Business Policy and Strategy
Chapter 1 – Basic importance of Organization and
Management
What is Organizations?
Is a collection of people who work together and
coordinate their actions to achieve or desired future
outcomes.
Organization desired future outcome defer to
“Organization Performance”.
What is Management?
It involves Planning, Organizing, Leading and Controlling
of Human and other resources to achieve organizational
goals efficiently and effectively
What is Organizations Performance?
Is a measure of how efficiently and effectively managers
uses available resources to satisfy customers and achieve
organizational goals.
Note: organizational Performance increases in direct
proportion to increase in efficiency and effectiveness
What is Efficiency and Effectiveness?
Efficiency – A measure of how well or how productivity
resources are used to achieve a goal or refers to getting
the most output from the least amount of inputs. “ Doing
things right”
For example: McDonalds develops over more efficient
fat fryers that not only reduce the amount of oil used in
cooking but also speed up the cooking of French fries.
Effectiveness – A measure of the appropriate ness of the
goals an organization is pursuing and the degree to which
the organization achieves these goals. “ Doing the right
things”
For example: managers at McDonald's decided on the
goal of providing breakfast service to attract more
customers. The choice of this goal has prove smart sales
of breakfast food now account for more that 30 percent
of McDonald’s revenues are still increasing.
Fig.1.1 Efficiency, Effectiveness and Performance in an
Organization.
Why Study Management?
The dynamic and complex nature of modern work means
managerial skills are in demand. Organizations need
individuals like you who can understand this complexity,
respond to environmental contingencies and make
decisions that are ethical and effective. Studying
management helps equip individual to accomplish each
of these tasks.
The Essential Managerial Task
The job of management is to help an organization make
the best use of its resources to achieve its goals. How do
managers accomplish this objectives? They do so
performing four essentials manager tasks; Planning,
Organizing, Leading and Controlling.
What is Planning?
To perform the planning task, managers identify and
select appropriate organizational goals and courses of
action; they develop strategies for how to achieve high
performance.
The three steps involved in planning are:
Deciding which goals the organization will pursue.
Deciding what strategies to adopt to attain those goals
and
Deciding how to allocate organizational resources to
pursue the strategies that attain those goals.
Question: How well managers plan and develop
strategies determine how effective and efficient the
organization?
What is Organizing?
Is structuring working relationship so organizational
member interact and cooperate to achieve
organizational goals. Organizing people into
departments according to kinds of job-specific task they
perform lay out the line of authority and responsibility
between different individuals and groups.
Note: Managers must decide how best to organize
resource particularly human resource.
What is Organizational Structure?
A formal system of task and reporting relationship that
coordinates and motivates member so they work
together to achieve organizational goals. Organizational
structure determined how an organizations resources
can be used to create goods and service.
 What is Leading?
Articulating a clear vision and energizing and enabling
organizational members so they can understand the part
they play in achieving organizational goals.
Leadership involves managers using their power,
personality, influence, persuasion and communication
skills to coordinate people and groups so their activities
and efforts are harmony.
What is Controlling?
Evaluating how well an organization is achieving its goals
and taking action to maintain or improve performance.
Example: managers monitor the performance of
individuals departments and the organization as a whole
to see whether they are meeting desired performance
standard.
Note: the outcome of the control process is the ability to
measures performance accurately and regulate
organizational efficiency and effectiveness.
Level and Skills of Managers
First they differentiate manager according to their level
or rank in the organization’s hierarchy of authority.
Second organizations group managers into departments
(or function) according to their specific job related skills
expertise, marketing expertise or sales experiences
What is Department?
Is a group of managers and employees who work
together and possess similar skills or use the same
knowledge, tools as techniques to perform their jobs.
Levels of Management
First Line Managers
Often called supervisors, they are responsible for daily
supervision of non managerial employees who perform
the specific activities necessary to produce goods and
services, first line managers who work in all department
or functions of an organizations.
Middle Manager
A manager who supervises first line managers and is
responsible for finding the best way to use resources to
achieve organizational goals.
To increase efficiency, middle managers find way to help
first line managers and non managerial employees better
use resource to produce manufacturing cost or improve
customer service.
Middle Manager
To increase effectiveness, middle managers evaluate
whether the organizations goals are appropriate and
suggest to top managers now goals should be changed.
Note: Often suggestion that middle managers make to
top managers can dramatically increase organizational
performance.
Middle Manager
The major part of the middle managers job is developing
and fine tuning skills and know-how, such as
manufacturing or marketing expertise that allow the
organization to be efficient and effective.
Middle managers make thousand of specific decision
about the production of goods and services:
which first line supervisors should be chosen for this
particular project?
where can find the highest quality resources?
how should employees be organized to allow them to
make the best use of resources?
Top Manager
A manager who establishes organizational goals decides
how departments should interact and monitor the
performance of middle managers.
They are responsible for the performance of all
departments. They have “ Cross departmental
responsibility. Top managers establish organization
goals, such as which goods and service the company
should produce:
they decide how the different departments should
interact and
they monitor how well middle managers in each
department use resources to achieve goals.
Managerial Roles Identified by Mintzberg
What is Managerial Roles What is Resource Allocator?

