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Historical Development and Overview of Management Reporters: Elissa L. Importante Nochelle S. Urboda, REB Bon Carlo M. Melocoton, CPA
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Principles of Management

Oct 31, 2014

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Page 1: Principles of Management

Historical Developmentand Overview of

Management

Reporters:• Elissa L. Importante• Nochelle S. Urboda, REB• Bon Carlo M. Melocoton, CPA

Page 2: Principles of Management

Management…

• The verb manage comes from the…

– Italian word “managgiare” which means to handle, train, be in charge of

– Latin word “manus” which means hand

– French word “mesnagement” later turned to “ménagement”

Page 3: Principles of Management

Management…

• Is the art of getting things done through other.

• Harold Koontz definition “is the process of designing and maintaining an environment in which individuals, working together in groups efficiently to accomplish selected aims”

Page 4: Principles of Management

Management Concepts…

• Managers carry out their managerial function• Applies to any kind of Organization• Applies to managers at all Organizational level• Aims to create surplus• Concerned with productivity, implies effectiveness

and efficiency• Management of 4 M’s in the Organization

MEN MACHINE

MATERIALS MONEY

Page 5: Principles of Management

Characteristics of Management…

• Management is…

Universal Purposely

Integrative Function Social Process

Multi Disciplinary Continuous Process

Intangible ART as well as SCIENCE

Page 6: Principles of Management

Management as an ART…

• Art involves the physical application of personal skills and knowledge to achieve concrete results

• It is a practical way of doing specific things

• Art is a practice based and perfection in it requires continuous practice over a long period of time

Page 7: Principles of Management

Management as an ART…

• Art is a personalized process and every artist has his own style. Art is essentially creative and the success of an artist is measured by the results he achieves

• The main elements of an art are –

Personal Skills Practical Know-how

Result Orientation Creativity

Constant practice aimed at perfection

Page 8: Principles of Management

Management as an ART…

• Management is basically an art because of the following reasons –

1. A manager applies his knowledge and skills to coordinate the efforts of his people

2. Management seeks to achieve concrete practical results

Page 9: Principles of Management

Management as an ART…

• Management is basically an art because of the following reasons –

3. Management is creative. It brings out new situation and converts into output

4. Effective Management lead to realization of Organizational and other goals. Mastery in Management requires a sufficiently long period of experience in managing

Page 10: Principles of Management

Management as SCIENCE…

• The essential elements of Science –

1. is a systematized body of knowledge

2. contains underlying principles and theories developed through continuous observation, experimentation and research

Page 11: Principles of Management

Management as SCIENCE…

• The essential elements of Science –

3. universal applicability

4. organized body of knowledge can be taught and learnt in class room and outside

Page 12: Principles of Management

Management as SCIENCE…

• Management is a science because it contains all the essential of science,

• Thus, the theory (Science) and practice (Art) of Management go side by side for the efficient functioning of an organization.

Page 13: Principles of Management

Management as a PROFESSION…

• The essential attribute of a profession

A well-defined and organized body of

knowledge

Learning and Experience

Entry restricted by qualification

Recognized national body

Ethical code of conduct

Dominance of service motive

Page 14: Principles of Management

Management as a PROFESSION…

• However, Management cannot be a FULLY PLEDGED PROFESSION due to the following shortcomings

– Skills not fully developed– No uniform method of entry– Objective is monetary rather than service– Ethical code is not strict– Associations are not statutory bodies

Page 15: Principles of Management

Administration VS Management…

# Administration Management

1 It is the higher level functions

It is the lower level functions

2 It refers to the owners of the organization

It refers to the employees

3 Concerned with decision making

Concerned with execution of decision

4 It acts through the management

It acts through the organization

5 Lays down broad policies and principles for guidance

Executes these policies into practice

Page 16: Principles of Management

Levels of Management…

• To analyze, evaluate and deal with the environmental forces

• To establish overall long term goals and broad policies of the company including the master budget

