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QUESTION # 1 (a)
12
Management Theory & Practice Course Code # 526MBA
Semester 1st Spring-2004
Assignment No.1Submitted by:
Muhammad Ilyas Khan
Roll # P-5031412
AIOU, IslamabadQUESTION # 1
Is your college instructor a manager? Discuss in terms of both Foyol's managerial functions, Mintzberg's managerial roles and Katz's skills?
ANSWER
Our College Instructor is also a Manager. He manage the college curriculum and non- curriculum activities then the instructor duties. He is a very good manager have most managerial qualities/ function. Now we compare him in the light of Fayols Managerial Functions and Mintzberg's managerial roles and Katz's skills
FAYOL'S MANAGERIAL FUNCTIONS
Fayol regarded the elements of management as its functions- planning, organizing, staffing, leading, controlling, and coordinating. Throughout Fayol's treatise there exists an understanding of the general applicability if principles. Again and again out that these principles apply not only to business but also to political, religious, philanthropic, military, and other undertakings.
PLANNING
Planning involves selecting missions and objectives and the actions to achieve them: it requires decision making that is, choosing future courses of action from among alternatives. There are various types of plans, ranging from overall purposes and objectives to the most detailed actions to be taken, such as ordering a special stainless steel bolt for an instrument or hiring and training workers for an assembly line.
ORGANIZING
People working together in groups to achieve some goal must have roles to play, much like the parts actors fill in a drama, whether these roles are ones they develop themselves, are accidental or haphazard, or are defined and structured by someone who wants to make sure that people contribute in a specific way to group effort.
STAFFING
Staffing involves filling, and keeping filled, the positions in the college (organization) structure. This is done by identifying work-force requirement; inventorying the people available; and recruiting, placing, promoting, appraising, planning the careers of, compensating, and training or otherwise developing both candidates and current jobholders so that tasks are accomplished effectively and efficiently.
LEADING
Leading is influencing student/staff so that they will contribute to organization and group goals; it has to do predominantly with interpersonal aspect of managing. Since leadership implies followership and Students/people tend to follow those who offer a means of satisfying their own needs, whishes and desires, it is understandable that leading involves motivation, leadership styles and approaches, and communication.
CONTROLLING
Controlling is measuring and correcting individual and organizational performance to ensure that events conform to plans. It involves measuring performance against goals and plans, showing where deviations from standing exist, and helping to correct them. In short, controlling facilities are the accomplishment of plans.
COORDINATION, THE ESSENCE OF MANAGERSHIP Some authorities consider coordination to be a separate function of the manager. It seems more accurate, however, to regard it as the essence of manager ship, for achieving harmony among individual efforts toward the accomplishment of group goals. Each of the managerial functions is an exercise contributing to coordination.
a.
OUR COLLEGE INSTRUCTOR PERFORM MANAGEMENT ROLES IN THE LIGHT OF HENRY MINTZBERG
In the late 1960s, Henry Mintzberg did a careful study of five chief executives at work. What he discovered challenged several long-held notions about the manager's job. For instance, in contrast to the predominant views at the time that managers were reflective thinkers who carefully and systematically processed information before making decisions, Mintzberg found that his managers engaged in a large number of varied, un-patterned, and short-duration activities. There was little time for reflective thinking because the managers encountered constant interruptions.
INFORMATIONAL ROLES
Our instructor/managers, fulfill informational role, receiving and collecting information from organizations and institutions outside their own. Typically, they do so by reading magazines and talking with others to learn of changes in the public's tastes, what competitors may be planning, and the like.
INTERPERSONAL ROLES
Managers is required to perform duties that are ceremonial and symbolic in nature interpersonal roles. When the president of college handout diplomas at commencement or factory supervisors gives a group of high schools students a tour of the plant, he or she is acting in a figurehead role.
DECISIONAL ROLES
He has perform decisional roll as per Mintzbergs identified four decisional roles, which revolve around the making of choices. As entrepreneurs, managers initiate and oversee new projects that will improve their organization's performance. As disturbance handlers, managers take corrective action in response to previously unforeseen problems.
