Topic 1: Meaning Of Environment analysis An environmental analysis, also called an environmental scanning, is a strategic tool used to identify and assess all external and internal elements in a business environment. It examines organizational and industry factors that can positively or negatively affect the business. By anticipating short-term and long-term impacts, the organization can readily respond to them when they appear. The purpose of this process of environmental scanning is to provide the entrepreneur with a roadmap to the changes likely to happen in the future. So this way they can adopt the suitable strategy to overcome the threats and capitalize the potential opportunities . Business environment analysis id done by Taking into account Both Internal & External Environmental Factors. Topic 2 : Internal Environment Components: The internal business environment constitutes several internal forces or elements within the control of a business that influences its operations. These include: 1. Value System: It is the ethical belief that guides the business towards achieving its mission and objective. The value system includes all components that form a business’s regulatory framework – organisational culture, climate, work processes, management practices and organisational norms. 2. Vision, Mission, and Objectives: The vision, mission, and objective of a business relate to what it wants to achieve or accomplish in future. It is the reason why the business exists. 3. Organisational Structure: It outlines how the activities are directed within the organisation to achieve its goals. It includes the rules, roles, and responsibilities, along with how tasks are delegated and how the information flows among the organisation’s levels. 4. Corporate Culture: It is a powerful system of shared norms and attitudes that works as a homogenising factor for an organisation’s employees and gets appropriated by them. 5. Human Resources: Human resources form all the employees and other personnel associated with the business. It forms the most valuable asset of the organisation as success or failure depends on it. 6. Physical Resources and Technological Capabilities: It includes tangible assets and the technical know-how that play an essential role in ascertaining the business’s competitive capability and future growth prospects. Topic 2 : External Environmental Components: External components are those factors that a business cannot control. These exist beyond a business’ jurisdiction and supervision limit. External components influencing a business environment are further classified into two categories: • Micro Environment • Macro Environment Micro Environment Micro environment is the business’s immediate external environment that influences its performance as it has a direct bearing on the firm’s regular business operations. It includes factors outside of the business’s control but can be analysed and worked upon by managing the business to prevent any business losses. Micro factors include: • • • • • • Customers: comprise the target group of the business. Competitors are other market players who target a similar target group and provide similar offerings. Media is the channel the business use to market its offering to the customer. Suppliers include all the parties that provide the business with the resources it needs to perform its operations. Intermediaries comprise the parties involved in delivering the offering to the final customers. Partners are all external entities like advertising agencies, market research organisations, consultants, etc., who conduct business with the organisation and satisfy customer needs. Public includes any group with actual or potential interest in the business’s operations or a group that affects its ability to serve its customers. Macro Environment: PESTLE Analysis: The macro environment includes remote environmental factors that influence an organisation. The extent of influence a macro element can have on a business is significant as they usually affect the industry as a whole. These factors are classified as : 1.Political Factors comprise government policies, political stability, corruption in the system, tax policies, labour laws, and trade restrictions that affect the business or the industry. 2. Economical Factors : The economic environment is the sum total of the economic conditions and the nature of economy in which the business has to operate and compete. Following are the main ingredients of economic environment; Economic Condition, Economic System, Economic Planning, Economic Infrastructure etc. 3.Social Factors comprise the demographics of the country. This type of environment comprises of many dynamic factors such as values ,traditions, social attitudes, religion, family background, education etc. 4.Technological Factors pertain to innovation in technology that affects the operations of the business. This refers to automation, research and development activities, technological awareness, etc. 5.Legal Factors are laws that affect business operations. They include business-specific, industryspecific, and even state-specific laws. 6. Ecological: Ecological factors influencing business are connected to actions and processes necessary to protect natural environment by being eco-friendly. Topic 4: SWOT Analysis : SWOT Analysis is a strategic management tool that assists an enterprise in discerning their internal Strengths, and Weaknesses, and external Opportunities, and Threats, to determine its competitive position in the market.The SWOT Analysis helps in ascertaining the factors that influences the efficiency and effectiveness of any product, project, or business entity. These are explained as under: 1. Strengths: The strengths of a company are the core competencies, in which the business has an edge over its competitors. It covers aspects such as: o Strong financial condition o A large customer base. o Strong brand name or a unique product o Latest technology or patents o Influential advertising and promotion. o Cost Advantage o Quality in product and customer service. 