UNIT-1

Meaning of Management

In order to satisfy his/her wants a person has o perform numerous activities. An individual
alone cannot perform all the necessary activities. Therefore, human beings join together in the
form of groups and organizations. Every organization (e.g. a family, a college, a business
enterprise, an army, school etc.) is basically a group of people seeking to achieve some
common objectives. A central organ or agency is required to coordinate the activities and
efforts of various individuals working together in an organization so that they can work
collectively as a team. Such an organ is called management.

Definition of Management

According to Harold Koontz – Management is the art of getting things done through others and
with formally organized groups.

According to F.W Taylor- Management is the art of knowing what you what to do and then
seeing that they do it in the best and cheapest way.

According toKoontzando’Donnel- Management is the creation and maintenance of an internal

environment in an organization where individuals, working in groups, can perform efficiently
and effectively towards he achievement of group goals.

According to Peterson and Plowman- Management may be defined as the process by means of
which the purpose and objectives of a particular human group are determined , clarified and
effectuated.

Nature/Features/Characteristics of Management

1. Management is Universal- Management is required in every form of group activity

whether it is a family, a club, a government, an army or a business enterprise. The
fundamental principles of management are applicable in all areas of organized effort.
2. Management is purposeful- Management exists for the achievement of specific
objectives. It is a means towards the accomplishment of predetermined goals. All
activities of management are goal-oriented.
3. Management is a social process- Management is done by people, through people and
for people. It is a social process because it is concerned with interpersonal relations.
Human factor is the most important element in management.
4. Management is multidisciplinary- Management has to deal with human behavior under
dynamic conditions. Therefore, it depends upon wide knowledge derived from several
disciplines like engineering, sociology, economics, mathematics etc.
5. Management is a continuous process- Management is a dynamic and an on going
process. The cycle of management continues to operate so long as there is organized
action for the achievement of group goals.
6. Management is Intangible- Management is an unseen or invisible force. It cannot be
seen but its presence can be felt everywhere in the form of results. However the
managers who perform the functions of management are very much tangible and
visible.
7. Management is situational- Efficient management is always situational or contingency
management because there is not one best way of doing things. A successful manager
must take into account situational differences.
8. Management is essentially an executive function- It deals with the active direction and
control of the activities of people to attain predetermined objectives. Management is a
technique by means of which the objectives of a human group are determined, clarified
and accomplishes.
9. Management is an Art as well as Science- Management contains a systematic body of
theoretical knowledge as ell as the practical application of such knowledge.
10. Group Effort – Management is a force to direct the activities of human group engaged in
the realization of a collective aim. The relationship of management with the collective
effort is because of the fact that in order to achieve the predetermined objectives of any
enterprise it is absolutely essential to depend on the collective effort of a group rather
than the efforts of any particular individual.

Importance/Purpose of Management

1) Optimum use of resources: management facilities optimum utilization of available

human and physical resources, which leads to progress and prosperity of a business
enterprise. Even wastage of all types are eliminated or minimized.
2) Achievement of group goals- Management enables an enterprise to achieve is desired
objectives through proper planning and control. It decides what should be done and
how. It lays down the long term and short term goals keeping in mind the resources of
the enterprise.
3) Competitive strength: Management develops competitive strength in an enterprise.
This enables an enterprise to develop and expand its assets and profits.
4) Motivates employees: It motivates employees to take more interest and initiative in the
work assigned and contributes for raising productivity and profitability of the enterprise.
 5) New techniques: Management facilities the introduction of new machines and new
methods in the conduct of business activities. It also brings useful technologies
developments and innovation in the management of business activities.

6) Effective management: Society gets the benefits of efficient management in terms of

industrial development, justice to different social groups, consumer’s satisfaction and
welfare and proper discharge of social responsibilities.

7) Expansion of business: Expansion growth and diversification of a business unit are

possible through efficient management. It creates good corporate image to a business
enterprise.

8) Stability and prosperity: Efficient management brings success stability and prosperity
to a business enterprise through cooperation and team spirit among employees.