OUR COLLEGE INSTRUCTOR FOLLOWES THE ROBERT L. KATZ'S MANAGEMENT SKILLS
A manager's job is varied and complex. Managers need certain skills to perform the duties and activities associated with being a manager. The relative importance of the different skills at the three management levels.
(i) Top Level Management
(ii) Middle Level Management
(iii) Lower Level Management
TECHNICAL SKILLS
First-line managers, as well as many middle managers, are heavily involved in technical aspects of the organization's operations. Technical skills include knowledge of and proficiency in a certain specialized field, such as engineering, computers, finance.
HUMAN SKILLS The ability to work well with other people both individually and in a group is a human skill. Since managers deal directly with people, this skill in crucial! In fact, it remains just as important at the op levels of management as it is at the lower levels. Managers with good human skills van get the best out of their people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust.
CONCEPTUAL SKILLS
Managers also must have the ability to think and to conceptualize about abstract situations. All managers at all levels need these types of conceptual skill but become more important as they move up the organizational hierarchy.
DESIGN SKILLS
Design skill is the ability to solve problems in ways that will benefit the college. To be effective, particularly at upper organizational levels, managers must be able to do more than see a problem. b.
What management skills does a manager need? Explain how the importance of these skills changes depending on management level?
ANSWER
MANAGEMENT DEFINATION
Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. The basic definition needs to be expended:
1.As managers, people carry out the managerial functions of planning, organizing, staffing, leading, and controlling.
2. Management applies to any kind of organization.
3.It applies to managers at all organization levels.
4.The aim of all managers is the same: to create a surplus.
5.Managing is concerned with productivity; this implies effectiveness and efficiency.
A MANAGER NEEDS FOLLOWING MANAGEMENT SKILLSA manager's job is varied and complex. Managers need certain skills to perform the duties and activities associated with being a manager. During the early 1970s, research by Robert L. Katz found that managers need three essential skills or competencies: technical, human, and conceptual. The relative importance of the different skills at the three management levels.
i.Top Level Management,
ii. Middle Level Management
iii. Lower Level Management.
TECHNICAL SKILLS
First-line managers, as well as many middle managers, are heavily involved in technical aspects of the organization's operations. Technical skills include knowledge of and proficiency in a certain specialized field, such as engineering, computers, finance, or manufacturing. For example, an accounts payable manager must be proficient in accounting rules and standardized forms so that he can resolve problems and answer questions that her accounts payable clerks might encounter.
HUMAN SKILLS
The ability to work well with other people both individually and in a group is a human skill. Since managers deal directly with people, this skill in crucial! In fact, it remains just as important at the op levels of management as it is at the lower levels. Managers with good human skills van get the best out of their people.
CONCEPTUAL SKILLS
Managers also must have the ability to think and to conceptualize about abstract situations. They must be able to see the organization as a whole and the relationships among its various subunits and to visualize how the organization fits into its broader environment. Managers at all levels need these types of conceptual skill but become more important as they move up the organizational hierarchy.
DESIGN SKILLS
Design skill is the ability to solve problems in ways that will benefit the enterprise. To be effective, particularly at upper organizational levels, managers must be able to do more than see a problem. They must have, in addition, the skill of a good design engineer in working out a practical solution to a problem.
IMPORTANCE OF SKILL CHANGES DEPENDING ON MANAGEMENT LEVEL
The relative importance of these skills may differ at various levels in the organization hierarchy. Technical skills are of greatest importance at the supervisory level. Human skills are also helpful in the frequent interactions with subordinates. Conceptual skills, on the other hand, are usually not critical for lower-level supervisors. At the middle management level, the need for technical skills decreases; human skills are still essential; the conceptual skills gain in importance. At the top management level, conceptual and design abilities and human skills are especially valuable, but there is relatively little need for technical abilities. It is assumed, especially in large companies, that chief executives can utilize the technical abilities of their subordinates. In smaller firms, however, technical experience may still be quite important.
