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Chapter 1: Introduction to business management: a value chain
perspective
1.1 Introduction
Our world = characterisedvar. types bus. act.o Ruralnot
isolatedin/dir affect
o Relevantall people society
Managersneed thorough understandingbus., workings &
management
o Traininggeneric & related subj. fields
Eco lifeinvolvementemployed; buy good/service
Bus. understanding & appreciation = knowledge &
understandingwhat & how
Bus. management = all act. relatedmanagementall types orgs.
o Incltypes; formsbus. ownership; management; management
process
o Management functional areas
= specific mode thinking achievement set goals &
objectives
utilise resources availableorg Value chain allows orgtransform
inputs outputs
1.2 Functional Areas of Business Management
Management bus ease
o Complex multinational corps
o Simpleone-man bus.
Involves functional areas of management ea = consideration BUT
importance
o Importance dep# factorstype G/S; locus; org size
Most bus:
o Purchasing & materials man.
o Production & operations man.
o Marketing man.
o Financial man.
Generic
o General man.
o Human resources (HR) man.
o Corporate communication man.
o Information man. & e-bus.
Separate functions & studied indiv theory
o
Not in practice
o All identifiable BUT inseparable
o All work togachieve goals & objectives of org
o Linked toguniqueorgeg. links in chain ea + strengthchain
One workweakens whole chain
o Parts & support ea
o Own role
1.3 The Role of Needs in the Business Cycle
Humans = diff wants & needs
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Want = vague feeling something absent/unavailable
o Not always clearly defined
Need = strong, internal desire gain/acquire/achieve
something
o Condition req. Relief/ uncomfortable tension
o intense & definable varying
o
Formal = psychological feature awakens organism action towards
achievingdesired goal; form reasonaction; giving purpose &
direction behaviour
Needs & wants satisfaction = underlying stimulus bus.
act.
1 need satisfiedanother appears
o Bus worknever-ending need spiral unsatisfied needs = bus.
opp.
needs created = bus. climate
Marketing makes consumers aware needs (un/conscious) create
potential customersatisfy newly discovered needs
Feeling of deficiencyfoundations expanding bus.
Bus. act. driven satisfactionhuman needs
No abs measure measure existence/strength needs subjective
feelings w/in ppl &
quantified development levelppl needs = diverse
o Diversity brings balancehuman life multifaceted
o Needs shape/motivate ppls behaviour & determine
lengthssatisfy
o Satisfaction of needs = driving forcehuman action
Maslow (19081972) = American psychiatrist
o Interesthuman behaviour & modification
o 5 basic human needs prime driving force needs satisfaction
behaviour
o Hierarchy of needs sequential
Physiologicalhuman existence
Safetysecurity
Socialbelonging Esteemrespect
Self-actualisationpotential fulfilment
o 1stsatisfy lower-order & repetitive needs higher-order
& infrequent needs
o Moment satisfied = no longer influence behaviour next basic
need req
satisfaction driving force
Lowest unfulfilled need (@pt) = strongest driver behaviour
o Cannot explain all human behaviour & need satisfaction
Maslows hierarchy = over-simplifiedonly 1 level of needs =
driving force
@ 1ptsingular manner
Humans = complex
o
Lower-order = basicreqsurvival & characterised
urgency(quick) & tempnature
Immediate reliefsoon reoccur
basic = reoccur quickly
Over-satisfying preventative
o Higher-order = superior & develop over long term
patient
Satisfaction lasts longer
Ppl = lengths satisfaction
o means satisfy ALL needs ($) prioritise easily change
(subjectivity) w/in
broader categories
o Ingrained urge in human nature max satisfaction w/ min effort
i.e. highest
satisfaction of needs w/ limited need-satisfying resources
Economic principle
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Fundamental basiseco act
Basisproductivity issues
o Highest poss output w/ min poss input
All bus considerations should be based highest conversion
factor
from inputs need-satisfying output
ProvisionG&Ssatisfy consumers needs forms basiseco acto
Essenceconcerns conversion var inputs need-satisfying outputs
o Inputs = production factors
Bus management = concerned w/ management aspects inputs,
conversion process & output
4 types
Landincl all natural resources
o Land; un/processed products used raw materials prod
process
o Agricultural land; premises
o Prodprimary sector = further processing
Capital = means financial means acquiring other forms
prodfactors
o Buildings & machinery
Labourphysical & mental abilities human resources
o Workers = manual
o Intellectual capital
Entrepreneurship = initiative combine range prod factors var
combos satisfy diverse needs
o Management & entrepreneur functions cater for
Not easily separated traditionally
Modern = integrated complex system work tog achieve
resultso Link value chainea act must note influence may have
other aspect of bus
Optimal combofactors req other aspects ext/int comm.
o Conversion process deals w/ prod
Applicationeco principle must = visible throughout entire
org
o @ every stage conversion process examine how value + process
most
efficient way
o Value conceptwhole process mustguided by adding value
= broadfinancial/monetary value BUT also adding value in terms
of place,
time & form utilities
+ valueutilitiesG&S = enhanced need-satisfiers demand $
value Act valuequestion & eliminate
Consumers = make choices satisfaction
o Limited resourcesfund need-satisfiers (G&S) prioritise
o Scarcity = resources of need-satisfiers scarce in relation
requirements &
demand said resources
Scarcity eco eco life = based relative scarcity
need-satisfying
products in relationaggregate demand
Resources always availableplace; time; quantity; quality
(place/time/form utilities)
o Selection problemWHICH needs satisfyalsoalternativeselect
o Supply side not a scarcity problem butinabilityutilise
available resources
Unemployment rates
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Info internet available imposs consider all info overload
oversupply problem
Take into accountswitchscarcity of resourcesabundancebus
management
o Law of supply & demand= valid & serious
consideration
o Resource abundance = bargaining power (supply side) &
influence (demand
side) Eco sensible management approach = discriminating
selection criteria choose only
elements+ most valueoperations of bus
Consumers = offer satisfy needs prov stimulusbus ventures
o Bus must ID needs specific G&Smake availableprospective
clients
= foundation of bus
1.4 The Free Market System
Systems approach1950s
o
Emphasise factbus consists var indep but interrelated
componentsisolated& studied but form integrated whole working
tog
o Systems sub- sub-systems
o Main focus = realise no component exist isolation must be
considered
context/environment
Managing 1 component = successful implications other
components
considered
Bus environmentshaped by existing eco system
Collective set interrelated conditions in which economy of
country works
Issues = aspects ownership & allocationprod factors;
decisions
prod & consumptionneed-satisfiers Free market system
variants in operationsouthern African countries
o Eco system = capitalism
o Bus management = free market system
o Market forces = freely able determine answers basic questions
in order guide
bus actwhat to produce; who produces; whom for
o No central control body determine characteristics develop
spontaneously over
time
Characteristics reveal fundamental eco philosophy particular
political
powers of time
Enough power regulate certain aspects economies adjust
certain characteristics BUT fundamental characteristics (core
value) = remain intact
o Alternativesocialism & communism
o None pureexist as hybrids
Outstanding characteristic = recognitionindiv & their eco
rights = basis of system
o Private ownershipprod factors
o Exercise initiative & pursue profit motive
o Freedom of choice var decision-making areas
o Market forces = determinantallocationprod factors
o Govt interference mineco system
Pvt ownershipprod factors (wealth in var forms) = allowed
o
Factors earn regular income & appreciate in value Personal
advantage gainedpossessioneco assets possibilityneed
satisfaction
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o Higher level need satisfaction = motivationexercise
initiative
o Adam Smith: The Invisible Hand urges indivexercise
initiative
Personal advantages & profit motive collectively help ppl
examine opp
levels need satisfaction
Achievementpersonal benefits = underlying driving force seek
best only if freedom
of choice existso Forms choose career, job, spend $
o limitless / w/out boundaries$ limit etc.
