ENTERPRISE

MANAGEMENT
Study notes
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Enterprise Management:
 Enterprise management is a field of business management that allows businesses to manage vital
day to day processes such as:
- Inventory management,
- Accounting,
- Considering investment opportunities,
- Human resources,
- Developing suitable incentives,
- Marketing, and
- Customer relationship management
As a single entity by the use of modern technology and information system.
 Individual departments can be handled with an individualist approach but when it comes to
organizing and handling a complete as a collection of too many departments or teams we must go
through enterprise management approach.
 EM helps the business in identifying the issues or the future risks which can affect the performance
of the business.

Benefits/functions of EM:
- Provides practical solutions that integrate and simplify operations across the entire business.
- Motivates decisions and actions consistent with organizational objectives and strategies.
- Aligns infrastructure, applications and their management to the needs of the organization and its
customers.
- Manages organization as a single system.
- Increases performance and availability.
- Steers the operations in the right direction.

Components of EM:
- Business planning and simulation; simulation tools are used to track performance level which helps in
future planning and simulation of business.
- Business consolidation; is necessary between diverse organizational units and roles to enable full
functionality.
- Business information collection; this enables an organization to collect, track and record detailed
information of each process in a unified form.
- Corporate performance monitor; this uses a feedback form from business execution systems to
measure the performance level of corporate solutions.
- Stakeholder relationship management; this enables strong, clear and unified interacting system
where every stakeholder participates and are aware of movements within organization.

Organization:
 A group of people who work together like a neighborhood association, a charity, a union, or a
corporation.
 A structure for classifying things or a system of arrangement or order.
 An organization comprised of various departments who work together to achieve the organization’s
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set goals as:

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 - The HR department finds, hires, trains and support new employees. It also defines their jobs.
- The payroll department manages the payment structure of employees.
- The sales department manages the sales and distribution process.
- The production department manages the inputs and outputs of a production.
- The finance department acquires and manages funds within the organization and plans for
expenditure.
- The marketing department serves as the face of company. It manages the promotional and
marketing activities of the organization.
- The IT department manages the information server and security, takes care of website, installs
new software and hardware, and assures communication lines running smoothly.

Challenges that businesses face:

Businesses face challenges and complexities with time as size of the organization increases.
- Uncertainty about the future.
- Financial management like cash flow, profit margins, reducing costs, financing etc.
- Performance monitoring; most business people are not experts in using a meaningful set of rounded
performance indicators that provide the business with insights about how well it is performing.
- Changes in rules and regulations with shift in markets and technologies.
- Finding and recruiting the right people and developing the right skills and competencies.
- Either to innovate with practically changing technologies or left behind.
- Exploring terabytes of data.
- Finding ways to improve customer service and fulfilling their expectations.
- Monitoring and maintaining online reputation because customers voice can displease more publically
and loudly than ever before.
- Knowing when to welcome/adopt changes.

Mintzberg’s building blocks of organization:

The five elements or building blocks in a typical
organization structure as suggested by
Mintzberg are:
i. Strategic apex:
This is the top management in the organization
who are overall responsible for formulating and
implementing strategy such as BODs.
ii. Operating core:
This comprises of those individuals who perform
basic work of the organization, convert input
into output or physically provide services to
customers.
iii. Middle line:
These are the mangers that interact with the
strategic apex and the operating core to achieve the objectives of the organization.
iv. Support staff:
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These individuals provide assistance outside of operational workflow such as catering services, repairs
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and maintenance personnel, cleaning staff, legal advice and press relations etc.
v. Techno structure:
This comprises of individuals who provide technical support services such as HR managers, accountants
and IT specialists who do not have line management responsibilities and are in staff positions.

Mintzberg identified six different organizational configurations depending on the type and complexity of
the work done by the entity. These are:

Internal features Key element Example

Simple structure Where everything is Strategic apex Small
directly controlled by entity/businesses
strategic apex
Machine bureaucracy Where prime mechanism Techno structure Walmart, heavy
is standardization and industries etc.
regulations
Professional bureaucracy Where highly skilled Operating core Audit firms,
professionals are the face hospitals, colleges
etc.
Divisionalized form Where diverse products Middle line McDonald’s
are produced, led by corporation etc.
divisional managers
Adhocracy Project based work Operating core & Builders, Pixar,
support staff maintenance co. etc.
Missionary organization Where all members have - IEM Pakistan, Edhi
the same set of beliefs foundation etc.
and values

Frederick Taylor’s four principles of scientific management:

Taylor suggested that there should be four principles in scientific management to improve efficiency:
1. There should be a science for each element of work, based on work methods and times and workers
should be rewarded through higher pay if they succeed in performing more efficiently than expected
or standard level.
2. Workers should be selected carefully. Trained and taught scientifically.
3. The scientifically selected and trained workers and the science of work should be brought together
for the best results and greatest efficiency.
4. There should be an equal division of work and responsibility between workers and management.