QUESTION # 2
The development of management thought has been determined by times and conditions. Do you agree or disagree with this statement. Discuss.
ANSWER
The management techniques Milton Kim wants to implement may seem familiar and trivial to us, but as he is discovering, it's not easy to make radical changes when things have always been done another way. In fact, the history of management is filled with examples of evaluations and revolutions in views of "how organizations should be managed".
The knowledge of management history can help to understand theory and practice as they are today. One of new practices is a hiring woman for senior positions. Says Kim, "If I find a capable woman who aggressive and willing to make a career out of this business, I will encourage her to join." Other techniques he wants to implement include merit-based career promotions and incentive-driven wages.
HISTERICAL BACKGROUND
Organized endeavors directed by people responsible for planning, organizing leading, and controlling activities have existed for thousands of years. The Egyptian pyramids and the Great Wall of China are tangible evidence that projects of tremendous scope, employing tens of thousands of people, were undertaken well before modern times. The pyramids are a particularly interesting example. The construction of a single pyramid occupied over 100,000 people for twenty years. Who told each worker what to do? Who ensured there would be enough stones at the site to keep workers busy? The answer to such questions is management.
Another interesting example of the early practice of management is the Roman Catholic Church. Its current structure was essentially established in the second century A.D. and is composed of only five levels: parish priest, bishop, archbishop, cardinal, and pope. Today, final authority over the church's direction and strategy remains centralized in Rome, a simple hierarchy that has remained basically unchanged for almost two thousand years.
THE EARLY YEARS
The first half of this century was a period of contrasts in management thinking. Scientific management looked at management from the perspective of how to improve the productivity of operative personnel. The general administrative theorists were concerned with the overall organization and how to make it more effective.
SCIENTIFIC MANAGEMENT
If you had to pinpoint the year that modern management theory was born, 1911 would be a logical choice. That was the year that Frederick Winslow Taylor's Principles of Scientific Management was published. Its contents would become widely accepted by managers throughout the world. The book described the theory of scientific management-the use of scientific methods to define the "one best way" for a job to be done. The studies conducted before and after the book's publication established Taylor as the "father" of scientific management. Why did scientific management receive so much attention? Certainly, many of the guidelines Taylor and others devised for improving production efficiency appear to us today to be common sense. For example, we think it's obvious that managers should carefully screen, select, and train workers before putting them on a job.
TAYLOR'S FOUR PRINCIPLES OF MANAGEMENT1.Develop a science for each element of an individual's work, which replaces the old rule-of-thumb method.
2.Scientifically select and then train, teach, and develop the worker, (Previously, workers choose their own work and trained themselves as best they could.)
3.Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed.
4.Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers. (Previously, almost all the work and the greater part of the responsibility were thrown on the workers.)
GENERAL ADMINISTRATIVE THEORISTS
Another group of writers looked at the subject of management but focused on the entire organization. We call them the general administrative theorists. They are important for developing more general theories of what managers do and what constitutes good management practice. Because their writings set the framework for many of our contemporary ideas on management and organization, this group and the scientific management group are frequently referred to as the classical theorists.
Weber's bureaucracy was an attempt to formulate an ideal prototype for designing organizations. It was a response to the abuses that Weber saw going on within organizations of that time. Weber believed that his model could remove the ambiguity, inefficiencies, and patronage that characterized many organizations.
HUMAN RESOURCES APPROACH
Mangers get thing done by working with people. This explains why some writers and researchers have chosen to look at management by focusing on the organization's human resources.
THE QUANTITATIVE APPROACH
We close our discussion of the early years of management with a review of quantitative contributions. This approach has also bee labeled as operations research or management science. It evolved out of the development of mathematical and statistical solutions to military problems during World War II.
RECENT YEARS: TOWARD INTEGRATION
The view of foreman or supervisor, the whole organization, the manager as guiding and directing human resources, and the manager as developing quantitative models to make optimizing decisions.