o Appreciationconsider situationno freedom
Framework needs & needs satisfaction offers var bus opp prov
need-satisfiers
o w/in framework indiv freedom what buy/offer on market main
objectivesbus org (sequential):
Profitability (rate of profit as return/yield on investment, not
level)
Growth (comparedprev yr)
Market share (relative position relationcompetitors)
Social responsibility (as public entity)
Employee well-being (recognising human nature of prod factor)
Product quality & service level (rep combo inherent &
associated qualities
reqsatisfy needs)
Bus main driver = make reasonable profit
o Reasonable incorp factors amount risk involved bus process (
risk =
expected return); usage prod factors (ea needs fair compensation
considering
var aspects); relative balance b/tw supply & demand
(reflecting current market
condition)
o Free market function wellexcessive profitability prevented
Bus purpose = make reasonable profitconsidering factors
o Risksprov need-satisfiers
o
Capital reqcreate infrastructure & production capacity If
profitable attract potential suppliers same need-satisfiers (due
freedom of bus
act)
o profitability = attractive
o suppliers = supply $ law of demand & supply
Successful busexpect competition
o Tryoutperformdifferentiating prod
o Competitive advantagecreate belief G&S offer value $
satisfying needs
Responsible freedom = indiv freedom exercised w/ caution &
accountability
o Make decisions & face consequences
o Decisions taken w/in frameworkwhat available & carefully
weigh options
Want certain G&S can only buy when available
Availabledecidebuy @ given time & price
o Collective freedomsbuyers & sellers determine what G&S
sold what prod
o Ruling prices on market = determinedfree workingmarket forces
= imp
o Market forces = prime determining factorallocationprod
factors
o interference in market mechanism should be restricted max
lead
disturbanceautomatic allocation process
Belief free market system (unrestricted) working market forces
lead widest
benefits for all
o w/in frameworkfree market reqgovt interference = min
o moment balance eco system = disturbed regulations &
allocation of prod
factors determinedforces other than market forces domino effecto
1 intervention = imbalancereq further interventioncounter
effects
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Govt role = create eco environment eco subjects participate in
system supply
sourcesneed-satisfying products
o Pvt initiative cannot/will not supply necessary govt enter eco
system (supplier)
o SA govt philosophyprivatisation @ appropriate time
Prov underlying principlesauto-regulatory features of system
Disadvantageswidespread unemployment = social costs = unstable
working conditions& labour unrest
1.5 Need Satisfaction in the Free Market System
3 distinct classes work accordingsame principles bus
management
o Application = diffbut core aspects remain same
1.5.1 Business organisations
Largest class
Entrepreneurs & bus ppl ID opp make $ in market observing
unfulfilled demands
G&Sfulfilling
o Est. bus & prov need-satisfiers
o Operate w/in existing bus environment & free market system
must adapt
forces @work in market
o Indiv firms = little/no influencemarket/participants
Market forces = shapedconsumer wishes
Bus meet consumers needs remain in business
Real/pureprofit-driven
Initiativeutilise oppown well-being & advantage + prov
need-satisfiers
1.5.2 Government organisations
Limited interference = feature free market system
Govt must restrict interventioncreate NPOscollective
benefits
o Protection, defence, justice, education, health-care
services
o Typically administeredgovt dept
o Use bus principles but form part civil service operate more
public admin
principles Interventionsupplying need-satisfierspvt initiative
unable/unwillingprov
o Corporations
o Follow same underlying principles bus org but profit motive =
strong
o Earlierheavily subsidisedtaxpayer
o Trendprofessional managers use bus principles avoid operating
@loss
1.5.3 Non-profit-seeking organisations
Imp roleeco life
Provcertain community needs not suppliedgovt/govt
org/profit-seeking bus Sport/cultural/religious org; social
welfare/responsibility org; associations not for gain
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Prov necessary G&S
Do not seek profit
Main driving force = prov G&SID as field of operations
Existence depown acquisitionfunds
o Donations
o
Member contributionso Prov G&S @ subsidised rate
o Applygovt subsidy (rare) butreduced & fall away soon
o National lottery proceeds
1.6 The Organisation as a System with Value-Adding Elements
All players interlinked economy & society
o No one completely indep in/directlysuppliers/customers
o bus = shaped by & shape context w/in which operate
Systems approach assumes all org = comprise interdependent parts
fully understood w/reference to whole
o Org = internal system w/ var act (functions)linked
o External linkother role-players
o Seriesinputs from environmentinternal processeseventual
outputs
Survival depability+ value processes
1.6.1 The role of inputs in the process of adding value
Resources = bus use pursue ends
o
Inputsconvertoutputsdeliver to customers
o 3 types
Financialcan take form of/can be readily convertedcash
Operatingfacilitiesallow ppldo jobs
Buildings, office equipment, raw mat, machinery ...
Humanppl + efforts/skills/knowledge/insightscontributesuccess
of
bus
o Fundamental role = + value bus
+ valueworkraw matfinished G&S
Diff b/tw market value output & costinputs
Calculatemust consider 3 areas cost
o
Human resources
o Raw mat
o Operating costs (excl raw mat)
1st2 = easyaccounts record date
3rd= complex
o Value land/building/plant/machinery/stocks/works in
process needassessment
o Replacement value operating resources & cost of
capital
allowelementriskcalculated
Imp strategic concept
No value + = no long-term reason
exist
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o ve + value dont recover full input costs danger of
collapse
o Sales (operating costs + wages & salaries + raw
materials
valueoutputs delivered customers
o Sales
costsinputs into buso Wages/salaries/capital/mat costs
Org w/ 1 prod analyse value + ea indiv prod
o Some may subsidise others value +
o Not all perform equally likely
use all available resources efficiently & effectively
Ensurepotential value of outputs = maximised fully meet customer
needs
o Achieve sees customersneeds as own objectives; enables
customers easily +
more value/true value for $
1.6.2 Processes for adding value
Functional processes combo transform inputs outputs prov value
customers
previously existed
o Actionsmake G&S usefulcustomers
3 broad categories
G&S = unique & diff
G&S = $
Org able respond quicklyspecific/distinct customer needs
New/modified G&S
Customer-friendly touchesG&S already prov
G&S designdurablility/reliability/usability/maintenance ease
$ policyesp combo w/ other sources value
$endure inconvenience obtain
o $ sensitive
$ = quality also additional service
o Quality sensitive
Timingprov G&S @ specific time
1.6.3 Outputs as the result of the value adding process
Must be viewedperspective all interested parties
o Role-player = person/groupsome claim/expectationbus should
operate
Primary = bus affects/interacts w/ most dir
Owners
Customers
Employees
Secondary = affects indire/limited way
Suppliers
Trade unions
Community
Environment Industry in which operates
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Other bus
Var levels govt
Special interest groups
Media
Society
o
+ valuedistribrole players Ownersfin returns
Employeessalaries
Govttaxes
Customerssupply qualityG&S
Supplierspayment
1.7 Adding Competitive Value
Supply potential = grownexceed demandmajorityindustries
o
More busprov specific need-satisfying G&S than
customerspurchase Competitive advantage = necessarysurvival
o Org = ablesatisfy customers more effectively competitors
+ value for customersdifferentiate org from competitors
o Examine all aspectsorg
Value/supply chain
Value chainbus actlink tog develop value bus
Supply chain broader group value generation org
supply/distrib/buy from ea
1.7.1 Adding competitive value: the value chain
Michael PortertoolID wayscreating customer value
o = systematic meansexamining all orgs functional act &
effectiveness creating
customer value
Functional activities = diffdiff types bus & relative imp =
diff
o Ea actfurther broken downmore detailed processes
Value chain analysis ID value + w/ ea act process prov G&S
compare buss
performance w/ competitors
o Help management make decisions & follow up w/ effective
action prov value
Obtainedoverall value + not superior value w/ ea act
o
Superior in 1 & behind in another, may still be superior in
end
Draw attentionstrengths & weaknesses
Primary act = line act involved physical creation; marketing