2. Weaknesses: Weaknesses can be described as the areas of limitations of the business, that hinders the growth of the company and even leads to a strategic disadvantage. These are the areas which need improvement to perform competitively. It encompasses: o Obsolete facilities and outdated technology. o The unit cost of a product is higher than the competitors. o No or less internal control. o Less quality in products and services offered. o Financial condition is not very sound. o Underutilization of plant capacity. o Lack of major skills or competencies, and intellectual capital. 3. Opportunities: Opportunities can be understood as the condition, which is favourable or beneficial to the organization in the business environment, that the business could exploit to gain an advantage. These are: o Looking for areas of development, by utilizing skills and technology to enter new markets o Adding new products to the existing product line to increase customer base. o Forward and backward integration. o Acquiring rivals businesses. o Joint ventures, mergers and alliances to increase market coverage. 4. Threats: Threat implies an adverse condition which can lead the business enterprise to losses, and can also harm the overall position and reputation of the enterprise. It entails: o A downtrend in market growth. o A new entrant to the market. o Substitute products that can decrease sales. o New regulatory requirements etc Topic 5: Types of Authrority : Topic 6: Principles of Organising : 1. Principle of Specialization: According to the principle, the whole work of a concern should be divided amongst the subordinates on the basis of qualifications, abilities and skills. It is through division of work specialization can be achieved which results in effective organization. 2. Principle of Functional Definition: According to this principle, all the functions in a concern should be completely and clearly defined to the managers and subordinates. This can be done by clearly defining the duties, responsibilities, authority and relationships of people towards each other, which helps in achieving co-ordination and thereby organization effectiveness. 3. Principles of Span of Control/Supervision: According to this principle, span of control is a span of supervision which depicts the number of employees that can be handled and controlled effectively by a single manager. There are two types of span of control:a. Wide span of control- It is one in which a manager can supervise and control effectively a large group of persons at one time. The features of this span are:i. Less overhead cost of supervision ii. Prompt response from the employees iii. Better communication iv. Better supervision v. Better co-ordination vi. Suitable for repetitive jobs According to this span, one manager can effectively and efficiently handle a large number of subordinates at one time. b. Narrow span of control- The manager according to a narrow span supervises a selected number of employees at one time. The features are:i. Work which requires tight control and supervision, for example, handicrafts, ivory work, etc. which requires craftsmanship, there narrow span is more helpful. ii. Co-ordination is difficult to be achieved. iii. Communication gaps can come. iv. Messages can be distorted. v. Specialization work can be achieved. Factors influencing Span of Control 3. Managerial abilities- In the concerns where managers are capable, qualified and experienced, wide span of control is always helpful. 4. Competence of subordinates- Where the subordinates are capable and competent and their understanding levels are proper, the subordinates tend to very frequently visit the superiors for solving their problems. In such cases, the manager can handle large number of employees. Hence wide span is suitable. 5. Nature of work- If the work is of repetitive nature, wide span of supervision is more helpful. On the other hand, if work requires mental skill or craftsmanship, tight control and supervision is required in which narrow span is more helpful. 6. Delegation of authority- When the work is delegated to lower levels in an efficient and proper way, confusions are less and congeniality of the environment can be maintained. In such cases, wide span of control is suitable and the supervisors can manage and control large number of sub- ordinates at one time. 7. 4. Principle of Scalar Chain : Scalar chain is a chain of command or authority which flows from top to bottom. A scalar chain of command facilitates work flow in an organization which helps in achievement of effective results. 