Refers to specific actions or behaviours expected of and Allocate organizational resources among different task
exhibited by a manager. When describing what manager and departments of the organization; set budgets and
do from a roles perspective, were not looking at a specific salaries of middle and first level managers.
person but at the expectation and responsibilities that
What is Negotiator?
are associated with being the person in the role of a
manager. Work with suppliers, distributors and labor unions to
reach agreement about the quality and price of input
Managerial Roles Identified by Mintzberg
technical and human resource; work with other
organizations to establish agreements to pool resources
to work on joint projects.

What is figure head?

Outline future organizational goals to employees at

company meetings; open a new corporate headquarters
building; state the organizations ethical guidelines and
the principles of behaviour employees are to follow in
their dealings with customer and suppliers.

What is Leader?

Provider an example for employees to follow; give direct

commands and orders to subordinates; make decisions
Types of Role
concerning the use of human and technical resources;
Decisional – managerial roles that revolve around mobilize employee support for specific organizational
making choices. goals.
Entrepreneur What is Liaison?
Disturbance handler Coordinate the work of managers in different
departments; establish alliance between different
Resource allocator
organizations to share resources to produce new goods
Negotiator and services.

Interpersonal – managerial roles that involve people and What is Monitor?

other duties that are ceremonial and symbolic in nature.
Evaluate the performance of managers in different task
Figure head and take corrective action to improve their performance;
watch for changes occurring in the external and internal
Leader
environments that may affect the organization in the
Liaison future.

Informational – managerial roles that involve collecting, What is Disseminator?

