter into lease agreements, which enables owners to reduce the

amount of taxes paid. Owners can lease assets, such as equipment, to a corporation, which allows them to

charge rental fees.

Company Property

A company owns its own property - the shareholders have no direct right to this or any share of it.

Person who no longer wishes to be a member is only entitled to whatever price he can get for his shares

Limited Liability

The fact that the company is a separate person from its shareholders makes limited liability possible.

Legality

Legality can be defined as an act, agreement, or contract that is consistent with the law or state of being

lawful or unlawful in a given jurisdiction.

Conversion of a Private Limited Company into a   Public Limited

1. Calling of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the

Companies Act, 2013, for convening a meeting of the Board of Directors

2. Issue of EGM Notice: Issue Notice of the Extra-ordinary General meeting (EGM) to all Members,

Directors and the Auditors of the

3. Holding of Extra Ordinary General Meeting: Hold the Extra-ordinary General meeting (EGM) on

due date and pass the necessary Special Resolution, to get shareholders’ approval for Conversion of

Private Company into a Public company along with alteration in articles of association under section 14

for such conversion.

4. ROC Form filing: For alteration in Article of Association for conversion of Private Company into a

Public company under section 14, few E-forms will be filed with concerned Registrar of Companies at

different stages

5. SCRUTINY OF DOCUMENTS BY ROC

As per Section 18, after receiving the documents for conversion of a Private Company into a Public

Company, ROC shall satisfy itself that the Company has complied with the requisite provisions for

registration of company. If so satisfied, ROC shall close the former registration and issue fresh certificate

of incorporation, after registering the documents submitted for change in class of company.

Differences between Partnership and companies

BASIS FOR

COMPARISONPARTNERSHIP FIRM COMPANY

Meaning When two or more persons agree to

carry on a business and share the

profits & losses mutually, it is known

as a Partnership firm.

A company is an association of persons

who invests money towards a common

stock, for carrying on a business and

shares the profits & losses of the

business.

How it is created? Partnership firm is created by mutual

agreement between the partners.

The company is created by incorporation

under the Companies Act.

Registration Voluntary Obligatory

Minimum number

of persons

Two Two in case of private company and

Seven in case of public company.

Maximum number

of persons

20 in trading business and 10 in

banking business.

50 in case of a private company and a

public company can have unlimited

number of members.

Audit Not Mandatory Mandatory

Management of the

concern

Partners itself. Directors

Liability Unlimited Limited

BASIS FOR

COMPARISONPARTNERSHIP FIRM COMPANY

Insolvency/Death a partnership ceases to exist if any

partner retires, dies or is declared

insolvent.

Insolvency or death of a shareholder

does not affect the existence of a

company.

Minimum capital No such requirement More capital needed

Use of word limited No such requirement. Must use the word 'limited' or 'private

limited' as the case may be.

LO4.FUNCTIONAL AREAS AND ACTIVITIES

Functional areas are teams of employees who have similar skills and expertise. Management is

the ‘brain’ of your business operations. Functional management is focused on the execution of a

specific organizational task within functional areas, through organizing and leading an

organization’s talent.

Functional managers have a high level of technical knowledge and skills relative to the area they

manage and focus their efforts on achieving best practices. There are five main functional areas

of management:

Human resource management:

Human resource development or personnel management or manpower management is concerned

with obtaining and maintaining of a satisfactory and satisfied work. It is a specialized branch of

management concerned with ‘man management’.

The recruitment, placement, induction, orientation, training, promotion, motivation, performance

appraisal, wage and salary, retirement, transfer, merit-rating, industrial relations, working

conditions, trade unions, safety and welfare schemes of employees are included in personnel

management. The object of personnel management is to create and promote team spirit among

workers and managers.

Production management:

Production management refers to planning, organization, direction, coordination and control of

the production function in such a way that desired goods and services could be produced at the

right time, in right quantity, and at the right cost. Some authors treat material, purchase and

inventory management as part of production management. Production management involves the

following functions:

Product planning and development,

Plant location, layout and maintenance,

Production systems and machines,

Management of purchase and storage of materials,

Ensuring effective production control.

Office management:

Office management can be defined as, “the organization of an office in order to achieve a certain

purpose and to make the best use of the personnel by using the most appropriate machines and

equipment, the best possible methods of work and by providing the most suitable environment.’’

The main topics of office management are; office accommodation, layout and environment,

communication, handling correspondence and mail, typing and duplicating, record management

and filing, indexing, forms and stationary and machines etc.

Financial management:

Financial management can be looked upon as the study of relationship between the raising of

funds and the deployment of funds. The subject matter of financial management is: capital

budgeting cost of capital, portfolio management, dividend policy, short and long term sources of

finance. Financial management involves mainly three decisions pertaining to:

Investment policies:

It dictates the process associated with capital budgeting and expenditures. All proposals to spend

money are ranked and investment decisions are taken whether to sanction money for these

proposed ventures or not.

Methods of financing:

A proper mix of short and long term financing is ensured in order to provide necessary funds for

proposed ventures at a minimum risk to the enterprise.

Dividend decisions:

This decision affects the amount paid to shareholders and distribution of additional shares of

stock.

