Definition of Management

• Management is the process of designing an

environment in which individuals working together in
groups efficiently accomplish selected aims

• Management is the art of getting things done through

and with the people in formally organised groups.

• Management is defined for conceptual, theoretical

and analytical purposes as that process by which
managers create, direct, maintain and operate
purposive organisation through systematic,
coordinated co-operative human effort.

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 Features of Management
• Existence of Objectives.
• Organised Activities
• Relationship Among Resources
• Working with and Through People
• Decision Making

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 Management Levels & their Functions
Establish Objectives Chairman of the BOD,
(Goals), policy and President, CEO, VPs, Chief
strategy, make long term Top Operating Officer
decisions. Management
Interpret directives given Directors, Area Managers,
by top management into Middle Plan Managers, Divisional
operating plans and make Management & Departmental Managers
implementation

Direct and support work

of non-managerial First line First Line Managers
personnel, makes short- Management (also called & Officers
term decisions at the supervisors)
operational levels

Perform variety
of task using Non-managerial personnel:- Operators,
technical skills Professionals, Technicians, workers,
labourers etc.
Functions of Management
Planning
Planning is the process of determining the
organization’s goals and objectives and
selecting a course of action to accomplish
them within the environment inside and
outside the organization.

Planning includes both the broadest view of the

organization, e.g., its mission, and the
narrowest, e.g., a tactic for accomplishing a
specific goal.
Organizing

Organizing is establishing the internal

organizational structure of the organization.
The focus is on division, coordination, and
control of tasks and the flow of information
within the organization. It is in this function
that managers distribute authority to job
holders.
Directing

• Directing is influencing people's behavior

through motivation, communication, group
dynamics, leadership and discipline.

• The purpose of directing is to channel the

behavior of all personnel to accomplish the
organization's mission and objectives while
simultaneously helping them accomplish their
own career objectives.
Staffing

Staffing is filling and keeping filled with

qualified people all positions in the business.
Recruiting, hiring, training, evaluating and
compensating are the specific activities
included in the function. In the family
business, staffing includes all paid and unpaid
positions held by family members including
the owner/operators.
Controlling

Controlling is a four-step process of

establishing performance standards based on
the firm's objectives, measuring and reporting
actual performance, comparing the two, and
taking corrective or preventive action/s, if
necessary.
 Strategic Decisions
• The long-term direction of the organisation
• The scope of an organisation’s activities
• Gaining advantage over competitors
• Addressing changes in the business
environment
• Building on resources and competences
(capability)
• Values and expectations of stakeholders which
affect operational decisions
 Strategic Decisions
• Be complex in nature
• Be made in situations of uncertainty
• Affect operational decisions
• Require an integrated approach (both inside
and outside an organisation)
• Involve considerable change
 Strategy
• Strategy is the direction and scope of an
organisation over the long term, which
achieves advantage in a changing
environment through its configuration of
resources and competences with the aim of
fulfilling stakeholder expectations.
 Understanding the Environment
• Diversity
– Many different influences
• Complexity
– Interconnected influences
• Speed of change
– Particularly ICT
Layers of the Business Environment
Macro-environment – PESTEL
Macroenvironment – PESTEL

Political Economic
• Government stability • Business cycles
• Taxation policy • GNP trends
• Foreign trade • Interest rates
regulations • Money supply
• Social welfare policies
• Inflation
• Unemployment
• Disposable income
Macroenvironment – PESTEL
Sociocultural Technological

• Population demographics • Government spending on

• Income distribution research
• Social mobility • Government and industry
focus on technological
• Lifestyle changes effort
• Attitudes to work and • New discoveries
leisure /developments
• Consumerism • Speed of technology
• Levels of education transfer
• Rates of obsolescence
Macroenvironment – PESTEL

Environmental Legal
• Competition law
• Environmental • Employment law
protection laws • Health and safety
• Waste disposal • Product safety
• Energy consumption
Key Aspects of PESTEL Analysis

• Not just a list of influences

• Need to understand key drivers of change
• Drivers of change have differential impact on
industries, markets, and organisations
• Focus is on future impact of environmental
factors
• Combined effect of some of the factors likely
to be most important
 Analysis of the strategic environment

• A scan of the internal and external

environment is an important part of the
strategic planning process.

• Environmental factors internal to the firm

usually can be classified as strengths (S) or
weaknesses (W), and those external to the
firm can be classified as opportunities (O) or
threats (T).
 SWOT analysis
• The SWOT analysis provides information that
is helpful in matching the firm's resources and
capabilities to the competitive environment in
which it operates
 SWOT Analysis Framework
Environmental Scan
/ \
Internal Analysis External Analysis
/ \ / \
Strengths Weaknesses Opportunities Threats

SWOT Matrix
Strengths….
• A firm's strengths are its resources and
capabilities that can be used for developing a
competitive advantage. Examples of such
strengths include:

• Patents
• Strong brand names
• Good reputation among customers
• Cost advantages from proprietary know-how
• Exclusive access to natural resources
• Good access to distribution networks
Weakness….
• The absence of certain strengths are a
weakness. For example, the following may be
considered weaknesses:

• Lack of patent protection

• A weak brand name
• Poor reputation among customers
• High cost structure
• Lack of access to best natural resources
• Lack of access to key distribution channels
OPPORTUNITY….
• An OPPORTUNITY is a chance for firm growth
or progress due to a favorable juncture of
circumstances in the business environment.