9) Human Development-Management is not simply the direction of things but the

development of men. It improves the personality and calibre of people to raise their
efficiency and productivity.

10) Effective use of managers: Management ensures effective use of managers so that
the benefits of their experience, skills and maturity are available to enterprise.

Scope of Management

1) Production Management
2) Marketing Management
3) Financial Management
4) Human Resource Management

1) Production Management-Production function so as to produce the right goods in right

quantity at the right time and at the right cost. It consists of the following activities:-
a) Designing the product
b) Location and layout of plant and building
c) Operations of purchase and storage of raw materials
d) Planning and control of factory operations
e) Repairs and maintenance
f) Inventory control and quality control
g) Research and development

2) Marketing Management- It refers to the identification of consumer’s needs and

supplying them the goods and services, which can satisfy those wants. The activities are
as follows:-
 a) Marketing research to determine the needs and expectations of consumers
b) Planning and developing suitable products
c) Setting appropriate prices
d) Selecting the right channels of distribution
e) Promotional activities like advertising and salesmanship to communicate with
customers.

3) Financial Management:- Financial management seeks to ensure the right amount and
types of funds to business at the right time and at reasonable cost. The activities are as
follows:-
a) Estimate the volume of funds requires for long term and short term needs of the
business
b) Selecting the appropriate sources of funds
c) Raising the required funds at the right time
d) Ensuring proper utilization and allocation of raised funds
e) Administration of earning

4) Human Resource Management- It involves planning, organizing, directing and

controlling the procurement, development, compensation , maintenance etc. of the
human resources in an enterprise. It consists of the following activities:-
a) Human resource planning
b) Recruitment
c) Selection
d) Training and Development
e) Performance appraisal
f) Compensation and promotion
g) Employee services and benefits
h) Maintaining Personnel recors.

Functions of Management

1. Planning

2. Organizing

3. Staffing

4. Directing

5. Controlling
 1. Planning- Planning is the most basic or primary function of management. It proceeds
other functions because manager plans before he acts. Planning involves determining
the objectives and selecting a course of action to achieve them. It implies looking ahead
and deciding in advance what is to be done, when and where it is to be done, how and
by whom it is to be done.
2. Organizing- Once plans are formulated, the next step is that of organizing. Organizing is
the process of establishing harmonious authority-responsibility relationship among the
members of the enterprise. The network of authority relationships is known as
organization structure. Such a structure serves as the framework within which people
can work together effectively for the accomplishment of common objectives..
3. Staffing- Staffing is the process of filling all positions in the organization with adequate
and qualified personnel. Staffing consists of manpower planning, recruitment, selection,
training, compensation, integration and maintenance of employees .Staffing function
has become important with growing size of organization.
4. Directing- Directing is the managerial function of guiding, supervising, motivating and
leading people towards the attainment of planned targets of performance. Even after
staffing the work of will not start so long as they do not know for what work they have
been recruited in the organization and the manager through the medium of
communication tells them as to what is expected from them or what functions they are
expected to perform. Once the employees start their work it is the duty of the manager
to give them good leadership. When under the leadership of the manager the
employees move ahead, he is supposed to supervise them and solve their problems at
work. After this, it becomes the responsibility of the manger to motivate the employees
so that they work with zeal and dedication. In this way four activities are included in the
function of directing.
I. Supervision- Supervision is an essential element of directing function of management.It
means observing the subordinates at work to see that they are working in accordance
with plans and to help them in solving their problems.
II. Communication- This is a process of passing information and making it understand from
one person to another. A manager has constantly to tell his subordinated as to what
they are to do, how they are to do it and when they are to do it.
III. Leadership- Leadership has an important role in directing. A manager guides his
subordinates through leadership and impresses their conduct also. The important
function of leadership includes directing the work of subordinates, unifying their efforts
and motivating every person in the attainment of the objectives of the organization.
IV. Motivation- Motivation means inspiring the employees of the organization in the work
of achieving its objectives. Among the various resources of production man is the only
active resource who provides movement to the material resources. If man becomes
 lethargic or inactive all other resources automatically become inoperative. It is therefore
necessary that human resource should be motivated to achieve organizational objective.
5. Controlling- Controlling is the last but very important function of management. Under
controlling managers ensure whether the work is being done according to plans or not
and whether the quality and amount of work is as per pre-determined standards. By
comparing the actual results with the pre-determined standards efforts are made to find
out variations. Then corrective action is taken in respect of negative variations so that
the difference between the results obtained and the results desired is reduced to the
minimum possible extent.