5. Principle of Unity of Command: It implies one subordinate-one superior relationship. Every subordinate is answerable and accountable to one boss at one time. This helps in avoiding communication gaps and feedback and response is prompt. Topic 7: Network Organizational Structure : Meaning: The network structure is a newer type of organizational structure viewed as less hierarchical (i.e., more "flat"), more decentralized, and more flexible than other structures. In a network structure, managers coordinate and control relationships that are both internal and external to the firm. The concept underlying the network structure is the social network—a social structure of interactions. Proponents argue that the network structure is more agile than other structures. Because it is decentralized, a network organization has fewer tiers, a wider span of control, and a bottom-up flow Advantages of Networking Organization: (i) Motivated functioning in the hub organization: Because of the absence of vertical and horizontal boundaries within the hub organization, people work with a sense of enthusiasm; being motivated by the organisational structural environment. (ii) Utilisation of best capabilities: A networking organisation allows different organisation engaged in performing different tasks for the hub organisation to bring their best capabilities together. (iii) Less environmental uncertainty: Management of the hub organisation faces less environmental uncertainty; because it has subcontracted many responsibilities to partners, in the networking structure. (iv) Flexibility of structure: A networking organisation possesses the advantage of flexibility. Depending on environmental conditions, new alliances can be made; and old dropped out. In a way, a networking organisation quickens response to changing environmental scenario. (v) Boon for small firms:Small firms, who otherwise face problems of survival, can ensure their survival by being a partner of a networking organisation. A networking organisations is an umbrella protecting the small, who are efficient but cannot face up to the challenges of the environment. Limitations of Networking Organization: (i) Co-ordination – The biggest problem: Co-ordination among the functioning of business partners is perhaps, the biggest problem for the management of the hub organisation, in the networking structure. (ii) Problem of reliability: A networking structure is successful only to the extent that its business partners are reliable. How to ensure reliability of business partners? For this, there is no formula devised so far. (iii) Lack of close control: In a networking organisation, there is usually lack of close control over manufacturing and marketing operations etc. by the management of hub organisation. Topic 8: Principles of Effective control : 1. Principle of Reflection of Plans: Planning and control are two sides of the same coin, they go hand in hand. So if the firm has a clear and complete plan then it is much easier to make a control system for the firm. 2. Principle of Prevention: The truth of the saying ‘Prevention is better than cure’ is wellestablished. In control more attention should be directed to prevention of shortfalls than, remedying them after they occur. Peed forward control is very helpful in this respect. 3. Principle of Responsibility: Responsibility for control particular measurement of deviations taking corrective action should be given to specific individuals at each stage of the operation. 4. Exception Principle: The managers should concern themselves with exceptional cases i.e., those where the deviations from standards are very significant. Deviations of a minor mature may be left to subordinates for necessary action. 5. Principle of Critical Points: All operations have got’ certain vulnerable or critical points. It is these which cause most of the troubles – give rise to major deviations. The managers should pay more attention to the guarding of these points. 6. Principle of Pyramid: Feedback data should first be communicated to the bottom of the pyramid i.e., those supervisors and even operating staff who is at the lowest levels. This will give the employees opportunity to control their own situations, apart from quickening remedial action. Topic 9: Blake & Mouton’s Managerial Grid : The managerial grid model is a very popular framework that unfolds the “task versus people” orientation. This was developed by Robert.R.Blake and Jane Mouton in 1964. This model identifies five different leadership styles based on the concern for production and concern for people. The perspective of people orientation and task orientation as two independent dimensions was a big step in leadership studies. In Blake and Mouton Managerial Grid, leadership styles are subdivided into 4 quadrants, 2 dimensions, and 5 basic leadership styles namely ▪ Impoverished Management ▪ ▪ ▪ ▪ Country Club Task Management Middle of the road and Team Management Dimensions of Managerial Grid Model. Concern for people and ▪ Concern for production a. Concern For People: This is the degree at which a leader considers his team members interests, areas of personal development and needs while determining how to attain goals. b. Concern For Production: This is a degree to which the leader emphasizes organizational efficiency, productivity and concrete objectives while determining how to accomplish the task. ▪ Leadership Styles As per Managerial Grid. 1.Impoverished Management (1, 1): In this approach, managers have low/no concern for both people and production. The leader has no or very low concern for work deadlines or employee satisfaction, because of which, the organization exhibits disorganization and disharmony. Leaders are This form of leadership is mostly employed to safeguard their position in the organization. 