& transferbuyer; after-
sales support
Support = staff/overhead assist bus as a whole prov
infrastructure/inputs allow
primary inputstake place
Value chain incl profit margin mark-up above cost prov firms
value-adding act = part
of pricebuyer
o Should exceed cost generate return
o All act in value chain = subject influences emanating ext bus
environment
+ve/-ve
Primary
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o Procurement & inbound logistics
Sourcing & receiving goods suppliers; storing until req
prod;
handling/transporting w/in org
o Production/operations
Splitseparate dept (sometimes)
Service bus technical core/backstage area service support act =
carriedout
o Outbound logistics
Distric final G&Scustomer; transport; warehousing
Multi-prod busincl selecting & wrapping
Service busreconfigured
o Marketing & sales
Analyses customer needs & brings attentioncustomerswhat
offered
o Customer service
Before/after final delivery = need arrange
financing/training/installation/after-sales service
Ea + valueown unique wayo Ensureprod costs; faster/cheaper
outbound delivery; standards service
o Prov areascompetitive advantageorg
Support
o Fin management
All act/costs/assets relating acquisition/utilisation/control$
org req
finance act
o HR management
Act/costs/assets relating
recruitment/hiring/training/development/compensation all
types
personal & labour relations act
o
Communication Act/costs/assets relatingcomm. w/ all int/ext
publics of org
o Info management & e-bus
Appall management principles managing e-business
o All + value more difficultlink w/ particular part of org
Margin indicate added value: diff b/tw total value &
collective cost performing value
activities
o enables concentration main areas + values in org & make
broad
comparisons w/ competitors
1.7.2 Adding competitive value: the supply chain
Org = part wider system adding value involves other role-players
suppliers &
distributors
Wider perspective+ value = supply chain approach
Supply chain encompasses all act associated w/ moving goods raw
mat stageend user
o Incl int processes + ext processes
Premise value + not only int from supplierdistributor
Philip Kotler1990sno longer indiv firmscompete w/ eawhole
distrib systems
Contrib.every link in chain = evaluated = full value +
o Purpose = ID operations/features+ less perceived value than
cost / not valued
by orgconsider elimination All partys perspective
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Also ID features + more value competitive advantage
1.7.2.1 Create a strong supply chain
Pastmanufacturers fought ea dominance ea strong enough take on
competition
on own
o
Survival depHOW performedrelationpeers
Modernconcerted effort needed
Competitive dominance = achievedeffortsentire chain
Org must have special/unique linkages b/tw supply chain
partners
o Joint ventures/ alliances/partnershipsrelydiff membersbring
expertise
1.7.2.2 Incorporate technology
Tech = impsupply chain enabler
Systems
manufacturing/warehousing/transportation enable integrate
operations
& supply chain
Satellite comm. tech track progress sourceend user
Advanced planning & scheduling systems match prod more
closely w/ actual customer
demands
Use of info tech in supply chain endow network raw mat
suppliers, factories,
warehouses, warehouses, distribution centres, delivery vehicles
& point-of-sale w/
computerised intel
o Conduct bus w/ latest & best info from everyone else
G&S move quickly & @ smallest costsupply & demand
fall into ever more perfect balance
enhance cash-flow situation
1.7.2.3 Shift focus to customer and the demand chain
Initial focussupply chain management = components
o Derived from historical strengths, resources & best
instincts
Evolvedmore collaborative relationship retailer &
manufacturer
o retail-friendly product adaptationspackaging
o Traditional = linearleftright progressionconsumer passive @
end
Supplydemanddue competition & era of compressionshrinking
world pop
o consumers buy G&S
o
Consumer behaviour changing time shopping focus other ways
spendtime; new techinternet shopping satisfy needs
have powerdecide which supply chains support/abandon
New = consumer = all-powerful
o Org revolutionary changes org structure & supply chain
relationships ie.
shift focus supplydemand
DEMAND CHAIN
Demand chainbeyond physical distrib boundaries supply chain
management
o Presents channel members w/ one mission prov consumers w/ more
value
competing chains
o Customer drives supply change process
o
Non-linear concept circular process starts consumers minds ends
w/market
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o Encompasses all players todays demand chains roles &
responsibilities =
changed
o G&S dont necessarily originate from manufacturers
developed by any player in
chain based consumer research & info gathered any entity
& shared w/ all
partners
1.8 Conclusion
All org = systemsinputs transformedoutputs
o Org system influences & is influenced by environment
bigger system
operates in
Survivalorg must + value valueoutput / costsinput
o competive environment
Succeedcompetitive advantage
Investigate all aspectsbusID areas+ value
Value chainfocusesorg int act Supply chain focuses also
processes performed role player
extorg
Consumer circumstances = changed recently core focus bus =
shifted
supplydemand
o Past = org push G&S on marketassumed could sell
o Now = customers dictate what
supply chain evolved demand chain players perform diff roles
&
have diff responsibilities
Chapter 2: Environmental Analysis
2.1 Introduction
Value chain suggests bus + value perform range act
primary/supportive
o Largely controllableindiv org
o Outside orgenvironment = uncontrollableindiv org
org must continually monitor events in environment remain
competitive
Org & its environment isolated/indep/mutually exclusive
entities Rather influence & dep eaexistence
Mutual dep arises society dep org satisfy needs
G&S/employment
Converselybus depenvironmentresources
Bus = creation of its environment
o Assets/income/problems/opp/survival dep environment
environment management = continually forced adjust
competitive strategy
SA 1990s structural
eco/tech/institutional/social/political/physical/international
environments fasterusual
o
Market environment = also Dramatic general standardlivingesp
black pop
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competition b/tw org
consumerism
= dynamic adaptation req inputorg than usual
Org influences environment
continual interaction b/tw org & environment
o
Determines how org = structures & how functions Management
must guard over-emphasising/disregarding certain environmental
influences
o = imbalance
o Bus depenvironmentsurvivalbut environment = often unstable
o Imp environmental factors org faced w/ choice
adjust/stagnate/cease
Stagnation/cessation = preventedcontinual
/adaptation/innovation
Dynamic environmentneed timeously/effectively
(current/anticipated)
o Thorough investigation/scanningenvironment = imp
Avert threats
Exploit opp
2.2 The Environment of the Organisation in Perspective
Environment bus operates in = rapidly req thorough environmental
awareness +
adaptabilitymanagement
SA democratisation normalised international relations also
exposed SA borderless
worldcompete
o Globalisationworld w/out barriersnew affects on busw/draw
investments
o urbanisation/poverty; immigrants; crime; law & order
affect
environment SA ppl do bus & make decisionsinvestments
Strategic planningimpconsider interaction b/tw org &
environmento long-term planning = geared towards future planning =
systematic/integrated
# environmental factors influence org = new approach reqfuture
events
o Research methods freq need development
o Org structures/management aidsrevised
o Stay aheadchallenges
Bus environment incl all int/ext variables exert influence bus
op
o Bus uses inputs environment delivers outputs (G&S) need
in
environment
o Management task effective/efficient w/out considering ext
factors
int environment = decision-making/micro-environment
o
incl strategy; bus functions; management tasks; goal setting;
resource abilities;interest group expectationsconsidered
o managementmake decisions relatingorgs strengths &
weaknesses
o Strength = unique capabilityparticular orggains competitive
advantage
o Weakness = deficiencyunaddressed = -ve impact orgs
posmarket
o Management control elements micro use strength pos /
rectify
weaknesses competitive capacity
Market/task environment = immediately outside org
o Lies b/tw micro & macro influenced by both & buffer
b/tw
Macro-environment incl all uncontrollable variables &
implicationsmanagement
o management strategic decisions w/ regard
eco/social/tech/phys/political/institutional/international
environments based macro-environment