Process of Management

Levels of Management
Level of management is to divide authority and responsibility of the organization among the
various managerial positions. Basically management is divided into three levels in which
different managerial functions are to be performed by different managerial positions holders
who are named differently in different levels. Their authorities and responsibilities are
different, however, they all perform well, effectively, efficiently and coordinately the corporate
goals surely achieved.
 Functions of Top level Management
 To formulate and determine the objectives and define the goals of the business.
 To establish policies and prepare plans to attain goals.
 To set up an organizational structure to conduct the operations as per the plans.
 To provide overall direction in the organization.
 To assemble the resources necessary for the attainment of the policy and
execution of the plan.
 To control effectively the business operations.
 To judge and evaluate the results.

Functions of Middle level Management

 To implement the task set by top management.
 To interpret the policies framed by the top management.
 To run the organization effectively and efficiently.
 To cooperate for the smooth functioning of the organization.
 To coordinate between different departments.
 To recruit, select and train the employees for better functioning of the
departments.
 To issue the instructions to the lower level management.
 To motivate the workers and staffs for higher productivity.
 To lead the department and build-up and organizational spirit.
 To report and make suitable recommendations to the top level management for
the better execution of the plans and policies.
Functions of Lower level Management
 To issue the orders and instruction to the workers.
 To supervise and control the performance.
 To plan the activities of the sections.
  To direct and guide the workers about the work procedures.
 To provide on the job training to the workers.
 To arrange necessary tools, equipment, materials for the workers and look after
their proper maintenance.
 To solve the problems of workers.
 To develop sense of co-operation and high group spirit among the workers.
 To advise the middle level about the work environment.
 To inform the unsolved problems of the workers to the middle level management.

Traits/Attributes/Qualities of a successful Manager

1. Communication Skills- This includes both written and spoken communication,
including public speaking. A good manager understands the importance of clear
communication, meaning that his or her instructions are always specific and
unambiguous, presentations are always well prepared and delivered and feedback is
constructive, frequent and effective.

2. Self-Motivation- As the manager the onus is on you to motivate your team – this is
simply not going to happen if you are unable to motivate yourself. Maintaining a
positive outlook is vital, especially on the bleaker days.

3. Flexibility-“The only constant is change.” This saying, make of it what you will, is
particularly relevant to management. One thing you can be certain of as a manager
is that you will be required to adapt to change regularly and without warning – how
well you adapt to this change is what is important.

4. Delegation- Managers with a “I’m the only one who can do this task properly”
attitude soon learn that that’s the quickest way to go crazy with stress. Part of being
a good manager is learning to trust your team enough to delegate work to them, as
well as knowing when and what to delegate.

5. Industry Knowledge- It is essential for a good manager to keep on top of industry

related news and developments, both so s/he can work more effectively in his or her
industry and also to facilitate better networking and relationship building,

6. Confidence- Managers are decision-makers. This means a manager needs to be

able to make decisions with confidence, lead with confidence and stand by his or her
convictions. Any team would find difficulty working with a manager who seems
unpredictable and unsure of himself, just as conversely teams as a whole become
 more confident with a strong leader.

7. Reliability- Are you dependable? Can your team, including juniors and superiors,
rely on you? This is a vital trait that any good manager should have.

8. Mediation -As a manager you will be required to resolve disputes in the

workplace. Are you capable of remaining objective? Can you smooth over issues
before they turn into disputes?

9. Implementing Training- A good manager improves his workforce (both as a whole

and individually) by implementing training to increase skill sets, improve cohesion
among workers and tackle relevant problems within the workplace. Not only does
training create a more skilled workforce but it also boosts morale.

