THE ORGANIZATION AS AN OBJECT OF

MANAGEMENT.

Theoretical questions1. Concept of organization in management theory.2. Life-cycle of organization 3. The internal environment of organizations.4. The external environment of organization.5. Factors of direct influence.6. The role of environmental factors of the indirect

influence.7. Characteristics of the external environment.

• Organizations are groups of individuals who work together to achieve the goals or objectives that are important to these individuals.

• An organization in its simplest form (and not necessarily a legal entity, e.g., corporation or LLC) is a person or group of people intentionally organized to accomplish an overall, common goal or set of goals. Business organizations can range in size from one person to tens of thousands.

The concept of "organization" is a particular group of several

essential requirements:

• Existence at least two people who consider themselves part of the group;

• Existence at least one goal, which take a total of all members of the group;

• Existence team members who intentionally work together to achieve meaningful for all purposes.

• The organization is viewed as a system that is an interrelated set of activities, which enables inputs to be converted into outputs. Systems are to be seen as 'closed' or 'open'.

• Closed systems are systems, which do not interact with their external environment, i.e. they are practically self-contained.

Open systems are systems, which rely on the interaction with their environment. Biological systems and social systems are examples of open systems.

Open systems have three major characteristics:

• they receive inputs (materials, finance, etc.) from their environment;

• they utilize these inputs to produce various outputs (goods, services);

• they discharge these outputs into the environment.

An open system has certain properties, namely:

• integrity (changing one component causes the change in others);

• each part can be viewed separately; • perspectives (development towards improvement); • independence (possible separation subsystems); • specialty (the ability to perform a scope of work); • conversion of input elements on weekends; • centralization (one of the components is dominant); • growth (attraction to expand, increase); • development cycle; • balance; • unpredictability of possible violations.

Organizations include the following features:

• According to the method and purpose formation: formal and informal organization

• By the number of goals: simple and complex organization

• The largest: large, medium and small organizations. • For legal status: individuals or legal entities. • By the forms of business organization is divided into

companies, economic associations, banks, insurance companies, investment funds and others

Life-cycle of organization

• Any organization has a recurring character development that goes through certain stages of the life cycle, defining the nature of industrial, economic, investment, financial and other activities and so on.

1. "Birth"

• The market penetration, ensuring survival of unprofitable activities, ensuring in sufficient amounts of capital investment for start-up organizations

2. "Childhood"

• Fixing in the market or its individual segments of business at breakeven

3. "Youth“

• A major expansion of target market segments, ensuring high rates of profit growth, investment development on the basis of self-financing

4. "Early maturity"

• Further expansion of market segments, focus on regional diversification, ensuring increase stable profits and ensuring them to the optimum level.

5. "The final maturity"

• Formation of the company image, balanced growth, focus on sectoral diversification of activities in order to maintain the level of competitiveness, providing support profitability at an optimum level

6. "Aging"

• Saving position or partly reduction in production volumes, clotting activities, falling profitability, financial stability

7. "Renaissance"

• Major update of shapes, forms and activities, providing conditions for profitable growth, attracting significant volumes of investments

Any organization consists of groups (teams). There is a complex interweaving of formal and informal groups in organizations that affecting

the quality and efficiency.

Groups which are created on request managers an organization called formal. The primary function of formal groups is to perform certain tasks and achieve specific goals.

In any organization, there are three types of formal groups:

• group of leaders (command group); • targeted production (economic) group; • committees.

• Committees - a special kind of groups which are authorized to perform a specific task or set of tasks (councils, committees, target groups).

• Special Committee - is a temporary group formed for a particular purpose or identify a problem.

• Standing Committee - permanently active group within an organization that has a specific purpose.

These include the board of directors, scientific and technical advice organization, audit committee and others.

• Group of managers consists of the manager and his immediate subordinates who, in turn, can also be leaders (president and vice president, director of the company (the head chemist)).

• Production (working) group composed of individuals who work together on one task (production team). They are highly specialized, have a certain autonomy. In an organization there may be groups of engineers, marketers, and suppliers.

Informal and formal groups have some common features:

• - Are managed by leaders on purpose solving specific problems based on a specific hierarchy;

• - have a management and interaction structure;

• - use in their activities unwritten rules (norms), use a system of rewards, incentives and sanctions.

Manager must understand that the group will be able to achieve its goals and ensure efficient

activity with a positive impact of such factors:

• The group’s quantity. According to various experts, the group may consist of 3-9, 4-5, 5-8, 5.11 persons. So, we know that departments which consist of employees between 5 to 25 persons work the most effectively.

• Composition of the group. Experience shows that the group should be composed of diverse people, people with different positions, ideas, ways of thinking, views on life and so on.

• Group rules (norms): pride for their work, the desire to achieve goals and ensure profitability, the principles of teamwork, training, treatment innovations, relationships with partners, ways to protect integrity, relationships between team members, methods of distribution of earnings etc..