• To appoint departmental and other key executives

• To represent the company to the outside world

• To coordinate the activities and efforts of different department

Top Management

Middle Management

Lower Management

Page 17: Principles of Management

Levels of Management…

• To interpret and explain the policies framed by top management

• To compile and issue detailed instruction regarding operations

• To cooperate among themselves so as to integrate various parts of the division or a department

• To motivate supervisory personnel to work for organization’s goals

• To develop and train supervisory and operative personnel

Middle Management

TopManagement

Lower Management

Page 18: Principles of Management

Levels of Management…

• Also known as Supervisory and Operating Management

• To plan day to day production within the goals lay down by higher authority

• To assign jobs to workers and to make arrangement for their training and development

• To supervise and control workers and to maintain personal contact with them

Lower Management

TopManagement

Middle Management

Page 19: Principles of Management

Roles of Manager…

Interpersonal

Informational

Decisional

FIGUREHEAD- as a symbolic head of an organization,

the manager performs routine duties of a legal nature

LEADER- Hiring, Training, Motivating and Guiding

subordinates

LIAISON- Interacting with other managers outside

the organization to obtain favors and information

Page 20: Principles of Management

Roles of Manager…

Interpersonal

Informational

Decisional

MONITOR- seeks and receive information

concerning internal & external events so as to gain understanding of the organization and its environment

DISSEMINATOR- transmits information to subordinates,

peers and superiors within the Organization

SPOKESPERSON- speaking on behalf of the Organization

and transmitting information on Organization plans, policies and actions to outsiders

Page 21: Principles of Management

Roles of Manager…

Interpersonal

Informational

Decisional

ENTREPRENEUR- initiating changes or improvements in

the activities of the organization

DISTURBANCE HANDLER- taking charge and corrective action

when organization faces unexpected crises

RESOURCE ALLOCATOR- distributing organization’s resources like

money, time, equipment, and labor

NEGOTIATOR- representing the organization in

bargaining and negotiations with outsiders and insiders

Page 22: Principles of Management

Importance of Management…

Management is the dynamic life – giving element in every business. Without it the resources of production remain resources and never become production.

Sound Management provides the following benefits:

•Achievement of group goals •Optimum utilization or resources

•Fulfillment of social obligations •Economic growth

•Stability •Human development

•Meets the challenge of change

Page 23: Principles of Management

Need for Management…

• To increase efficiency

• To crystallize the nature of Management job

• To improve research in Management

• To attain social goals

Page 24: Principles of Management

Management Timeline…

MANAGEMENT APPROACH

DATES EMPHASIS

1. Classical Approach

Scientific Approach 1880s Traditional rules of thumb are replaced by precise procedures developed after careful study of an individual work

Administrative Management

1940s Gives idea about the primary functions of management and the 14 principles of management

Bureaucratic Management

1920s Replaces traditional leadership and charismatic leadership with legal leadership

2. Behavioral Approach

Human Relations 1930s Workers’ attitudes are associated with productivity

Page 25: Principles of Management

Management Timeline…

MANAGEMENT APPROACH

DATES EMPHASIS

Behavioral Science 1950s Gives idea to understand human behavior in the organization

3. Quantitative Approach

Management Science (Operation Research)

1940s Uses mathematical & statistical approaches to solve management problems

Production & Operations Management

1940s This approach focuses on the operation & control of the production process that transforms resources into finished goods & services

Page 26: Principles of Management

Management Timeline…

MANAGEMENT APPROACH

DATES EMPHASIS

4. Recent Developments

Systems Approach 1950s Considers the organization as a system transforms inputs into outputs while in constant interaction with its environment

Contingency Approach

1960s Applies management principles and processes as dictated by the unique characteristics of each situation

INPUT PROCESS INPUT

EXTERNAL ENVIRONMENT

FEED BACK

Page 27: Principles of Management

Henry Fayol (1841-1925)…

• He is a French Industrialist known to be the “Father of Management”

• He contributed the “14 Principles of Management” which is widely applied in all the organizations

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Henry Fayol (1841-1925)

Page 28: Principles of Management

14 Principles of Management…

Work should be divided in proper way with reference to the available time. In general worker on the same job and the managers on the same duty acquire ability sureness and accuracy which increase their output.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Division of Work

