BUSINESS STUDIES
What is business?As an economic activity
• It refers to all profit producing activities in the economy.
• It refers to work efforts of people who are concerned with creating wealth.
• Any enterprise must make or provide any article or service that is required by members of the community who are able and willing to pay for it.
From the above definitions we can conclude that bus is an economic activity whose aim is to make profit by satisfying customer need.
For those who own or manage businesses business activities become a way of life as they are usually faced with great demands and responsibilities. Some of them include entrepreneur prof managers & functional specialist. For business to develop and prosper they normally create business. Objectives i.e goals that the business intends to achieve these includes:
a) Maximization of profits
A business is usually an economic activity which aims at the allocation of limited resources for maximum gain in form of profits. Biz organizations are usually engaged in production of or purchase of goods and services with the aim of maximizing profit.
b) Maximize total sales revenue
Where the organization is engaged in achieving maximum sales c) Minimization of costs
Where the firm intends to reduce costs of operation in order to be competitive.
d) Creation of wealth: Business sometimes are crated with the aim of maximizing wealth so that there is good return to the business owners. In case of a LTD Co this may result into a rise in market value of the shares
e) Long term survival
Some business organizations may want to establish long term survival. A firm that has this objective is usually very cautions and all its decisions are safely oriented e.g Banks. Building
societies in addition, such firms do not like to real Larger infits in the short run but rather higher profits in the long run.
f) Achieving financial soundness
No business firm can continue for along time unless it is financially sound. Banks and financial institutions usually stress upon financial soundness as a foundation
g) To achieve economic self sufficiency
A business firm cannot be successful in achieving its objective if it only depends upon external source and therefore a business firm should be independent in all the affairs. If complete self dependence is not possible them dependence on external financial sources must be minimal.
h) Welfare of employees
Employees are usually the determinants of productivity in conjunction with other factors of production. Their welfare is therefore likely to improve productivity or the welfare of the organization.
i) Suppliers welfare
Suppliers are an important component of any business organization and induces trade creditors who may have supplied any goods to the organization or bank or other forms of financial obligation. A business unit should honour their obligations by paying them when they fall due.
j) Government welfare
B. units may have consciousness of its obligations to the government. This includes paying faxes, operating within the legal system e.g obeying labour laws as this would minimize disruption of its activities
k) Welfare of the society.
• Supplying of goods or products
• The business unit should contribute to the welfare of society in terms of contribution’s to social projects.
• The business units should not use production processes that are harmful or cause heath hazard to the society in terms of pollution to the society.
l) Having an interest to the customers
• Charging of fair prices
• Having a good relationship with customers
• Having an honest dealing with its customers
NATURE OF BUSINESS OBJECTIVES (SMART) 1. Specific – should not be vague or ambiguous
2. Measurable – should be able to measure the success or failure of the objective with time. 3. Attainable / achievable- within the current resources to achieve your stated objective.
4. Realistic – within means
5. Time board – Period within which the objective should be achieved- eg within 1 yr, 2 yr etc
Determinants of success of any business unit There are 3 determinants
1. Provision of value to customers (quality goods/ services) 2. Be profitable – growth
3. Managed efficiently
1. Provision of values to customers
It means that the products offered by a business must have utility for the customers who want to buy them.
Customers usually find utility of satisfaction in terms whose benefits are available when and where they are required. Customers therefore get utility from products and services through their availability at the right time and at the right place.
Concept of utility
Utility is the ability / capacity of a good or services to satisfy a human need. It refers to the usefulness of the product- There are several types of utility:
i) Form utility- the form of the product- transform raw materials from their original form to the current forms. This brings greater different satisfaction
ii) Place utility- making it available to customer by transporting the product to a pace that is appropriate to the customer.
iii) Position utility – this utility is crated by increasing the desire and will to customers
iv) Time utility- this one is created by ensuring that products are made available when customers want them.
2. Making of profit as a component
Business unit should aim at profit making because Profit can be used to pay for expenses
Can be indicator of efficiency
Can also be used for growth of the business 3. Managerial efficiency
It is essential for any business unit to produce goods and services that customers want and hence earn profit. But unless the business unit is efficient as its competitors the aggressive rivals may
serve customers better and make more profit. This may eventually drive the bus out of business. I is therefore important for management to be efficient and effective.
Things that management should do to be efficient include: 1) Minimize costs of operation
3) Social welfare / environment 4) Set realistic goals
5) Utilization of resources in the most optimal manner 6) Identification of market and customer adaption 7) Proper adaption of external business environment
Management should direct the resources towards realizing the business and to direct these resources management must look at the following
1. Strength of the business • Capital base
• Skilled base
• Location
2. Weaknesses
Internal to the business- Take corrective action. These internal weakness must honestly be investigated as they tend to retard the growth of the business operation. Remedies must be found to overcome them as they present disadvantages to the organization
Examples include • Inexpensive staff
• In adequate staff
• Training policies
3. Opportunities – External in nature
Can come by – chance- Dynamic environment - Research - concious
4. Threats – External
- Are usually outside the organization
- They must be recognized and their effects minimized e. g – Dynamic I.T
- Insecurity
- Changing world politics
CONCLUSION
SWOT analysis approach enables managers to closely and analytically look at every aspect of their operations. This may involve
- Setting realistic goals
- Determining strategies that are to be used to manage these business units.