10. Organization
Being organized, in terms of projects, your staff, goals etc. is important for any
manager. Without organization you will be unable to plan effectively, execute goals
or measure you success/failure.

Managerial Roles

Mintzberg has identified ten roles of manager which are grouped into three categories.

Interpersonal, Informational and Decisional

1. Interpersonal Roles
a) Figurehead- In this role a manger performs symbolic duties required by the status of
his office. Making speeches, bestowing honours, welcoming official visitors,
distributing gifts to retiring employees
b) Leader- This role defines the manager’s relationship with his own subordinates. The
manager sets an example, legitimizes the power of subordinates and brings their
needs in accord with those of his organization.
c) Liaison- It describes a manager’s relationship with the outsiders. A manager
maintains mutually beneficial relations with other organizations, governments,
industry groups.

2. Informational Roles
 a) Monitor- It implies seeking and receiving information about his organization and
external events. An example is picking up a rumor about his organization.
b) Disseminator- It involves transmitting information and judgements to the members of
the organization. The information relates to internal operations and the external
environment. Manager calling a staff meeting after a business trip.
c) Spokesman- In this role, a manager speaks for his organization. He lobbies and defends
his enterprise. A manager addressing the trade union is an example.

3. Decisional Roles
a) Entrepreneur- It involves initiating change or acting as a change agent. For example, a
manger decides to launch a feasibility study for setting up a new plant.
b) Disturbance Handler- This refers to taking charge when the organization faces a
problem or crisis. E.g. a strike, feud between subordinates loss of an important
customer. A manager handles conflicts, complaints and competitive actions.
c) Resource Allocator- In this role a manger approves budgets and schedules , sets
priorities and distributes resources.
d) Negotiator- As a negotiator , a manager bargains with suppliers, dealers ,trade unions
,agents etc.

Managerial skills

According toprofessorRobertkartz, all managers require three managerial skills. However ,the
degree of these skills required varies from levels of management and from an organization to
organization.
 1. Technical Skills

Technical skills refer to the ability and knowledge in using the equipment, techniques and
procedures involved in performing specific tasks. These skills require specialized knowledge and
proficiency in the mechanics of a particular job. Ability in programming and operating computer
is, for instance, a technical skill.

There are two things a manager should understand about technical skills

In the first place, he must know which skills should be employed in his particular enterprise and
be familiar enough with their potentially to ask discerning questions of his technical advisers.

Secondly, a manager must understand both the role of each skill employed and the
interrelationships between the skills.

2. Human Skills

Human skills consist of the ability to work effectively with other people both as individual
and as members of a group. These are required to win co-operation of others and to build
effective work teams. An awareness of the importance of human skills should be part of a
manager’s orientation and such skills should be developed throughout the career.

3. Conceptual Skills

Conceptual skills comprise the ability to see the whole organization and the
interrelationships between its parts. Such skills help the manager to conceptualize the
environment, to analyze the forces working in a situation and to take a broad and
foresighted view of the organization.

A manager also needs these extra skills.

4. Diagnostic Skills

Diagnostic skills include the ability to determine, by analysis and examination, the nature
and circumstances of a particular condition. It is the ability to cut through unimportant
aspects and quickly get to the heart of the problem e.g. logical thinking, analytical reasoning
and creativity.

5. Communication skills- Communication skills are required equally at all three levels of
management . A manager must be able to communicate the plans and policies to the
 workers. Similarly he must listen and solves the problems of workers. He must
encourage a free flow communication in the organization.
6. Leadership skills-Leadership skill is the abilityto influence human behavior. A manager
requires leadership skills to motivate the workers. These skills help the manager to
getthe work done through workers.
7. Problem solving skills- A manager should know how to identify a problem. He should
also possess an ability to find best solution for solving any specific problem. This
requires intelligence, experience, and up-to date knowledge of the latest developments.
8. Decision making skills- Decision making skills are required at levels of management.
However it is required more at the top level of management. A manager must be able
to take quick and correct decisions. The success or failure of a manager depends upon
the correctness of his decisions.

