Chap 2 Business Mgt_10

8/7/2019 Chap 2 Business Mgt_10

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CHAPTER 2

BUSINESS MANAGEMENT


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Technopreneruship (WBB10102)

SME Definitions

In 2005, National SME DevelopmentCouncil (NSDC) approved the use ofcommon definitions for SMEs in themanufacturing, manufacturing-relatedservices, primary agriculture and servicessectors.

applied by all Government Ministries and

Agencies involved in SME development,as well as by the financial institutions.


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SME Definitions

SMEs can be grouped into :

Micro, Small, or Medium

These groupings are decided based onEITHER

the numbers of people a business employs OR

on the total sales or revenue generated by abusiness in a year.


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Number of Employees

Based on the number of full-time employees:

PrimaryAgriculture

Manufacturing(including Agro-Based) & MRS*

Services Sector(including ICT**)

Micro Less than 5employees

Less than 5employees

Less than 5employees

SmallBetween 5 &

19 employees

Between 5 & 50

employees

Between 5 & 19

employees

MediumBetween 20 &50 employees

Between 51 &150 employees

Between 20 &50 employees

*MRS : Manufacturing-Related Services

** ICT

: Information and CommunicationsTechnology


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Annual Sales Turnover

Based on annual sales turnover :

PrimaryAgriculture

Manufacturing(includingAgro-Based) &MRS*

Services Sector(including ICT**)

MicroLess thanRM200,000

Less thanRM250,000

Less thanRM200,000

Small

BetweenRM200,000 &less than RM1

million


million


million

MediumBetween RM1million & RM5million

Between RM10million & RM25million

Between RM1million & RM5million

*MRS : Manufacturing-Related Services

** ICT

: Information and CommunicationsTechnology


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Characteristics of a Small

Business

Ownership

Management

Resources Organisational Structure

Flexibility of Change


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MANAGEMENT FUNCTIONS


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PURPOSES OF PLANNING

Planning provides direction

Planning reduces uncertainty

Planning minimizes waste andredundancy

Planning sets the standards used in

controlling.


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Goals and Plans

Goals

are desired out comes forindividuals, groups, or entire organizations.

Goals = objectives

provide the direction for all managementdecisions and form the criteria against

which actual work accomplishments canbe measured.


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Goals and Plans

Plans

documents that outline how goals aregoing to be met and that typically describeresource allocations, schedules, and othernecessary actions to accomplish the goals.


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Levels of Goals/Plans


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Types of Goals (1)

Stated goals

official statements of what an organizationsays, and what it wants its stakeholders tobelieve.

can be found in an organization's charter annual report

made by managers-are often conflicting and

excessively influenced by what societybelieves organizations should do.

Examples: Faster revenue growth, wider profitmargins, bigger market share.


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Types of Goals (2)

Real goals

those goals that an organisation actuallypursues observe what organizational

members are doing. Actions define priorities. For example, universities that proclaim the

goal of limiting class size, facilitating closestudents- faculty relations, and actively

involving students in the learning processand then put them into lecture classes of 300or more are pretty common.


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Characteristics of welldesign goals

S-Specific

M-Measurable

A-Achievable

R-Realistic

T-Time Frame


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Types Of Plans


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Types Of Plans: Breadth

Strategic plans apply to the entire organization, establish the

organization's overall goals, and seek to positionthe organization in terms of its environment.

tend to cover a longer time frame and a broaderview of the organization.

include the formulation of goals

Operational plans

specify the details of how the overall goals are tobe achieved.

define ways to achieve the goals.

tend to cover short time periods-monthly, weekly,and day-to-day.


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Types Of Plans: Time frame

long-term plans

with the time frame beyond threeyears.

short-term plans

covering one year or less.


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Types Of Plans: Specificity

Specific plans

clearly defined and leave no room forinterpretation.

They have clearly defined objectives. There'sno ambiguity and no problem withmisunderstanding.

Directional plans

flexible plans that set out general guidelines.

provide focus but don't lock managers intospecific goals or courses of action.


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Types Of Plans: Frequency of use

Single-use plan a one-time plan specifically designed to

meet the needs of a unique situation. Example: a single-use plan to guide the

creation and implementation of the newservice.Standing plans ongoing plans that provide guidance for

activities performed repeatedly. policies, rules, and procedures. Example: the safety and health policy

developed by the university.