BUSINESS AS A WAY OF LIFE
There are 3 main types of people who may make business activities as a way of life. The first one is usually the
Entrepreneur, the 2nd one is usually the professional manager and the 3rd one is usually the functional specialist. An entrepreneur- is usually a person with idea, energy and drive
To turn this business ventures. The ideas are usually generated vial a set ways Generating ides
- Observing the environment - Genera knowledge
- Hobbies - By profession - Talking to people
After generation you rank (validate) the ideas
Selection of the best ideas (alternative) Additional the entrepreneurs should be ready to take great risks and in most cases they have the following characteristics
i. They have a positive attitudes
ii. They are capable of identifying business opportunities
iii. They are able to understand factors that might affect their business.
iv. They normally have entrepreneur competence- i.e drive, energy, leadership - Risk taking
v. Coping with change
vi. Are willing to acquire or learn management skills that are necessary for running an enterprise successfully.
Professional managers
Once an entrepreneur starts a business growth can be rapid. This can involve producing large quantity of goods and services. The business unit may require many activities. At this stage the business requires a professional manager to organize the many activities and employees.
Therefore the entrepreneur should relinquish ownership control to these managers, Because the entrepreneurs are usually concerned with ideas and their implementation while managers are usually concerned with the management function.
Management functions include 1. Planning 2. Organizing 3. Directing 4. Staffing 5. Controlling Functional specialists
These are usually people trained in specialized fields e,g Accounting, market, production HR management. Their main duty/ function is to advice management in the areas of expertise some of these functional specialists can also be involved in management functions.
BUSINESS AS A SYSTEM
Business units can be studied as system. Business units can be studied as system
System- Definition- can be looked at in 2 dimensions
i. Organized combination of parts which form a complex entity. This entity interacts and interrelates with external environment
ii. An assembly of things connected or interdependent so as to form a complex unit. From above definition therefore certain
Characteristics of a system can be formed 1. It is composed of subsystem
2. The subsystem are mutually related for each other 3. A system has a boundary
The characteristic of a boundary enables business systems to be classified as either open or closed. Closed systems have constituent part (subsystem) but they do not take anything from the
environment. These types are very rare in real life. Open systems are these which interact with the environment and get inputs which are converted into outputs. These outputs are later realesed into the environment as either goods or services. In terms of the system model the business unit usually gets inputs of resources e.g finance, human resource (employees) raw materials etc. which are used in the transformation process to create outputs.
Whether goods are – standard
-customer satisfaction
Using the system model it is easier to analyze business organizations and suggest general principles or their management or organization. As business organization develop they tend to become complex units
Causes of complexity business units
Business growing from a simple to complex business
1. In order for business to compete they develop systems and produces that make them become complex
2. Bulky
3. Change in technology 4. Government regulation
This may require business units to operate in a certain way and systems have to be revised to cope with the government rules and regulations.
5. Objectives so the organization when business units change some of their objective they are likely to develop complex procedures e.g the business units that direspies into new. Ares will be forced to become complex at times
6. Personality of those managing the business unit 7. External environment
• Politics
• Economic
• Social
Classification of business Business can be classified based on
i. Turnover
ii. Geographical spread iii. Number of employees iv. Size
Practioners have indentified number of employees as a basis of classifying business units
Based on number of employees business can be classified as
Micro 0-9 Small 10- 49 Medium 50-99
Large 100
Business units in developing countries like Kenya are more concentrated in small micro sectors and the large organization a gap in the medium structure of the economy. This medium gap may be as a result of:
i. Fear of those in control
ii. Fear of government regulations iii. Capital requirements
BUSINESS FORMS
The choice of business form is usually an important decision for business units. The business forms sometimes determine.
- Tax consideration - Legal requirements
Therefore based on this a business can be a sole proprietor where you have one individual running a business unit. This form of a business has the following advantages:
1. The owner enjoys satisfaction of being the owner i.e operates independently.
2. Experience rewards of ownership profits independent decision making, save time for committements.
3. Share in your prosperity
4. Have an opportunity to use your skills and develop your potential as you engage in valid duties
5. Sole proprietors usually experiences sense of achievements However this type of business has some penalties/ disadvantages i. Constrains e.g from customers and government rules and regulations
ii. Scope of operation are LTD due to scare resources e.g capital, human, physical e.g space, machinery etc.
iii.May suffer from stress related problems
Partnership
Partnership arrangement is also a form of business origin. In Kenya the operations of partnership are controlled by CAP 29 of the partner
Reasons for partnership formation includes:
- Certain business usually stress the factor of personal service like areas of medicine, law
accounting. This is because there is usually a personal responsibility of the professional to his/ her clients. In addition people may seek.