PROCESS APPROACH
In December 1961, Professor Harold Koontz published an article in which he carefully detailed the different approaches to the study of management and concluded that there existed a "management theory jungle" Koontz conceded that each of the approaches had something to offer management theory but then proceeded to argue that:-
1The human resources and quantitative approaches
were not equivalent to the field of management, but
rather were tools to be used by managers.
2.A process approach could encompass and synthesize the various viewpoints. The process approach, originally introduced by Henri Foyal, is based on the management functions.
SYSTEM APPROACH
During the 1960s, researchers began to analyze organizations from a systems perspective. The systems approach defines a system as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. Societies are systems and so too are automobiles, animals, and human bodies. Physiologists to explain how animals maintain an equilibrium state by taking in inputs and generating outputs, for instance, have used the systems perspective.
CONTINGENCY APPROACH
Management, like life itself, is not based on simplistic principles. Insurance companies know that everyone doesn't have the same probability of being in an auto accident.
POPULAR CONTINGENCY VARIABLES
Organization Size: The number of people in an organization is a major influence on what managers do. As size increases, so do the problems of coordination. For instance, the type of organization structure appropriate for an organization of 50,000 employees is likely to be inefficient for an organization of fifty employees.
Routine ness of Task Technology: In order for an organization to achieve its purpose, it uses technology; that is, it engages in the process of transforming inputs into outputs. Routine technologies require organizational structures, leadership styles, and control systems that differ from those required by customized or no routine technologies.
Environmental Uncertainty: The degree of uncertainty caused by political, technological, social cultural, and economic changes influences the management process. What work best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment?
Individual Differences: Individuals differ in terms of their desire for growth, autonomy, tolerance for ambiguity, and expectations. These and other individual differences are particularly important when managers select motivation techniques, leadership styles, and jog designs.
QUESTION # 3
Managers are often characterized as being "boundary spanners". What do you think this term refers to and why do you think it might be an important description of what a manager does in relation to external environmental factors?
ANSWER
a.
The interaction of managers and their subordinates with the environment inside the enterprise, but most instances the effective manger must also deal with the outside environment. Every time mangers plan, they take into account the needs and desires of members of society outside the organization, as well as the needs for material and human resources, technology and other requirements in the external environment. All managers, whether they operate in a business, a government agency, a church, a charitable foundation, or a university, must, in varying degrees, take into account the elements and forces of their external environment. While they may be able to do little or nothing to change these forces, they have no alternative but to respond to them. They must identify, evaluate, and react to the forces outside the enterprise that may affect is operations. The constraining influences of external factors on the enterprise are even more crucial in international management. Different organizations face different specific environments. Most organizations, though, are influenced by the following external factors that impose uncertainty: suppliers, customers, competitors, governmental agencies, and special interest pressure groups.
SUPPLIERS
When you think of an organization's suppliers, you typically think of firms that provide materials and equipment. The reason of most large organizations have purchasing, finance, and human resources departments is to supply the machinery, equipment, capital, and labor input they need to operate.
CUSTOMERS
Organizations exist to meet the needs of customers. It is the customers or client who absorbs the organization's output. This is true even for governmental organizations. They exist to provide services, and we are reminded, especially at election time, that we indicate by the way we vote how satisfied we actually are as customers. Customers obviously represent potential uncertainty to an organization. Customers' tastes can change.
COMPETITORS
No managers can afford to ignore the competition. When they do, they pay dearly! Many problems incurred by the competition. When they do, they pay have been attributed to their failure to recognize who their competitors were. They believed they were in the railroad business when, in fact, they were in the transportation business. Trucking, shipping, aviation, and bus and private automobile transportation are all competitors of railroads. In fact, as technological capabilities expand with the development of the information superhighway, the number of viewing options will explode, providing even more competition.
GOVERNMENT
Federal, state, and local governments influence what organizations can and cannot do. Some federal legislation has significant implications. For example, consider the following: The Sherman Anti-Trust Act of 1890 sought to stop monopoly practices that result in restraint of trade. The National Labor Relations Act of 1935 stipulated that employers were required to recognize a union chosen by the majority of their employees and also established procedures and rules governing collective bargaining. The Civil Rights Act of 1964 made it unlawful for an employer to discharge, refuse to hire, or discriminate in employment against an individual because of race, color, region, sex, or national 0rigin.
