INTRODUCTION TO BUSINESS ADMINISTRATION

Transcription

1 INTRODUCTION TO BUSINESS ADMINISTRATION UNIT 1 Basic Fundamentals of Business Administration KEY WORDS Business Wants Needs Goods Services Resource Production Profit Consumer Customer Market Demand Supply Utility WHAT IS BUSINESS? An organization or economic system where goods and services are exchanged for one another or for money.

2 What are the objectives of business? Making profit Supplying benefits for the society To exist and survive To get competetive advantages Goods and Services Goods Goods are items that can be seen and touched, such as books, pens and cloths etc... Goods are physical products with form and substances used by consumers for their satisfaction. Services Services are provided by other people such as Doctors, Dentists, barbers and teachers etc... Services are non-physical products usually involving performance. It is an activity performed for the benefit of someone else. Needs People need various kinds of goods and services in order to stay alive and to be a part of the society. People make efforts to get their needs met; Get satisfied and happy, when they get their needs met; And otherwise get unhappy and dissatisfied.

3 MASLOW S Hierarchy of Needs Hierarchy of Needs According to the Needs Hierarchy Theory of Abraham Maslow, one must satisfy lower level deficit needs before progressing on to meet higher level growth needs. When a deficit need has been satisfied it will go away. However growth needs continue to be felt and may even become stronger once they have been engaged. Once these growth needs have been reasonably satisfied, one may be able to reach the highest level called self-actualization. How Do Companies Meet People s Needs? 1. Shape change 2. Time change 3. Place change 4. Ownership change Wants Wants are the things you wish you could have. Each person has wants.

4 A group of people may also share the same wants. Although these wants are shared, they are considered private wants. Satisfying Wants and Needs with Goods and Services Necessary wants are needs. Food, shelter, and clothing are basic needs. Goods can be physically weighed or measured. Goods satisfy your wants and needs for material things that you can see or touch. Unlimited Wants, Limited Resources Most people have unlimited wants for goods and services. The more money you make, the more goods or services you want. Resources A resource is anything that people can use to make or obtain what they need or want. Examples of resources include fuel, timber, labor, and money. Unlimited Wants, Limited Resources The problem of unlimited wants and limited resources affects individuals, companies, and nations. Resources limit the number of wants people can satisfy. Businesses and government are influenced by the same problem. Consumer A consumer is a person who selects, purchases, uses, or disposes of goods or services. Business is aware of customers changing needs and wants. Customer v. Consumer Customer: someone who buys the product Consumer: someone who uses the product

5 Worker (Wage Earner) (Employee) In order to make products and provide services, businesses hire people to work. In order to produce a product, the business decides how it will be produced. In business today, workers have more input about how business is done. When you re an employee, quality of work, decision-making skills, and input to problems help a business flourish. Markets Interaction between buyers and sellers Markets may be Local National International Price is discovered in the interactions of buyers and sellers Free Market Economics Demand: The willingness and ability of buyers to purchase a good or service Law of Demand: Buyers will demand (purchase) more of a product as its price drops and less as its price increases The Formation of Demand Need Want Demand

6 Need Want Sufficient Income Demand Supply: The willingness and ability of producers to offer a good or service for sale Law of Supply: Producers will supply (offer) more of a product for sale as its price rises and less as its price drops Demand Curve Supply Curve

7 Equilibrium Price Determinants of Demand Change in consumer tastes and preferences Change in the number of buyers Change in income Change in prices of related goods Change in consumer expectations Determinants of Supply A change in resource prices A change in technology A change in the number of sellers A change in taxes and subsidies A change in prices of other goods A change in producer expectations Production The activities performed in order to create economic goods and services. The transformation of the physical and labor inputs into outputs which will meet human needs.

