Introduction to Business and Management

CHAPTER 1: INTRODUCTION TO BUSINESS

- A society is an association of men brought together by common traditions, beliefs, values, purposes and actions.
- The association of men is called an organization.
Nature of Business
Business- is the process of producing (manufacturing) goods (products) and services and then distributing (selling) them
to those who desire or need them.

Four Factors of Production

1) Natural Resources- These include the Land and the materials that come from the land, such as timber, mineral
deposits, oil deposits, and water.
2) Labor( Human Resource) – This encompasses the mental and physical efforts of all workers regardless of their skill or
education, who perform the many tasks required to produce.
3) Capital- This factor includes the buildings, machinery, and tools used to produce goods and services.
4) Entrepreneurship- This factor refers to the people willing to accept the opportunities and risks of starting and running
a business.

*The objective of most businesses is to maximize profits.

- Profit is the difference between the amounts received from customers for goods or services provided and the amounts
paid for the inputs used to provide the goods or services.

Why do People go into business?

1. Profit 6. Economy and effectiveness of operations
2. Prestige and Popularity 7. Livelihood
3. Family control 8. Power
4. Social Consciousness 9. Protection
5. Satisfaction of Personal Objectives

KINDS OF BUSINESS
1. Commerce- It refers to the transfer or exchange of goods and services with the movement of goods from the point of
production to the point of consumption.

2. Industry- It refers to business firms which are mainly concerned with the production.
Classification of Industry
a.) Genetic Industry- Those involved in agriculture, forestry and Fish Culture
b.) Extractive Industry- Those involved in the extraction of goods from natural resources which include mining,
lumbering, hunting and fishing.
c.) Manufacturing Industry- Those which convert raw materials into a finish product.
d.) Construction Industry- Consists of firms which engaged in building infrastructures.

3. Service- enterprises cater to personal needs of people, the rendering of personal service.
Classification of Service
a.) Recreation- Movie Houses, TV and Radio Station, Theaters
b.) Personal- Restaurant, Hotels, Transportation
c.) Finance- Bank, Insurance Companies, Financing Companies

FORMS OF BUSINESS ORGANIZATIONS

1. Sole Proprietorship- is a business organized by one person who usually acts as manager. As a owner he or she gets all
the profits.
ADVANTAGES:
- Easy to set up and discontinue
-Owner has full control
-Requires small amount of capital to start
-Profit all accrue to the owner
DISADVANTAGES
-Limited source of funds
-Limited management skills
-Unlimited liability ( debts )
-Lack of continuity in case of death or incapacity of owner

2. Partnership- is a contract of two or more persons binding themselves to contribute money, property or industry to a
common fund with the intention of dividing profits among themselves.
ADVANTAGES:
- More source of capital, resources, Knowledge and skills VS. Sole proprietorship
- Easy to set up, manage and control Compared to corporation
- Risk are shared
- More personal and Informal
DISADVANTAGES:
- Profit are shared
- Easily dissolve and unstable
- Mutual agency and unlimited liability May create personal obligations to partner
- Less effective than a corporation in raising large amount of capital

3. Corporation- is an artificial being created by operation of law having the right of succession and the powers, attributes
and properties expressly authorized by operation of law or incident to its existence.
ADVANTAGES:
- Has legal capacity to act as legal entity
-Shareholders have limited liability
-Has continuity of existence
-Ownership can be easily transferred Through stocks
- Management is centralized in the
-Board of directors
- Greater liability to acquire funds
DISADVANATAGES
- More difficult to set up and manage Due to greater requirements Government security
- High cost of formation and operation
- Subject to heavier taxation
- Transferability of shares permits the Uniting of incompatible and conflicting elements in one venture

Types of Business Operations

1. Service Business- is the simplest type of business which performs service, for a fee, to a client or customer.
Ex. Doctors, CPA’s, Lawyers, Nurses, Barber Shops, Airlines

2. Merchandising Business- is one in which buys and sells goods or merchandise. Involved in selling of finished goods
produced by other businesses
*Merchandisers could either be a wholesaler or retailer.