PRESSURE GROUPS Managers must recognize the special-interest groups that attempt to influence the actions of organizations. Automobile manufactures, toy makers, and airlines have been visible targets of Ralph Nader's Center for Responsive Law. Conservative citizen action groups have successfully pressured publishers of elementary and secondary.
As social and political movements change, so too does the power of pressure groups. For example, through its persistent efforts, groups like MADD (Mothers Against Drunk Driving) and SADD (Student Against Drunk Driving) have not only managed to make changes in the alcoholic beverage and restaurant and bar industries, but have also raised public awareness about the problem of drunk drivers.
QUESTION # 3
Describe an effective culture for a:
Relatively stable environment-Dynamic environment
ANSWER
b.
DEFINING THE ENVIRONMENT: The term environment refers to institutions or forces that are outside the organization and potentially affect the organization's performance. As one writer describes it, "Just take the universe, subtract from it the subset that represents the organization, and the remainder is environment. " But it's really not that simple.
GENERAL VERSUS SPECIFIC ENVIRONMENT:
The general environment includes everything outside the organization, such as economic factors, political conditions, social cultural influences, globalization issues, and technological factors.
The bulk of management's attention is usually given to the organization's specific environment. The specific environment is the part of the environment that is directly relevant to the achievement of organization's goals. It consists of the organization's effectiveness. Each organization's specific environment is unique and changes with conditions.
GENERAL VERSUS SPECIFIC ENVIRONMENT: - The environment is important to managers because not all environments are the same. They differ by what we call their degree of environmental uncertainty. Environmental uncertainty, in turn, can be divided into two dimensions: degree of change and degree of complexity.
"If the components in an organization's environment change frequently, we call it a dynamic environment."
Whereas:
"If the components in an organization's environment change is minimal, we call it a stable environment."
A stable environment might be one in which there are no competitors, no technological breakthroughs by current competitors, little activity by pubic pressure groups to influence the organization, and so forth. For instance, at Justin Boot Company of Fort Worth, Texas, managers are always seeking new market opportunities even though its environment is a relatively stable one where change is infrequent. In fact, the latest phenomenon Justin has had to deal with is that its standard work boots have become a popular choice for both country western and heavy metal grunge fanatics.
DYNAMIC ENVIRONMENT
In contrast, Compaq Computer and the other computer manufacturers face an uncertain and unpredictable environment. At Compaq Computer based in Houston, Texas, managers experienced firsthand during the early 1990s the volatility of the PC marketplace. Although the company grew explosively during the 1980s by selling desktop computers to business customers, it suffered severe setbacks when the 1990-1991 recession hit. To continue as a viable competitor in the industry, the new CEO directed company managers to begin looking more closely at the consumer market. After implementing several dramatic changes in manufacturing and marketing, Compaq began rushing a series of lower-priced and user friendly computer to the market in early 1992. The company has been on a roll ever since. Compaq and the other computer manufacturers face an uncertain and unpredictable environment.
Environmental uncertainty can be described as shown in the matrix below. There are four cells, with cell 1 being lowest in environmental uncertainty and cell 4 being highest. Management's influence on organizational outcomes is greatest in cell 1 and least in cell 4. Since uncertainty is a threat to an organization's effectiveness, managers try to minimize it. Given a choice, managers would prefer to operate in environments like those in cell 1. But managers rarely have full control over that choice. For example, managers of firms that produced and marketed computers and information systems to operate in, they faced a highly dynamic and complex environment. Had they chosen to manufacture standard wire coat hangers, they would probably have found themselves in cell 1.
Degree of Change
Stable
Dynamic
Cell 1 Stable and predictable environment Few components in environments Components are somewhat similar are remain basically the same Minimal need for sophisticated Knowledge of components.Cell 2 Dynamic and unpredictable environments Few components in environments Components are somewhat similar but are in continual process of change minimal need for sophisticated knowledge of components Knowledge of componentsSimple
Cell 3 Stable and predictable environment Many components in environment Components are not similar to one other and remain basically the same continual process of change High need for sophisticated Knowledge of components.