Page 29: Principles of Management

14 Principles of Management…

AUTHORITY – it is the power given to a person to get work from his subordinates

RESPONSIBILITY – It is the kind and amount of work expected of from a man by his superior. One of the essential elements of a good management is delegation of authority to the lower levels of management and fixing responsibility on town

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Authority and Responsibility

Page 30: Principles of Management

14 Principles of Management…

Discipline is very essential for the smooth running of organizations. To Fayol, discipline will result from good leadership at all levels of the organization, fair agreements and judiciously enforced penalties for infractions.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Discipline

Page 31: Principles of Management

14 Principles of Management…

An employee must receive orders and instructions from one supervisor only. Multiple commands will cause conflicts and confusions. A sound management should avoid dual commands.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Unity of Command

Page 32: Principles of Management

14 Principles of Management…

Unity of direction signifies each group of activities having the same objectives must have one head and one plan. All the groups should coordinate and work together to achieve the common goal.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Unity of Direction

Page 33: Principles of Management

14 Principles of Management…

Every employee is working in an organization and his interest is to earn money to meet his personal needs. The general interest of the organization is development and the progress of the organization.

The employees should give importance first to the general interest than his individual interest. It will lead to effective management of the organization.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Subordination of Individual Interest to General Interest

Page 34: Principles of Management

14 Principles of Management…

Remuneration should be fair for both the employees and employers. The wage payment systems should satisfy the employees.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Remuneration of Personnel

Page 35: Principles of Management

14 Principles of Management…

The organization is centralized when the power is connected with one person. If the power is fully distributes to the subordinates of the organization is fully decentralized. For effectives management of people decentralization is necessary. Decentralization helps to take a quick decision on all important problems.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Centralization

Page 36: Principles of Management

14 Principles of Management…

Scalar chain principles states that instructions and orders should be sent from the top management to the lower management.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Scalar Chain

Page 37: Principles of Management

14 Principles of Management…

Two types of order 1) Materials order

2) Social order.

In any organization materials and for men are correct places provided. So that materials can be easily taken out and men easily located and also save time.

• Materials order:” A place for everything in its place”

• Social order:” A place for everyone and everyone in place”.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Order

Page 38: Principles of Management

14 Principles of Management…

Equity refers to the treatment of employees equally. Equal treatment of the employees helps to achieve organizational goals.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Equity

Page 39: Principles of Management

14 Principles of Management…

A high employee turnover rate is not good for the efficient functioning of any organization.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Stability of Tenure of Personnel

Page 40: Principles of Management

14 Principles of Management…

It is concerned with thinking and execution of a plan. When employees come forward with new ideas, they must be encouraged by the superiors. It will create the morale of the employees.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Initiative

Page 41: Principles of Management

14 Principles of Management…

This means union is strength. In organization employees should be harmony and unity. It improves employee morale.

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Esprit-de-corps

Page 42: Principles of Management

Critical Evaluation…

• Too formal• Not pay adequate attention to

workers• Vagueness• His principle hinted but did not

elaborate that management can and should be taught

Division of Work

Authority and Responsibility

Discipline

Unity of Command

Subordination of Ind. Int. to Gen. Int.

Remuneration of Personnel

Centralization

Scalar Chain

Order

Equity

Stability of Tenure of Personnel

Unity of Direction

Initiative

Esprit-de-corps

Critical Evaluation to H. Fayol

Page 43: Principles of Management

F.W. Taylor (1856-1915)…

• He is an American Mechanical Engineer known to be the “Father of Scientific Management”

• “The art of knowing exactly what you want men to do and see that they do it in the best and cheapest way.”