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o give riseopp/threats
o Opportunity = favourable condition ext environment can be
exploited
benefit of org deliberate actions management
o Threats = unfavourable conditionext environmentseriously harm
orgs market
pos
o
Org managementmust = aware international eventsesp
eco/social/politicaldevelopments
Bus environment characterised
o Interrelatednessenvironmental factors
1 ext factors= micro/int factors
1 ext factorsother ext environmental variables
o instability
Consequencesinterdependence environment = instability &
General rate in environment acceleratesenvironmental fluctuation
=
some industriesothers
o Environmental uncertainty
Function amount info environmental variables & confidence
management possesses such info
o Complexityenvironment
Indicates # ext variables bus org must react + variations in
variables
themselves
2.3 The International Environment
International bus act referprofit-orientated act across national
norders
o Op w/in country drawing resources from/selling to another
country affected
inter/national level
SA1990s = key playerinternational community
o
sanctions/boycottso Org = exposed# bus opp + intensive
international competition
o Market globalisationspecific abilities/insight/knowledge = req
success
o Many advantagesesp expertise reqexploit natural mineral
resources
o Export potentialraw mat/agri prod/wine/manufactured goods =
unltd
Market must be analysed & investigated
Generally applied methods
contracting/transportation/marketing/financing/guaranteeing
enable
efficient competitioninternational market
Opening international borders & international trade
agreementsnow accompanied
more than previously
o
SA bus ppl tariff/protective measures against foreign
competitorspast local bus must = cost efficient & productive
enable meet
competitionforeign mass prod & economies of scale
diff b/tw SA & trading partners req intensive
research/analysis
o Social; cultural; eco; legislative
o If notforgo proit
Local org abreast latest international data inflation; exchange
rates; recession;
shortagesnatural resources; gold $; political events
o Success/failure depknowledgediff & management practices
followed
o Professional manager conversant nature international
management &
trainedrecognise threats & convertopp
Countrys ambition = totally self-sufficient & eco indep
o Not viable strive max level eco indep poss
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o Ambition & challenges stimulate entrepreneurship,
intrapreneurship & spirit of org
2.4 The Macro Business Environment
Incl all ext influencesbearing on bus BUT dont fall w/in dir
sphere influence Emphasis fallsuncontrollable macro-variables bring
about & implicationsbus
Remain abreastenvironmental predict environmental changes =
difficult
o certain = unpredictablespeed take place; lack of info
Primary characteristics ext environment = originate externally;
largely unpredictable;
constantly
o All determining factororgs survival
Uncertaintyfutureneed developenvironmental scenarios
o Note world & local scenarios
o Rules of the game w/ regard eco/social/political
considerations = key factors
Development scenarios
o
Also tech aspects consideration Interaction b/tw
macro-environmental variables & strategy of org
o Community (social)creates powers institutional environment
Democratic countrydetermines what kind govt wants
Determinants = culture/values/traditions/customs/way of life
o Authorities influence communitylegislation &
regulations
authoritys influence = influencepreservation &
expansionculture
of social environment
Become & remain well-informed = difficult
2.4.1 The economic environment
Forms central focus ptmacro-environment
Influence ALL other environments
o In turninfluenced by
o Resultinteraction = continually macro-environment
Complicates decision-making
Eco factors inflation/recession/bus cycle influence demand
G&S compel
consumerreassess priorities consumer G&S
Ea significant eco req appropriate reaction from bus
Management responsibility
attempt
determine intensity
bus cycle
specificindustry & forecast poss cycle economy@least next
yr
2.4.1.1 Inflation
= continual risegeneral price level
o Control = difficult $ most commodities = continually
Intro uncertaintydecision-making
Price stability = imp parteco landscape
2 forms
o
Demand inflation Demand supplyG&S $
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o Cost-push inflation
Prod costsG&S = continually input costs $
Org must counteract influence max poss
Under conditions high inflation emphasis placed management
working capital
items
o
Debtors/stock/creditorso Traditionallyliquidity = financially
soundnot in double-figure inflation
Better recover $ debtors owe quickly; stock levels poss; pay
creditorspostpone max
2.4.1.2 The business cycle
Involves patternexpansion & contractioneco act around
long-term growth tendency
Western countries affected inflation & recession follow ea
quick succession & =
interruptedshort periods eco growth
Bus & consumer make value adjustments during various phases
bus cycle adapt emerging eco realities
Cycle peakeco act = high relationgeneral tend
Troughlowest pt eco act = reached
Practical measure = link cyclebehaviourreal gross domestic
product
o GDPprov combo indicatorprevailing eco climate of economy
Exogenous factors/eco act
o Wars/drought/natural disaster/inventions/drastic consumer
demand
o Result = vol. prod act & bank credit; interest rate
patterns; order &
installationcapital equipment; $ /
o Spark chain reaction w/in environment
Upswing phase (eco growth) = imp
Inflation fought w/ monetary & fiscal policyencourage
job-creating eco growth
Interest rates = est control inflation & influence factors
i.e. tendency save;
applicationsavings; employment; balancepayments; allocationrare
resources
2.4.1.3 Interest Rates
Interest = price paid for money
Levelinterest rates = largely determineddemand for & supply
of funds
Reserve Bank uses
influence $ supply Repo rate = cost @ which banks borrow $
Reserve Bank
Prime rate = floor price @which banks make loans/overdraft
facilities available
o Personal risk leads rateindiv & org
Current & expected = imp
o Marked influencecostcapital; expected min return capital
o High interest rates = implications
Usedebt-financing = expensive &places liquidity under
pressure
Dissuade consumerbuy durable G&S
Buy HPhigh interest rates discourages
Also appliesinterestoverdrawn bank accounts
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2.4.1.4 Provision of employment
Unemployment = problem
o Spread beyond unskilled labour force
o
40% = social implications
o Crime spend more disposable income securityhome-owners &
bus
Curb povertyconsider unemployment & pop growth %
o Need eco growthcounter
o Unemployment & pop growth economy = unable absorb new
entrants
labour market
o Illegal immigrants aggravate
2.4.1.5 Productivity & profitability
Not synonymous but strong relationship
o Productivity profit
o productivity enables org compete bettermarket
Labour unit costSA = 1 highest cont deteriorate = serious
consequences economy &
esp bus= difficult compete world scale based on price
o Causes
Trade union conduct
Low work ethic
Affirmative action
Need clear & fair policy
SA = wage psychosiso No +ve correlation b/tw wages &
productivity
o Highest disparity b/tw labour productivity & wages
labour-unit cost & inflation
2.4.1.6 The influence of trade unions
Act force many org close
o lossemployment opp
impmanagement kendeal w/ labour disputes
SAcharacterisedintimidation & violence
Govt must recognise seriousness & restore ordero /
economysuffer
2.4.2 The technological environment
recent bus environment = from tech advances & innovation
o Research & development prov source
o Result = new G&S/processes/methods/management
approaches
Interaction b/tw tech & other environmental factors =
continual tendency innovation
all spheres bus community
o
Scientific research prod & systematises new knowledgeapp in
prac new G&S =developed
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Eco environment largely determines directiontech innovation
Entrepreneurial ability determines how much tech innovation =
absorbed
Tech innovationaffects other environmental variables
o # new inventions influences eco growth rate
o Social new G&Srevolutionise ppls lives
o
Conversely variables influence tech processtech innovation =
repeatedo Dramatic tempo
Small org = difficulty accessibility cost/lack
knowledge/experience
new tech
Large org = favourable pos become part tech development
absorb
& apply easily $ & physical capacity
All new facettech & innovation creates
opp/threatsenvironment
o Television
Fronts
o Trading
Electronic comm. developmentsfacebus
Create new bus opp/capabilities
E-commerce/e-trading/e-marketing/e-supply etc.