- Partners composite for skill shortages or financial deficiency Significant features of a partnership
i. Sharing of profit/ loss in an agreed way
ii. Partnership can be created without many legal formalities
iii. Limited life- partnership can and at any time by depth of a partner withdrawal of a partner incapacity of a partner, expiration of the period of which the partnership was formed bankruptcy admission or retirement of a partner.
iv. Mutual agency
Each partner normally acts as an agent of partnership. He may have authority to enter into a contract or purchase of goods and services. This feature of mutual agency require that individuals must be cautious in selecting partners.
v. Unlimited
Each partner is usually responsible for all the delets of the firm. However this feature can be reduced by some partners having liability in order to secure their personal assets n case of liquidation or dessolution.
vi. Co –ownership of property
When partners in vest assets like building inventory or any other property he does not retain any personal right so she asset contributed as this property becomes jointly owned.
i. They can bring out skills, capital and other talents that can effectively run the business ii. Members partners enjoy more freedom and flexibility of action- than those in co-operative
because they can – withdraw funds,
- make business decisions without any formal or legal processes However general partnership have limited liability
- unlimited liability
- problems due to mutual agreement Partnership contract
Although Partnership ca be formed without written agreement it is always desirable that a written agreement be put in place for the sake of future eventualities.
It is always desirable to prepare a contract partnership “deed” which should address some of the following issues
i. - Name -Location
-Nature of business
ii. Mode of sharing profits/ loss
iii. Capital contributions by each partner or non –cash assets contributed.
iv. Provision for dissolution- i.e it must specify methods of computing amounts to be paid to retiring partner, deceased etc.
v. Provision for arbitration of disputes vi. Accounting period to be used vii. Provision for periodic audits Corporation
It is an artificial being, invisible, intangible and only existing in contemplation of the law. It is usually contemplated to be a legal entity i.e legal person having a continuous existence a part from that of it owners.
Ownership in a corporation I usually evidenced by:
Transfer of shares & stock i.e by stock holders & shareholder
To – administer corporation stock holders usually elect a board of directors who in turn select the management team that carry on management of the business.
Advantages
i. Greater amounts of capital can be generated
ii. The issue of limited liability- there creditous of the corporation and not against any personal property of the owner in the shareholder can never loose more than the invested.
iii. Continuity of existence – because the corporation is a separate legal entity. It has continuous life that exists despite changes in ownership. This is because the shares are transferable.
iv. Professional management. i.e shareholders usually do not have time or skills to manage the business. The corporation is usually to employ executives and use the best managerial talent available.
v. Authority – corporations usually have a centralized authority which may sometimes be delegated for efficient operation of the business. However this form of business sometimes ha the following:
Disadvantages
i. Heavy taxation- a corporation has to pay high rates of tax on its income if payments of income is distributed to owners in form of dividend the dividend are also taxed as they are considered to be personal income.
ii. Corporation regulations or government controls corporations come into existence under the terms of the law and regulations may be cumbersome and may interfere with operations. iii. Separation of ownership and control management may pursue objective that may be at variance
to the shareholders objectives. This may result into realization on shareholders value. Assignment
-Business environment – internal & external -Social responsibility of business
THE BUSINESS ENVIRONMENT
Definition – Elements that interact or are related to the business. They are internal and external a) Internal
1. Rules and regulations 2. Resources – raw materials
-Financial
-Human resources – skills
- Motivation – input/ output - Abilities
- Personality - Physical resource e.g machinery and equipment - Technology
- Automation – more useful information - Manual
Technology affects the effectiveness by increasing the speed of certain processes. E.g the decision making process. However nobody can control it since it suffers from obsolescence requiring business units to continue investing in new technology.
3. Structure of the business- organization structure refers to the way the activities and tasks are arranged. If arrangement is not optimal the business unit is likely to suffer i.e grouping of tasks should be made such that economies of scale are realized.
4. Age of the business unit
-Learning effects
Business units that are older are likely to be more effective because of the learning effects whereby performance is perfected with time.
-Experience
Long time performance of tasks
-Autocratic – decision made by one person – not optimal -Democratic – involves many participants – consensus
-Bureaneratic – Elaborate rule and procedure that govern the activities of the organization.
-Riskiness – Risk takers -Risk averse
NB Democratic – consensus has limitations of time and resources A mixture of 3 leadership style is sometimes necessary.
System, procedures, policies and practices. These are internal mechanism that tend to regulate and monitor performance. They may be restricted or they can enhance performance in situations where they are restrictive they normally
-Kill morale -Irritative -Oppressive
Where they are enhancing they encourage creativity and innovative in the business units.
b) External factors
These are factors outside the business unit that are likely to affect the business unit.
Global
National
1. Political legal environment • laws and regulations
These laws and regulations include – labour laws, -Laws on price
-Formation of the business unit -Location of the business -Quality of products -Labour law
a. Political stability
Political environment normally will guarantee stability in policies of the government. This stability can enhance business growth. It can be hostile, can be, stable or favourable to certain business. 2. Judicial system
The procedures used by the courts and the degree to which certain laws and regulation’s are enforced. Endowed with bottlenecks – political patronage who has money etc.
3. National pressure groups and how they affects business in external environment e.g -Consumer association
-Labour unions- not very effective in Kenya
The purpose of labour union I usually to fight for workers right. It is done in organized labour system however labour unions are becoming less effective because – membership is reducing
- Fund (finance reducing)
b. Social / cultural factors
These are factors in the external environment that are likely to affect efficiency of the business enterprises. Element involved are
-Family – size- the more purchasing power the better
-Religion – e.g SDAs – do not operate business on Sabbath -Education – can enhance
-Awareness -Projections
-Management of the enterprises -Lifestyle
-Economic factors
-Affects business units in terms of
1. Stage of the business cycle Boom
Recovery
Depression
Signs of recovery of Kenyan economy at the moment -GDP growth rale -Stability of currency -Decreasing inflation -Stability of prices -Employment -Increased investment -Increased production -Increased optimism
2. MONETARY POLICY
Involves tightening (regulating) the supply and demand for money in the economy. This will affect interest rates and cost of borrowings if interest rates increases the cost of borrowing increases discouraging borrowing
- Discouraged borrowing affects growth negatively
- Interest rates also tend to determine where funds grow to in the economy 3. The fiscal policies
This refers to tax regulation- affects enterprises e.g relocation from highly taxed areas to lowly taxed areas and business enterprises can move for convinlence.