receiving, and disseminating information.
Inform employees about changes taking place in the
Monitor external and internal environments that will affect them
and the organization; communicate to employees the
Disseminator organizations vision and purpose.
Spokesperson What is Spokesperson?
What is Entrepreneur? Launch a national adverting campaign to promote new
Commit organizational resources to develop innovative goods and services; give speech to inform the local
goods and services; decide to expand internationally to community about the organization’s future intentions.
obtain new customers for the organization’s products. Managerial Skills
What is Disturbance handler? 3 types of Skills
Move quickly to take corrective action to deal with Conceptual Skills
unexpected problems facing the organization from the
external environment, such as a crisis like an oil spill, or Human Skills
from the internal environment, such as producing faulty
Technical Skills
goods or services.
What is Conceptual Skills?
Are demonstrated in the general ability to analyse and
diagnose a situation and to distinguish between cause
and effect. Top managers require the best conceptual
skills because their primary responsibilities are planning
and organizing.
What is Human Skills?
Include the general ability to understand, alter, lead and
control the behaviour of other individuals and groups.
The ability to communicate, to coordinate and to
motivate people , lead, inspire enthusiasm, trust and to
mold individuals into a cohesive team distinguishes
effective from ineffective managers.
What is Technical Skills?
Are the job-specific skills required to perform a particular
type of work or occupation at a high level.
Examples include a manager’s specific manufacturing,
accounting, marketing and IT skills.
Managers need a range of technical skills to be effective.
The array of technical skills managers need depends on
their position in their organizations. Also managers are
group into different departments because a major part
of a manager’s responsibility is to
Also managers are group into different departments
because a major part of a manager’s responsibility is to
Monitor
train
supervise employees
So their job specific skill and expertise increase.
Managerial Skills?
Strategic Management
It can be defined as the art and science of formulating,
Implementing and evaluating cross functional decisions
that enable an organization to achieve its objectives.
Question? What is Cross Functional Decision?
PRODUCTION AND OPERATION MANAGEMENT
William J. Stevenson
Introduction
Operation is that part of a business organization that is
responsible for producing goods and/or services.
Goods are the physical items produced by business
organizations
Services activities that provide some combination of
time, location, form, and psychological value.
Operation and Management
The Management of systems or processes that create
goods and/ or provide services.
Supply Chain
A sequence of organizations-their facilities, functions,
and activities that are involved in producing and
delivering a product or service
The three basic functions of business organization
The three basic functions of business organization
Finance is responsible for securing financial resources at
favorable prices and allocating those resources
throughout the organization, as well as budgeting,
analysing investment proposals, and providing funds for
operations.
Marketing is responsible for assessing consumer wants
and needs, and selling and promoting the organization’s
goods or services.
Operations is responsible for producing the goods or
providing the services offered by the organization.
Competitiveness, Strategy, and Productivity
Competitiveness – How effectively an organization
meets the wants and needs of customers relative to
others that offer similar goods or services.
Marketing influences, competitiveness is several ways.
Identifying consumers wants and / or needs- is a basic
input in an organization’s decision making process, and
central to competitiveness. The ideal is to achieve a
perfect match between those wants and needs and the
organization’s goods and/or services.
Price and Quality are key factors in consumer buying
decision. It is important to understand the trade-off
decision consumers make between price and quality.
Advertising and Promotion are ways organization can
inform potential customers about features of their
products or services, and attract buyers.
Competitiveness, Strategy, and Productivity
Operation has a major influence on competitiveness
through
Product and service design – should reflect joint efforts
of many areas of the firm to achieve a match between
financial resources, operations capabilities, supply chain
capabilities and consumer wants and needs.
Cost – of an organization’s output is a key variable that
affects pricing decisions and profits. Cost reduction
efforts are generally on going in business organizations.
Location – can be important in terms of cost and
convenience for customers. Location near inputs can
result in lower input costs.
Quality - refers to materials, workmanship, design and
service. Consumers judge quality in terms of how well
they think a product or service will satisfy its intended
purpose.
Quick response – can be a competitive advantage. One
way is quickly bringing new or improved products or
services to the market.
Flexibility – is the ability to respond to changes. Changes
might relate to alterations in design features of a product
or service, or to the volume demanded by customers, or
the mix of product or services offered by an organization.
Competitiveness, Strategy, and Productivity
Operation has a major influence on competitiveness
through
Inventory management can be a competitive advantage
by effectively matching supplies of goods with demand.
Supply chain management – involves coordination
internal and external operation (buyers and suppliers) to
achieve timely and cost effective delivery of goods
throughout the system.
Service – might involve after-sale activities customers
perceive as value added, such as delivery, setup,
warranty work, and technical support.
Service quality can be a key differentiator, and it is one
that is often sustainable.
Managers and workers are the people at the heart and
soul of an organization, and if they are competent and
motivated, they can provide a distinct competitive edge
by their skills and the ideas they create.
Why some organizations fail
Organization fail or perform poorly, for a variety of
reason. Being aware of those reasons can help managers
avoid making similar mistake.
Neglecting operation strategy
failing to take advantage of strengths and opportunities,
and/or failing to recognize competitive threats.
Why some organizations fail
Organization fail or perform poorly, for a variety of
reason. Being aware of those reasons can help managers
avoid making similar mistake.
putting too much emphasis on short-term financial
performance at the expense of research and
development.
placing too much emphasis on product and service
design and not enough on process design and
improvement.
Organization fail or perform poorly, for a variety of
reason. Being aware of those reasons can help managers
avoid making similar mistake.
neglecting investment in capital and human resources.
failing to establish good internal communication and
cooperation among different function areas.
failing to consider customer wants and needs.
Categorizing Operation and Supply Chain Management