Henri Fayol’s fourteen rules of classic management:

Henry Fayol’s 14 principles of management look from a top-down approach to help managers get the
best from employees and run the business with ease. These are:
1. Division of labour: If an employee is given a specific task to do, they will become more efficient and
skilled in it. This will help them to become more productive, skilled and efficient in long run.
2. Authority: Management must have the authority to get the work done.
3. Discipline: Discipline must be maintained in organization to run effectively.
4. Unity of command: Each employee should have only one boss.
5. Scalar chain: Clear chain of command running from top to bottom of the organization. Employees
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should know where they stand in the hierarchy of organization.

6. Equity: Manager should be fair at kindness and justice towards everyone all the times.
7. Esprit de corps: Esprit de Corps means “Team Spirit”. Manager should strive to create unity, morale,
and co-operation among the employees.
8. Initiative: Employees should be given necessary level of freedom to create and carry out plans.
9. Centralization: It refers to the concentration of power in the hands of the authority and following a
top-bottom approach to management.
10.Remuneration: Management should be fair with all employees financially and non-financially.
11.Order: Workplace facilities or resources (people, places and things) should be arranged orderly and
properly.
12.Subordination of individual interests: The interest of the organization should not be sabotaged by
the interest of an individual at work.
13.Stability of tenure of personnel: Management should work to minimize staff turnover.
14.Unity of direction: Employees should all work towards a common goal, using one plan under the
direction of one main person.
*DADU SEE I CROSS U

Max Weber’s ideal bureaucracy:

Max Weber defines bureaucracy as a formalized and highly structured organization. Max Weber’s
bureaucracy has ideally following six characteristics:
- Formal selection: All employees should be selected on the basis of technical skills and competences.
- Task specialization: Division and specialization of labour.
- Rules and regulation: A formal and written set of rules and regulations.
- Impersonal: Impersonality and impartiality in the application of rules.
- Career orientation: There should be promotion of individuals based on their achievement.
- Hierarchical order of authority: Management positions should be organized in hierarchical order
with information flowing up the chain and instructions passing down the chain of command.
*FT. RICH

Advantages of bureaucracy Disadvantages of bureaucracy

- It centralizes power.
- It encourages specialization.
- It discourages favoritism.
- It provides job security.
- Rules and regulations make multiple workers to
function in the same way.
- It makes people responsible and accountable.
- Due to long hierarchical chain of command,
information passes slowly and decisions take a
long time to make.
- Competition has increased and technology has
changed but it still prefers old ways of doing
things.
- It creates boredom for their employees, which
decreases employee morale.
- It may inhibit productivity, diminish innovation.
- Rules and regulations discourage initiative and
creativity.
- There is less freedom to act within a
bureaucratic structure.
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Operation/production; is the transformation of input (material, labour, capital) into output (product or
service) in order to add value or the process of combining various material and immaterial inputs for
consumption.

Operations management; The activities required to produce and deliver a product or service such as
purchasing, warehousing and transportation etc.

Garvin’s eight dimensions of product quality:

Garvin’s eight dimensions of product quality that can help build a competitive advantage are
summarized as follows:
1. Performance: It refers to a product's primary operating characteristics. E.g. For an automobile,
performance would include traits like acceleration, handling, and cruising speed.
2. Features: It refers to a product’s secondary aspects of performance that enhance or supplement
basic functioning.
3. Perceived Quality: It is the quality attributed to a product or service based on indirect measures.
4. Conformance: It is the precision to which the product or service meets the specified/established
standards.
5. Aesthetics: It is a subjective dimension of quality. How a product looks, feels, sounds, tastes, or
smells is reflection of individual preference.
6. Reliability: It refers to likelihood functioning of a product that it will not malfunction or fail within a
specific time.
7. Durability: It refers to the amount of use that user gets from a product before it breaks down and
requires replacement.
8. Serviceability: It is the competence and ease of repair because consumers are also concerned about
dealings with service personnel.

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RESOURCE BASED COMPETITIVE ANALYSIS:
Strategic capability is dependent on the following:
 Resources:
- Tangible resources; are labour, machine, finance etc.
- Intangible resources; are knowledge, information, brand, reputation etc.
 Competences:
Competences are activities or processes/procedures/methods in which an entity uses its resources,
created by bringing resources together and using them effectively.