8 Utility Utility adds value Want a product to be something we can use and get some usefulness out of Form Utility Form utility involves changing raw materials or putting parts together to make them more useful EXAMPLES: tree wood paper OR tree wood furniture assembling various fabrics together into a garment you can wear Place Utility Place utility involves having a product where customers can easily buy it EXAMPLE: Time Utility Having fruits & veggies at the grocery store Time utility involves having a product available at a certain time of year or a convenient time of day EXAMPLES: Easy to reach different kinds of products in a shopping mall Fast-food restaurants Possession Utility Possession utility involves making it easier for a customer to buy/own a product EXAMPLE: Having a variety of easy payment methods Cash, debit, credit, loans, PayPal Information Utility Information Utility involves communication with consumers.

9 EXAMPLES: Sales associates Packaging Tags and labels Advertising Owner s manuels Internet sites What are Factors of Production A business is a system which combines production factors in a coordinated and compatible way. In order to produce goods and services to satisfy the needs and wants of consumers we need four basic things which are called factors of production. Factors of Production NELC Natural Resources Entrepreneurship Labour Capital Natural Resources Fixed in supply Cannot be renewed Found in nature E.g. Oil, water, marine life, forests etc Entrepreneurship Brings all the factors of production together in a profitable way An entrepreneurship is a person who is willing to take risks and is motivated.

10 Labour All the physical and mental effort used to create goods and services. Physical labour involves using your body and physical ability and mental labour involves using your mind and mental ability to get something done. Capital Capital goods are used to produce other goods and services. It can also mean the actual money used to start a business. Manufactured resources e.g. machines, tools, and buildings (capital goods) UNIT 2 EntrepreneurshIp Entrepreneur An entrepreneur is a person who organizes and combines the production factors in order to produce and/or market economic goods and services for making profit; and also takes all the risks which might occur as a reason of his venture. An entrepreneur is a person who dreamed, believed, and finally succeeded to start his own business.

11 A Successfull Entrepreneur Has dreams, Is able to take risks, Can observe and evaluate opportunities, Is able to organise, coordinate and control, Is the owner of the capital with its risks, Can maintain the workplace, labor, equipment and finance inputs, Has the ability and knowledge necessary to perform the business Basic Features of A Successful Entrepreneur Ability of Organizing Extravert personality Tendency to take risks

12 Determined personality Visionary Team working Leadership Flexibility What do Entrepreneurs Need? Knowledge and Abilities Technical/Functional Knowledge Management Planning Sources Business Idea Financial assets Talent, knowledge, ability, experience Social network Time Management Leadership Courage The first step of entrepreneurship is having a business idea which has the potential for success. The Process of Starting A New Business Business Startup Process

13 Develop the Business Start the Business Business Plan Pre-assessment Working Schedule Get a Business Idea Have the Motivation Business Startup Process 1) High Motivation 2) Business Idea 3) Working Schedule 4) Pre-assessment 5) Feasibility Study 6) Business Plan 7) Start Business 8) Develop Business Sources of Motivation for Entrepreneurs Being the boss of your own business; getting rid of taking commands. Achieving much more than present opportunities Willing to design your own future by your own decisions and efforts Having limited numbers of choices to earn your life Willing to get much more inner satisfaction Having a flexible and independent work atmosphere

14 Business Ideas Business ideas come from 2 sources: Past experience, knowledge and abilities Market opportunities Successful Business Ideas Supply benefits to consumers, such as Takes less time Needs less money Methods of Generating New Business Ideas Using education, experience and abilities Observation Brainstorming Idea mapping Problem solving Meeting needs Lateral Thinking BRAINSTORMING Producing an idea or way of solving a problem by holding a spontaneous group discussion. The group must be 4-8 people One should write down the ideas On a defined purpose, in a limited time As many ideas as possible BRAINSTORMING RULES 1. No dumb ideas. Your brainstorming session should be fun. It should be inviting and accepting of everyone s ideas, no matter how crazy, big or untried.