F.W. Taylor (1856-1915)

Principles of Scientific

Management

Techniques of Scientific

Management

Page 44: Principles of Management

Scientific Management…

• Science not rule of thumb• Harmony not discord• Cooperation not individualism• Maximum output in place of

restricted output• Development of each individual to

his greatest efficiency and prosperity

• Mental Revolution – Mental attitude of the two parties

Principles

Principles of Scientific

Management

Techniques of Scientific

Management

Page 45: Principles of Management

Scientific Management…

• Scientific task and Rate-setting• Planning the task• Selection and training• Standardization and

simplification• Specialization (functional

foremanship)• Mental Revolution

Techniques/Elements

Principles of Scientific

Management

Techniques of Scientific

Management

Page 46: Principles of Management

Critical Evaluation…

• Mechanistic Approach

• Unrealistic Assumptions

• Narrow View

• Impracticable

• Exploitation of Labor

Critical Evaluation to F.W. Taylor

Principles of Scientific

Management

Techniques of Scientific

Management

Page 47: Principles of Management

Other Contributors…

Professor of Industrial Psychology at the Harvard Business School

Hawthrone Experiments1. Illumination experiments

2. Relay assembly test room experiments

3. Mass interviewing programme

G.E. Mayo (1880-1949)George Elton

Mayo

Henry Lawrence Gantt

Frank Bunker Gilbreth

Page 48: Principles of Management

Other Contributors…

• Workers working in a group develop bond of relationships

• Behavior at workplace depends on their mental state, emotions and prejudices

• Human and liberal attitude of supervisor helps in improving performances

• Managerial skills and technical skills are not necessary to be a successful leader

Outcome of Hawthrone ExperimentsGeorge Elton

Mayo

Henry Lawrence Gantt

Frank Bunker Gilbreth

Page 49: Principles of Management

Other Contributors…

An American Mechanical Engineer and Management Consultant who is famous for his “Gantt Chart” used for scheduling and control of work

Task and Bonus plan (Minimum wages is guaranteed to all workers irrespective of output, Extra wages are paid for extra work)

H.L. Gantt (1861-1919)George Elton

Mayo

Henry Lawrence Gantt

Frank Bunker Gilbreth

Page 50: Principles of Management

Other Contributors…

Was an early advocate of scientific management and a pioneer of time and motion study, and fatigue study

Work simplification – 3 positional promotion plan

- Present position

- Position to be held before promotion to his present position

- The next higher position

F.B. Gilbreth (1868-1924)George Elton

Mayo

Henry Lawrence Gantt

Frank Bunker Gilbreth

Page 51: Principles of Management

Function of Management…

FUNCTIONS SUB FUNCTIONS

Planning •Forecasting•Policy making•Programming•Problem solving•Innovation

•Decision making•Strategy formulation•Scheduling/Budgeting•Investigation•Research

Organizing •Grouping of functions•Delegation•Decentralization

•Departmentalize•Activity analysis•Task allocation

Staffing •Manpower planning•Job analysis•Recruitment•Selection

•Training•Placement•Compensation•Promotion/Appraisal

Directing •Supervision•Motivation

•Communication•Leadership

Controlling •Fixation of standard•Recording

•Measurement•Reporting corrective action

Page 52: Principles of Management

Function of Management…

Managerial Function

Planning

Organizing

StaffingDirecting

Controlling

Page 53: Principles of Management

Types of Business Organization…

• When organizing a new business, one of the most important decisions to be made is choosing the structure of a business

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Page 54: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Sole Proprietorship

• The individual entrepreneur supplies the entire capital, employs labor and machine

• Individual uses his own skill in the management of affairs and is solely responsible for the good or bad result of its operation and working

Page 55: Principles of Management

Types of Business Organization…

MERITS DEMERITS

Easiest and least expensive from of ownership to organize

Unlimited liability and are legally responsible for all debts against the business

Sole proprietor are in complete control, within the law, to make all decisions

Their business and personal assets are 100% at risk

Sole proprietor receives all income generated by the business to keep or reinvest

Are limited to using funds from personal savings

Profits from the business flow-through directly to the owner’s personal tax return

Have a hard time attracting high-caliber employees

The business is easy to dissolve, if desired

Have a hard time to raise investment funds

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Sole Proprietorship

Page 56: Principles of Management

Types of Business Organization…

• Two or more persons come together and start a business with their own funds, the parties agree to share the profits as well as bear the losses in the agreed proportion.