Create new bus
Comm. services/vehicle tracking/info supply/GPS
o Labour-saving machinery/equipment/products
New G&Sspecific needsavailable now
Research & development depts. continually pursue
improvement
existing & developmentnew G&S
o Administrative systems & equipment
Electronic & automated apparatus & systems = intro new
area
competition
Banking/retailing/tourism/recreation Entrepreneurs forced
awareness info credit
card/computer-backed services
Primarily focusedconvenience/servicecustomer
o Increased productivity
= most outstanding result
Demands/increases turnover
Creates intense competition
Reduce employment opp
2.4.3 The social environment
Org = creation
Orgs role dynamic environment = continually adapt circumstances
& meet
expectations
Some overlappingelements social & eco environments
Org = centre occurringsocial environment
o Contrib.social
o Also influenced by
o awareness culture; needs; preferences; purchasing patterns;
nationality;
religion; geographical locationconsumers = imp
Consumer = membercertain groupunique characteristics
o Lang; religion; habits; culture; traditions
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o Culturegroups way of life influences indiv way of life
consumption explained only eco terms also as function
culture
& social
o Management full awareness social compositionconsumers &
labour force
est. advantageemployee & employer
2.4.3.1 Distribution of income
SA = many sub-cultures ea reacts diff
o Result of heterogeneous pop & geographical vastness
income levels & literacyblack pop = influencemarket
o black consumer market & buying power = impmany
branchesindustry
Management must est. where biggest buying power = located
o Ensure market = exploited & served w/ high-quality
G&S
2.4.3.2 Consumerism and employees interests
Primary responsibility orgconsumer = protection but demands
society social
responsibilityorgs partculminate consumerism
o Link b/tw org & social environment
Social responsibility previously ltdsocial/welfare services
o Social well-beingworkers
o No attentionsocio-eco/cultural fateindiv
Modern
o Totalityemployees existence/experience studied
o
Expectationsentire community demand attention
o Neglect = criticism community/consumer groups/govt
2.4.3.3 Participation of employees and the community (social
involvement)
New labour community characterisedprincipleslabour democracy
o Worker = saydesign/execution/evaluationwork
o Employerprov + educational servicesliteracy programs
o Other areas dir social involvement
Transport; housing; fin assistance; clothing; medical
services;recreational/cultural facilities; general counselling
(perceived w/ regards demands made on org) = indication trad org
role w/in
community = questioned
o Expected involvement process solving fundamental issues
lack
housing/electricity/medical care w/in community
lead standard of living & encourage confidence
abilities&
advantagespvt capitalist org
2.4.3.4 Different languages
Comm. w/ target marketunderstandable langeffortinform consumers
about G&S
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o = challenging task multi-lang
o Consider
Most widely spoken
Prevalence by province
2ndlang ability
Home lang Ea orgformulate policy regarding service prominent
lang groups market
o w/out discriminationother
o responsible manner
marketing comm.adjustedcaterpreferencesdiff market segments
2.4.3.5 Level of education
levels productivity/skillSA labour force = result level
educationbroader society
o Makes difficultdevelop sophisticated industrial & work
ethic
Education = imp key future socio-eco developmento School
o Teachingvalues & eco systems
Toolswealth-creating bus formed
1st world well-developed work ethic generally enhances
competitive pos those
economies
SA employers = special effortemployee training &
developmentskills & value systems
2.4.3.6 The threat of HIV/Aids
imp factorprocessstrategy formulation
Africa = speculationimplications
regional impact = W Cape; KwaZulu-Natal; Gauteng
# casesmotherchild transmission =
Window period = danger
2/3 19-45 age group = imp part economically active pop
# infection 2-3%/yr
o 26% 2002
o 31% 2010
o Some workforces = 40% incidences
Management
urgency
develop personnel policy
dealing w/ Aids workplaceo Preparein/dir consequences
o Costs
Loss trained manpower
Costsrecruitment/training/inductionreplacement
Loss labour productivity
Loss efficiencyloss skills/experience
In/dir costs health care
Interruptionsprod process
costsemployee benefits
consumer base
disposable income
healthcare costs
influence
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Handlingincorporatedstrategic planning
o Policy formulated timeously & incorporatedexisting health
& security policies
2.4.3.7 Population growth
Size market/labour force & unemployment = closely related
pop
Org = imp partemployee educationhealthy family planning
SA pop rate2.4%social misery
2.4.3.8 Urbanisation
Along w/ expected pop far-reaching social
implications/consequences
influence economy
o Purchasing power concentratedurban areas
o
Entrepreneursnote trend w/ regardsmarkets/labour force/new bus
opp
2.4.4 The physical environment
Availability/conservation/improvement/utilisation ltd natural
resources country
possesses
Bus obtains basic raw matphys environmentmarket combo w/ other
prod factors
o Shortage influences supply G&S; contrib. $ inflation
o Consideration sophisticated/diff prod methods; reorientation
marketing
thinkingo Clear policyresponsibilityjudicious
utilisation/conservation
Factordetermines eco potential
o Availabilitysufficient suitable/qualified
personnel/entrepreneurs
SA shortage skilled labourmass exodus
Periods eco labour force unable meet total demand skilled
manpower result of annual addition skilled workers labour market
=
insufficient
o productivity by trainingalleviate
recent years
o Tech training =
labour force structure further unbalanced
2.4.5 The political environment
Complicated variables difficultcontrol/predict
Management acquaint w/ govt policy acceptance free market system
key eco act
o Informedgeneral eco policy & specific policiesunderlying
eco issues
o Specific govt policy standpts implemented by govt
ordinances
Monopolistic laws
Environmental conservation
Employment policies Taxation laws
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Most unpredictable environment complexity; diff ways influences
management
environment
o most difficultscan
SA 1994reorganisationsignificantly influenced org behaviour
Political stability imp eco ; developmentmanagement in bus
act
Essential incl political options & effect on economyany
scenario SA political decision-making effect economy (whole/org)
form part all orgs strategy
formulation
o Issues
Political v violent soln
Multiparty political system
Devolutionpowerdiff regions
Ltd govt interventionregional matters
Disciplined monetary/fiscal policy
Free market system
Fair income tax structure
High eco ; rate inflation Job opp creation; unemployment
disposable income
productivity/work ethic
Limit HIV infection
Pop control
environmental awareness
crime/violence
Indep/fair judicial system
trend urbanisation
Orderly housing; clearout informal settlements
Healthy education system (primary/secondary/tertiary)
Infrastructure maintenance
Realistic system primary/advanced healthcare
Absence govt intimidation/corruption
Press freedom/indep broadcasting industry
Downscale govt size
Govt role = create bus climateflourish/develop
o Policyfactorsfoster/hinder
2.4.6 The institutional environment
Govt/semi-govt/institutions org involved w/ in/dir
Association protect org/industry branches interests
o SAFTO
o SACOB
o NAAMSA
o Legal advice
o Chamber of Mines
MembershipID/utilise opp/threatsmacro-environment;
influencedegree
o Management utilise expertise esp analysing macro
o Associations continually compile projections/reports/research
generate valuable
infostrategic decision-making
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2.5 The Market Environment
Interaction w/ org determines competitive ability
Surrounds orglink/buffermacroinfluenced/influences
Imp environmental variables varies influence on org through
market
Management consumer needs; ID threats/opp convert threats;
develop strategies
counteract competition
Uncontrollable but certain components influenced by org
Investigate current
Predict variables nature future
Consistsmarket w/ all forces/influences inherent capitalist
order
Components w/in analysed
o Interest groups
Groups/institutions w/ interest existence/futureorg
Diff emphasis
orgs act Lack power of govt agenciescan exert influencemedia
o Consumers
effect org performancepurchasing
Org offervalue for $
Primary responsibilitymarketing dept
Comprehensive/continual market research
needs/motives/behaviour
needs affect threats/opp
o Competition
Strategiesunique advantage
Continually adjusted
ensure Req sound competitive analysis
o Suppliers
Close working relationships NB
Affect performance
o Labour force
Dir effect
Mission/structure/system processes = major determinants
employee
capability level
Unions
o Strategic alliances
Joint ventures Obtain expertise they lack
Management trend awareness utilise opp & counteract
threats
o Knowledge/info/market research
o challengespredict future trendsformulate marketing
strategy
2.6 The Micro-Environment
Decision-making environment
Org goals + functional management + entrepreneurial ability +
interest groups +...+
Internal functioningmanagement make decisions
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2.6.1 The functional division of the organisation
All org functions
o Complement
o Coherent unit isolationserve as whole
o Cooperation total interdependency
o Stake in entrepreneurial ability capital; raw mat; labour;
management expertise
2.6.2 Entrepreneurial ability
Potential of resources
o Resources = raw mat; capital; labour; equipment; fixed assets;
land; expertise
o Primary impanalysis of bus potential
Potential availabilitymeans of production
Poss creative utilisation
Potential reflectedfunctional act Difficult determine/evaluate
inadequate knowledge relevant resources/basic
evaluation techniques (determine capacity)
o Resources
Capital
Determines entrepreneurial ability capital = ltd options
Funds = vitalcontinued functioning
Fin management attuned needs & sources ensure right type
capital available @ cost
o Goals = realistic/attainablesound fin planning
Labour & expertise
Acquisition/retention/utilisation adequate & suitable
personnel handle act efficiently
HR planning/task analysisremain informed total personnel req
w/out comparable labour advantage competitive edge
Raw mat
Well informed consumer needs market research
Purchasing function
o Certainneedsright quantity/quality stocked
o Delaysstock shortage avoided NB
Management skill
Quality = imp assetnecessity
w/out achieve success
2.6.3 Interest Groups
All groups/institutions w/ interest org continued existence
o In/dir interest
o Contrib.achieving primary goal
Org success depattitude & relationship
Emphasis/influence differ
Org control allcan influence/dir control
Shareholders/employees/public/authorities/competitors/clients/suppliers
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2.7 Environmental Analysis & Scenario Development
essentialformulate corporate strategy
o Management deliberate decision adaptcurrent/future
market/micro
Timeous/eco/effective manner
Step-by-step approach
ORG strategyo Functional strategies developed coordinated
basis
Environmental exploration = aware ext powers/opp/threats; int
strengths/weaknesses
o Developed by orgcater unique purposes
future uncertainty
2.7.1 Sources of information for scenario development
Gen media
Research reports (by/for org)
Pvt libraries/databanks Eco data sources (SARB)
SARB Quarterly bulletin
National Productivity Institute
HSRC/Development Bank of SA
Frame of reference top managements disposal
2.7.2 The process of scenario development
Select int/ext factors scenarios developed for
o
Important influence on org
Select critical indicatorsea factor
Determine indicator nature/occurrence/trend in past
o Trend Impact Analysis (TIA) trend behaviour reasons NB
Verify potential future trends
o Suppositions
Forecast/extrapolate idea
Write scenario
Use scenariosformulate strategy
SA context NB scenarios
o Constitutional
o Eco
o Social
o Cultural
o Political
General scenariosdevelop further scenarios & formulate
internal strategies
What if?