-Government expenditure- affects because government is high consumer of goods and services. 4. Balance of payments
The value of imports versus the value of exports – surplus- means more export than import may depress local business environment
-Deficit – import- export- constrain local demand
-Globalised economy- they affects business unit in a complex way- characterized by free trade and
-Unlimited flow of goods and services 5. Competition
i. Enterprise completion- where firms produce similar goods and services -Price wars- media houses KBZ vers castle
-Sabotage – mastermind and BAT. ii. Generic competition
This is where firms whose products although different are used for the same purpose 1. Drug generic origin
a. Competition can increase cost of operations for the competing firms
b. Competition can be wasteful for the economy even though it may improve the efficiency. Competition strategies 1. Competitive intelligence 2. Quality product 3. Service delivery 4. Advert 6. Demographic factors
These are factors that are related to pop and includes -Size of the pop- purchasing power (customer vote)
-Age distribution – Depends on the sector – fashion industry -Income and its distribution
-Level of inflation -Size of families -Gender
Technogical factors
Technology affects the way inputs are transformed to outputs within the business enterprises -It also affects the ways the techniques are used to produce goods and services
-It affects tools and equipments to be used technology is changing the production processes and this is affecting business enterprises internally.
The effects are -On workers -On work itself
-On quality of output
-Customers- intelligible, more demanding on quality, quality services
-Globalised economy – free trade, unlimited goods and services
-Investment in quality- new employees, new equipment, cost cutting measures,retrehment. Investment in ICT
SOCIAL RESPONSIBILITY OF BUSINESS
-Business enterprises are normally also part of the society
-People have argued that the primary responsibility of business is economic in nature and therefore the purpose of business is business
-Society on the other hand is dependent on the economic activity of business and therefore without business the material side of life wouldn’t exist.
-1st schools of thought- cites 3 responsibility
-The purpose of business is to provide products and services -To provide employment
-To earn profit- pay taxes
• Finance business ( modernization)
• To fund research and development
• To pay dividends
2nd school of thoughts
• Business are established for sole purpose of making profits but it is the citizens who gives them business.
• It is the citizens allow them to do so and hence they should fulfill ethical and social obligations to the community and other stake holders
(BK by prof. Kibera)
Ethical responsibilities (moral responsibility) Ethics is the displine that deals with what is considered to be good or bad i.e being in accordance with approved td of behaving
Each society has its own way of what constitutes good or bad behaviour and this view changes with time e.g A business man may consider it as ethical to take advantage of a poor customer but he
takes advantage of a rich customer. Therefore to meet ethical standards business have developed and adapted various organizational arrangements in order to encourage reasonable behaviour from their members.
Social responsibility of management
There are usually a set of obligations that business have with stake holders. This is because it I the responsibility of business to promote and not to damage the overall welfare of the society. Business therefore has the following economic and social obligations.
Obligations of a business for itself -Profit maximization
-Growth and expansion -Staff in business and survive
Responsibility of business to stake holders -Pay dividend through reasonable profits
-Informed about the co’s progress through progress reports
-Safeguard stakeholder’s interests by protecting their property from fraud or damage. Responsibility of business to employee
-Must pay fair wages
-Equal opportunity for growth of employees
-Encourage participatory management where employees take part in decision making. -Provide safe working environment
-Provide job security
Responsibility of the customers
-Business must offer products and services the lowest price possible -Business should offer quality product that are not injurious for customers -Should be courteous when dealing with customers
BUSINESS RESPONSIBILITY TO THE SOCIETY -They must build a good image
-They must contribute to the society’ welfare -Must pay taxes in time
-Provide some charitable donations to alleviate suffering in society Responsibility to government
-Must pay taxes
-Obey law and regulations
-Practice and enforce government policies- affirmative action Responsibility to supplies
-Business should be fair in their tender selection processes/ systems -Pay suppliers on time
-Provide reasonable and fair terms of purchase Responsibility to creditors
-Fund providers e.g bank -Pay on time
-Avoid defaulting payment because it tends to affect other business
Arguments for businesses/enterprises getting involved in social activities
i. The creation of a better social environment benefit the society and business. Society benefits through better neighborhood and employment support. The business benefits because the comm is source of employment and also ultimate customer base for their businesses
ii. Social involvement usually discourages additional gorvnment regulations and interventions. iii. Business enterprises usually have a great deal of power and this should be accompanied by
equal responsibility towards social environment.
iv. Social involvement of business usually creates favorable public image. This may result into -Increased customers
-Attract investors -Attract employees
v. It is expected that business should prevent social problems through social responsibility. It I easier to create employment than to deal with social unrest/ anarchy
vi. Business normally get their charter (right to operate from the society and hey have to respond to the needs of the society.
