Chapter 2

Managing a business

201053_Ch2_Managing a business 1
 Topic list
1. What is management?
2. Power, authority, responsibility, accountability and delegation
3. Types of manager
4. The management hierarchy
5. The management process
6. Managerial roles
7. Culture
8. Management models
9. Business functions
10. Marketing
11. Operations & production
12. Procurement
13. Human resource management (HRM)
14. Information technology
15. Introduction to organizational behavior

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 1. What is management?

Management: ‘Getting things done

through other people’ (Metcalf and Harper, 1942)
Managers: act on behalf of owners in the
organisation

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 2. Power, authority, responsibility,
accountability & delegation

POWER
POWER

Power – the ability to get things done

Note that power is not something a manager

has in isolation. It depends on the
individuals or groups being managed
recognising the manager’s power over
them
QB: Q1, Q2
201053_Ch2_Managing a business 4
 Six types of power

Coercive power Reward (or Legitimate (or

resource) power position) power
Power of
physical force Based on access to Associated with
or punishment or control over a particular
valued resources position in the
organisation

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 Six types of power

Expert power Referent (or Negative

Based on personal) power
experience, power The power to
qualifications Based on disrupt
or expertise personality or operations
‘charisma’

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 authority
Authority – the right to do something, or to ask someone
else to do it and expect it to be done
Discuss: Relate Authority to Legitimate power (Recall:
Legitimate power: related to a particular position)?
- Why do a manager have authority?
- Because s/he in the position of being a manager!
- So, authority is thus another word for legitimate
(position) power!

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Responsibility and accountability

Responsibility The obligation to fulfil a task

to account for
Accountability The liability the fulfilment
of the task

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 Delegation

• Delegation – the act of delegating (‘passing’) a

particular job, duty, right, etc. to someone

• Delegation: one may make subordinates (ones

having lower positions) responsible for work, but
remains accountable to his/her own
superior/manager

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 Types of managers

• According to types of authority, there are four types of

managers:
- Line manager: authority
- Staff manager: specialist advice - no line authority
- Functional manager: has functional authority (hybrid):
✓Specialist
✓Authority
- Project manager: authority (temporary) + line manager

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4. The management hierarchy

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 5. The management process
-Specific aims
-What is needed
-Resources
Planning -Objectives, plans, targets
-Amendments (if necessary)

E.g. motivating staff

Leading Organising

Allocation of resources
including: process, technology,
- Monitor events people
- Remedial actions -Co-ordination of those
Controlling resources within timeframes
(if necessary)
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 6. Managerial roles
• Management process: sets out what
managers have to achieve and how
• Management roles: what management
actually do – 3 key roles (Henry Mintzberg)

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 6. Managerial roles

Planning Organising Controlling Leading

Informational Interpersonal Decisional

• Communicating data • Role of a leader • Allocate resources

information • Linking within/ out • Handle disturbances
of the team • Negotiate for what
they need
• Solve problems
• Act as entrepreneur
– spotting markets

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 Business culture
• Definition:
• Culture: The common assumptions,
values and beliefs that people share –
‘the way we do things around here’

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 Business culture
• The tension between having flexibility and
control
- Control may harm the performance of
members. For example, if I put control on you
– to finish all the questions in chapter 1 in two
days
• + Advantage: motivation
• + Disadvantage: pressure
- Flexibility: less pressure but may lead to
demotivating
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 Business culture
• Flexibility

Human Open
relations systems
culture culture
• Inward- • Outward-
looking looking

Internal Rational
process goal
culture culture

• Control
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 Business cultural types
Internal Human
Rational goal Open systems
process relations
• Looking inwards • The business is • Looking • Looking
• Aiming to make controlled inwards outwards to
its internal • To achieve goals meet
environment that satisfy • Acting with opportunities
stable and external flexibility to from the
controlled requirements meet their external
• Goals are • The business is needs. Staff environment
known and structured and are • Flexibility in the
unchanging, controlled so as motivated by sense that staff
there are rules to deal is motivated by
the sense of challenges and
and procedures effectively with
outside world belonging need for
• Eg: public sector
organisations • Eg: Large • Eg: Support creativity
established service units • Eg: technology
businesses business

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 8. Management models
• Introduction:
• Complex realities such as those found in
businesses can be ‘modelled’ or
described fully, so that their workings can
be understood and the effects of future
policies and decisions can be predicted

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 The rational goal model of management
• The rational goal model: see effectiveness through the
reason why the business does something – that is, its goal
• Federick Taylor’s ‘scientific management’ model in 1915 –
analysed factory work
- Detailed control of every last part of the process
- Individual initiative was not part of the equation

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The rational goal model of management