Emerging Challenges of Management

1. Globalization: - Globalization phenomenon is getting popular these days. Globalization

of business refers to the free flow of goods service, technology, labor, capital
information, across the national boundary; it is closer economic integration among
different countries in terms of flow of good service, capital labor and technology.
Globalization is the tendency of expanding business in different countries. Managers
have to work in boundary less world. There is no territory or barrier in export and
import business. Globalization invites global competition. Organizations which were
competing locally with local competitors now they have to compete with global
competitors. It is very difficult to organization to survive and develop in such situation.

2. Workforce diversity: - Modern organizations are characterized by workforce diversity.

Diversified workforce is the reality of business these days. Organizations are becoming
heterogeneous in terms of ethnicity, gender, nationality, age group, etc. People having
different religions, different nationality works together under one roof. Different people
have different nature and they show different behavior because they come from
different background. How to manage such diversified workforce is a great challenge for
managers. If such diversified workforce is managed properly, organization will be highly
benefited because they also bring diversified skill and knowledge. But, if they are not
managed properly, they create serious problem.

3. Quality assurance and productivity: - Quality is the ability of the product to satisfy
customers need. How to improve quality of the product or how to assure customers
about the quality of the product has become a great challenge for management. Quality
ensures organizations survival and growth. Organizations use quality to compete with
 competitors. Only improving quality of product organizations can face the global
competition. Therefore, there must be continuous improvement in quality. Quality
improvement has no boundary. It is the race without final line. It is said that people buy
quality not product. And, to improve quality is a really a challenge for management.
Along, with increasing quality to increase productivity again is another challenge for
management.

4. Technological advancement: - How to utilize advanced and sophisticated technology

has become another challenge for management. Technology has developed beyond the
expectation of anybody in the world over last 100 years. Tremendous advancement has
been made in production, distribution and information technology. Managers must
manage all this technology with the development of computer, the face of information
technology has absolutely changed. Introduction of internet, email and other electronic
media, have benefitted organizations in the field of productions, distribution and other
areas of business.

5. Ethics and social responsibility: - Ethics is study of how our decisions affect other
people. It is the study of people’s right and duties. The moral rules the people to make
decisions and the nature of relationship among people. Ethics is to follow social code of
conduct, social norms, values and attitude. The decisions made by managers have a
broad reach both inside and outside the organization. So, managers must follow ethical
norms and consider social responsibilities. Managerial decision must be based on ethical
ground. But, these days ethics id\s decreasing in business world. So, many business
organizations have unethical practice. Because of the unethical practice of some
business houses, all business world is blamed.How to fulfill social responsibility is also a
challenge for management. The concept of corporate social responsibility has
developed. Social responsibility means obligation of business organizations towards
society community, people, share holders, etc. To provide quality product at affordable
price, to develop more and more employment opportunities, to carry out different
development activities in society, to control pollution are some social responsibilities of
business organizations.

6. Innovation and change: - Management must pay attention on innovation and change.
Otherwise, they would go out of business. Rapid innovations are taking place in
technology, product and service. Product lifecycle is getting shorter and shorter. Product
needs continuous improvement if the life span is to be made long. New ideas, new
techniques, new methods are being innovated; there must be new inventions of ideas,
new invention of product. Old and outdated product cannot satisfy customers.
There is change in external environment, political and legal, socio-cultural, economic
and technological environment change rapidly. How to adjust with such change, how to
keep pace with such change, how to keep pace with such change that has become
challenge for management.
 7. Empowerment: - This is the age of empowerment. Role difference between
management and workers has narrowed down. Status between worker and manager is
very narrow. Most of the decisions are taken at operating level. Workers are free to plan
and schedule their work. They are given more and more autonomy and freedom. They
participate in major decision making activities. Joint goal setting and joint performance
evaluation has become common. Self managed work team had been established, more
and more information are given to employees, and how to manage such empower team
has become challenge for managers.