o # ext factors/influences/elements
analysedassumptions/forecasts/predictions
Forecasts
o
Qualitative info
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Long-term
o Quantitative
statistical info
Short-term
Simple regression analysis
Correlation analysiso Econometric models; weighted ave; time
series extrapolation; delayed
accompanying & leading series; input-output analysis
o Simulation; decision-tree
SWOTapplication of analysis
o Strengths/weaknesses/opportunities/threats
o Int/ext environment
o Logical framework of org act obtained
Convert threatsopp & weaknessesstrengths
2.8 The Result of Environmental Scanning and Scenario
Development
Purpose = prov basis strategy formulationorg act
Strategic decisions
o Maintenance strategy
Cont route taken
Maintain current profit pos
o Growth strategy
Act extension
Focus 1 G&S/market/tech
Market/G&S development w/ small
Innovation (new) Vert/horizontal integration
Joint venture
Multi-divisional diversification
Conglomerate diversification
o Curtailing strategy
Reduction/turnaround
Disinvestments (w/draw)
Liquidation (partial/total)
Reorganisation
o Combo strategy
Combo serve multi-marketso Specific activity strategy
Concerning specific aspects formulated
Fin/investment/personnel/prod/purchases
Before final strategy chosendis/advantages analysed
o Req skills/resources needed
2.9 Conclusion
Continuous interaction b/tw org & environment
o Determines organisational structure & bus functioning
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Awareness int/ext forces; S/W/O/T
o Environmental exploration
o demandsmanagement expertise
static circumstances non-existent
o Provision & uncertainty
Dynamic environmentdemands/challengeso Strategic
managementtimeous adaptation
Environmental scanning corporate strategy formulation
o Decisionsadapt dynamic environment
o Scenario development NB role
Demographic; cultural; eco; social; tech; political environments
NB
HIV/Aids
Org = creationenvironment
o Environment options
Stagnation
Adaptation
Decline preventedcontinual /innovation
Chapter 5: General Management & Leadership
5.1 Introduction
Refers basic management tasks all managers irrespective
level/nature of
specialisation/role in value chain
o
Focus differo Acquire & continuously develop management
skills plan/organise/lead/control
work-related act
o Successful POLC secondary tasks
motivation/comm./decision-making
effectively incorp
Specific focus organisational/departmental/indiv objectives
o Entrepreneurial management behaviourcope w/ new demands
managing bus
5.2 Management Roles & Skills
3 skillso Conceptual
Decision-making
Problem solving
o Human
Communication
o Technical
Administrative
Essential for managers planning/organising/leading/controlling
organisational
resources
Level in org hierarchy dictates right mix skills req
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5.2.1 Conceptual skills
Ability understand abstract ideas make decisions alternatives
selected solve
problems
Emphasises abilityunderstand org/dept/G&S as whole &
grasp interrelationship of parts
Reason for skill = bus competes
continually diversifying global environment
5.2.2 Technical skills
Ability use methods/processes/techniques perform task
Successspecific knowledge/techniques/resourcesperforming
work
Possess technical skills of ppl they manage
Vary
5.2.3 Human skills
Ability work w/ ppl teams
Comm. skills = NB
o effective team member/manager
Participative management practices
o use teamsworkplace
human skills manage workforce diversity; ; employee conflict
Effectivemotivate & evaluate employees work
3 types essentialeffective performance
Relative NB skills vary level
o Human skills
NB low level
Dayday interpersonal problems
o Technical skills
Req ea level
NB middle
Specialised deptspeak w/ authority
o Conceptual skills
levels NB top level
hierarchy involved long-term decisions influence
5.2.4 Management roles
3 categories
o Interpersonal roles
Specific role
Figureheadset ethical guidelines
Leadermotivate employees Liaisonest. alliances b/tw teams
int/ext
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o Informational roles
Specific role
Monitoranalyse int/ext environmental factors
Disseminatorinform employees; feedback
Spokespersoninform stakeholdersperformance
o
Decisional roles Specific role
Entrepreneurinnovation G&S/processes
Disturbance handlercorrective actionunexpected problems
Resource allocatoreffective use
Negotiatorhandle diversity/conflict
Mintzberg (1975) grouped 10 management roles 3 categories
o Perform simultaneously
o Assume ea roleinfluence indiv/group behaviour int/ext
Skills cont developed conduct var roles
5.3 Management Levels
Reflectedbus organisational structure
First; middle; top
5.3.1 Top managers
Top managers = responsible overall direction
o Develop vision & mission; long-term goals; policies;
strategies
#
CEO/president/MD
Timeplanning & leading long-term & future-oriented
focus
o Leadingppl/org
Public corpreportBoard of Directors
Focus areas
o Strategy formulation
o HR management
o
Conflict resolution & negotiationo Globalisation
5.3.2 Middle managers
Large orgfocus
o Coordinating employee act
o Determine G&Sprov
o How manufacture
o How market
Broad/general strategies & policies; action plans1stlevel
managers implement
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Responsible directing & coordinating 1stlevel managers
act
o Est. target dates project completion
o Developing criteria employee performance evaluation
o Resource allocationprojects
o Translate top-level gen goalsspecific operational
plans/schedules/procedures
Dept head/plant manager/marketing manager/operations manager
organisational levels remaining middle-management levels = autonomy
&
responsibility
o pressure
5.3.3 First-level managers
Prod G&S responsibility
Non-managerial employees report & responsible operations
o Basic production/service provision
Supervisors/crew leaders/section heads Forms link b/tw
operationsea dept & rest org
Spend time higher management/ppl other org
Focus specific operational issues & responsibility focus
area only
Develop skillsinteract w/ variety management roles
o ableeffective planning/organising/leading/controlling
enterprise resources
Var management skills & applicable tasks according relevant
levels
o Top
Tasks Planning
Organising
Leading
Skills
Conceptual
Human
o Middle
Tasks
Planning
Organising
Leading Controlling
Skills
Conceptual
Human
Technical
o 1st
Tasks
Leading
Controlling
Skills
Human
Technical
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5.4 Planning & Strategy
Planning = 1stprimary management task conducted by managers
Strategic planning = process developing mission & long-term
objectiveswhole org
Functional planning focuses medium-term objectivesmiddle
level
Operational planning focuses short-term objectives &
determine advance how accomplish Diff b/tw = time frame & level
involved
5.4.1 Types of planning
5.4.1.1 Strategic Planning
Developing vision; mission statement; long-term objectives
o Consider management & employee norms/values/philosophy;
int
strengths/weaknesses; ext opp/threatsbus environment
1-10yrs achieve objective
Reviewed & revised annually
o Always 2yr/5yr/10yr plan
o Allows orgfuture-oriented; adapt bus environment
Top-level develop
o Consult var role-players
Employees
Suppliers
Govt
Shareholders
Communities
Customers
Fin institutions
Media
Strategic process
o Top = long-term plans
o Middle & 1st = medium-term (tactical) & short-term
(operational) accomplish
objectives
Steps
o Develop vision (dream) & mission (reason existence) &
long-term goals
Vision = proactive dreamideal situation in bus environment
Pictureideal orgfuture
over short term
Driving force/passion directing future
Gives employees directionorg strive for
Managers responsibility create vision & ensure all
employees
support
Mission = main objectivedistinguishes org similar in
industry
Mission statementindicate main reasonsexistence
complete/well-defined = difficult create/maintain
competitive
advantage
o
Analyse bus environment (micro/market/macro) SWOT analysis
int
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Opp/threats extmarket/macro bus environment
Factors (int)
G&S
Fin pos
Marketing/sales
Organisational structure Current objectives/strategies
NB analyse primary & secondary act as reflected in value
chain
Factors (ext)
Customers
Suppliers
Competition
Govt
Eco
Social
International environment
o