TO ACHIEVE GOALS THAT SATISFY

EXTERNAL ENVIRONMENT

Five principles of scientific

management
• Determine one best way
• Select best person
• Follow procedures
precisely
• Financial incentives
• Responsibility given to
manager
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The internal process model of management
• Looking inwards – how the organisation is doing things,
not at why

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The internal process model of management

TO MAKE ITS INTERNAL

ENVIRONMENT STABLE AND
CONTROLLED

Management tends to find:

• Rationality – most efficient means
• Hierarchical lines of authority
• Rules and procedures
• Division of labour: HR,
marketing,…
• Impersonality: KPIs
• Centralisation
24
 9. Business functions
• Functions: that need to be performed in a
business depend on many variables such as: its
industry, geographical locations, etc
• Key functions of a business:
- Marketing – including sales and customer service
- Operations or production – including R&D and
procurement
- Human resources
- Finance
- Information technology

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 10. Marketing
• Session overview:
Consumer vs.
Customer vs.
Marketing Industrial Marketing mix
consumer
markets

Market Marketing Product

Price
segmentation orientation marketing

Right place Push and Pull

Distribution Promotion
and right time techniques

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 What is marketing?
• Definition:
- Marketing: The set of human activities
directed at facilitating and consummating
exchanges. It therefore covers the whole
range of a business’s activities
• OR
- Marketing: The management process which
identifies, anticipates and supplies
customer requirements efficiently and
profitably

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 Customer vs. consumer

• A customer buys a product

• A consumer uses a product
(Both groups need to be targeted)
• Can a customer and a consumer be the same
person?
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Consumer and industrial markets

Consumer markets: Industrial markets:

markets for products
and services bought by
individuals for their
own or family use
markets where one
business serving as a
consumer purchases
goods or services from
another business

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 Consumer markets
• Goods bought by consumers can be
categorised in several ways:

FMCG (fast-moving Consumer durables Services: deliver

consumer goods) • Low volume intangible goods or
• High volume • High value services
• Low unit value • Last for three or more • Insurance
• Fast repurchase years
• Broadband
• Eg: food • Eg: electronic devices
• Utilities
and appliances,
vehicles, services, etc. • Holidays

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 The marketing mix
• Definition:
• Marketing mix: the set of controllable
marketing variables that a firm blends to
produce the response it wants in the target
market
• (Blend: to mix or combine together)

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 The marketing mix
(4Ps for tangible products)
PRODUCT
PRICE PROMOTION PLACE
(Quality of the
product)
• Prices • Advertisement • Distribution
• Suitability for • Discount • Sales promotion channel
stated purpose • Promotion • Public relations • Website selling
• Aesthetic factors pricing • Salesmanship • Outlets location
(beauty) • Methods of (sale skills) • Warehouses
• Durability purchases location
• Brand factors • Alternatives to • Inventory levels
• Packaging outright • Delivery
• Associated purchase frequency
services • Geographic
market
definition
• Sales territory
organisation

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 The marketing mix
(adding 3Ps for service products)
PHYSICAL
PEOPLE PROCESSES
EVIDENCE
• The people • Enquiries and • Physical substance
employed by the reservations such as:
service deliverer • Registration • Logos
procedures • Staff uniforms
• Timing of when the • Store layout/design
service is consumed
• After-sales services

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 Market segmentation

• Definition:
• Market segmentation: the division of the
market into homogeneous groups of
potential customers who may be treated
similarly for marketing purposes
• For your convenience: marketing purpose
is to attract attention and create interest

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 Example of market segmentation
(Ford automobile)
Segment of market
High income groups
Families with children
Low income groups
Target segment by
emphasizing on:
Promotion- to create
the image quality,
status
Product- size, safety
Price-low; Product-
economy

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 Marketing orientation and
alternatives
• Basis for operations: identify and satisfy
Marketing needs of potential customers
orientation
• Main purpose: sell as much as possible
Sales orientation their existing products or services

Production • Main purpose: making as many units as

possible
orientation

Product • Main purpose: develop their products

orientation
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 product
• Product: anything that can be offered to a
market for attention, acquisition, use or
consumption that might satisfy a want or a
need
• It includes: physical objects, services,
persons, places, organisations and ideas
• Marketers tend to consider products not
as ‘things’ with ‘features’ but packages of
‘benefits’ that satisfy a variety of
consumer needs
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 Three main elements of a product

Basic (core) Actual product Augmented

product • Develop product product
• Main and service
features, design,
(additional
purpose/real
benefits a quality level, a benefits and
• E.g. a car – to
brand name, and services)
packaging
travel, shoes – to • Warranty
protect feet • Access to website