• Solidarity of members• Group unanimity, that the mechanism

of suppression of the individual to preserve the harmony of the group.

The informal group (organization) is a spontaneously created group of people, who regularly interact for achievement of a

definite purpose.

The most important reasons for entry into informal groups are:• Presence of problems in the organization;• Resistance to organizational changes;• Feelings of an accessory;• Mutual aid;• Protection;• Close dialogue;• Interest.• The ways of informal groups control:• using the influence to leader of informal group;• enlist members of informal group to the process of management;• giving a full information to subordinates.

• Factors of influence on the organization are the driving forces that affect the production and business activity of the organization and provide a certain level of results.

Factors define any processes that are carried out in the organization, they can be classified according to two criteria:

• level of influence (macro level, the micro level);

• the environment impact (internal, external).

In terms of impact are defined:

• Microeconomic factors (goals, structure, tasks, technology, staff, resources, trade unions, parties, suppliers, customers, competitors, etc.) that have an effect on the enterprise level;

• Macroeconomic factors (legislation, public authorities, the system of economic relations in the country, the economy, international events) that have an effect on the level of industries and countries.

THE INTERNAL ENVIRONMENT

• The organization is an open system closely connected with the external world. Simultaneously it is a complex multifunctional organism, which has the internal environment and consists of multiple interdependent parts.

•

The purpose is a concrete final condition or desired result that the group tries to achieve working together.

• A company always has several purposes that it is pursuing simultaneously, which reflects the complex nature of business. The main purpose of organization is named mission. It is the reason of the organization's existence. It has a social component. For example, the mission of a drugstore is a qualitative and steady medicinal servicing of the population. Another purpose may be to get a profit.

There are the following ENTERPRISE GOALS:

• development - intentions of pharmaceutical companies concerning increase sales, profits, investment on the background of cooperation with other firms, etc.;

• stability - intentions of pharmaceutical companies keep the current level of sales, ensure constant performance;

• survival - intentions of pharmaceutical companies maintain vital market segments in a crisis.

• The task is a work, series of works or a part of the work, which must be executed by beforehand fixed way in beforehand fixed period.

• The tasks are not ordered to employee, but to office. On the basis of the management decision about the structure each office includes the range of tasks, which are considered as the necessary contribution to achieve organization's purposes.

The tasks are divided into three categories:

• a work with people;

• a work with subjects (raw materials, feedstocks, technical equipment, instruments, etc.);

• a work with information.

The structure of the organization is a logical interrelation of management levels and

functional areas built in such form, which allows to achieve an organization's objectives

most effectively.

• Linear organizational management structure consists of mutually subordinate bodies in a hierarchical ladder.

• Each manager is subject to only one manager and all communication with senior management levels go through it.

• This structure is characterized by simplicity, clarity and understandability relations units and staff management.

Disadvantages of linear organizational management structure:

• high requirements to the leader, which must be comprehensively prepared to ensure effective management;

• no links with planning and decisions;• information overload, many contacts with

subordinates, superiors and related structures;

• the concentration of power in the top management.

• Functional organizational management structure is based on a hierarchy of in order to perform each function of management at all levels.

• Managers specializing in certain administrative functions performed by appropriate specialists.

• The disadvantage of the functional structure is that the management process is broken into separate poorly interconnected functions.

• Technology is a means of the transformation of inputs (the people, information or material) into outputs (sought products and facilities).

• There are two classifications of technologies.• According to the first classification by Woodward

there are three kinds of technologies:• Individual, Unitary and Small Batch Production. It

includes custom-made products, the production of prototypes, and the production of small batches.

• Large Batch and Mass Production. It encompasses the production of large batches, including assembly-line production, and mass production.

• Continuous Production. It includes the production of steel, atomic stations.

According to the second classifications by Tompson there are such kinds of technologies as:

• multi-link technology characterized by series of the interdependent tasks, which are executed consecutively. The adjustment lines, conveyors of the mass production are typical examples of such type of technology.

• intermediary technologies characterized by meeting of the groups of people, who are or want to be interdependent. For instance, bank operations, telephone companies, employment agency;

• intensive technologies characterized by using special methods, skill or services. For instance, montage of a film, work of reanimation.

• The fifth variable of organization is its staff (people, personnel).

• In wardly organization people are determinant for definition of correspondence between problems and chosen technology.

• No technology can be useful and no problem can be executed without the people.

The most significant human features are:• abilities, the individual qualities, which are inherent to each person.

Organizations always try to use the abilities for decision of the problem, what work a concrete employer will execute and what office he will work in;

• gifts, a potential of a person in respect of execution of some type of work. Arising from combinations of both innate quality and gained experience, gifts become a talent in some area;

• needs, an internal condition of psychological or physiological sensation of insufficiency of anything;

• expectations. Based on the past experience and estimation of the current situation people form expectations comparatively with results of their behavior.