vii. Social involvement is the best interest of the shareholders
Arguments against social involvement
i. Social involvement can reduce economic efficiency. Especially where it is perceived that it is not directly benefiting the business enterprise
ii. Society is likely to pay for these social costs through higher prices
iii.Businesses usually have enough power and therefore social involvement is likely to further increase this power and influence
iv.Social involvement assumes that business enterprises have the necessary social skills to deal with the problem of the society, however business people training and experience is usually directed at economic matters and therefore this case may not b relevant to solving social problems.
v.It can create, weakend international of payments because the cost of social programmes are likely to be added to the price of goods and services. This is likely to affect the terms of trade. That because business have no complete support for involvement in social action disagreement among groups with different views point cause conflicts. In addition support of social programmes may be discriminatory and areas most favourable are likely to develop than those not addressed.
The future of business enterprise
A business in modern society will be expected to have the following characteristics i. To be a certifying and rewarding place to work
ii. Business will be expected to support ethical and moral identity
iv. Expected to be a contribution to social goals and public interests
v. It will be expected to be a good example of a good to sell and buy from. Strategies
Policies plans Procedures
-Planning can be done as top down planning or bottom of activity Top down planning
This is where the planning process in a business unit starts at the top of the organization. This may be done by seeking assistance from operational specialists who will produce forecasts and trends to the planers. This method is good because it utilizes higher specialized skills. However it may result in a lot of resentrant and assistance from those requested to put into action.
Bottom-up planning
This is where business units allow various department or divisions to produce departmental planning’s which are finally consolidated in control plan to be used by the enterprise often
appraisal and modification are considered necessary have been made. The major advantage of this is that it ensures investment of those- required it
Ensures investment of those required to implement it reals enhance of resestence and enhances acceptance of the plans however this type of planning is time concerning.
In both techniques of planning it is usually important for the business unit to incorporate swot analysis.
Management is a universal activity i.e it can be done by big organization and small organization Management is associated with group effort i.e its objectives can be achieved through
effectiveness o corrective effort
Management is usually separated from ownership that many business units or cooperation owned by diverse share holders but their management is in hands of new qualified professional managers Management functions
It is essentially a decision making process and involves conscious determination of the course of action to be taken to achieve certain objectives for the plans for business unit may be classify either program or budgets.
2. Business will be expected to be a good neighbor and participants in community activities 3. Expected to be a contributor to social goals and public interests
4. It will expected to be good example to a good company to sell to and to buy from. MANAGEMENT OF BUSINESSES ENTERPRISES
Definition of management – is a universally necessary function that it is essential for all kinds of organizations because all business units require making of decisions co-ordination of activities,
handling economy of people, evaluation of performance. This is done in order to enhance he objectives of the enterprise. The people who usually perform what are termed managerial functions i.e planning, organizing, stepping, directing, controlling are usually called managers. However type of managers depend on the type of the organization
Trade as organization has executive directors
Military are Army generals. The structure of management always been at 3 levels
Bottom up planning Advantages
Ensures involvement of all deptal employees reduces resistance Disadvantages encourages implementation
Participants are likely to have depper knowledge in those areas affecting their jobs and are better placed to give all the relevant information to planners of the organization
Disadvantages
-Time consuming which may affect performances or organization -Costly
-Because of vested interests participants may hide information or inflates some of the variables in order to gain from these advantages
NB- a balance be established between top down planning and the bottom up planning approaches ORGANISING FUNCTION
To organize is to arrange or to form a cotherent structure. Management usually involves dealing with various individuals and the group in order to achieve certain tax. In organizing business enterprises the concern is usually
i. Identification of tasks to be performed ii. Grouping of these into dept
iii. Allocation of tasks into dept
iv. Granting the necessary authority to these depts.This is usually called an organization chart (structure) which is framework that indicates how the tasks area arranged in an enterprise. The structure will also show reporting relationships and communication channels (I.T function) Guidelines of structuring an organization
i. Group together those that share a common activity ii. Structure such that there is no stringing
iii. If tasks do not have any commonality then separate them into different department Directing
Is usually a function that involves 3 main activities as follows:
Motivation- is usually a key part of the management job as it enables the manager to make people want to perform activities. So that the objectives of the organization are achieved.
Motivation has been defined as a set of processes that determine behavioral choices. It involves what makes people decide to behave in a certain way.
We have internal and external motivation. Internal motivation is that inner person that makes a person to behave in a certain way. It can be both psychological and physiological needs.
External motivation involves those external interactions in which a individual is operating therefore managers will be able to manipulate these external factors that motivate an individual e.g the
motivation of rewards and punishment rewards are currently being encouraged in the current business environment. Punishment can also be encouraged to motivate through it has been difficult to draw the line of reliable evidence that punishment is more effective of the desirable behaviour.
Human behaviour is a complex process and is usually determined by human needs i.e needs are drives that affects human behaviour. When needs becomes vey strong people make efforts to fulfill the needs. They come up with the following diagram that illustrates this process.