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Partnerships

Page 57: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Partnerships

MERITS DEMERITS

Partnerships are relatively easy to establish, however time should be invested in developing the agreement

Partners are jointly and individually liable for the actions of the other partners

With more than one owner, the ability to raise funds may be increased

Profits and decisions must be shared with others, disagreements can occur

The profits from the business flow directly through to the partners’ personal taxes

Some employee benefits are not deductible from business income on tax returns

Prospective employees may be attracted to the business if given the incentive to become a partner

The partnerships have a limited life; it may end upon a partner withdrawal or death

Page 58: Principles of Management

Types of Business Organization…

• A corporation is considered by law to be unique “entity”, separate and apart from those who own it

• A corporation can be taxed, sued, or enter into contractual agreements

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Corporations

Page 59: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Corporations

MERITS DEMERITS

Shareholders have limited liability for the corporation’s debts

The process of incorporation requires ,ore time and money than other organization forms

Generally, shareholders can only be held accountable for their investment in stock of the company

Corporations are monitored by state and some local agencies

Corporations can raise additional funds through the sale of stock

Incorporating may result in higher overall taxes

A corporation may deduct the cost of benefits it provides to officers and employees

Dividends paid to shareholders are not deductible from busn income, thus can be taxed twice

Page 60: Principles of Management

Types of Business Organization…

• Capital is contributed by a large number of person in the form of shares of different values– Private Limited Company– Public Limited Company

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Joint Stock Company

Page 61: Principles of Management

Types of Business Organization…

Private Limited Company

- can be formed by 2 to 50 persons. In this, transfer of shares is limited to members only. The government does not interfere in the working of the company

Public Limited Company

- membership is open to general public. The minimum required number to form such company is 7, but there is no upper limit

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Joint Stock Company

Page 62: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Joint Stock Company

MERITS DEMERITS

The liability, being limited, of the shareholder bear no risk and therefore more persons are encourage to invest capital

It is difficult to preserve secrecy in these companies

Because of large number of investors, the risk of loss is divided

It requires a large number of legal formalities to be observed

Joint stock companies are not affected by the death or the retirement of the shareholders

Lack of personal interest

Page 63: Principles of Management

Types of Business Organization…

• Wholly owned by the Government. It is usually established by a Special Act of the parliament

• Special statute also prescribes its management pattern power duties and jurisdictions

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Public Corporations

Page 64: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Public Corporations

MERITS DEMERITS

These are expected to provide better working conditions to the employees and supported to be better managed

Any alteration in the power & Constitution of Corporation requires an amendment in the particular Act, which is difficult and time consumingQuick decisions can be

possible, because of absence of bureaucratic control

More flexibility as compared to departmental organization

Public corporations possess monopoly & in the absence of competition, these are not interested in adopting new techniques & in making improvements in their work

Since the management is in the hands of experienced & capable managers, these are managed more efficiently than that of government departments

Page 65: Principles of Management

Types of Business Organization…

• Share capital is held by the government or partly by government and partly by one or more state government

• Managed by the elected board of directors which may include private individuals

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Government Companies

Page 66: Principles of Management

Types of Business Organization…

Sole Proprietorship

Partnerships

Corporations

Joint Stock Company

Public Corporations

Government Companies

Government Companies

MERITS DEMERITS

It is easy to form Misuse of excessive freedom cannot be ruled out

The directors of a government company are free to take decisions & are not bound by certain rigid rules and regulation

The directors are appointed by the government so they spend more time in pleasing their political masters & top government officials, which results in inefficient management

Page 67: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

On the basis of the extent of intimacy with the firm, the environmental factors may be classified into different types namely internal and external

EXTERNAL

Page 68: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

INTERNAL ENVIRONMENTAL FACTORS - has a direct impact on the business - generally controllable because the company has control over these factors - these factors are as follows:

a. Resources- these can be tangible, intangible and human resources

b. Capabilities - firm’s capacity for undertaking a particular

productive activityc. Culture - specific collection of values and norms that

are shared by people and groups in an organization

Page 69: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

EXTERNAL ENVIRONMENT FACTORS - indirect influence on the business - uncontrollable by the business - two types of this factor are as follows