2.Task Management (9, 1): The leader is completely task-oriented. Employee well-being is neglected; as production is the only point of focus. The leader exerts disciplinary pressure and is authoritative or dictatorial by nature. 3.Middle of The Road (5, 5): As the title suggests, this leadership style places equal importance on organizational goals and personal needs. Leaders focus on performance by balancing work requirements and employee morale. This is a compromising leadership style where the leader strikes a balance between people and production. 4.Country Club (1, 9): Most leaders are driven by this style, which focuses on high concern for people and low concern for production. Such leaders intend to create a cordial and comfortable working environment that increases job satisfaction. People get motivated to work harder because their well-being is prioritized. 5. Team Management (9, 9): This leadership style is characterized by a high concern for both people and production and is regarded as the most effective leadership style. It creates a highly encouraging workplace culture, where people are motivated, productive and cooperative. Topic 10: Likert’s theory of Leadership : Rensis Likert established management styles called Likert's management systems in the 1960s. To characterize the interaction, engagement, and roles of managers and subordinates in industrial contexts. Rensis Likert and his colleagues at the University of Michigan in the United States studied the patterns and styles of managers for three decades and established a four-fold model of management systems. There are four management systems or four leadership styles, according to Likert: 1. Exploitative Authoritative System: It is the first system in Likert's Leadership Styles. Under this style Likert states that the ultimate power lies in the hands of the superiors. Here, it is observed that the workers at the lower level do not feel free to discuss their work with their superiors. The communication and teamwork in this system are very little. 2. Benevolent Authoritative System: Under this system of Likert’s, it is observed that the authority lies in the hands of the managers and not in the hands of the lower-level workers. The superiors have a small amount of confidence and trust in the employees. This type of a leader trusts his employees have enough confidence in them to seek and use their ideas, thus allows some delegation. 3. Consultative System :Consultative Leadership Style is exhibited by those managers who display so much confidence in their subordinates that they consult them before taking any decision related to organization function. There is fair communication between the employees and the superiors. However, the power to form policies and rules lies in the hands of the top management. 4. Participative System: Under this style, Responsibility for achieving the organizational goals is widespread throughout the organizational hierarchy. There is a high level of confidence that the superior has in his subordinates. There is a high level of teamwork, communication, and participation. Topic 11: Transformational Leadership : Transformational leadership is a leadership style in which leaders encourage, inspire and motivate employees to innovate and create change that will help grow and shape the future success of the company. Transformational leaders encourage their workforce without micromanaging — they trust trained employees to take authority over decisions in their assigned jobs. It’s a management style that’s designed to give employees more room to be creative, look to the future and find new solutions to old problems. The concept of transformational leadership started with James V. Downton in 1973 and was expanded by James Burns in 1978. In 1985, researcher Bernard M. Bass further expanded the concept to include ways for measuring the success of transformational leadership. Four “I’s” of transformational leadership: • • • • Intellectual stimulation encourages innovative thinking by emphasizing new experiences and growth opportunities. Individual consideration builds positive relationships by mentoring employees and helping each person understand their value and potential. Inspirational motivation models a vision for the organization, the team and for employees to emulate and make their own. Idealized influence models expectations and actions for employees, earning their trust and respect. These four “I’s” provide the foundational philosophy of transformational leadership, helping to differentiate it from leadership philosophies with a similar style, such as visionary leadership, and even complement those styles with opposite approaches, such as transactional leadership. Features of Transformational leader: A transformational leader is someone who: • Encourages the motivation and positive development of followers • Exemplifies moral standards within the organization and encourages the same of others • Fosters an ethical work environment with clear values, priorities and standards. • Builds company culture by encouraging employees to move from an attitude of selfinterest to a mindset where they are working for the common good • Holds an emphasis on authenticity, cooperation and open communication • Provides coaching and mentoring but allowing employees to make decisions and take ownership of tasks Topic 12: Behavioural Approach to management : Behavioural sciences approach also called a Neoclassical approach to management initiated after 1940 is an extension and modification version of the