This motivation process is usually dynamic because it have several needs to in so many times in different organizations needs and wants of employees differ because of different biological make up. Motivation is usually more complicated in the work place because it is not clear who is responsible for employee motivation i.e. is he the worker (needs or environment)
Theories of motivation Abrahams maslow
-Is normally associated- the needs hierarchy he developed the hierarchy needs theory of motivation based on the fact that human needs can be arranged in order of importance -Once a need is fairly well satisfied it no longer motivates human behaviour
-He therefore come up with a diagram of hierarchy of needs as follows
Self actualization
(realize all our potential)
Physiological (Biological) These are the most basic needs for sustaining life Needs for food
These needs have the following characteristics
i. Are independent of each other
ii. Can be identified with specific location of the body iii. To remain satisfied they must be met repeatedly
iv. Unless these needs are satisfied to the degree necessary to satisfy life, other needs are unlikely to motivate people.
Esteemed needs Social needs Safety or security needs Physiological (Biological)
Safety needs
Are needs as an expressed as a desire for protection against danger/ threat or beibg deprived the desire may be for economic, physical and social safety e.g employees desires orderly working relationship.
Social needs
The need for – belonging, acceptance, association
-Man being a social being will usually aspire for a place in his own and will try to achieve it. -Evidenced by informal organization within formal organization.
-Managers in enterprises tend to fear informal organization because of strong allegiance that the members of those organization have to the informal groups.
-Informal groups if properly managed can a. Help improve productivity
b. Frustrate productivity – with old labour effort. Esteemed needs (EGU)
Are needs that do not become motivators until the lower level needs are satisfied. These needs are rarely satisfied. Once these needs sought. These needs includes
-Achievement -Self confident -Self respect -Freedom -Competent
Satisfaction of esteemed needs normally leads a feeling of • Worthiness
• Power
• Prestige
• Status
• Useful and necessary in the world
Frustration of these needs leads to inferiority – complex, weakness, helplessness Self actualization
Usually emerge after all other needs have been satisfied. They includes the realization of ones – potential – self fulfillment, self developing, self fulfillment, greatness
Some ways of fulfillment of these includes: -Athletics -Polities -Academic -Family -Religion -Business -Hobbies
1.Man is forever wanting and therefore all needs a need diminishes another need emerges there for need satisfaction is a never ending process which serves to motivate people.
2. Needs are interdependent and overlapping, since one need must disappear while another need emerges 3. The need theory- has general and not specific application
4. Maslow’s theory is important to managers because it spells out the needs that people have. Other theories of motivation
1. Mcclleland
2. Mc Gregor theory x, theory y 3. Herzberg- two factor theory Mc. Gregor theory to motivate employees Under theory x it is assumed that
1. That the average person will try to avoid work (need based)
2. Because people dislike work they must be coxed threats and punishments if they have to contribute to the organization objectives
3. People want security
4. They prefer being lead and they avoid responsibility Theory y
1. Work is as normal as playing
2. Threat of purnishment is only one way to make work.
3. Committed people are usually self motivated and self directed 4. Under the right conditions the person seek and like responsibility
5. The ability to think creatively, enovatively and solve problems are widely distributed among people.
Notes
1. Theory x assumptions
Are mainly used in industrial organization but are inadequate to utilize the workers potential On the other hand theory y looks at employees a higher internally motivated
2. Managers must identify remember that each employee is unique and should be treated as such. Mc ileland
Need based motivation,
Human beings have 3 basic needs 1. Need for achievement
2. Power 3. Affiliation
People have need for achievement in whatever they do and strong desire to achieve power need. The need for power is shown by strong desire for people after or change cause of events
-People need -Friendship -Love
-Group approval (good group) Notes – conclusion
Under this theory, he found out that businessmen and professionals have above average desire for achievements and therefore they have:
i. Prefer tasks which can take personal responsibility for the outcome ( Net vey good team players)
ii. They normally set moderate goals and take calculated risks iii. They usually want direct feedback concerning success or failure
iv. They usually prefer co – workers who are competent despite their personal feelings about them.
MANAGEMENT FUCTION 1. Planning 2. Organization 3. Directing 4. Staffing 5. Controlling
LEADERSHIP (DIRECTING FUCTION) Def
Leadership usually has several definitions. One of definitions looks at leadership as an influence process directed at slaping behaviour of others.
…. Sclwets works as leadership[ as the act of inspiring surbonate perform their of duties willingly competevely and enthzstically.
In general terms leadership could be described as getting others to follow or do things willingly. NEED OF LEADERSHIP
1. Leadership always gives guidance in organization effort towards achieving the objectives 2. It has been said without leadership organization would become a middle of men and machines 3. Leadership usually transforms potentials into reality.
4. Workers usually need to know how he can contribute to the organization and therefore leadership provides a venue where workers can contribute to the organization
In order to perform leadership functions leaders usually requires some form of power. Sources of power include:
1. Legitimate power
That power that is based on the perception that the leader has the right to exerse influence because of the position.
It is power that is created and conveyed by the organization. 2. Reward power
The power of grand as withdraw certain rewards 3. Coarcial power
The power to force complaint through threats (physiological emotional or physical threats) In the modern organization several power has been exercised through
- Oral repremands (warning)
- Fries
- Layoffs
- Demothen
4. Expert power
Power based on knowledge and expertise the more knowledge one has and experience and the viewer the people who are aware of it the morer powerful the individual.
5. Referent power
This is power that is based on surbonate indentification with the leader i.e the leader exerts influence because of reputation. Follower usually want to be with the leader.