15 2. No Criticizing: No debating. No voting. Brainstorming is about sparking ideas and pulling and pushing each other to break-out thinking. 3.Build on Ideas: One person s idea will spark another and another, building upon each idea to come up with the WOW idea. It s a team effort. 4. Go for quantity over quality : Our goal is to bring out as many ideas as we can. The more creative the idea, the better. Idea Map Problem Solving & Meeting needs What is the problem/need? What is the reason? Possible solutions Best 3-4 solutions The best solution Try Implement E.g: Home servicing hairdressers Pet hotels Fast food restaurants Travel size cosmetics

16 Summer schools and camps for children Lateral Thinking Thinking creative and in a different way. LIFE CYCLE of BUSINESS IDEA Maturity Decline Growth Dreaming stage Introduction Preliminary Stage Time Sales Working Schedule Sample

17 Pre-Assessment of Business Idea Success and revenue potential of business idea must be examined. It is a comprehensive and time taking research. It should be clarified if there is any obstacle to realize the idea on this preliminary stage. What is a Feasibility Study Is this a good business idea? It answers the question of whether to go forward with the business idea or not. Feasibility study is carried out in order to assess the viability of a new project. Feasibility Study Gives focus to the project. Narrows the business alternatives. Identifies new opportunities. Identifies reasons not to proceed. Provides valuable information for go/no go decision. Increases probability of business success by identifying weaknesses early. Provides documentation that the idea was thoroughly investigated. Feasibility Study Must be researched: Demand Supply balance of business idea Competition analysis Potential customer profile Characteristics of product/service Legal choices for establishment Machines and equipment necessary Labor requirement Technical knowledge and competence necessary

18 Business Plan Financial requirement Options of financial resource Business plan is needed to implement the determined business model. The main purpose of business plan is to determine how to perform which activities for which objectives? It is the guide and the road map of the entrepreneur. It shows the present sitiaution, upcoming needs and results to be reached. It is a study of the detailed planning of all the elements of the realisation of the project. It reduces the uncertainities and the risk by making the entrepreneur analyse all the elements of the project. It helps different factors such as marketing, competition, production, finance, etc to be evaluated together. It provides the entrepreneur with a critical and objective point of view about his enterprise. It helps the entrepreneur to develop alternative strategies and analyse the effects of them on the result. The Sections of A Business Plan? The presentation of the entrepreneur The main qualities of the business Market and demand structure Marketing plan Production and Service Process Management and Organisation Process Estimated Financial Tables Activity Program Risk Assessment

19 The Success Rates Of Startups In the world, The survival rate of startups in the first 5 years is 40% The Success Rates Of Startups In Turkey, The survival rate of startups in the first 5 years is 30% Failure Rates IN EUROPE: 75% of startups fail in the first year. 50% of the survivors (which means 12,5% of all) have failed once or twice before. The ones, which have started with a business plan, have the success rate of 80%. Main Reasons of Failure Lack of competitive innovation Inappropriate customer choice according to product/service Incorrect sales methods Low quality product/service Delays and retuns Management problems Yönetim zorlukları Improper pricing Personal faults

20 UNIT 3 MANAGEMENT MANAGEMENT People have to meet their needs in order to stay alive. Organizations are necessary to get these needs met. The establishment and functions of these organisations are priorly issues of management. Every organization needs management to achieve its goals. MANAGEMENT is the effort to reach the goals which are not reachable by oneself, by a group. MANAGEMENT is the process of making others work and achieve goals. Minimum 2 people should be organised to reach a goal. To call it MANAGEMENT; There must be at least 2 people who should cooperate for a mutual purpose. ORGANIZATIONAL MANAGEMENT The management of the production factors which are natural resources, entrepreneurship, labour and capital. Performing the management functions (Planning, organizing, staffing, directing & controlling) successfully

21 PLANNING Deciding in advance : What to do How to do When to do Who is going to do it Bridges a gap between where we are today and where we want to reach. Sets the goal of an organization. It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. It is an exercise in problem solving & decision making. Planning is determination of courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways & means for accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties

22 ORGANIZING It is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry Fayol, To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel s. To organize a business involves determining & providing human and non-human resources to the organizational structure. Establishing the framework of working: How many units or sub-units or departments are needed. How many posts or designations are needed in each department. How to distribute authority and responsibility among employees Once these decisions are taken, organizational structure gets set up. Organizing as a process involves: Identification of activities. Classification of grouping of activities. Assignment of duties. Delegation of authority and creation of responsibility. Coordinating authority and responsibility relationships. STAFFING Recruiting, selecting, appointing the employees, assigning duties, maintaining cordial relationship and taking care of grievances of employees. Training and Development of employees, deciding their remuneration, promotion and increments. Evaluting their performance. It is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose o staffing is to put right man on right job i.e. square pegs in square holes and round pegs in round holes.