human relations approach. This approach tries to analyse the social factors affecting the working of an organisation and proposes a study of behavioural sciences including psychology, sociology and anthropology variables for understanding human behaviour at work and shaping human behaviour in the desired way. Some important sociologists and psychologists who are major contributors to this approach are Abraham Maslow, Hugo Munsterberg, Rensis Likert, Douglas McGregor, Frederick Herzberg, Mary Parker Follet, and Chester Barnard. Features or elements of behavioural sciences approach: o o o o o o o o o Along with an organisation being a physical-technical system, it is also a social system. All human resources have their own needs, motives, values, beliefs, desires and perceptual qualities and attributes. An organisation is incomplete without Informal groups of employees, which directs individual behaviour favourably/unfavourably towards formal job objectives. Conflicts are an essential part of the organisation, which can be between the organisation and employees and their groups Monetary and non-monetary motivation has a profound impact on human behaviour at work, which also affects productivity. For transforming workers’ attitudes and behaviour towards a healthy work environment and organisational goals, democratic leadership with informal supervision is essential. Two-way communication between employees and management results in good human relations and improved employee efficiency at work. Participation of employees in decision-making processes acts as a motivation and commitment device leading to the achievement of organisational goals. Better understanding of human behaviour at work, such as motivation, needs, conflict, expectations, and group dynamics leads to better productivity. Topic 13: System Approach to management : Contributors to this approach considered organization as an open system which is composed of a subsystem, interdependent parts of the organisation which interact with each other and function as a whole. According to this approach, management is a system or an organised whole body made up of subsystems which are interrelated and interdependent. An organization as a system is composed of four elements: o o o o Inputs — It includes resources like raw materials, natural resources, human resources. These are organised, motivated and controlled under transformation. Transformation processes —These are technological and managerial processes which result in output and achievement of organisational goals. Outputs — Theses are the final products or services produced to improve the quality of life for customers. Feedback — These include reactions from the environment, reviews from customers using the products. The basic characteristics of the Systems approach: o o o o o A system consists of interacting elements. It is a set of interrelated and interdependent elements organised in a manner which results as a unified whole. Each organisational system has a borderline that classifies its elements as internal and external. Every system receives input from others as information and material, which goes under a transformation and drops the output for other systems. An organisation is exposed to changes as required by the environment in which it exists, so it is a dynamic system. The various sub-systems should be studied in their inter-relationships rather, than in isolation from each other. Topic 14: BCG Matrix : The Boston Consulting Group (BCG) Matrix is an uncomplicated tool to evaluate a company’s position in terms of its product range. It facilitates a company think about its products and services and makes decisions about which it should keep, which it should let go and which it should invest in further. Also called the BCG Matrix, it provides a useful way of screening the opportunities open to the company and helps to think about where one can best allocate resources to maximize profit in the future. At the end of the 1960s, Bruce Henderson, creator of the Boston Consulting Group, BCG, developed portfolio matrix, which is explained as: 1. Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. If successful, a star will become a cash cow when the industry matures. 2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growth industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. Cash cows therefore typically generate cash in excess of the amount of cash needed to maintain the business. This, excess cash ‟is supposed to be milked’ from the Cash Cow for investments in other business units(Stars and Question Marks). 3. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars. 4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated Limitations of BCG Matrix The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected. 2. Market is not clearly defined in this model. 3. High market share does not always leads to high profits. There are high costs also involved with high market share. 4. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability. 