Cell 4 Dynamic and unpredictable environments Many components in environment. Components are not similar but are in continual process of change. Minimal need for sophisticated Knowledge of componentsDegree of uncertainty
Complex
QUESTION # 4
Explain in detail how a global economy creates both opportunities and threats for managers?
ANSWER
a.THE MANAGERIAL FUNCTIONS IN INTERNATIONAL BUSINESS There is evidence that management fundamentals are applicable in different countries. However, the practice of carrying out the managerial functions of planning, organizing, staffing, leading, and controlling differ in domestic and international enterprises.
PLANNING IN THE MULTINATIONAL CORPORATION Planning requires setting objectives and then selecting strategies, policies, programs, and procedures for achieving them. A critically important activity for the MNC is the assessment of opportunities and threats in the external environment. This is a complex task even for a domestic enterprise, but it becomes much more intricate when many different, ever changing world markets must be scanned.
External threats External threats and opportunities must be matched with the external strengths and weakness of the firm. For example, a poor educational system makes it difficult to find qualified personnel. Similarly, cultural orientation toward time will affect planning. Specifically, cultural attitudes that emphasize a short time economic instability in a country makes it difficult to forecast and will discourage long-term commitment of resources.
Even large multinational companies may find it difficult to compete in the world market. Therefore, they form global strategic partnerships (GSPs). General Motors formed a joint venture with Toyota to produce cars at the Fremont plant in California. American Telephone and Telegraph Company shares technology with Olivetti and Philips, large multinational corporations in Europe. Kodak works with Japanese company to produce some of its cameras. Clearly, success of the GPSs will depend on balancing cooperation with competitiveness among the firms.
ORGANIZING THE MULTINATIONAL CORPORATION
Organizing structures are established to achieve corporate objectives. A company can select from a great variety of structures. An enterprise may, for example, establish a vice presidential position at corporate headquarters with responsibility for the international division. An alternative is to organize according to geographic areas. For example, managers may be put in charge of regions such as North America, Latin America, Europe, Africa, and Far East. Still another way of grouping organizational activities is according to the product lines. For instance, at corporate headquarters, managers may be put in charge of a product line that is marketed worldwide. The truly multinational firm may integrate domestic and international business into a global structure that gives similar importance to domestic and foreign business activities.
STAFFING IN THE MULTINATIONAL CORPORATION
Qualified persons must fill the positions identified in the organization structure. This involves Staffing.
Sources of managerial talent. Managers of the MNC can be classified in three ways. First, managers may be nationals selected from the country in which the headquarters is located. These expatriates (with home-country nationality) are chosen to represent and manage the enterprise abroad. Second, a firm may select managers who are nationals of the host country. These managers are familiar with the country's environment, its education system, its culture, its legal and political processes, and its economic environment. The third group of managerial personnel consists of third-country nationals. These are managers who have a nationality that is different from the parent company country or the host country. Such managers may have gained experience by working at the company headquarters as well as in different countries.
LEADING IN THE MULTINATIONAL CORPORATION
Leading Involves motivating and communicating. It requires exerting leadership by including employees to contribute to enterprise objectives.
Motivating and leading demand an understanding of employees and their cultural environment. For instance, participative management may work well in one country but may cause confusion among employees in another country with tradition of autocratic rule.
CONTROLLING IN THE MULTINATIONAL CORPORATION
Controlling-the management and correction of performance to ensure that events conform to plans-is an essential managerial function that is influenced by several environmental factors unique to international enterprises. First, revenues, costs, and profits are measured in different currencies. Second, the ratios between currencies are subject to considerable fluctuation. Third, according practices and financial reporting often differ from country to country. For example, accounting procedures may have to satisfy the demands of tax authorities of the host country as well as the government of the parent firm.
QUESTION # 4
How do characteristics of a country's economic environment influence management practice? Discuss.