8. Development of Environmentalism: Environmental issues are major issues in

management these days. These issues involve deforestation, global warming, depletion
of ozone layer, toxic waste, and pollution of land, air, and water. These matters draw
the attention of different social, business and political institutions. The mainstream of
politicians and social activists around the world have picked up the environmental
banners.The green movement has spread in Europe, North America and other parts of
the world to maintain the environmental ecology. Therefore, the present managers
have the challenge to develop creative ways to make a profit without harming the
environment in the process of production.

9. Knowledge Management:In this competitive environment, knowledge has become

power. The society expects new ideas, new things, and creativity in product or service
from any organization. To fulfill such social expectations, the manager has to
accumulate knowledge and ideas from all members involved in the organization. A
model manager must be flexible to manage knowledge and should also consider the
situational factor

Social Responsibility of Business

Definition of Social Responsibility

According to Keith Davis – Social responsibility is the obligation of the decision makers to take
decisions which protect and improve the welfare of the society as a whole along with their own
interests.

Why should business be socially responsible

Social responsibility is a voluntary effort on the part of business to take various steps to
satisfy the expectation of the different interest groups. As you have already learnt, the interest
groups may be owners, investors, employees, consumers, government and society or
community. But the question arises, why should the business come forward and be responsible
towards these interest groups. Let us consider the following points:
 1. Public Image - The activities of business towards the welfare of the society earn goodwill
and reputation for the business. The earnings of business also depend upon the public
image of its activities. People prefer to buy products of a company that engages itself
in various social welfare programmers. Again, good public image also attracts honest
and competent employees to work with such employers.

2. Government Regulation - To avoid government regulations businessmen should

discharge their duties voluntarily. For example, if any business firm pollutes the
environment it will naturally come under strict government regulation, which may
ultimately force the firm to close down its business. Instead, the business firm should
engage itself in maintaining a pollution free environment.

3. Survival and Growth -Every business is a part of the society. So for its survival and
growth, support from the society is very much essential. Business utilizes the available
resources like power, water, land, roads, etc. of the society. So it should be the
responsibility of every business to spend a part of its profit for the welfare of the
society.

4. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere,
employees also expect other facilities like proper accommodation, transportation,
education and training. The employers should try to fulfill all the expectation of the
employees because employee satisfaction is directly related to productivity and it is
also required for the long-term prosperity of the organisation. For example, if business
spends money on training of the employees, it will have more efficient people to work
and thus, earn more profit.

5. Consumer Awareness - Now-a-days consumers have become very conscious about

their rights. They protest against the supply of inferior and harmful products by forming
different groups. This has made it obligatory for the business to protect the interest of
the consumers by providing quality products at the most competitive price.

Responsibility towards Different Interest Groups

1. Responsibility towards owners

Owners are the persons who own the business. They contribute capital and bear the business
Risks. The primary responsibilities of business towards its owners are to:

a. Run the business efficiently.

b. Proper utilization of capital and other resources.
c. Growth and appreciation of capital.
d. Regular and fair return on capital invested.

2. Responsibility towards investors

Investors are those who provide finance by way of investment in debentures, bonds, deposits
etc. Banks, financial institutions, and investing public are all included in this category. The
Responsibilities of business towards its investors are:

a. Ensuring safety of their investment,

b. Regular payment of interest,
c. Timely repayment of principal amount.

3. Responsibility towards employees

Business needs employees or workers to work for it. These employees put their best effort
for the benefit of the business. So it is the prime responsibility of every business to take care
of the interest of their employees. If the employees are satisfied and efficient, then the only
business can be successful. The responsibilities of business towards its employees include:

a. Timely and regular payment of wages and salaries.

b. Proper working conditions and welfare amenities.
d. Opportunity for better career prospects.
e. Job security as well as social security like facilities of provident fund, group insurance,
pension, retirement benefits, etc.
f. Better living conditions like housing, transport, canteen, crèches etc.
g. Timely training and development.