5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. Topic 15: Types of Communication : 1. Formal Communication: Formal communications are the one that flows through the official channels designed in the organizational chart. It may take place between a superior and a subordinate, a subordinate and a superior or among the same cadre employees or managers. Formal communication may be further classified as Vertical communication and Horizontal communication. a. Vertical Communication: Vertical Communications as the name suggests flows vertically upwards or downwards through formal channels. Upward communication refers to the flow of communication from a subordinate to a superior whereas downward communication flows from a superior to a subordinate. b. Horizontal Communication: Horizontal or lateral communication takes place between one division and another. For example, a production manager may contact the finance manager to discuss the delivery of raw material or its purchase. 2. Informal Communication: Any communication that takes place without following the formal channels of communication is said to be informal communication. Informal communication is often referred to as the ‘grapevine’ as it spreads throughout the organization and in all directions without any regard to the levels of authority. Informal communication spreads rapidly, often gets distorted and it is very difficult to detect the source of such communication. It also leads to rumours which are not true. 3. Unofficial Communication: There is also an unofficial way of communication. Unofficial communication refers to employee communication outside of the workplace on matters unrelated to work. Friendly meetings, dinner outings, and social gatherings among employees are examples of unofficial communication channels. Topic 16: Ratio Analysis as a technique of controlling : Ratio analysis is a useful technique for judging the efficiency of an organisation through analysis and interpretation of financial statements. Absolute values of financial statements do not reveal the true financial picture and thus are not reliable for taking managerial decisions and exercising control. Ratios by establishing relationships between two or more values attempt to derive relevant meaning from financial statements. These ratios being indicators of actual performance also serves as a measure of control by providing base of comparison with standards. However, ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths and weaknesses of a firm. Ratios may be treated as symptoms from which financial health of an organisation may be gauged. The most commonly used ratios used by organizations can be classified into the following categories: • Liquidity ratios • Solvency ratios • Profitability ratios • Turnover ratios Topic 17: Delegation of Authority, Meaning and Types : Meaning: Delegation of authority refers to the transfer of authority from the level of supervisor to the level of subordinates. In other words, delegation is the downward transfer of authority from the manager to the subordinate. Delegation of authority is important as the superior in an organisation is not able to manage all the work by himself. Delegation of authority helps the managers to focus on more important functions of the organisation that need to be taken care of on priority. Delegation is the transfer of responsibility which is less important and can be performed by the subordinates. This also brings a sense of responsibility to the work done by the subordinates and paves the way for growth of the subordinates. There are four types of delegation: • General or specific delegation • Top to bottom or bottom to top • Formal or informal delegation • Lateral delegation 1.Formal & Informal: a.Formal Delegation A formal delegation of responsibility and authority referees to entrusting responsibility and authority to an official position in the organization structure. A formal delegation creates obligation and makes the delegation accountable for his performance. b.Informal Delegation On the other hand an informal delegation does not create any obligation. Here delegation is not entrusted the work neither he is given the responsibility and authority formally. Instead work is taken and authority is exercised because people do want the person to take the responsibility and exercise the authority. The organization formally has to do nothing with such a responsibility and authority. Sufficient flexibility in delegation process is required. It helps in making a provision for both the formal and informal delegation according to the organization structure temperament of the delegator necessity of the enterprise and exigency of the work. 2.General or specific delegation a.General delegation: Under general delegation, subordinates usually perform general managerial functions like planning, coordinating, directing, etc. The assistants perform these tasks with the necessary authority to achieve the objective. b.Specific delegation: Under specific delegation, subordinates have their tasks defined and understand the responsibilities, roles, and necessary authority delegated to them. 3.Top to bottom or bottom to top delegation a. Top to bottom delegation: Top to bottom is a process where superiors assign tasks to their subordinates to decrease their own workload and increase efficiency. b. Bottom to top delegation: Under bottom to top delegation, institutions acknowledge the value of informal groups inside institutions. The unity among members is so strong that if given a choice between obeying their peers or their superiors, there is a high probability that they may choose their peers. 4. Lateral delegation : When a task is delegated to a subordinate by a superior, the subordinate may require assistance from others to complete the task. But delegating formally might be time-consuming or inefficient. The subordinate approaches others informally to obtain their help and save the time formal delegation would have taken.