Types of resources:
Organizations use different resources to accomplish goals. The key resources used by organizations are
as follows:
1. Human resources – include leaders or managers and other employees, & their skills and knowledge.
2. Physical resources – include tangible assets such as manufacturing plant, buildings, vehicles,
machines/equipments, and also raw materials.
3. Financial resources – include financial assets such as cash, bank deposits, lines of credit, stocks
holdings etc. and the ability to acquire additional financing.
4. Intellectual capital – includes resources such as patents, trademarks, brand name, copyrights,
customer database and acquired knowledge etc.

Strategic capability:
Resources and competencies both are equally important to create capability. Strategic capabilities help
a company to improve performance by providing competitive advantage in a competitive business
environment. Following are two types of strategic capability:

1. Threshold capability:
- Threshold capabilities are minimum/essential resources and competencies that are needed for the
organization to be able to compete or survive.
- It cannot give competitive advantage.
- It can run business but difficult to get long term sustainability/growth.
- These resources and competencies are common and easy to copy.
- Manufacturing space, raw material, offices, equipments, appropriate personnel and sufficient
customers are examples of threshold resources.
- Electronics engineering is an example of threshold competency for an electronic firm.

2. Unique/distinctive capability:
- Capabilities which are required to gain competitive advantage over the rest of the market and
distinguishes a company from competitors.
- These capabilities serve as a source for long term superior performance.
- These resources and competencies are distinctive and hard to copy.
- Patents, knowhow, licenses and rights are examples of unique resources.
- Interfirm social relationships, effective leadership, tacit knowledge, design, etc. are examples of
unique competencies.
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Ways to ensure unique capability:
A number of methods have been developed to ensure capability. Following are the most widely used
methods:

1. Critical Success factors (CSF):

“CSFs are vital factors or contributors that determine an organizations’ or product’s success or failure.”
Or “CSFs are limited number of areas where an organization needs to perform best in order to achieve
success.”

There are five prime factors/sources that should be considered when identifying CSFs:
 Industry structure – Every industry has a set of CSFs and these are determined by characteristics of
the industry itself.
 Competitive strategy – These CSFs are influenced and impacted by what competitors are doing and
how customers see our business in relation to our competitors.
 Environmental factor – These CSFs are those over which an organization has no control. E.g. energy
supply availability, downturn in the economy and change in policy etc.
 Temporary influences – These CSFs significantly affect the success of organization for a particular
period of time. E.g. unexpected temporary changes and reduced staff capacity etc.
 Functional managerial position – These CSFs are unique to a specific person or position rather than
entire organization.

2. Key performance indicator (KPI):

KPIs are quantifiable measure of performance that reflects the critical success factors of an organization.
It gives a value to compare against your current performance and set targets. Most commonly used KPIs
include sales KPIs, operational KPIs, financial KPIs and marketing KPIs etc.
E.g. pre-tax profit & shareholder equity measurements are KPIs for a profit making company while
graduation rate and employment rate after graduation are KPIs for school/university.

Types of KPIs:
1. Process KPIs – Process metrics measure the efficiency or productivity of a business process. “days to
deliver an order”,”no. of rings before a customer phone call is answered” and ”no. of employees
graduating” are examples of process KPIs.
2. Input KPIs – Input KPI measures assets and resources invested in or used to generate business
results. “Money spent on research”, “funding for employee training”,”quality of raw material” are
examples of input KPIs.
3. Output KPIs – Output KPIs measure the financial and nonfinancial aspects of created products or of
results of other activities. “No. of new customers” and “revenue per customer” are examples of
output KPIs.
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Types of production:
 Job method: A manufacturing process in which the complete task is performed by a single worker or
team for a particular customer.
Types of job method
Low technology
- Simple and relatively easy.
- E.g.: hairdressing, tailoring, painting,
decorating, plumbing etc.
Advantages of job method
- High-quality products due to focused
production.
- Personalized products bring customer
satisfaction.
- A flexible production method.
- Higher job satisfaction due to varied tasks.
- Employees can be motivated better because
of their strong commitment to tasks.
High technology
- More complex, and relatively difficult.
- Requires well management, high qualified
and skilled workers.
- E.g.: film production, ship building, dam
construction, transport system installation
etc.
Limitations/Disadvantages of job method
- Due to short-run production, economies of
scale may not be attained.
- The demand is irregular for some products.
- Specialized machines are required for
complex items.
- It requires investment in workers’ skills and
training.
- Requires close consultation with client.