Functions of leaders
- Inclice as persuacle surbodinate
- Influence surbonate to change the mode of behaviour
- Perform arbitrator function where members of an organization disagree on a course of action to be taken. The leaders decide on the final decision.
- They supply objectives of the organization.
- They also create power able impressions about the organization.
- Should recognize subordinates for them to enhance self esteem for them to perform jobs well. 1. Approaches to leadership
Leadership can be approached in many ways:
Can be looked at as a trait, under this trait theory leaders are considered to process stable and endurance traits or characteristics that sets them apart of their followers. Some of the traits are intelligence, self confidence, attractive and emotional stability.
2. Behavioral approach
This approval normally seeks to define behaviour that sets effective leaders apart from effective leaders. A leader under this approach can be either be task centered as people centered. Task centered leaders usually concentrate on
Punctuality of the organization. On the other hand the people centered leaders usually expect their concern for people to lead into employee’s satisfaction which can be translated into high productivity.
3. The contingency approach
This is leadership that emerges because of certain situation. - It depends with the situation of the leader
- Situation in the subordinate - Situation of the environment
- It can be referred to as circumstantial leadership - It is also an informal kind of leadership.
Leadership styles
The method as type of leadership that is used by individuals usually influences their effectiveness. Leadership style together with external motivation can lead to both individual and organization effectives.
Some of the styles are:
1. Autocratic style – (used for emergence structure)
This is where authority and decision making are cetied with leader as he makes all the decision and execute all controls through threats and harshment. The leader requires conformity from the
surbodinate and considers this decision to be superior. MERITS - Decision are made
- There is accountability even if negative 2. Democratic (anticipative) style
In this type of leadership the leader tries to seek or obtain cooperative from the followers in achieving the goods by allowing them to participation in decision making. The leader however retrain the decision making responsibilities of his power over his surbotage
This power can increase performance and a better working relationship - Can lead to job satisfaction
- Less dependence on the leader manner decision - Lead to acceptance of decisions
Problems
1) Time consuming 2) Very expensive
3. Laisezz faire (free reign)
This is where subordinates are allowed to make their own decision as they place That the workers motivate themselves based on their need, wants and desires. They are usually given goals and left alone to achieve them.
The main advantage is: Advantage
Workers is independent and that the functions without too much control However the disadvantage is
Disadvantages
The works may loose direction or control which may lend to frustration of the workers.
It is usually useful where we have professionalism (professional look at their own work)
THEORY ON LEADERSHIP 1. The managerial grid
It was provided by somebody called blake.
According to blake on leader should be people or task concerned
People centred leaders are concerned with human aspect while task concerned are concerned with plain aspect. And therefore base on that he developed
(1,9) D (9,9) E
Concern of people
(5,5) C
A (1,1) B (9,1) Point A( Improvised management)
At this point effective plan is attainable. There is very little concern for people and effective plan cannot be obtain because people are lazy apathetic and relationship are poor.
Point B
-We have task oriented leader people are treated like machines -The leaders role in plan direct and control
-Efficiency in operations is emphasized
-Work is arranged such that human element interfere to a less degree. Point C – middle of road
At this point there is adequate organization performance because of adequate balancing been plan and concern.
Point D (The country clib)
Leaders under such situations have a lot of attention to needs of the people.
The leader looks at satisfying relationships and this leads to comfortable and friendly organization, however productivity suffer.
Point E (Team management)
-Work is usually accomplished through people
-That people have common streak in the objectives of the organization.
CONCLUSION
A leader usually performs many function which greatly determine the success of an organization some of the functions include:
-Arbitration
-Providing security
To be able to accomplish these function the leader may require skill- conceptual, technical, influential. The most appropriate style of leadership usually depends on the leader situation subordinate and the organization. Leaders in ( e.g in Kenya) are faced with environmental circumstances of their
CONTROLLING FUNCTION
This usually that function that ensures conformity with policies, rules and regulations of an organization. The process of controlling usually have the following elements:
1. Setting of standards
Can be set – scientifically by the expert -Through experience
2. Measure performance against the standard
3. Identify the deviation (manually and electronically) 4. Take any corrective action
5. Feed back- Review the standard TYPES OF CONTROL
1. An organization can be controlled administratively i.e through rules and regulation 2. Through budjetory control
3. Through direct supervision : either individuals are supervise 4. Through setting performance targets
These are targets that are supposed to met in terms of output and other performance indicators
5. Through social, cultural control in an organization. This concerned with norms and culture of the organization e.g dressing code.
CONCLUSION
Currently the functions of management are facing new challenges 1. Customers and employees are becoming more knowledgeable
2. Managerial functions have become morer attractive and interdependent. 3. There is need for managers to be multiskilled to handle current problems 4. There is employees on – quality problem, cost control