Planning – consist of the processes needed to operate an
existing supply chain strategically. Here a firm must
determine how anticipated demand will be met with
available resources. A major aspect of planning is
developing a set of metrics to monitor the supply chain
so that it is efficient and delivers high quality and value
to customers.
2. Sourcing – involves the selection of supplier that will
deliver the goods and services needed to create the
firm’s project. A set of pricing, delivery and payment
processes are needed, along with metrics for monitoring
and improving the relationships between partners of the
firm. These processes including receiving shipment,
verifying them, transferring them to manufacturing
facilities and authorizing supplier payments.
Categorizing Operation and Supply Chain Management
3. Making – is where the major product is produced or
the service provided. The step requires scheduling
processes for workers and the coordination of material
and other critical resources such as equipment to
support producing or providing the service. Metrics that
measure speed, quality, and worker productivity are
used to monitor these processes.
4. Delivering – is also referred to as logistics processes.
Carriers are picked to move products to warehouses and
customer, coordinate and schedule the movement of
goods and information through the supply network,
develop and operate a network of warehouse and run
the information systems that manage the receipt of
orders from customers and the invoicing systems that
collect payments from customers.
5. Returning – involves processes for receiving worn out,
defective and excess products back from customers and
support for customers who have problems with
delivered products. In the case of services, this may
involve all types of follow up activities required for after-
sales support.
Categorizing Operation and Supply Chain Management
Sourcing Function
Is responsible for finding other organizations to serve as
sources and then buying the material and service inputs
for transformation process of the organization. (also
called purchasing or procurement)
Logistics function
Is typically responsible for the actual movement of goods
and/or services across organization.
Supply Chain
Is the network of manufacturing and service operations
(often multi organizations) that supply one another from
raw materials through product to the ultimate customer.
Also consist of the physical flow of materials, money and
information along the entire chain of sourcing
production and distribution.
Three aspect of Operations Management
1. Decisions is refers to decision making as an important
element of operations management. Since all managers
make decision, it is natural to focus on decision making
as a central theme in operation
2. Function – operations is a major function in any
organization, along with marketing and finance. In
manufacturing company, the operation typically is called
the manufacturing or production department.
3. Process – operations managers plan and control the
transformation process and its interfaces in organization
as well as across the supply chain. This process view
provides common ground for defining service and
manufacturing operations as transformation processes
and is a powerful basis for the design and analysis of
operations in an organization and across the supply chain
The Five main decision made by operations and supply
chain
1. Process –corporate staff make some of the process
decisions, since uniformity across different stories is
desirable. They have developed a standard facility design
that is sized to fit a particular location.
Example: As pizzas are made, customers can watch the
process through a glass window; this provide
entertainment for both children and adults as they wait
their orders to be filed. Because this is a service facility,
special care is taken to make the layout attractive and
convenient for the customers.
2. Quality – the standard include procedures to maintain
service quality and ensure the quality and food safety to
be served. Service quality measure include courtesy,
cleanliness, speed of service and a friendly atmosphere.
Service quality monitored by the store manager,
comment cards and occasional random surveys
The Five main decision made by operations and supply
chain
3. Capacity – is the available at any point in time is
determined by the availability of equipment and labor
inputs the product making process at that time.
when initial location and process decision are made, the
corporate staff determines the physical capacity of each
facility
4. Inventory – store operators must carefully integrate
sourcing and inventory decisions to control the flow of
materials in relation to capacity.
Example: the do not want to purchase ingredients for
more pizza than they have the capacity to bake. They also
want run out of food during peak periods or waste food
when demand is low.
5. Supply Chain – consist sourcing and logistics. Sourcing
is done by the corporate office. They select specific
suppliers for all inputs, negotiate prices, write contracts
and issue blanket purchase orders that stores use to
order individual ingredients and items as they need
them. the orders are fulfilled by the supplier and logistics
provider ensures the orders are delivered on time.
logistics is handled by a third-party provider who
secures transportation and uses its distribution centers
to make deliveries.
The Decision-making framework for operations in the
supply chain
The Decision-making framework for operations in the
supply chain
Cross Functional Decision Making
Is a group of people with different functional expertise
working toward a common goal. It may include people
from finance, marketing, operations and human
resources department. Typically it includes employees
from all levels of an organization.
Cross Functional Collaboration
Is a mutual commitment toward common goals and the
joint effort necessary to achieve them. it is in every
business leaders best interest to lay the foundation of a
united approach to innovation and improvements.
Cross Functional Decision Making
Cross Functional Decision Making
Cross Functional Decision Making
Challenges facing operations and supply chain managers
1. Services – Operations concepts and ideas have
been applied in service operation for years, yet
service operation lag behind manufacturing in
applying latest ideas in supply chain
management, lean operation and quality
improvement
Environmental Scanning/Industry Analysis
The process of which organizations monitors their
environment to identify opportunities and threats
affecting their business.
Is the foundation for high quality strategic thinking that
informs the development of futures ready strategy for an
organization.
The basic purpose of environmental scanning is to help
management determine the future direction of the
organization.
Factors affecting environmental scanning
EXTERNAL ENVIRONMENT to INTERNAL ENVIRONMENT
EXTERNAL ENVIRONMENT
1. EVENTS Is the important and specific occurrences that
taking place in a certain sector. Past events of business
environment is the important factor of business
environment
2. TRENDS The general tendencies of courses of action
along which these events take place

3. ISSUES The current concerns that arise in response to

the events and trends.

4. EXPECTATIONS The demand made by interested

groups in the light of their concern for issues.

INTERNAL ENVIRONMENT

Human Resources
Infrastructure
Equipment
Structure
Budget