• Possible Opportunities:
– Emerging customer needs
– Quality Improvements
– Expanding global markets
– Vertical Integration
THREAT….
• A THREAT is a factor in your company’s
external environment that poses a danger to
its well-being.

• Possible Threats:
– New entry by competitors
– Changing demographics/shifting demand
– Emergence of cheaper technologies
– Regulatory requirements
– shifts in consumer tastes
– increased trade barriers
 SWOT / TOWS Matrix
• To develop strategies that take into account
the SWOT profile, a matrix of these factors can
be constructed.

• The SWOT matrix, can be changed into what

is known as the TOWS Matrix that is shown on
the next slide:
 SWOT / TOWS Matrix
TOWS Strengths Weaknesses
Analysis
Opportunities S-O W-O
Strategies Strategies

Threats S-T W-T

Strategies Strategies
 TOWS Matrix
• S-O strategies pursue opportunities that fit
well the company's strengths.
• W-O strategies overcome weaknesses to
pursue opportunities.
• S-T strategies identify ways that the firm can
use its strengths to reduce its vulnerability to
external threats.
• W-T strategies make a defensive plan to
prevent the firm's weaknesses from making it
susceptible to external threats
Layers of the Business Environment
Changing Boundaries of Industry
• Convergence
– Where Previously separate industries begin to overlap in
activities, technologies, products and customers.
E.g.: Computing-telecommunication-entertainment.
Two sets of ‘forces’
– Supply-led, e.g.
• bundling and unbundling of sectors in public services
• externally driven by government regulation
• externally driven by e-commerce trends
– Demand-led, e.g.
• Substitution of one product by another (TV/PC)
• Customers want bundling of complementary products (Tourism-
holiday)

• Convergence-Creates new market segments

 The purpose of
Porter’s Five-Forces Analysis

• The five forces framework helps to identify the

attractiveness (Profit potential) of an industry.
• company’s ability to compete in a given market.
• The purpose of five-forces analysis is to
diagnose the principal competitive pressures in
a market and assess how strong and important
each one is.
• Gaining advantage over competitors
 Five Forces Analysis:
Key questions and implications
• Are some industries more attractive than others?
(weaker forces)
• What underlying forces in the macro-environment
drive the competitive forces?
• Will competitive forces change?
• What are the strengths and weaknesses of the
competitors in relation to the competitive forces?
• Can competitive strategy influence competitive
forces? (e.g. build barriers to entry)
The Five Forces Framework
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants
 Threat of New Entrants
Economies of Scale

Barriers to Product Differentiation

Entry
Capital Requirements

Access to Distribution Channels

Customer or supplier loyalty

Government Policy

Expected Retaliation
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining
Power of
Suppliers
 Bargaining Power of Suppliers
Suppliers are likely to be powerful if:

Supplier industry is dominated by a few firms

Supplier power
Suppliers’ products have few substitutes
* Threatening to raise
prices or to reduce quality Buyer is not an important customer to supplier

Powerful suppliers can

squeeze industry Suppliers’ product is an important input to
buyers’ product
profitability if firms
are unable to recover
Suppliers’ products are differentiated
cost increases
Suppliers’ products have high switching costs

Supplier poses credible threat of forward

integration
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining Bargaining
Power of Power of Buyers
Suppliers
 Bargaining Power of Buyers
Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases are large

relative to seller’s sales
Buyer Power
Purchase accounts for a significant fraction of
supplier’s sales

Products are not differentiated * Bargaining down prices

Buyers face few switching costs * Forcing higher quality

Buyer has full information

Product unimportant to quality

 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining Bargaining
Power of Power of Buyers
Suppliers

Threat of
Substitute
Products
 Threat of Substitute Products
Keys to evaluate substitute products:

Products with improving price/performance

tradeoffs relative to present industry products
Products with
similar function
Example:

Product for product substitution

e.g. email for post
Electronic security systems in place of security guards

Generic substitution
competition for household income,
e.g. cars versus holidays
 Porter’s Five Forces
Model of Competition
Threat of
Threat
New of New
Entrants
Entrants

Bargaining Bargaining
Power of Power of Buyers
Suppliers
Competitive Rivalry
(Among Competing Firms)
in Industry

Threat of
Substitute
Products
 Rivalry Among Existing Competitors

Competitive rivals are organisations with similar products and

services aimed at the same customer group = direct competitors

Intense rivalry often plays out in the following ways:

Using price competition

Staging advertising battles
Increasing consumer warranties or service
Making new product introductions
 Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when:
Numerous or equally balanced competitors
Slow growth industry
High fixed costs
Lack of differentiation or switching costs
Capacity added in large increments
Diverse competitors
High exit barriers
 The Five Forces are Unique to
Your Industry
• Five-Forces Analysis is a framework for
analyzing a particular industry.
– Yet, the five forces affect all the other businesses
in that industry.