Marketing management:

Marketing as a social and managerial process by which individuals and group obtain what they

need and want through creating and exchanging products and values with others. The course

content of marketing management generally includes; marketing concept, consumer behavior,

marketing mix, market segmentation, product and price decisions, promotion and physical

distribution, marketing research and information, international marketing etc.

MANAGEMENT FUNCTIONS

Management is the art of getting things done through and with people in formally organized

groups.(Haimann, T.)

Management is simply the process of decision-making and control over the actions of human

beings for the express purpose of attaining predetermined goals.(Vance S.)

Management is a social process entailing responsibility for the effective and economical

planning and regulations of the operations of an enterprise in fulfillment of a given purpose

or task (Brech E. F., 1957).

Characteristics of Management:

To further enhance our understanding of the term management, we shall now examine some of its

major characteristics.

(i) Management is an activity.

Management is an activity that concerns the effective use of all resources both human and

non-human. It is the driving force that inspires an undertaking. It creates the conditions

and relationships that bring about the full use of resources.

(ii) Management is Purposeful and goal-oriented.

The main concern of management is the achievement of clearly defined goals or

objectives. Management is said to be successful only to the extent to which these

objectives are achieved.

(iii) Management is a Social Process

Organizations are social entities, as they are constituted of people. As such,

management has to control, organize and motivate people and create a favourable

climate for their development.

(iv) Management is getting things done.

A manager does not usually do the operating work himself, but gets the work done with

and through people. A manager has to direct people, harness talents through training and

procure technical, human, and psychological skills (intellectual capital).

(vi) Management is an intangible force.

Though intangible, management is not abstract but a social skill which is evident

by the quality of the organization in terms of the efficiency and effectiveness of

its operations.

(vii) Management is an Integrating Process.

Management brings together people, machines and materials to carry out the

operation of the organization and achieve a set of given objectives. It is a result-

oriented process.

(viii) Management is separate from ownership.

Management and ownership may be the same in small family or individual or sole

proprietorship businesses, but in modern enterprises or corporations, a vast number of

shareholders own the business enterprise or organization, while management is in the

hands of qualified, professional and competent managers, who normally do not

posses any ownership interest.

(ix) Management is a Universal Activity

The techniques and tools of management are universally applicable. Managers

perform the same functions regardless of their position in the management hierarchy,

type of enterprise or location of enterprise.

(x) Management is a social science

The science of management is universally accepted as a distinct discipline. It has assumed professional

character, hence requiring the use of specific knowledge, skill and practice. It utilizes certain fundamental

concepts, theories, tools and techniques that constitute the subject matter of management. It therefore

satisfies all the conditions of a profession.

The basic functions of management

The job of management is to help an organization make the best use of its resources to achieve

its goals. They do so by performing essential managerial functions which include:

Planning

Organizing

Directing

Staffing

Controlling

Planning: It is the process of setting goals and objectives and showing how these goals and

objectives will be accomplished.

Organizing: This refers to the process of establishing a structure of working relationships. It

involves grouping people into departments according to specific tasks performed and deciding

how best to coordinate organizational resources.

Directing: This is the process of communicating what has been planned by leading and

motivating the efforts of people towards attainment of goals

Staffing: This function refers to the process of filling positions with the right kind of people in

the right job at the right time.

Controlling: This refers to the process of evaluating how well an organization is achieving its

goals and how to maintain and improve performance.

Figure 1 below illustrates the relationships among these functions. It indicates that all the

functions are interdependent.

►

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Figure 1: Interdependence among managerial functions

III. Organizing Charts

Learning objective 1

Explain the purpose of an organization chart. (Text pages 202-203)

A. An organization chart uses a series of boxes connected with one or more lines

to graphically represent the organization’s structure.

B. The chart gives an overall picture of how the entire organization fits together.

factors affecting organization

Describe factors and changes that affect an organization’s structure. ()

A. Strategy

Planning

Organizing

Directing

Staffing

Controlling

1. An appropriate structure helps the

organization reach strategic goals.

2. The organization’s structure clarifies strategy through delegation of

authority and responsibility.

3. Alfred D. Chandler’s study of organization strategy describes a repeating pattern.

a. Changing strategy led to decline in performance, then revised structure, and improvement.

b. Chandler concluded that changes in strategy ultimately led to changes in the organization’s

structure.

4. There are many variables to consider matching structure to strategy.

B. Size

1. The most common measures of

organization size are sales volume and number of employees.

2. Small organizations tend to be less specialized.

3. Larger organizations tend to be more specialized.

C. Environment

1. A study by Tom Burns and G. M. Stalker found a relationship between organization and

characteristics of the external environment.

a. Mechanistic systems are characterized by:

i. a rigid definition of functional duties

ii. precise job descriptions

iii. fixed authority and responsibility

iv. a well-developed organizational hierarchy

b. Organic systems are

characterized by:

i. less formal job descriptions

ii. greater emphasis on adaptability

iii. more participation

iv. less fixed authority

2. They found that successful firms in stable and established industries tend to be mechanistic in

structure.

Successful firms in dynamic industries tend to be organic.

4. Another study by Paul Lawrence and Jay Lorsch reached similar conclusions.

a. Firms operating in a dynamic

environment needed a relatively flexible structure.

b. Firms in a stable environment needed a more rigid structure.

c. Firms operating in an intermediate environment needed a structure somewhere between.