ANSWER
b.
ECONOMIC ENVIRONMENT
It is sometimes thought that the economic environment is of concern only to businesses whose socially approved mission is the production and distribution of goods and services that people want and can pay for. But it is also of greatest importance to other types of organized enterprises. A government agency takes resources, usually from taxpayers and provides services desired by the public. A church contribution from members and serves there religious and social needs. A university takes resources inputs from taxpayers, and students, and contributors of various kinds and transforms these in to educational and research services.
CAPITAL Almost every kind of organization needs capital-machinery, buildings, inventories of goods, office equipment, tools of all kinds, and cash. Some of this may be produced by the organization itself, as when a business builds its own machinery or a church group prepares a church supper. Cash resources may also be generated within an organization to buy capital items outside, as when business profits are used to purchase equipment or when a university collects parking fees to pay for the building of parking structures. But organized enterprises are usually dependent for capital requirements on various suppliers, whose job it is to produce the many materials and other items of capital that an organization requires for its operation.
LABOR
Another important input from the economic environment is the availability, quality, and price of labor. In some societies, untrained common labor may be plentiful, while highly trained labor may be in short supply. Engineers may be scarce at one time and plentiful at another, as has occurred in the ups and downs of the defense and space operations of the United States.
PRICE LEVELS
The input side of an enterprise is clearly affected by price-level changes. If prices go up fairly rapidly, as happened in most part of the world in the 1970s and early 1980s, the turbulence created in the economic environment on both the input and output sides can be severe.
GOVERNMENT FISCAL AND TAX POLICES
Another important input to the enterprise is the nature of government fiscal and tax polices. Although these are, strictly specking, aspects of the political environment, their economic impact on all enterprises is tremendous. Government control of the all availability of credit through fiscal policy has considerable impact not only on business but also on most non business operations.
CUSTEMERS
One of the most important factors for the success of an enterprise is customer. Without them, a business cannot exist. But to capture customers, a business must try to find out what people want and will buy. Non-business enterprises have "customers" also. Universities and colleges have students and alumni to satisfy. Similarly, police, fire, and government health departments must serve the public.
Interest rates, Inflation rates, Changes in disposable income, Stock market indexes, and The stage of the general business cycle are some of the economic factors in the general environment that can affect management practices in an organization.
For example, many of the world's largest financial institutions have learned how closely their fortunes are tied to the U.S. real estate industry. The collapse of the commercial real estate market, stating in the late 1980s, reverberated throughout the banking and savings and loan industry. Many banks, including some major players like Citicorp and Chase Manhattan that had lent heavily on commercial property, absorbed huge losses and then had to lay off thousands of employees in order to reduce costs. Likewise, many specialty retailers like The Sharper Image, The Limited, and Williams-Sonoma are acutely aware of the impact the level of consumer disposable income has on their sales. When consumers' income fall or when their confidence about job security declines, they will postpone purchasing anything that isn't a necessity. Even charitable organizations like the Salvation Army and United Way feel the impact of economic factors. During economic downturns they are asked to provide greater assistance while, at the same time, their contributions typically decrease.
QUESTION # 5
What does social responsibility means to you? Do you think business firms should be socially responsible? Why?
ANSWER
a.
SOCIAL RESPONSIBILTY DEFINITION:"An obligation, beyond that required by the law and economics, for a firm to pursue long-term goals that are good for the society."
TWO OPPOSING VIEWS
Few terms have been defined in as many different ways as social responsibility. Some of the more popular meanings include "profit making only," "going beyond profit making," "voluntary activities," "concern for the broader social system," and "social responsiveness." Most of the debates have focused on the extremes. On one side, there is the classical.
Purely economic, view that management's only social responsibility is to maximize profits. On the other side stands the socioeconomic position, which holds that management's responsibility goes well beyond making profits to include protecting and improving society's welfare.
THE CLASSICAL VIEW
"The view that management's only social responsibility is to maximize profits. "
The most outspoken advocate of the classical view is economist and Nobel laureate Milton Friedman. He argues that most managers today are professional managers, which means they don't own the business they run. They're employees, responsible only to the stockholders. Their primary responsibility is therefore to operate the business in the best interests of the stockholders.