1. MICRO ENVIRONMENTAL FACTORS• External factors close to the company that

have a direct impact on the organizations process

2. MACRO ENVIRONMENTAL FACTORS• Consists of non specific aspects in the

organization’s surroundings that have potential to affect the organization’s strategies

Page 70: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

MICRO ENVIRONMENTAL FACTORS

a. Shareholders• Any person or company that owns at least

one share in a companyb. Suppliers

• Individual or an organization involved in the process of making a product or service available for use or consumption by a customer

c. Distributor• Entity that buys non-competing products,

warehouse them and resells them to retailers or direct end user

d. Customers• A person, company, or other entity that

buys goods and services produced by other person, company or other entity

Page 71: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

MICRO ENVIRONMENTAL FACTORS

e. Competitors• A company in the same industry or a

similar industry which offers a similar product or services

f. Media• Positive or adverse media attention on an

organizations product or service can in some cases make or break an organization

Page 72: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

MACRO ENVIRONMENTAL FACTORS

a. Political Factors• Include government regulations and legal

issues and define both formal and informal rules under which the firm must operate

• tax policy; • employment laws; • environmental regulations, • trade restrictions and tariffs; • political stability

b. Economic Factors• Affects the purchasing power of potential

customers and the firm’s cost of capital• economic growth;• interest rates; • exchange rates; • inflation rate

Page 73: Principles of Management

Classification of Environmental Factors…

MACRO Environment

MICRO Environment

INTERNAL Environment

EXTERNAL

MACRO ENVIRONMENTAL FACTORS

c. Social Factors• Include demographic and cultural aspects

of the external macro environment.• These factors affect customer needs and

the size of potential markets• health consciousness;• population growth rate;• age distribution;• career attitudes;• emphasis on safety

d. Technological Factors• This can lower barriers to entry, reduce

minimum efficient production levels and influence outsourcing decisions

• R&D activity; technology changes• technology incentives; automation

Page 74: Principles of Management

Trends and Challenges of Management in Global Scenario…

• The management functions are planning, organizing, directing, and controlling are just as relevant to international managers as to domestic managers.

• International managers need to…– Have a clear view of where they want their firm to be in

the future– Organize to implement their plans– Motivate those who work to them– Develop appropriate control mechanisms

Page 75: Principles of Management

Trends and Challenges of Management in Global Scenario…

• Planning in a Global Scenario – to effectively plan and make decisions in a global economy, managers must have the following– Broad-based understanding of both environmental

issues and competitive issues– Need to understand local market conditions and

technological factor that will affect their operations– At the corporate level, executives need a great deal

information to function effectively– Variety of strategic decisions about their organizations

Page 76: Principles of Management

Trends and Challenges of Management in Global Scenario…

• Organizing in a Global Scenario– Managers in international business must also attend to

a variety of organizing issues– The firm has made the decision to give local managers

a great deal of responsibility for how they run their business

– Managers in an international business must address the basic issues of organization, structure and design, managing change, and dealing with human resources

Page 77: Principles of Management

Trends and Challenges of Management in Global Scenario…

• Directing in a Global Scenario– Individual managers must be prepared to deal with

cultural and other factors as they interact people from different cultural backgrounds

– Managers must understand… • How cultural factors affect individuals• How motivational processes vary across cultures• How the role of leadership changes in different

cultures• How communication varies across cultures• How interpersonal and group processes depend on

cultural background

Page 78: Principles of Management

Trends and Challenges of Management in Global Scenario…

• Controlling in a Global Scenario– Managers in international organizations must also be

concerned with control– Distances, time zone differences, and cultural factors

also play a role in control– Basic control issues for the international manager revolve

around operation’s management productivity, quality, technology and information system

Page 79: Principles of Management

They say that dedicating is one of the most beautiful acts of love one can

perform.

I would argue that it is even more beautiful to dedicate this to you without saying my

name

Page 80: Principles of Management

Historical Developmentand Overview of

Management

END OF PRESENTATION