 Batch method: A manufacturing process in which similar/identical/homogeneous units are produced

in a group or batch by dividing the task into parts.
E.g.: production of computer chips, sandwiches, cookies, jet engine etc.
Advantages of batch method
- A flexible production method.
- Inventories of semi-finished goods can be
stored and completed later.
- Small batches provide the opportunity of
variety of goods.
- Larger batches may help to achieve
economies of scale.
- Production of only required number of
goods helps to minimize waste.
Limitations/Disadvantages of batch method
- Making small batches can be expensive.
- The product cannot be personalized for an
individual customer.
- The space is not utilized to make money in
the periods of downtime.
- Cost is increased to store large quantities of
produced products at a time.
- If company solely relies on machines then
workers sitting idle is considered inefficient.

 Flow method: A manufacturing process in which production on large scale is continuous and work on
a task at one stage is completed then it is directly passed to next stage without waiting for the
remaining stock in the batch.
E.g.: production of injections, drinks, chocolate bars etc.
Advantages of flow/mass method Disadvantages of flow/mass method
- Deviation in quality is detected at the spot - The product cannot be personalized for an
due to standardization. individual customer.
- It reduces direct labour cost. - It is more difficult to keep staff motivated
- This method is ideal for less populated working in flow method because of repetitive
countries because it is capital intensive. work.
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- Cost per unit s reduced because production - This method is bad for highly populated
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can continue at night and over weekends. countries.

- It is approximately errorless because - It is more costly to alter production process
machines are less likely to make mistakes. because it requires redesigning of whole
process.
- Cost is increased to store excess production.

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PLANT MAINTENANCE:
Plant maintenance is defined as a set of activities that are necessary to keep machinery, parts & types of
equipment in good operating conditions to avoid stoppage and loss.

Objectives of plant maintenance:

- The objective of plant maintenance is to achieve minimum breakdown and to keep the plant in good
working condition at the lowest possible cost.
- Machines and other facilities should be kept in such a condition that allows them to be used at their
optimum (profit making) capacity without any interruption or hindrance.
- Maintenance division of the factory should ensure the availability of the machines, buildings and
services which enables other sections of factory to achieve maximum return on investment whether
in material, machinery or personnel.

Consequences of improper maintenance/breakdown: (importance)

- Improperly maintained plants will sooner or later require more expensive and frequent repairs.
- Equipment breakdown leads to loss of production.
- Increase in spoilt materials from sudden stoppage of process.
- Failure to recover overheads because of loss in production hours.
- Need for overtime which costs more than regular hours.
- Need for outsourcing or subcontracting.

Causes of breakdown:
- Lack of lubrication.
- Failure to replace worn out parts.
- Poor electric connections
- Use of wrong or cheap fuel.
- Overrunning machines.
- Operating in wet or muddy conditions can put strain on equipment.
- Carelessness/inattention towards minor faults i.e. unusual sounds, overheating etc.

Types of plant maintenance:

Plant maintenance can be classified into following:

1. Corrective/breakdown/reactive maintenance:
It occurs when work gets stopped because of breakdown and equipment can no longer perform its
normal function. In this sense maintenance becomes repair work.
E.g.: if a belt is broken then electric motor will not start.

2. Preventive maintenance:
In contrast to corrective maintenance, it is undertaken before the need arises or aims to minimize the
possibility of unanticipated production interruptions by locating or uncovering any condition which may
lead to it.
E.g.: regular cleaning, replacing parts, ensuring cooling and ventilation etc.
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 PM should be taken care by production department or maintenance department or a separate

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division of inspectors depending upon conditions i.e. size, age, location and machinery etc.
 PM should not apply to the entire plant at once. It should tackle and finish one section/department
then start the next.
 PM should apply to key items for continuing the production, not to all items because PM is costly.
 PM frequency should be decided on the basis of:
- Hours of operation
- Condition and value of equipment (age)
- Safety requirements
- Dirt, friction, fatigue etc.
- Vibration, sound, temperature etc.

3. Scheduled/planned maintenance:
It occurs in a planned manner in advance to avoid and minimize breakdowns and cost associated with
breakdowns.
E.g.: It generally involves inspection, lubrication, servicing etc. of equipments over a fixed period of time.

4. Predictive maintenance:
It uses data analysis tools and techniques to detect possible defects in equipment so we can fix them
before they result in failure.
E.g.: vibration analysis, thermal analysis, amplitude observations etc.