a. Wholesaler Merchandiser- is a company that buys its products from the manufacturer and then sells the product to the
company that eventually sells it to the consumer.
Ex. Macro Inc., Uniwide Corporation
b. Retailer Merchandiser- is a company that buys its products from a wholesaler or manufacturer and then sells the
product to the end consumers.
Ex. Shoemart, Rustan’s Department store, Gift shops, clothing stores

3. Manufacturing Business- buys raw materials first and after changing the form sells the product to the customer.
Ex. Garment Factories, shoe factories, drug laboratories, and
food processing companies, San Miguel Corporation, Toyota Philippines.
Chapter 2: Introduction to Management
Organization and management is twin terms that exists side by side with each other, each one needs and supports the
other. Organizations will be inert and useless if there is no management that will steer it; management will be hollow and
meaningless if there’s no organization to manage. In the real world of administration, organization and management are
essential elements through which human actions and objectives are carried out and accomplished. In a manner of
speaking, organization and management become a means to an end.

1.1 Why Managers are important.

1. Managers are important is that organizations need their managerial skills and abilities more than ever in these uncertain,
complex, and chaotic times. Managers play an important role in identifying critical issues and crafting responses.
2. Managers are important is that they’re critical to getting things done.
3. Finally, managers do matter to organizations!

1.2 Where do Managers work?

- Managers work in organizations

According to Scott and Mitchell as cited in Nigro 1989, “Formal Organizations are a system of coordinated activities of
group of people working cooperatively toward a common goal under authority and leadership.

An organization is a deliberate arrangement of people to accomplish some specific purpose. It can be conceptualized as
collection of individuals deliberately structured within identifiable boundaries to achieve predetermined goals.

Three characteristics of organization:

• Have a distinct purpose (goal) – this purpose is typically expressed through goals that the organization hopes to
accomplish.
• Social entity/people – it takes people to perform work that is necessary for the organization to achieve its goals.
• Designated as deliberately structured and coordinated activity systems – that structure may be open and flexible, with
no specific job duties or strict adherence to explicit job arrangements.

1.3 Who are Managers?

A manager is:
 Someone who coordinates and oversees the work of other people so the set organizational objectives can be achieve.
 A manager’s job is not about personal achievement – but about helping others do their work.
 He/she may have work duties not related to coordinating ad overseeing others’ work. An example, is that an insurance
claims supervisor might process claims in addition to coordinating the work activities of other claims clerks.
Levels of Management
a. Top level managers
-They are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire
organization.
-They are responsible in controlling and overseeing the entire organization.
-These individuals typically have titles such as executive vice president, president, managing director, chief operating
officer, or chief executive officer.

b. Middle level managers

-They manage the work of first-line managers and can be found between the lowest and top levels of the organization.

-Their roles can be emphasized as: executing organizational plans in conformance with company’s policies and
objectives; define and discuss information and policies from top management to lower management; and most
importantly, inspire and guide low-level managers towards better performance.
-They may have titles such as regional manager, project leader, store manager, or division manager.
-They devote their time to organizational and directional functions than top-level managers.

c. First-line managers
-They manage the work of non-managerial employees who typically are involved with producing the organization’s
products or servicing the organization’s customers.
-They usually have responsibilities of assigning employees’ tasks, guiding employees on a day-to-day basis, and making
suggestions and recommendation.
-First-line managers may be called supervisors, or even shift managers, district managers, department managers or office
managers.

There are many definitions given by some of the management experts are as follows:
 Henri Fayol: “Management is conduct of affairs of business, moving towards its objectives through a continuous
process of improvement and optimization of sources”.

 Koontz: “Management is the process of designing and maintaining an environment in which individuals, working
together in groups, efficiently accomplish selected aims”.

 Mary Parker Follet: “Management is the art of getting things done through people”.

 George R. Terry: “Management is a process consisting of planning, organizing, actuating, and controlling, performed to
determine and accomplish the objectives by use of people and resources”.
Management involves coordinating and overseeing the work activities of others so that their activities are completed
efficiently and effectively.
Simply speaking, management is what managers do.