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Organising

a management functionthat involves determiningwhat tasks are to bedone, who is to do them,how the tasks are to be

grouped, who report towhom, and wheredecisions are to be made


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The Purposes of Organising

Divides work to be done into specific jobs anddepartments

Assign tasks and responsibilities associatedwith individual jobs

Coordinates diverse organizational tasks

Clusters jobs into units

Establishes relationships among individuals,

groups and departments Establishes formal lines of authority

Allocated and deploys organizationalresources


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Organisational Structure

the formal arrangement of jobs withinan organisation.

arranged in levels that represent the

management hierarchy.


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CEO

Department Department Department

represent the

chain ofcommand

represent the division

of work and the way in

which tasks are

departmentalised


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Key Elements of OrganisationalDesign

1. Work Specialisation

2. Departmentalisation

3. Chain Of Command

4. Span Of Control

5. Centralisation And Decentralisation

6. Formalisation


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Key Element 1: Work specialisation

describe the degree to which activitiesin an organisation are divided into

separate jobs.

an entire job is not done by oneindividual but instead is broken down

into steps, and each step is completed

by a different person. Individual employees specialise in

doing part of an activity.


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Key Element 2: Departmentalisation

the basis on which work or individualsare group into manageable units

called department

departmenta unique group ofresources established by management

to perform some organisational task.


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Departmentalisation

Functional

Product

Geographical

Process

Customer


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Product departmentalisation

Group jobs by product line Each major product is placed under the

authority of a manager whos responsible foreverything to do with that product line.

Advantages Allows specialisation in particular products and

services Managers can become experts in their industry Closer to customers

Disadvantages Duplication of functions

Limited view of organisational goals


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Product (cont.)

ManagingDirector

Executive DirectorChildren Wear

Executive DirectorMens Wear

Executive DirectorWomens Wear


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Geographical departmentalisation

Groups jobs on the basis of territory orgeography such as southern, northern,western, eastern, state or country.

Advantages More effective and efficient handling of

specific regional issues that arise Serve needs of unique geographic markets

better

Disadvantages Duplication of functions Can feel isolated from other organisational

areas


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Geographical (cont.)

VicePresidentFor Sales

Sales

Director,WesternRegion

SalesDirector,SouthernRegion

SalesDirector,

MidwesternRegion

SalesDirector,EasternRegion


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Process departmentalisation

Groups jobs on the basis of product orcustomer flow.

Work activities follow a natural

processing flow of products or even ofcustomers.

Advantages

More efficient flow of work activities

Disadvantages

Can be used with certain types of products


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Process (cont.)

Plant

Superintende

nt

Manager,

Sawing

Department

Manager,

Planning and

Milling

Department

Manager,

Assembling

Department

Manager,

Lacquering

and Sanding

Manager,

Finishing

Department

Manager,

Inspectionand Shipping

Department


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Customer departmentalisation

Groups jobs on the basis of customerswho have common needs or problemsthat can be met by having specialist for

each. Advantages Customers needs and problems can be

met by specialists

Disadvantages Duplication of functions

Limited view of organisational goals.


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Customer (cont.)

Director ofSales

Manager,

Retail

Accounts

Manager,

Wholesale

Accounts

Manager,

Government

Accounts


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Key Elements 3: Chain of command

the continuous line of authority thatextends from upper organisationallevels to the lowest levels and clarifieswho reports to whom.

It helps employees answer questionssuch as

Who do I go if I have a problem?

To whom am I responsible?


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Key Element 3: Chain of command

Authority - formal and legitimate right ofa manager to make decisions, issueorders, and allocate resources toachieve organisationally desiredoutcomes.

Responsibility - duty to perform anyassigned duties.

Unity of command the managementprinciple that each person shouldreport to only one manager.


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Key Element 4: Span Of Control

the number of employees amanager can efficiently andeffectively manage


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Key Element 4: Span Of Control

Factor Increase Span ofControl when

Decrease Span ofControl when

1. Similarity offunctions

1. similar functions 1. differentfunctions

2. Geographiccontiguity

2. physically close 2. physically distant

3. Complexity offunctions

3. simple tasks 3. complex tasks

4. Coordination 4. need littlecoordination

4. need muchcoordination

5. Planning 5. managerspends little time

planning

5. manager spendsmuch time

planning


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Key Element 6: Formalisation

jobs within the organisation arestandardised and the extent to whichemployee behavior is guided by rulesand procedures.

highly formalised job = then workers haslittle discretion as to what is to be done,when it's to be done, and how he or she

does it. resulting in consistent and uniform

output.