Set long-term goals Indicate desired results pursuing mission
statement
Longer periodsfiscal year
o Develop strategies (corporate/bus/functional level)
Corporate levelgrandoverall performance
Growth sales size
o Concentration; integration; diversification; mergers;
acquisitions
Stabilityhold/maintain present size; grow slowly
Turn-aroundreverse bus
Combinationfor diff line of org
Bus level
Cost leadership
Differentiation
Focus strategy
Generic strategies allowcreate/maintain competitive
advantage
o 1 bus unit ea has own link up w/ grand @ corporate
level
Functional level
Developedea management function
Aligned w/ bus unit generic & grand strategy success
&
competitive advantage
o
Implement & control most appropriate strategies selected
1st-level responsibility
Effective support system prov top-level = NB successful
implementation
5.4.1.2 Functional Planning
Medium-term planning
Middle-level
Var functional dept realiseobjectives (derivedlong-term)o HR
strategyemployment equity
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o MarketingG&S positioning
o Finprofit management & dividend payments
Sometimes long-term naturenormally designed medium-term
o Tactical strategic
Componentslong-term
5.4.1.3 Operational planning
Short-term objectives
1yr
Middle/1st
level develop
o Day-to-day act
Some org distinguish b/tw strategic/tactical/operationalo
Tactical
Intermediate range b/tw others
Focus functional planning issues
Many combo tactical & operationaldescribe as both tactical
& operational
Organisational structure indicates whether distinction made only
b/tw strategic &
operational (flat); b/tw all 3 (high)
5.4.1.4 Levels of planning
Developing strategies takes place3
levelscorporate/functional/business Corporate
o Planmanaging multiple lines of the bus
o Broad strategies whole org
o Variety indep bus
Bus
o Planmanaging 1 line bus
o Focuses product line/services prov1enterprises
Functional
o Planmanaging 1 functional area bus
5.4.2 The planning process
Starting ptmanagement process
Fundamental elementmanagement
o Predetermines what & how accomplish
Primary management task = formal process selecting
vision/mission/overall goals
o Overall goals further related divisional/departmental/indiv
goals
Incorp selectionappropriate strategies & related
tacticsachieve set goals
Successfulwell-planned resource allocation
Allows management ID opp; anticipate/avoid threats; develop
courses action w/ related
risks involved
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o chance achieving goals
Adapt/innovate create desirable ; productivity; maintain
organisational stability
Achieve future performance long-term growth; profitability;
survival
growing, turbulent environment
w/outunstructured organising; difficult lead employees &
explain direction clearlyo control measures performance appraisal
subjective no standards for
measurement
NB based on factors
o Gives direction
o Allows for use advanced tech
o Ensures all related activities interact effectivelyest.
synergy in practice
o Forces managers look toward future
Identification & formulationobjectives; developmentplans;
choice alternative plans
achieve objectives; implementationselected alternatives
o Implementation operation existing; create new w/ special
purpose; taking
lead; exercising control Steps
o 1. Objectives & setting of objectives
Starting ptmanagement process & guidelinesdeveloping
plans
Particular future state of things to be achievedorg &
employees
Diff kinds diff levels
Missionbroad, long-term proposed directionprofit
o Developed/presented owners & top level perceived
reason existencestrategic planning
Long-term goalsbased on mission
o Strategic planstop level
o
Goals competitive advantage; profitability; productivity;market
leadership
Functional objectives functional managers ea area
o Medium/short-term derivedlong-term
Operational1stlevel
o Short-termday-to-day performance
Formulatingconsider req
Precise
Accurate
Consistent w/ other
Accepted
Understood Effective settinginvolve employees &
lower-levelssetting goals
Influencedsize; structure; corp culture; current market
situation;
top level leadership style
o 2. Developing plans: Choice of alternatives
Objectives indicate combo resources req + method/plan fulfil
Clearwhowhatwhen
Consider several alternatives achieve
= selection alternative best suited = achievement
Consider cost implications; ext bus environment factors; org
strengths/weaknesses
o
3. The implementation of the selected plan Planning process
attentionorganising/leading/controlling
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confirm interdep4 primary tasks of management
Involves development framework execution; necessary
leadership;
exercise control determine if performance achieved
(according
standards)
5.5 Organising
Entails structuring actfacilitate objective achievement
5.5.1 Organising concepts
5.5.1.1 Unity of command
Ea employee = 1 boss dir responsible
Know who gives direction & report to
Problems motivation & productivity managers unclearwho
responsible what
5.5.1.2 Chain of command
Scalar principle/chain
Clear lineauthoritytop level1stlevel
o Incl non-managerial employees w/in particular org
Vert separation b/tw levels baseddiffauthority/responsibility
All members know who report/report to
ID comm. lines w/in formal structure
5.5.1.3 Span of management
Span of control
# employees reportmanager
employeessingle managergreater/wider span of control
# reporting should be ltd
# effectively supervisedo Ideal # hierarchy
Factors influencing
o Employee maturity
o Skills & ability
o Nature of work
o Enterprise size
o Employee self-control skills
5.5.1.4 Division of Labour
Specialisationdegreework ltd1/few tasks = pronounced
hierarchy
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o w/in employees = specialised jobs & related functions
grouped tog 1 manager
Specialised jobs functional area marketing
5.5.1.5 Coordination
All dept & indiv w/in work tog achieve
strategic/functional/operational goals/plans
Req conceptual skills ken relation b/tw employees; teams; dept;
greater org
Process integrating organisational & departmental
tasks/resourcesmeet objectives
5.5.1.6 Responsibility and authority
All employeesauthority req meet responsibilities & =
accountable
o NB clearly defined
Responsibility = obligationachieve objectives performing req
act
Accountability ensures meet responsibilities
Authority = right make decisions; issue orders; utilise
resources
o Delegated by CEO
Responsible entire org performance down chain of command
middle1stlevels
Tactical & operational objectives
o Differentiated
Formal specified relationship among employees starts @top
&
delegated down
Informalreflects patterns relationships/comm.evolve employee
interact/comm.do job
Line & staff explain core & supportive authority w/in
organisational
structure
Lineresponsibility make decisions & give orders down
chain
o Managers primarily responsible achieving org objectives
Staffresponsibilityadvise/assist personnel w/ line authority
o Marketing = linesupportedHR
Final diff based major diff b/tw de/centralised authority
Centralisedtop = most NB decisions
o Advantage emphasise level control & task
duplication
Decentralised
middle & 1
st
level also allowed
NB decisionso Advantage management development; efficiency
&
flexibility
5.5.1.7 Delegation
Process assign responsibility/authorityaccomplish objectives
o Delegated down chaintopother & non-managers
Purpose = enable managersconcentrate NB issues/work done
Worker delegated to gets involved carrying out particular
job
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5.5.1.8 Flexibility
Always exceptions to rule
NBcontinuously environment
o Allows implement effectively w/ min disruption
Entails continuous revision
rules/guideline/policies/practices
5.5.2 Organisational design
5.5.2.1 Organisational structure
Formal systemworking relationshipsboth separate/integrate
tasks
o Separationmakes clear who what
o Integrationhow effortsinterrelate/ interact
Interaction of organising as management task w/
planning/leading/controlling = based
o Planning implemented & leading occur once human resources
assignedtasks
o Leading = effectiveclear responsibilities/authority
allocatedemployees
o Successful leadership basedmotivationemployees ken what
expected through
rules/procedures/performance standards
o Controlling occur after procedures est. collecting &
evaluating info help
managers decision-making/evaluate performance/solve problems