EFFICIENCY
- Efficiency measures the relationship between inputs and outputs, or how successfully the inputs have transformed into
outputs.
- Often referred to “doing things right” – it is getting the most output from the least amount of inputs. Because managers
deal with scare inputs including resources such as people, money and equipment.
- Emphasize on input and output; focuses on the process

EFFECTIVENESS
- It measures the degree to which a business achieve its goals, or the way outputs interact with the economic and social
environment.
Zheng, 2010, stated that effectiveness determines the policy objectives of the organization.
- It is often described as the “doing the right things”- that is, doing those work activities that will help the organization to
achieve its goals.
- Emphasize on means and ends; focuses on the result
- Measures if actual output meets desired output

In spite of this, management researchers have developed three approaches to describe what managers do:
functions, roles, and skills.

1.3.1 Management Functions

-According to the functions approach, managers perform certain activities or functions as they efficiently and effectively
coordinate the works of others.
-Henri Fayol, a French businessman, first proposed in the early part of the twentieth century that all managers perform
five functions: planning, organizing, commanding, coordinating, and controlling.
-Today these five functions were condensed into four: planning, organizing, leading, and controlling.

Functions of Management
-PLANNING Management function that involves setting goals, establishing strategies for achieving those goals, and
developing plans to integrate and coordinate activities.
-ORGANIZING Management function that involves arranging and structuring work to accomplish the organization’s
goals.
-LEADING Management function that involves working with and through people to accomplish organizational goals.
-CONTROLLING monitoring, comparing, and correcting work performance.
1.3.2 Mintzberg’s Managerial Roles and a Contemporary Model of Managing Henry Mintzberg,
- a well-known management researcher, studied actual managers at work. In his first comprehensive study, Mintzberg
concluded that what managers do can best be described by looking at the managerial roles they engage in at work.

The term managerial roles refers to specific actions or behaviors expected of and exhibited by a manager.

These 10 roles are grouped around interpersonal relationships, the transfer of information, and decision making.
1. The interpersonal roles are ones that involve people (subordinates and persons outside the organization) and other
duties that are ceremonial and symbolic in nature. The three interpersonal roles include:
*figurehead- performs social or legal duties
*leader- direct and motive train employees
*liaison- establish and maintain contact within or outside the organization

2. The informational roles involve collecting, receiving, and disseminating information. The three informational roles
include:
monitor- seek and acquire information
disseminator- communicate the info to the other organization
spokesperson- transmit info to outsiders

3. Finally, the decisional roles entail making decisions or choices. The four decisional roles include:
*entrepreneur- identify new ideas and initiate new projects
*disturbance handler- deals with dispute problems
*resource allocator- decides where to allocate the resources
*negotiator- defends business interest

“Basically, managing is about influencing action. It’s about helping organization and units to get things done, which
means action”. Based on his observations, Mintzberg went on to explain that a manager does this in three (3) ways:
• By managing actions directly (for instance, negotiating contracts, managing projects, etc.)
• By managing people who take action (for example, motivating them, building teams, enhance the organization’s culture,
etc.)
• By managing information that propels people to take action (using budgets, goals, task delegation, etc)

The manager at the center of the model has two roles – framing, which defines how a manager approaches his or her job;
and scheduling, which “brings the frame to life”
1.3.3. Management Skill
Robert L. Katz is an American social and organizational psychologist. He created the concept of managerial skills, which
describes how the required skills structure changes, depending on the management level. What types of skills do managers
need? Robert L. Katz proposed that managers need three critical skills in managing:
TECHNICAL SKILL- Are specific job knowledge and techniques needed to proficiently perform work ta
HUMAN SKILL- it relates to the ability to work with people both individually and in group. Because all managers deal
with people, these skills are equally important to all levels of management.
CONCEPTUAL SKILL- These are skills managers use to think and conceptualize about abstract and complex
situations.

Structural Elements (5 M’s) of Management

1. Money – it is the most critical and all-purpose resource because it used to acquire or hire other resources. In
organization, money is employed to generate more in the forms of profit or income.
2. Manpower – it refers to the managerial and non-managerial personnel employed in an organization
3. Materials – represent the physical raw materials and intermediate products which are converted and/or assembled into
finished products with the help of certain process and technology.
4. Machinery – machines are the equipment used to process the materials into semi-finished or finished products. With
the used of modern machinery, they help to improve quality and reduce cost so they become an important ingredient in the
efficient management of management.
5. Methods – refers to the normal and prescribed way of doing things. Various operations are performed according to
certain systems and procedures.