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Leading

is a management functionthat involves motivatingsubordinates, influenceindividuals or teams asthey work, selecting themost effective

communication channel,or dealing in any way withemployee behavior issues


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Studying Leadership

Leadership Motivation


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Traits and Skills

Traits: the unchanging characteristics ofa person that predisposes someone to

act in a particular way.

Leaders Have Drive Leaders Have Honesty and Integrity

Leaders Are Motivated to Lead

Leaders Have Self-Confidence Leaders Have Cognitive Ability

The Leader Knows the Business


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Traits and Skills

Skills : the ability to do something in aneffective manner.

Technical skills job know-how, knowledge of the

industry and its particular process,machinery and problems.

Interpersonal

skills

Knowledge of human behaviour, the

ability to work effectively withindividuals and groups.

Conceptualskills

ideas, plans, and directives.

the ability to see the organization asa whole and to understand theoverall effect of several

departments.


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Power and Leadership

Power is the potential ability to influence thebehavior of others.

Legitimate Power

develop from a formal management position in

an organization and the authority granted to it.

Reward Power

results from the authority to reward others

Coercive Power

develop from the authority to punish orrecommend punishment


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Power and Leadership

Expert Powerstems from special knowledge or skill in thetasks performed by subordinates.

Referent Power

results from characteristics that commandsubordinates identification with respect andadmiration for, and desire to emulate theleader.


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Motivation

the set of processesthat moves a persontoward a goal.

motivated behaviorsare voluntarychoices controlledby the individual

employee.

Jobcharacteristics

organisational

practices

Individualdifferences

Factors that affectwork motivation:


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Maslow's Hierarchy of Needs


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Maslow's Hierarchy of Needs

Level I Physiologicalneeds

most basic human needs.

They include food, water, and comfort

Level II Safety needs the desires for security and stability,

to feel safe from harm

Level III Social needs the desires for affiliation.They include friendship and belonging.

satisfy employees' social needs throughsports teams, parties, and celebrations.

Level IV Esteem needs the desires for self-respect and respect

or recognition from others.Show appreciation

Level V Self-actualisationneeds

the desires for self-fulfillment and therealisation of the individual's fullpotential.


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Controlling

is a managementfunction that involvesmonitoring actualperformance,

comparing actual tostandard, and takingaction id necessary.


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Importance of Controls

Critical link back to planning

Empowering employees

Protecting the workplace


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Controlling Process


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Controlling Process: Step 1(Measure)

a) How We MeasureAdvantages Disadvantages

Personal

Observations

o Get firsthand knowledge

o Information isnt filtered

o Intensive coverage of

work activities

o Subject to personalbiases

o Time-consuming

o Obstructive

Statistical

Reports

o Easy to visualize

o Effective for showingrelationships

o Provide limitedinformation

o Ignore subjectivefactors


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C lli S


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Controlling Process: Step 1 -Measure

b) What We Measure

Examples

Production manager(paper tablet

manufacturer) quantity of paper

tablets produced perday and per labor-hour

scrap rate percent of rejects

returned bycustomers.

Marketing managers:

percentage of market

held average dollar per sale,

number of customervisits per salesperson

number of customer

impressions peradvertising medium.

C t lli P St 2


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Controlling Process: Step 2 -Comparing

determines the degree of variation betweenactual performance and the standard

to determine the acceptable range ofvariation.

A standard is the level of activity establishedto serve as a model for evaluating

organisational performance.


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C t lli P St 3 T ki


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Controlling Process: Step 3-TakingManagerial Action

A manager who decides to correct actualperformance has to make another decision:

Immediate correctiveaction correctsproblems at once toget performance

back on track.

Basic correctiveaction looks at howand whyperformance has

deviated and thenproceeds to correct

the source ofdeviation.

C t lli P St 3 T ki


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Controlling Process: Step 3- TakingManagerial Action

b) Revise the Standard It is possible that the variance was a result of

an unrealistic standard; that is, the goal mayhave been too high or too low.


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Tools for Controlling Performance

Documents

Chap 2 Business Mgt_10