According to Friedman, when managers decide on their own to spend their organizations resources for the "social good", they undermine the market mechanism. Someone must pay for this redistribution of assets. If socially responsible actions reduce profits and dividends, stockholders lose. If wages and benefits have to be reduced to pay for social actions, employees lose. If prices are raised to pay for social actions, consumers lose. If consumers reject higher prices and sales drop, the business might not survive, in which case, all the organization's constituencies lose. Friedman's argument is probably best understood by using microeconomics. If socially responsible acts add to the cost of doing business, those costs either have to be passed on to consumers in the form of higher prices or absorbed by stockholders through a smaller profit margin. If management raises prices in a competitive market, it will lose sales. In a purely competitive market where competitors have not assumed the costs of social responsibility, prices can't be raised without losing the entire market. Such a situation means that the costs have to be absorbed by the business, which results in lower profits.
THE SOCIOECONOMIC VIEW
"The view that management's social responsibility goes well beyond the making of profits to include protecting and improving society's welfare."
The socioeconomic position counters that times have changed, and with them society's expectations of business. This is best illustrated in the legal formation of corporations. State governments charter corporations. The same government that grants a charter can take it away. So corporations are not independent entities, responsible only to stockholders. They also have a responsibility to the larger society that creates and supports them. One author, in supporting the socioeconomic view, reminds us "maximizing profits is a company's second priority, not its first. The first is ensuring its survival.
THE SOCIAL RESPONSINILITIES OF MANAGERS
In the early 1900s the mission of business firma was exclusively economics. Today, partly owing to the interdependencies of the many groups in our society, the social involvement of business has increased. There is indeed a question as to what the social responsibility of business really is. Moreover, the question of social responsibility, originally associated with businesses, is now being posed with increasing frequency in regard to Governments, universities, non-profit foundations, charitable organizations and even churches. Thus, we talk about social responsibility and social responsiveness of all organizations, although the focus of this discussion is on business. Society, a vacant and vocal with respect to the urgency of social problems, in asking managers, particularly those at the top, what they are doing to discharge their social responsibilities and why they are not doing more.
SOCIAL RESPONSIBILITY AND SOCIAL RESPONSIVENESS
The concept of social responsibility is not new. Although the idea was already considered in the early part of the 20th century, the modern discussion of social responsibility got a major impetus with the book Social Responsibilities of the businessman by Howard R. Bowen, who suggested that businesses should consider the social implications of their decisions. As might be expected, there is no complete agreement on the definition. In a survey of 439 executives, 69% of responding managers agreed with this definition: "Corporate social responsibility is seriously considering the impact of the company's actions on society. " A concept that is newer, but still very similar to social responsibility, is social responsiveness, which is simple term means "the ability of corporation to relate its operations and policies to the social environment in ways that are mutually beneficial to the company and the society. "
Both definitions focus on corporations, but these concepts should be expanded
1. To include enterprises other than businesses,
2. To encompass relationships within a enterprise. T
The main difference between social responsibility and social responsiveness is that latter implies actions and "how" of enterprise responses. In this discussion the term will be used interchangeably.
ARGUMENTS FOR AND AGAINST BUISNESS INVOLVEMNET INSOCIAL ACTIONS
Although there are arguments for business involvement in social activities, there are also arguments against it. Today many businesses are involved in social actions. A decision as to whether companies should extend their social involvement required a careful examination of arguments for and against such actions. Certainly, society's expectations are changing, and the trend seems to be towards greater social responsiveness. In fact, social responsibility is a legitimate and achievable aim for business. Still, the mission of organization must be taken into account.
THE MISSION OF ENTERPRISE
Various kinds of organized enterprises have different missions entrusted to them by society. The mission of business is the production and distribution of goods and services. The mission of a police department is the protection of people's safety and welfare. The mission.
Assignment # 1
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Management Theory-526
M. Ilyas Khan R # P-503412