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 From basic to actual and
augmented product

Augmented
product

Actual
product

Quality Design
Basic
(core)
product Aesthetics

Brand name
Packaging

Services (warranty, delivery,

product support)
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 Price (4Cs)
• Price should be above total cost
Costs

• Monopoly (prices are subject to government control)

Competitors • Competitive markets: Prices should be comparable to
those of competitors

• Price elasticity - how customer demand is affected by

Customers changes in price

Corporate • Possible pricing objectives: profits maximisation, return

on investment, revenue, market share, competition,
objectives etc.
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 Place (distribution)
• Place (distribution): the idea of putting
products in adequate quantities, in the
convenient locations and times

• Basic decision:
- Sell direct to customers
- Use intermediaries (wholesalers and
retailers)

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 Advantages of selling direct/using
intermediaries
Advantages of selling Advantages of using
direct intermediaries
- No need to share profit - More efficient logistically
margins - Costs usually lower
- Control over the ultimate - Consumers expect
sale choice at the point of
- Speed of delivery sale
- Producers may not have
sufficient resources to
sell direct
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 Promotion
• Promotion: activities (usually involve
communication) to inform customers about the
product and to persuade them to buy.
• There are 05 main types of promotion:
– Advertising
– Sale promotion (buy 01 get 01 free)
– Public relation
– Digital marketing (on social media or websites)
– Direct marketing
– Personal selling

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 Promotion techniques
• Push technique: ensure products/services are available to
consumers by encouraging intermediaries to stock items
• Pull technique: persuade consumers to buy

Pull: persuading the

PUSH ultimate consumers
to buy

Push: ensuring
products/services PULL
are available to
consumers
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 Operations and production
• Operations (or production) management: managing the
process of transformation from inputs (materials, labour,
other resources, information) to outputs (products and
services)
• The ‘four Vs’ of operations:
- Volume: how many units of inputs and outputs; high volume
➔ low unit cost and low volume ➔ high unit cost
- Variety: the range of various products or services; high variety
➔ high unit cost and low variety ➔ low unit cost
- Variation in demand: the degree to which demand is
fluctuated; high variation ➔ high unit cost and vice versa
- Visibility: the extent to which an operation can be seen by its
customers; high visibility (need communication) ➔ more
expensive and vice versa
201053_Ch2_Managing a business 46
 Operations management
• Key variables:
- External and internal demand for goods/services
- Resources
- Capacity (the ability of the business in terms of
long-term and short-term assets to produce
goods and services)
- Inventory levels
- Performance of the process

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 Research and Development

Applied
Pure research Development
research

Research to Research which Use existing

obtain new has obvious technical
scientific or commercial or knowledge to
technical practical end in produce and
knowledge or view test new (or
understanding improved)
- Product
products or
(no specific research
systems, prior
commercial or - Process to commercial
practical) research production

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 Procurement
• Procurement: the acquisition of goods and/or
services at the best possible total cost of
ownership, in the right quantity and quality, at
the right time, in the right place and from the
right source.
• Procurement may be part of the operations
function or it may be a function on its own

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Procurement mix (4 elements)
Quantity: size
and timing of ‘Lead
Quality:
orders time’:
- Time: delays The quality Price:
This is the
in production of input Trends of
caused by time
resources prices
insufficient between
inventories affects the
placing and
quality of
- Cost of delivery of
holding outputs
an order
inventories

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 Procurement and Supply Chain
• Procurement team helps secure competitive
advantage if it can manage the links between the
organization and its suppliers and customers as
part of supply chain.
• Supply chain: the network of organizations, their
systems, resources, and activities that are
required to turn raw resources into a product or
service provided to a customer.
– Upstream supply chain members: the elements of the
supply chain which provide materials and production
of the goods and services.
– Downstream supply chain members: the elements of
the supply chain that are involved after the product
has been manufactured or provided
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 Human resource management
• Human resource management (HRM): ‘The creation, development
and maintenance of an effective workforce, matching the
requirements of the business and responding to the environment’
(Naylor)
• Workforce – related functions:
- Personnel planning and control
- Production of job description
- Development of policies relating to employment standards
- Designing remuneration packages

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 Human resource management
• Aspects of HRM relates to line managers:
- Performance appraisal
- Discipline
- Identifying training needs
- Recruitment and selection

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Different approaches to HRM - activity
Hard approach
Emphasis the resources of
HRM. Human resources are
planned and developed to
meet wider objectives of
business, as with any other
resources like money and
materials. It involves
managing functions of HRM
to maximise employee
effectiveness and control
staff cost.
Soft approach
Emphasis the human
element of HRM. It is
concerned with employee
relation, development of
individual skills and welfare.
- Short term commitment
- Long term individual well-
being

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The Harvard four Cs model of HRM
• Employees’ motivation, loyalty and job
Commitment satisfaction. Measures can include labor
turnover ratio.

