Welcome to MT140 Introduction to Management

Professor Rhonda Shannon

Unit 2 Seminar – Foundations of Management

This seminar is being recorded

4 Functions of Management: POLC

• Planning - The management function of systematically making decisions about goals and activities that an individual, a group, a work unit, or the overall organization will pursue.

• Organizing - The management function of assembling and coordinating human, financial, informational, and other resources needed to achieve goals.

• Leading - The management function that involves the manager’s efforts to stimulate high performance by employees.

• Control - The management function of monitoring performance and making needed changes.

What is Business

A commercial entity that engages in activities to earn a profit. (For Profit)

OrAn entity that exists to return something other than profits to its owners. (Not For

Profit)

What is Profit

The positive gain from an investment or business operation after subtracting for all expenses.

Profit can be generated by any business that sales products or services.

Profits are a measuring stick to indicate how well the business provides value.

Revenue and Expenses

What is RevenueFor a company, this is the total amount of money received by the company for goods sold or services

provided during a certain time period.

What is ExpenseAny cost of doing business resulting from revenue-

generating activities.

Unit 2 Objectives

Tonight we will be covering the following:

1. Identify significant past and current management theories

2. Describe the business organization as an open system

3. Identify the role of internal and external environmental factors in business

3 Key Concepts for Chapter 2

• Organizations are open systems that are influenced by their environment and in turn, influence their environment.

• All organizations must operate in a macroenvironment.

• All organizations must operate within a competitive environment.

Businesses are Systems

System – “regularly interacting or interdependent group of items forming a unified whole” (Webster’s New Collegiate)

Parts of a Business:• Management• Marketing• Human Resources• Information technology• Other areas of a business

Closed and Open systems

Closed System

Does not allow anything to enter from outside its environment nor does it allow anything to escape into its

environment.

Open System

Accepts input from its external environment (the area outside the system) and is changed to some extent by this

input.

Businesses are Open Systems

• Organizations are affected by the environment, and organizations affect, their environment.

• They take in Inputs: In the form of goods and services to create products or services (customers, supplies, capital).

• They produce Outputs: In the form of goods or services. These are in constant interaction with the firm’s environment.

• These impact and are impacted by both the External Environment and the Macroenvironment.

Examples of Inputs Into The Open System

• Raw Materials• Services• Equipment• Capital (Human Labor, Money, Intellectual, Managerial,

etc.)• Information (Knowledge)

Examples of Outputs Into The Open System

• Products (Example: Cars, Computers, Furniture, Groceries, etc.)

• Services (Example: accountants, medical services providers, etc.).

External Environment

All relevant forces outside the firm’s boundaries. These include competitors, customers, the government, and

the economy.

• Copyrights, patents, trademarks, government licenses • Industry-specific requirements for entry • Specific taxes • Interest rates for both customers and business• Technological changes that impact the firm (Example:

VCR to DVD; tapes to CDs, etc.)

Any questions ?

Can you think of an example of a change within the external environment that would pose a threat to a business?

Can you think of an example of a change within the external environment

that would create an opportunity to a business?

Do you think a change within the external business environment can

provide threats to some while it provides opportunities for others? Why?

External Environment Subdivisions

External environment can be broken further into a subdivisions that are significant to the specific business.

• Macroenvironment• Competitive Environment

Macroenvironment

• A part of the External Environment that forms the general environment for the business. Includes:

• Governments (Government actions, rules, laws, regulations, etc.)

• Economic Conditions (Amount of money, interest rates, etc.)

• Other fundamental conditions that could affect the business.

Good example is Figure 2.2 in your text or page 4 of the online chapter.

Competitive Environment

• A part of the External Environment that forms the immediate environment surrounding the business. Includes:

• Customers: Current customers as well as potential customers.

• Rival Businesses: Size, efficiency, and market position of current competitors.

• Potential rival Businesses: Size, efficiency, and market position of potential competitors. What could customers substitute for your product?

• Suppliers and others: that the firm needs to conduct business (Distribution channels).

Barriers to Market Entry

Barriers to entry are things that make it harder for competition to enter a particular Market.

Barriers can originate from:• Government Policy

• Capital Requirements

• Brand Identification

• Cost Disadvantages

• Distribution Channels

Ultimately the Customer Decides!