5.5.2.2 Departmentalisation
Grouping related actunits
Dept created w/ int/ext focus
Int focusfunctional departmentalisation
Ext focusproduct/customer/geographic departmentalisation
Functional departmentalisation
o Organise dept around core functionsorg
o Managerial functions fin; marketing; operations created
o Advantages
Promotes functional specialisation
Enhances career development w/in dept Promotes specialised
technical problem-solving
resource duplication & coordination w/in functional area
Centralises decision-making
o Disadvantages
Emphasises routine tasks
Create conflictproduct priorities
Focus mainly departmentalisation rather than organisational
issues b/tw
dept
Develops managersexpertsfunctional areas only
Product (service) departmentalisation
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5.5.2.3 Matrix departmentalisation
Combo functional & product departmental structures above
Employee worksfunctional dept & also assigned 1
products/projects
complexarrangement
Advantages
o Achieves coordination meet dual demands efficiency &
customer
preferences
o Encourages flexible sharing human resources across G&S
lines
o Allows employees learn new skills diff areas
Disadvantages
o Req interpersonal skills
o Req skilled matrix manager maintain balance b/tw functional
& G&S/project
interest
o
Req ppl work
2 managers
5.5.2.4 Factors influencing organisational design
Environment
o Customers; competitors; suppliers; new G&S; subs G&S;
economy; social/cultural;
political; govt/legal; tech
Strategies
o Corporate level; business level; functional level
Stable environmentltd tech innovation; competitorso Problems
diff rapidly bus environment
Degreestability = implications strategy & structure
Competitive forces dir influence info neededmanagers make
successful decisions
o Customers; competitors; suppliers; new entrant; subs
G&S
5.5.2.5 Informal organisational structure
*not for semester test 1
5.5.2.6 Project management structure
*not for semester test 1
5.6 Leadership
Process influencing employeesperform mannerorg objectives
achieved Effective leaders acknowledge cultural & workforce
diversity w/in groups/team
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o Use secondary management tasks comm./motivation
5.6.1 Leadership principles
Occupy management pos w/out being true leader
Utilise powerinfluence ppls behaviour
o Powergetdo whatever neededachieve objectives
o w/in org power viewed+ve sense
threatsubordinates; abuse
w/out power achieve org objectives; effective managers
legitimate power
o based indivs pos/power given by org
o reflects indivs authority w/in org
o
managers = legitimate power based pos & acquired authority
delegate subordinates
Coercive power
o Create fear among followers
o Threats/punishmentachieve complianceworking towards
objectives
o Do as requested fear
reprimands/probation/suspension/verbal
abuse/dismissal/humiliation
Reward power
o Based indivs ability influence others giving/withholding
rewards
o Incentives praise/recognition/pay /promotions influence
subordinates
behaviour
o Affects performance expectations & achievement of
employees
Expert power
o Based indivs skill knowledge
o Expertppl depknowledge/skills/info
o Respect expert
o ppl w/ particular expertise power expert
Referent power
o Based indivs personalpower relationships w/ others
o
Based primarilypersonalityo Association w/
indvid/representinfluenced by person w/ reference power
Info power
o Based indivs ability acquire NB/valuable infomake
availableothers
o NB infoperformance/decision-making in org indivs info
power
Use diff types power results 1/3 types behaviourfollowers
o Commitment enthusiastic about meeting expectations &
strive to
Expert; referent
o Compliance what has to be done w/ n/m enthusiasm
Legitimate
Reward
info
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o Resistance range intentional sabotage delay appearance of
acting on
influences
Coercive
5.6.2 Leadership approaches
Varanalysing leadership
Researchlast century3 categories
o Leadership trait approach
o Leadership behaviour approaches
o Situational approach
5.6.2.1 Leadership trait theory
Based assumption leaders born, not made
Researchers ID characteristics distinguished in/effective
leaders
o Physical & psychological factors analysed effortID traits
successful leaders
o Traits
Motivationstrong desire influence others w/ focusset
objectives
Intelligenceverbal & quantitative competence; handle complex
info
Integrityhonesty/truthfulnessfollowers/others
Self-confidencedecisive & assertive arrogant
Knowledgeclear kenjob/org/industry
Drivewillingness take initiative w/ needachievement
5.6.2.2 Behavioural leadership theories
Leadership research shifted focus limitations theory on
leadership characteristics
New focus find best leadership style all situations ID diff b/tw
behaviour
in/effective leaders
Results enabled grouping
effective leadership behaviouro People-orientedstrong focusppl
involvedoperational process
o Product, process & task-orientedstrong focusactual
operational process
5.6.2.3 Situational leadership theories
Obviousno 1 best leadership style all situations
o Next step = est. how managers need adapt diff leadership
styles diff
situations
Theorists attempt determine appropriate leadership style diff
situations
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o Some factors ID = employee needs/maturity; leader-follower
relationship;
leadership power; traits; task structure; leadership behaviour;
decision-making req
incorp all 3 broad approaches
Situational/contingency leadership theories = leadership
continuum; contingency leadership
theory; situational leadership
5.6.3 Leadership factors
NBacknowledge core issues relatingleadershipprimary management
task
Prominent factors = motivation; comm.; group/team functioning;
culture; workforce
diversity
5.6.3.1 Motivation
Any influencecauses/channels/sustains goal-directed
behaviour
Manager responsibilityassist employees
o Understandmotivates themselves & employees
Theories exist distinguishing b/tw content/process/reinforcement
theories no single
theory addresses all aspects motivation adequately
o Contentwhat motivates ppl
o Process howmotivate ppl
o Reinforcementkeep motivated
Ea person diff most prominent needs; value as important;
competencies
o Specific content ea indiv = uniqueness
o = NB determinants how think/behave
o Maslows hierarchytheorywhat motivates ppl
Baseddiff regarding needs
Factors physiological; security; social; esteem;
self-actualisation
indicate diff
Effective manager-leaders ken indiv diffshape employees unique
view work
o Use kenmotivate max ea employees effectiveness
Job characteristics determine extent to which employees
experience work meaningful;level responsibility experienced;
feedback
Job design determines immediate context of work
Job itself tog w/ organisational factors determine
motivation
o Factors = managerial practicesdelegation; communication;
decision-makin...
theories address how 1 factor affects motivation @ 1 time
o Few consider ways factors combo affect actual flow indivs
motivation over
time
5.6.3.2 Communication
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Transfer & exchange info & understanding thereof one
person another
meaningful symbols
= core supportive management taskall membersorg
W/out effective comm.accomplish
In/formal; non/verbal; many forms
o Face-to-face; phone; fax; e-mail; letters; memos; reports;
videos; orals
Process req bother sender & receiver
o Senderbegins process
o Receivercompletes comm. link
Cycle only completedfeedback received
Process = 6 basic elements
o Sender (encoder)
o Receiver (decoder)
o Message
o
Channelso Feedback
o Perception
Allows leadersdirect/inform/motivatefollowers
Management comm. infoplan/strategise/decide
Info = NBmanagers organise/structure/delegatesubordinates
Final control = successful only once received info actual
performance employees
Poor comm. = bad performance/conflict/wastage/low levels
motivation
Listening = NB part comm. process
o
Leader = truly effective
talk clearly & listen/acknowledge needs; suggestions;ideas;
inputs
Est. effective comm.
o Plan/clarify ideas before comm.
o Examine actual purpose comm.
o Consider situational factors comm. occur
o Take oppconvey msghelpful
o Actions must support comm.
o Non-verbal msgs powerfulalertness
o Comm. complete w/out feedback
o
ListeningNB
o Ensure comm. = info rich
5.6.3.4 Culture & diversity