4. Responsibility towards suppliers

Suppliers are businessmen who supply raw materials and other items required by
Manufacturers and traders. Certain suppliers, called distributors, supply finished products
to the consumers. The responsibilities of business towards these suppliers are:

a. Giving regular orders for purchase of goods.

b. Dealing on fair terms and conditions.
c. Availing reasonable credit period.
d. Timely payment of dues

5. Responsibility towards customers

No business can survive without the support of customers. As a part of the responsibility of
Business towards them the business should provide the following facilities:

a. Products and services must be able to take care of the needs of the customers.
b. Products and services must be qualitative
c. There must be regularity in supply of goods and services
d. Price of the goods and services should be reasonable and affordable.
e. All the advantages and disadvantages of the product as well as procedure to use
the products must be informed do the customers.
f. There must be proper after-sales service.
g. Grievances of the consumers, if any, must be settled quickly.
h. Unfair means like under weighing the product, adulteration, etc. must be avoided.

6. Responsibility towards competitors

Competitors are the other businessmen or organizations involved in a similar type of business.
Existence of competition helps the business in becoming more dynamic and innovative so as
to make itself better than its competitors. It also sometimes encourages the business to
indulge in negative activities like resorting to unfair trade practices. The responsibilities of
business towards its competitors are:

i. not to offer exceptionally high sales commission to distributers, agents etc.

ii. not to offer to customers heavy discounts and /or free products in every sale.
iii. not to defame competitors through false or ambiguous advertisements.

7. Responsibility towards government

Business activities are governed by the rules and regulations framed by the government. The
various responsibilities of business towards government are:

a. Setting up units as per guidelines of government

b. Payment of fees, duties and taxes regularly as well as honestly.
c. Not to indulge in monopolistic and restrictive trade practices.
d. Conforming to pollution control norms set up by government.
h. Not to indulge in corruption through bribing and other unlawful activities.
8. Responsibility towards society
A society consists of individuals, groups, organizations, families etc. They all are the members
of the society. They interact with each other and are also dependent on each other in almost
all activities. There exists a relationship among them, which may be direct or indirect. Business,
being a part of the society, also maintains its relationship with all other members of the
society. Thus, it has certain responsibilities towards society, which may be as follows:

a. to help the weaker and backward sections of the society

b. to preserve and promote social and cultural values
c. to generate employment
d. to protect the environment
e. to conserve natural resources and wildlife
f. to promote sports and culture
g. to provide assistance in the field of developmental research on education, medical
science, technology etc.
 Business Ethics towards Society

Ethics means norms for the conduct of people in social groupings. Ethics is derived from Greek
word "Ethos" which means culture - the prevalent behavior in the society. Thus, it is a code of
conduct which has social acceptance.
It deals with moral principles and social values. It helps to classify ,what is good and what is
bad? It tells us to do good things and avoid bad things.

Business Ethics can be defined as the critical, structured examination of how people &
institutions should behave in the world of commerce. In particular, it involves examining
appropriate constraints on the pursuit of self-interest, or (for firms) profits, when the actions of
individuals or firms affect others.
According to Andrew crane- Business ethics is the study of business situations, activities, and
decisions where issues of right and wrong are addressed

Features of business ethics

1. Code of conduct: Business ethics is the code of conduct which businessmen should follow
while conducting their normal business activities.
2. Based on moral and social values: Business ethics is based on well-accepted
moral/principal values. It suggests moral of conduct for businessmen. They include self-
control, service to society and fair treatment to social groups and not to harm/ exploit
others.
3. Provides basic framework: Business ethics provides the framework within which business
is to be conducted. It suggests legal, social, moral, economic and cultural limits within
which business has to be operated. It suggests what is good and what is bad in business.
4. Needs willing acceptance for enforcement: Business ethics cannot be enforced by law or
by force. It must be accepted as self-discipline by businessmen. It should come from
within the businessmen.
5. Education and guidance required for introduction: Businessman should be given proper
education, guidance and training in order to motivate them to follow ethical business
practices.
6. Not against profit making: Business Ethics is not against fair profit making. However, it is
against profiteering by cheating and exploiting consumers, employees or investors. It
supports expansion of business activities but by fair means and not through illegal
activities or corrupt practices.
7. Voluntary : Business ethics must be voluntary. The businessmen must accept business
ethics on their own. Business ethics must be like self-discipline. It must not be enforced by
law.