23 It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Staffing involves: - Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place). - Recruitment, selection & placement. - Training & development. - Remuneration. - Performance appraisal. - Promotions & transfer. DIRECTING Giving direction or instruction to employees to get the job done. Leadership qualities are required. Motivating employees by providing monatory and non-monetory incentives. Comunicating with them at regular intervals. Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers. Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose. Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction. Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding CONTROLLING Matching actual performance with the planed goal. If problem, tries to find out the reasons of deviation. Suggesting corrective measures come on the path of plan

24 It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. According to Theo Haimann, Controlling is the process of checking whether or not proper progress is being made towards the objectives and goals and acting if necessary, to correct any deviation. Therefore controlling has following steps: - Establishment of standard performance. - Measurement of actual performance. - Comparison of actual performance with the standards and finding out deviation if any. - Corrective action. MANAGER Manager is responsible of the functions of management in the organization. Manager makes other people work in order to get the goals achieved. Managing workers are supervisors Managed workers are subordinates

25 MANAGEMENT LEVELS

26 MANEGERIAL SKILLS How DID IT BEGIN? INDUSTRIAL REVOLUTION By the end of 1400s, Great Britain developed by the pirate trade. Tudor Dynasty made Britain people protestant at Protestantism is the mother of capitalism. Renaissance also triggered industrial revolution. The revolution started with the usage of steam power in industry. By the industrial revolution Industrial development by the invention of machines and steam power Mass production, assembly line

27 Increasing production and trade quantity; decreasing prices Increasing international trade by the development of shipping vehicles The formation of factory system and the working class Population migration to the industrially developed regions The foundation of unions because of the labor-capital conflicts EVOLUTION OF MANAGEMENT Management Perspectives over Time 1) Classical Perspective Scientific Management Bureaucratic Organization Administrative Principles 2) Humanistic Perspective Human Relations Movement Human Resources Perspective Behavioral Sciences Approach 3) Management Science Perspective 4) Systems Theory

28 5) Contingency View 6) Total Quality Management 7) The Learning Organization 8) The Technology-Driven Workplace Classical Perspective The earliest study of management Emerged during the nineteenth and early twentieth centuries Contains 3 subfields, each with a slightly different emphasis: 1) Scientific management 2) Bureaucratic organizations 3) Administrative principles 1) Scientific Management Scientific Management: emphasized the scientific study of work methods to improve the productivity of individual workers Frederick W. Taylor The Father of Scientific Management The theory of scientific management Using scientific methods to define the one best way for a job to be done: Putting the right person on the job with the correct tools and equipment. Having a standardized method of doing the job. Providing an economic incentive to the worker. Management Today How Do Today s Managers Use Scientific Management? Use time and motion studies to increase productivity Hire the best qualified employees Design incentive systems based on output

29 Characteristic of Scientific Management General Approach Contributions Developed standard method for performing each job Selected workers with appropriate abilities for each job Trained workers in standards methods Supported workers by planning their work and eliminating interruptions Provide wage incentives to workers for increased output. Demonstrated the importance of compensation for performance Initiated the careful study of tasks and jobs Demonstrated the importance of personnel selection and training Criticism Did not appreciate the social context of work and higher needs of workers Did not acknowledge variance among individuals Tended to regard workers as uninformed and ignored their ideas and suggestions 1. Scientific management theory arose in part from the need to increase productivity. 2. In the united states especially, skilled labor was in short supply at the beginning of the twentieth century. 3. The only way to expand the productivity was to raise the efficiency of workers. 4. Therefore,Fredick W.Taylor,Henry Gantt,and Frank and Lillian Gilberth devised the body of principles known as Scientific management theory SCIENTIFIC MANAGEMENT STANDARDISATION HIERARCHY COOPERATION