• Employees’ skills, abilities and potential,

Competence measured by skills & knowledge
appraisal

• The extent to which management and employees

Congruence share a common vision (hence consistent actions).
Evidence of congruence can include absence of
grievances, conflicts, etc

Cost- • Operational efficiency and productivity –

in comparison to those of competitors
effectiveness
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 Information Technology
Management Action Advice
Monitoring It is vital to maintain an awareness of
potentially useful developments and any
compliance obligations of IT such as cloud
computing, automation, cognitive
technologies
Planning IT functions and effective management
require careful planning and preparation
to ensure smooth run.
Structure IT management tasks should be
prioritized and documented.
Staffing and skills IT team requires right people to be
recruited and retained

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 Introduction to organizational
behaviors
Organisational Covert Morgan’s
Overt variables
behaviour variables metaphors

Remuneration
Scientific Theory X and Maslow’s
– a hygiene
management Theory Y hierarchy
factor

Development
Effectiveness
Effective teams stages of Key roles
of a manager
groups

Leadership
Delegation
style
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 What is organisational behaviour
• Organisational behaviour: the study and
understanding of individual and group
behaviors in an organizational setting
• => Not about human behaviour, but about
how how people’s behavior interlinks with the
business’s formal structure, the tasks to be
undertaken, the technology and processed,
the management process and external
environment

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The organisational iceberg

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 Motivation
• Motivation: the degree to which a person
wants certain behaviors and chooses to
engage in them
• Motivated workers are characterized by:
- Higher productivity
- Better quality of work
- Greater sense of urgency
- Have feedback and suggestions
- Demand for feedback and suggestions
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Maslow: the hierarchy of needs
People
Self-
have needs Actualization
needs

Status/ego
Goals and strategies needs
are formed to meet
those needs Social needs

Safety/security
needs

Behaviors Basic/physiological
needs

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 Group behaviour
The usefulness of groups:
- For business, groups are used to:
⁻ Bring together skills
⁻ Plan and organize
⁻ Solve problems/take decisions
⁻ Distribute info
⁻ Make awards
⁻ Coordination between departments
- For individuals in business, groups are useful to:
- Satisfy social and status needs
- Give support
- Provide social contact and personal relationship

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 Stages of group development
Forming: a collection of individuals who are
seeking to define the purpose of the group and
how it will operate

Storming (conflict stage): preconceptions,

norms, behaviours are challenged and rejected.
Roles within the group are chosen

Norming: Norms are established – how the

group will take decisions, behaviour patterns,
etc.

Performing: Difficulties of adjustment,

leadership contests etc should have been
resolved
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 Team roles
Leader • Co-ordinating

Shaper • Promoting activity

Plant • Provoking thoughts/ideas

Evaluator • Critising

Resource-investigator • Bridging ideas

Company worker • Turn general ideas into specific

Team worker • Concern with the team relationship

Finisher • Ensure timetables are met

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 Leadership styles
• Manager’s effectiveness is influenced by their:

Authority over Autonomy given to

subordinates subordinates

Leadership – exercising
power to win a willing and
positive response from
subordinates

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Likert’s authoritative-participative
Exploitative- Benevolent- Consultative Participative
authoritative authoritative
-Decisions are - Leadership is a - Superiors have - Superiors have
imposed by form of master- substantial but not complete
managers servant totally trust in confidence in
- Subordinates are - Subordinates are subordinates subordinates
motivated by motivated by - Motivation by - Motivation by
threats rewards rewards rewards
- Authority is - Some degree of - Increasing degree - High degree of
centralized delegation of delegation delegation
- Little - Little - Some degree of - Much
communication communication communication communication
- No teamwork - Little teamwork - Moderate - Substantial
teamwork teamwork

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 Delegation
• Delegation: involves giving a subordinate
responsibility and authority to carry out a
given task, while the manager retains overall
accountability

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 Delegation
- Manager can relieved of activities
- Enables decisions to be taken nearer to the point of impact and without
delays
- Chance to meet changing conditions
- Subordinates’ jobs more interesting
Advantages - Career development
of - Bring together skills and ideas
delegation
- Motivational team aspect
- Performance appraisal
- Too much supervision
Problems - Too little supervision
caused by - Manager uses delegation to ‘pass the buck’
poor - Only delegation of boring work
delegation - Delegation of impossible tasks
- Not enough delegation
- Subordinates being lack of skills

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• END OF CHAPTER 2
• THANK YOU!

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