Ultimately, it is the customer who determines the success or the failure of a business. Regardless of the type of customer involved, business organizations that create value for their customers will retain their

customers and attract new ones. Those that fail to provide perceived value for the customer will eventually lose the customer and fail.

Profit is only the measure of how well a business provides value to its customers! Management plays a key role in determining how well a

business provides this value.

Any questions ?

Management Theories

As you no doubt discovered as you watched the video “The Evolution of Management,” business management

theories extend over many years and cover many different aspects of the management function. One way

to describe these is to divide them into three broad categories: Scientific Management Theories,

Bureaucratic Management Theories, and Human Relations Management Theories.

Taylor and Fayol

Scientific Management Theories: Concerned with specific work tasks. These theories were called “scientific”

because they introduced task definition and specific measurement to the process of work (Taylor, Fayol,

etc.) Around 1900 until about 1940.

Fredrick W. Taylor, an American mechanical engineer, is credited with the initial work of Scientific Management

with the publication of his Principles of Scientific Management in 1911.

Henri Fayol, French mining engineer, was one of the most influential contributors of modern concepts of management. Known for the 6 primary functions of management and the 14 principles of management.

Taylor’s Principles of Scientific Management

1. Replace ad hoc “rule of thumb” methods with methods based on scientific management.

2. Use scientific methods to select, and develop (train) each worker rather than leaving this selection and training to the individual employee.

3. Management and workers should cooperate to ensure the scientific methods and procedures are followed.

4. Work tasks should be equally divided between managers and workers. Managers were to use scientific principles in planning the work while the workers were to apply scientific methods as they performed the actual work.

Weaknesses Taylor’s Principles

1. Its rather mechanistic view of the worker with ignores individual wants and needs.

2. Its complete separation of planning and performance.

3. Its constant comparison of individuals against each other.

4. Its failure to provide a single “best approach” to solving work problems.

Fayolism

Controlling is described in the sense that a manager must receive feedback about a process in order to make

necessary adjustments.Fayol’s 6 primary functions:1.Forecasting2.Planning3.Organizing4.Commanding5.Coordinating6.Controlling

Max Weber

Bureaucratic Management Theories: These added to the measurement and specifications of earlier theories to

recognize the need for structure, lines of authority, and control within the management of businesses. It

responded to the growth of large business organizations by adding hierarchy to the business structure (Weber,

etc. 1930s to 1950s).

Human Relations Management Theories

This broad range of management theories responded to the impersonal approach of earlier theories by

recognizing the uniqueness of humans and the need for managers to resolve the needs of the business with the

needs of workers. Many of these come from the Behavioral Sciences (McClelland, Maslow, Lewin,

McGregor, etc. 1930s to today).

Elton Mayo, Australian psychologist and organization theorist, is credited with the Hawthorne experiments

which challenged Taylor’s theory.

Hawthorne Challenge

Hawthorne experiment challenged Taylor’s scientific theory on 3 key points.

1.it was discovered that the female workers had formed a team and that the social dynamics of the team were more influential to the work processes than any one best approach mandated for the task.

2.it was observed that the women varied their work habits to counteract boredom without adversely affecting productivity.

3.the work group examined was not closely managed but instead enjoyed a great degree of autonomy.

Next Week: Unit 3 Planning!

• Next week, we begin our examination of the four functions of management (POLC) with the Planning function. Professional business managers devote much of their time to planning at every level of the business organization. We will learn about the types of plans and how planning differs at different levels within the firm.

• We will also familiarize ourselves with Sandwich Blitz, Inc. a little business case through which we will discuss many of our course concepts and practices. This will allow us to apply these to a hypothetical business in operation!

Any questions ?

Instructor Contact Information

Professor Rhonda Shannon. MBA (Eastern Time Zone)

Email: rshannon@kaplan.edu

Phone: (317) 885-0469

Cell: (317) 690-9917

AIM: RhondaShannon1

Please don’t hesitate to email or call me if you have questions.

Reminders

There are many resources that Kaplan offers beyond the class experience. You can attend school meetings,

seminars and presentations as well as visiting the online library and the writing center. Take advantage of the

extra help in areas where you need it.

Also, don’t forget I will be posting my notes and

PowerPoint out on doc sharing and will also be emailing you those as well.

You are always welcome to listen to the archives after the Seminar.

Thanks for attending seminar

I look forward to seeing you next week.

Everyone have a great night!