30 2) Bureaucracy Organizations A systematic approach developed in Europe that looked at the organization as a whole. During the late 1800s, many European organizations were managed on a personal, family-like basis. The weaknesses of this management style was that resources were used to realize individual desires rather than organizational goals. Bureaucracy is the combined organizational structure, procedures, protocols, and set of regulations in place to manage activity, usually in large organizations. it is often represented by standardized procedure (rule-following) that guides the execution of most or all processes within the body; formal division of powers; hierarchy; and relationships, intended to anticipate needs and improve efficiency. Positions organized in a hierarchy of authority Managers subject to rules and procedures that will ensure reliable predictable behavior Management separate from the ownership of organization Administrative acts and decisions recorded in writing Personnel selected and promoted based on technical qualifications Division of labor, with clear definitions of authority and responsibility.

31 3) Administrative Management Administrative Management: concerned with managing the total organization Among the pioneering theorists were Henry Fayol & Max Weber Henry Fayol The Functions of Management Henry Fayol was the first to systematize management behavior he was the first to identify the major functions of management: planning, organizing, leading, controlling, as well as coordinating and commanding. Management philosophy: Unity of command Each subordinate receives orders from one and only one superior Division of work Managerial and technical work are amenable to specialization to produce more and better work with the same amount of effort. Unity of Direction Similar activities in an organization should be grouped together under one manager. Scalar chain A chain of authority extends from the top to the bottom of the organization and should include every employee. Humanistic Perspective Emphasized the importance of understanding human behaviors, needs and attitudes in the workplace as well as social interactions and group processes. 1) The Human Relations Movement Proposed that better human relations could increase worker productivity. One of the earliest to study motivation, Maslow proposed his hierarchy of human needs in Maslow s Hierarchy of Needs

32 2) Human Resources Perspective Maintained an interest in worker participation and considerate leadership but shifted the emphasis to consider the daily tasks that people perform. Combines prescriptions for design of job tasks with theories of motivation. This will allow workers to use their full potential. 3) Behavioral Science Approach Behavioral Science relies on scientific research for developing theories about human behavior that can be used to provide practical tools for managers. Behavioral Science draws from sociology, psychology, anthropology, economics and other disciplines to understand employee behavior and interaction in an organizational setting. Management Science Perspective Management Science focuses on using mathematics to aid in problem solving and decision making. Suitable for large scale business firms. Example: forecasting, inventory modeling, linear and nonlinear programming, scheduling and break-even analysis.

33 Recent Historical Trends There are 2 recent trends that grew out of the humanistic perspective: 1) Systems Theory 2)Contingency View The Systems Theory The Systems Theory regards the organization as a system of interrelated parts By adopting this perspective you can look at your organization in two ways 1. A collection of subsystems parts making up the whole system 2. A part of the larger environment environment Input The people, money, information, equipment and materials required to produce and organization s goods or services Example: For a jewelry designer- designer money, artistic talent, gold and silver tools, marketing expertise Transformational Process The organization s capabilities in management and technology that are applied to converting inputs to outputs Example: Designer s management skills (planning, organizing, leading, controlling) gold and silver smithing tools and expertise, website for marketing Output The products, services, profits, losses, employee satisfaction or discontent, and the like that are produced by the organization Example: Gold and silver rings, bracelets, etc. Feedback Information about the reaction of the environment to the outputs that affect the inputs Example: Web customers like Africa style designs, dislike imitation Old English designs Open and Closed Systems Open System continually interacts with its environment Closed System has little interaction with its environment; it receives very little feedback from the outside

34 The Contingency View The Contingency View emphasizes that a manager s approach should vary according to that is, be contingent on the individual and the environmental situation Also sometimes called the situational approach. There is no one universally applicable set of management principles (rules) by which to manage organizations. Organizations are individually different, face different situations (contingency variables), and require different ways of managing.