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
201053_Ch2_Managing a business 2
 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
201053_Ch2_Managing a business
QB: Q1, 4Q2
Six types of power

Coercive Reward (or Legitimate (or

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

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Six types of power

Expert Referent (or Negative

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

201053_Ch2_Managing a business 6
 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

The
Responsibility 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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 3. 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:
✓ Specialist
✓ Authority
- Project manager: authority (temporary) + line manager

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 4. The management hierarchy

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5. 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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Managerial roles

Informational Interpersonal Decisional

• Communicating • Role of a leader • Allocate

data • Linking within/ resources
information, or out of the team • Handle
acting as disturbances
“spokesperson” • Negotiate for
for his/her own what they need
team
• Solve problems
• Act as
entrepreneur –
spotting markets

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 6. 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 process Rational goal Human relations Open systems

• Looking • The business is • Looking inwards • Looking

inwards controlled • Acting with outwards to
• Aiming to • To achieve flexibility to meet
make its goals that meet their opportunities
internal satisfy needs. Staff are from the
environment external motivated by external
stable and requirements the sense of environment
belonging
controlled • The business is • Flexibility in
• Eg: Support the sense that
• Goals are structured and service units
known and controlled so staff is
unchanging, as to deal motivated by
there are rules effectively challenges and
and with outside need for
procedures world creativity
• Eg: public • Eg: Large • Eg: technology
sector established business
organisations
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businesses 18
7. 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
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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 23
• Centralisation
8. 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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9. Marketing
 Session overview:

Consumer vs.
Customer vs. Marketing
Marketing Industrial
consumer mix
markets

Market Marketing Product

Price
segmentation orientation marketing

Right place
Push and Pull
and right Distribution Promotion
techniques
time

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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

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 Consumer and industrial markets

Consumer markets: Industrial markets:

markets for products markets where one
and services bought business serving as a
by individuals for consumer purchases
their own or family goods or services
use 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 channel
stated purpose • Promotion promotion • Website selling
• Aesthetic pricing • Public • Outlets
factors • Methods of relations location
(beauty) purchases • Salesmanship • Warehouses
• Durability • Alternatives to (sale skills) location
• Brand factors outright • Inventory
• Packaging purchase levels
• Associated • Delivery
services frequency
• 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
service is layout/design
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 Target segment by

emphasizing on:
High income groups Promotion- to create
the image quality,
status
Families with Product- size, safety
children
Low income groups Price-low; Product-
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 Marketing orientation and alternatives
• Basis for operations: identify and
Marketing satisfy needs of potential customers
orientation
Sales • Main purpose: sell as much as possible
their existing products or services
orientation
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 Augmented

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

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 From basic to actual and
augmented product

Augmented
product

Actual
product

Qualit Basic Design

y (core)
produc
t Aesthetics

Brand name
Packaging

201053_Ch2_Managing a business
Services (warranty, 38

delivery, product support)

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

• Possible pricing objectives: profits maximisation,

Corporate return on investment, revenue, market share,
objectives competition, etc.
201053_Ch2_Managing a business 39
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)

201053_Ch2_Managing a business 40
 Advantages of selling direct/using
intermediaries
Advantages of selling Advantages of using
direct intermediaries
- No need to share profit - More efficient
margins logistically
- Control over the - Costs usually lower
ultimate sale - Consumers expect choice
- Speed of delivery at the point of sale
- Producers may not have
sufficient resources to
sell direct
201053_Ch2_Managing a business 41
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
PUSH the ultimate
consumers to buy

Push: ensuring
products/services PULL
are available to
201053_Ch2_Managing a business
consumers 43
10. 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
201053_Ch2_Managing a business 45

expensive and vice versa

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

Pure Applied
Development
research 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
201053_Ch2_Managing a business 47
11. 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
orders Quality: time’:
- Time: The quality Price: This is the
delays in of input Trends of time
production resources between
caused by prices
affects the placing
insufficient
inventories quality of and
outputs delivery of
- Cost of
holding 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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12. 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 Soft approach
Emphasis the resources of Emphasis the human
HRM. Human resources element of HRM. It is
are planned and concerned with employee
developed to meet wider relation, development of
objectives of business, as individual skills and
with any other resources welfare.
like money and materials. - Short term commitment
It involves managing - Long term individual
functions of HRM to well-being
maximise employee
effectiveness and control
staff cost.
201053_Ch2_Managing a business 53
The Harvard four Cs model of HRM
• Employees’ motivation, loyalty and
Commitment job satisfaction. Measures can
include labor turnover ratio.

• Employees’ skills, abilities and

Competence potential, measured by skills &
knowledge appraisal

• The extent to which management and

Congruence employees 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
201053_Ch2_Managing a business
effectiveness those of competitors 54
13. 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
201053_Ch2_Managing a business
be recruited and retained55
 14. Introduction to organizational
behaviors
Organisational Overt Covert Morgan’s
behaviour variables variables metaphors

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

Development
Effective Effectiveness
stages of Key roles
teams 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 needs
strategies 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
201053_Ch2_Managing a business
- Provide social contact and personal relationship 61
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
201053_Ch2_Managing a business resolved 62
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 complete
managers servant not totally trust confidence in
- Subordinates - Subordinates in subordinates subordinates
are motivated by are motivated by - Motivation by - Motivation by
threats rewards rewards rewards
- Authority is - Some degree - Increasing - High degree of
centralized of delegation degree of delegation
- Little - Little delegation - Much
communication communication - Some degree of communication
- No teamwork - Little communication - Substantial
teamwork - Moderate teamwork
teamwork

201053_Ch2_Managing a business 65
Delegation

 Delegation: involves giving a subordinate

responsibility and authority to carry out a
given task, while the manager retains
overall accountability

201053_Ch2_Managing a business 66
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
- Career development
Advantage
- Bring together skills and ideas
s of
delegation - Motivational team aspect
- Performance appraisal

- Too much supervision

Problems - Too little supervision
caused - Manager uses delegation to ‘pass the buck’
by poor - Only delegation of boring work
delegatio - Delegation of impossible tasks
n - Not enough delegation
201053_Ch2_Managing a business
- Subordinates being lack of skills
67
  END OF CHAPTER 2
 THANK YOU!

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