Role or Importance of Business Ethics

1. Stop business malpractices- Some businessmen do business malpractices by indulging

in unfair trade practices like black marketing, artificial high pricing, adulteration,
cheating in weights and measures, selling of duplicate and harmful products etc.
Business ethics helps to stop these business malpractices.
2. Improve customer’s confidence- Business ethics are needed to improve the customer’s
confidence about quality, quantity, price, etc. of the products, The customer have more
trust and confidence in the businessmen who follow ethical rules.
3. Survival of business- Business ethics are mandatory for the survival of the business. The
businessmen who do not follow it will have short term success, but they will fail in the
long run. This is because they can cheat a customer once
4. Safeguarding consumer’s rights- The consumer has many rights such as right to health
and safety , right to be informed right to choose ,right to be heard, right to choose etc.
But many businessmen do not respect and protect these rights. Business ethics are must
to safeguard these rights of consumers.
5. Protecting employees and shareholders- Business ethics are required to protect the
interests of employees ,shareholders, competitors, dealers, suppliers etc. It protects
them from exploitation through unfair trade practices.
6. Develop good relations- Business ethics are important to develop good and friendly
relations between business and society. This will result in a regular supply of good
quality goods and services at low prices to the society.
7. Creates good image- Business ethics create a good image for the business and
businessmen . If the businessmen follow all ethical rules, then they will be fully accepted
and not criticized by society. The society will always support those businessmen who
follow this necessary code of conduct.
8. Smooth functioning- If the business follows all business ethics, then the employees,
shareholders, consumers, dealers, competitors and suppliers all will be happy. So they
will give full cooperation to the business. This will result in smooth functioning of the
business.
9. Consumer satisfaction- Today, the consumer is the king of the market, Any business
simply cannot survive without the consumers. Therefore the main aim or objective of
business is consumer satisfaction.
10. Healthy competition- The business must use business ethics while dealing with
competitors. They must have healthy competition with the competitors.

Factors governing Business Ethics

1. Value Forming Institutions- The value system of an individual is shaped by various

institutions e.g. family, religion, school and the government. These institutions prescribe
what is good or bad for an individual. Right behavior is rewarded while wrong behavior
is punished. This continuous throughout the life of an individual as acquires certain
values through his daily experience in the long run.
2. Organizational goals- The objectives of an organization influence the values of its
members. A business is an economic institution and it must be profitable. The classical
economic theory stressed profit maximization goal. Many times, managers may be
forced to compromise their personal ethical values in order to achieve organizational
goals.
3. Work and career- Work refers to the job and the tasks or responsibilities associated
with it. Career, on the other hand, represents a series of jobs or positions. Each work
has its own values and persons performing the work follow these values. For example,
Sales people may have different values than engineers.
4. Superiors- Most people succumb to pressure from superiors in doing things that they
may consider unethical otherwise. For example, a secretary may tell a visitor that the
boss is out when he is actually in because her boss has told her to do so.
5. Peers and Colleagues- An individual in a work group tends to conform to the norms of
the group. He does so either to get approval or friendship of his colleagues. He adopts
the attitudes, beliefs and values of the group to which he is associated. Thus, the
behavioral standards of the peers and colleagues exercise a significant influence on the
value system of an individual. For example- a person may justify some indiscretions on
the basis that’ everybody is doing’
6. Professional codes- Code of ethics is a written document that outlines the principles of
conduct to be used in making decisions within an organization. These days 3 types of
code are available.
a) Big companies formulate their philosophy or creed to guide the behavior of their
employees. The main objective of these documents is to build the company’s image by
showing the company’s concern for ethical behavior in the society.
b) Company policies contain a code to guide actions that have an ethical conduct i.e. no
discrimination in recruitment on any basis to govern the conduct of their members.
c) In India, the institute of chartered accounts , institute of company secretary of india,
have formulated professional codes. These codes are enforced through fines and even
expulsion of erring members.