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PORTER VALUE CHAIN:
Michael Porter’s value chain is an approach that is based on set of activities, broken into five primary
and four secondary activities, performed by organizations in order to look whether they are giving cost
or quality advantage or not.
Firm infrastructure
Secondary/support value Human resource management
activities Technology development
Procurement
Inbound Outbound Marketing and
Primary value activities Operations Services
logistics logistics sales

Primary activities:
 Inbound logistics – It covers all relationships with suppliers. It includes receiving, storing and
handling raw material inputs.
 Operations – It includes procedures for transforming all inputs (raw materials) to outputs (goods &
services).
 Outbound logistics – It includes all activities of storage and distribution system for finished goods.
 Marketing and sales – It includes activities/strategies to enhance brand image and target
appropriate customers such as advertising, promotion and pricing etc.
 Services – It includes all activities to enhance customer experience after point of sale such as
installation, training, repair, refund, exchange etc.

Secondary/support activities:
 Firm infrastructure – It includes the functions that allow a company to maintain its operations such
as planning, finance, quality control, information management etc.
 Human resource management – It includes activities related to hiring, retaining and managing
employees who will fulfill business strategy and are needed for marketing, logistics and other
operations etc.
 Technology development – It includes all activities that are used during R&D and are concerned
whether directly with the product or with the process.
 Procurement – It includes activities related to acquisition of materials and resources for firm, finding
and negotiating prices with suppliers and vendors.

PRODUCTION PLANNING AND CONTROL:

There are a number of systems that are developed to improve planning and control of operational
capability as follows:

1. Material Requirements Planning (MRP):

MRP is a computerized system for effectively planning all the resources (including raw materials, work-
in-process and finished items) of a manufacturing firm.

Purpose/Functions of MRP:
- Identifying firm orders/requirements to meet demand.
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- Forecasting future orders with confidence.

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- Determining timing for material requirement.

- Determining purchase quantity based on stock levels.
- Automatically placing orders.

Benefits of MRP:
- Effective inventory management.
- Reduced stock holding.
- Reduced customer lead times.
- Improved labour productivity.
- Ability to warn about production problems due to delays in supply chain.

Limitations/disadvantages of MRP:
- MRP is not suitable in the early days of deployment before the users gain experience.
- Errors can be magnified at later stages if key inputs are not completely accurate.
- MRP cannot integrate all departments of a business like ERP.

2. Manufacturing Resource planning II (MRP II):

- MRP II is an extension of the MRP system.
- It integrates other processes that are related to materials planning such as financial requirements
planning, equipment utilization scheduling, labour scheduling etc. into the MRP system.
- MRP II provides a central database to which all functions can access. Thus everyone works from the
same information.

3.Enterprise Resource Planning (ERP):

- ERP is an extension of MRP II.
- It integrates and connects SCM, CRM, HRM and other cross functional management systems.
- As with MRP II it ensures that everyone is working off the same information.
- This system is designed to centralize and integrate information for effective decision making,
inventory management as well as cost control using real-time data.
- SAP, Oracle Financials and J.D. Edwards are examples of ERP.

Advantages of ERP:
- Improved efficiency.
- Easy share of data between departments and across the organization.
- Significant reduction in costs.
- Better monitoring and forecasting.

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Capacity management:
Capacity management refers to the act of:
- Balancing customer demand and production capability.
- Ensuring a business is achieving, producing or selling at its most optimum level under all conditions.
- E.g.: a call center can field 7000 calls/week, a café can brew 800 cups/day etc.

Approaches for capacity planning:

 Constant rate approach – A simple approach which maintains production activity at constant rate.
 Match strategy approach – A flexible approach which matches production with demand.
 Demand management approach – An approach which maintains production and aims to stabilize
demand by different ways i.e. offering discounts etc.

A number of methods can be used to manage operational capacity:

1. Flexible Manufacturing System (FMS) – A production method that is designed to easily adapt
changes in the type and quantity of product manufactured. Machines and computerized systems are
used to handle changing production levels.
2. Queuing Theory – A technique designed to optimize the balance between customer waiting time and
idle service capacity using mathematical methods. It is helpful in improving traffic flow, reducing
average time per call, servicing customers at shops or hospitals etc.
3. Forecasting – A process of projecting past customer buying habits into the future to optimize
inventory levels for production and meeting customer expectations.

Six steps to follow for enhancing plant capacity:

- Consider required capacity (demand) for the process.
- Find the available capacity in the process.
- Identify mismatches between required and available capacity.
- Suggest alternative plans for overcoming mismatches.
- Compare these plans and find the best.
- Implement and control the best option.

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