• perception. The perception is an intellectual realization of stimuli, got from sensations. The perception is very important because it defines exactly what a «reality» is for a concrete individual.

• attitude, standpoint. The attitude forms our subjective perception of the environment and hereunder influences upon behaviour;

• values. Values are faiths, the general beliefs what is good and what is bad or what is important or unimportant in the life. Values are gained by means of training in school, by education. Values are consolidated in social contacts and even through leisure.

The external environment of the organization - totality of economic entities, economic, natural conditions,

national and general international structures and external conditions on enterprise i factors.

Environmental factors should be divided into two groups:

• Direct effect (direct effect on the activities of the organization and depend on this activity);

• Indirect (not directly affected, but due to certain mechanisms and relationships).

Factors of direct influence SUPPLIERS• Organizations must acquire resources from their

environment and convert those resources into products or services to sell.

• Suppliers provide these resources. Every business must acquire people (supplied by universities, trade schools and employment services), raw materials (supplied by producers, wholesalers, and distributors), and capital (supplied by banks, investment funds, stockholders, sponsors and other sources).

• Suppliers are important to an organization for reasons beyond the resources they provide. Suppliers can raise their prices or provide poor quality goods and services.

CUSTOMERS

• Customers purchase the products or services the organization offers without customers, a company wouldn't survive.

• There are a final consumers, who buy a goods for own use, and intermediate consumers, who buy raw materials or wholesale products and then sell to final consumers.

• Intermediate customers actually make more purchases than individual final consumers do. Examples of intermediate customers include hospitals, which buy medicines from wholesalers, and manufacturers' representatives for use them to patients, and industrial buyers, who buy raw materials (such as chemicals) before converting them into final products.

• Like suppliers customers are important to organizations for reasons other than the money they provide for goods and services. Customers can demand lower prices, higher quality, or more service. In all businesses — services, as well as manufacturing — strategies that emphasize good customer service pro vide a critical competitive advantage.

COMPETITORS• Of the various components of the competitive environment,

competitors within the industry must first deal with one another. When organizations com pete for the same customers and try to win market share at the others' expense, all must react to and anticipate their competitors' actions.

• Organizations must identify their competitors including (1) overseas firms, especially their first, unobtrusive entry into small niches; (2) small domestic firms, especially their entry into tiny, premium markets; (3) big new domestic companies exploring new markets; (4) strong regional competitors; and (5) unusual entries such as TV home shopping and the explosion of retail catalogers.

• Once competitors have been identified, the next step is to analyze how they compete. Competitors use tactics like price reductions, new-product introductions, and advertising campaigns to gain advantage over their rivals. It's essential to understand what competitors are doing when perfecting their own strategy.

Factors of direct influence• Political factor. Government policies both impose

strategic constraints and provide opportunities. The government can affect business opportunities through tax laws, economy, and international trade rulings.

• In the world of economics, an important governmental influence on business is trade legislation.

• For example, a state has an enormous and persistent trade deficit (it imports more than it exports). One government may prefer free trade, without legislation that restricts imports, provides subsidies (e.g., for agricultural products), or otherwise helps state business interests. And another government, in contrast, may believe the state needs to play an active, protective role in improving state international competitiveness.

The economy. The international environment is an important contributor to another crucial component of the

macroenvironment: the economy.

• The economic environment dramatically affects companies' ability to function effectively and influences their strategic choices. Interest and inflation rates affect the availability and cost of capital, the ability to expand, prices, costs, and consumer's demand for products. Unemployment rates affect labor availability and the wages the firm must pay, as well as product demand.

• Economic conditions change over time and are difficult to predict. Periods of dramatic growth may be followed by a recession. Even when times seem good, budget deficits or other considerations create concern about the future.

Technology• Today a company cannot succeed without incorporating

into its strategy the astonishing technologies that exist and continue to evolve. Technological advances create new products, production techniques, and ways of managing and communicating.

• As technology evolves, new industries, markets, and competitive nichcs develop. The advent of computers created a huge industry. Early entrants in biotechnology are trying to establish dominant positions, while later entrants work on technological advances that will give them a competitive niche.

• Strategies developed around the cutting edge of technological advances create a competitive advantage; strategies that ignore or lag behind competitors in considering technology lead to obsolescence and extinction.

Social/cultural factor. Social/cultural environment implies installation, life value and traditions, which influence upon

organization.

• One example of restraint on business action is the standards regarding bribery. In some countries, bribes and kickbacks are common and expected ways of doing business. But for U.S. firms, these are illegal, unethical and amoral practices. Social/cultural factors influence on consumption of some products and facilities including medicines.

Market factors:

• demographic structure of the population;

• incomes of the population and their dynamics;

• market conditions;

• level of competition in the branch.

THANK YOU FOR ATTENTION!