5. There is restructuring of organization and right sizing and this is affecting the practice of management.
6. Globalization / liberalization are providing new challenges for managers.
7. Skill dev by employees is becoming mandatory in order to remain releve in the work environment
8. I.C.T (computer literate)
9. Emphasis of quality control and quality product. SMALL SCALE BUSINESS
Small scale enterprises can be looked at 3 levels in terms of definition
2. One that uses surible technology 3. It is either family own as controlled 4. However it has been observed:
It has not been univesly acceptable to define a small enterprise but additional definations look at a small enterprise from a qualitative approval and say that:
-A small scale enterprise is on that has few assets -Little investment in it
-Few employees
The small enterprise sector usually has various terms describing it e.g 1. Miro enterprise
2. Informal sector 3. Small scale enterprise 4. Small firms
5. Small scale industries
CHARACTRERISTIC OF SMALL SCALE ENTERPRISES 1. Each of entry (easy to enter and to leave)
2. They have less restriction and use less technology
3. They were unregulated and operate is very highly competitive environment.
4. They have a self employment orientation i.e they are owners managed and controlled 5. They use simple technology in their operations e.g scrap metal, sisal product, raw material 6. They are labour intensive (less machinery but more labour in operations)
7. They are usually not very Dominant in these areas of operation. 8. Small capital base (replication of copying)
ADVANTAGES OF SMALL SCALE ENTREPRISES 1. They can be used a source of employment
2. They have great flexibility to act which tend to accelerate decision making 3. They have a lean organization and depends on small relative permanent staff. 4. Only hire specialists when required and this tends to cut down on operation costs. 5. Indepence decision making which tends to be faster
6. Profits are not shared like in the case of partnership. 7. Can easily be set up and easily dissolved.
1. They normally suffer poor management because management here a difficulty in receiving good employees as they are unable to pay adequate salaries and therefore tend to employ people with less skill and knowledge.
2. They have difficulties in financing of operating because bank are redusing to loan these sectors because of high failure rale and bank requires immovable assets which are not readily available. 3. Poor record keeping
4. Survival rates are very low- They die after inception life depends on individuals. CAUSES OF FAILURE OF SMALL SCALE ENTERPRISES
1. Problems with marketing due to either competition or poor market research or over estimation. 2. They may fail because of neglect
3. They may fail because of unlimited market because they do have access to market due to expert increased competition.
4. Poor infrastructure – Rural based, stem based
They are constrained from using the formal leading agencies e.g High interest rates that may make debt a burden to pay.
5. They have a vey low purchasing power and this makes them not to take advantage of the economies of scale.
6. Taxation tend to be a failure especially where the taxes are very high. ROLE OF SMALL SCALE ENTERPRISES IN THE COMPANY
Apart from the fact that small scale enterprises in all countries form a high proportion of business enterprises they have been recognized as major contribution to the economy of the countries concerned. However recent studies have reveled the following contributions to sse.
i. They have a role in transfer of appropriate technology utilize simple technology and can be used to adopt as adopt technology
ii. They assist in income generation and povery reheive i.e the ss. Sector is capable of generating income to large section of the population and therefore it is a sector that is being regarded as being on the forefront of povery.
iii. Regulations of prices because of competition
iv. They also assist in getting balanced development and distribution of opportunities i.e the sector creates new job and distribute economic opportunities
v. They are good at mobilizing and utilizing of local resources i.e this sector creates an avenue for effective mobilizing of productive use of family or individual savings.
vi. It is hitch to make use of readily raw material In addition:
vii.National output : that the total output produced by this sector although usually unrecorded is usually huge and recently the sse is getting in export market e.g Kenya baskets
Small scale enterprises can be utilized in rural urban balance. That because of increased opportunities in the rural areas as a result of growth of sse’s it is expected that this sector can check or slow down the life of people from rural to urban – areas.
DECISION MAKING AND RISK TAKING
Decision making to a process of making choices between alternatives. A decision is a choice of a course of action from two or more alternatives and therefore decision making is a process of
completing a series of steps to select a cause of action. Decision making in business involves making choices about people physical resources, processes, strategies, compensation decision etc.
Decisions in business can either be programmed or non programmed decision.
Programmed decisions is where management sets up policies or procedures for handling matters involving dairy operation of a business. These decision are usually routine and competitive because they are usually made in the same way by different managers.
Non programmed decision are normally referred to as on time decision. -They are not routine
-They are less structured
NATURE OF BUSINESS DECISIONS
1. Usually very complete in that many factors have to be considered Multiple goals must be met
2. Usually generate a lot of conflicts especially among individuals
3. Business decision tend to have long term because of the nature of the above conflicts Conflicts
1. Individuals conflicts approach where by one is forced to choose between 2 or more attractive alternative actions
2. Avoidance conflicts
This is where you have to choose between 2 or morer unattractive alternatives.
3. Approach – A situation where a single alternative ha both positive and negative features e.g a job matatu business.
CONSTRAINTS / LIMITAION THAT AFFECT DECISION MAKING 1. Authority
2. Time
3. Information- information is usually the raw material for decision making process. For information to be useful it must be:
i. Relevant- it must be supplement the decision makers prior knowledge ii. Reliability- credibility of the source, Accurate
iii. Properly acquired – through documents, through people iv. Have a proper processing system.
Avoid emotionalism Imitation
v. Resources – financial, human and physical resources. vi. Environment- peer group, high income
vii. Government
viii. Cultural values- tend to control the way the members approach their decision making process.
Some cultures enables risk taking others supplers decision making and therefore the impact on business can either be positive or negative.
ix. Organization policy
CHARACTRISTICS OF DECISION MAKERS
Decision makers are usually have the following characterizes:
1. Perception- this is the way in which the decision makers view the proble. The way in which you view you proble is determined by- previous experience
-Current location
2. Altitude of decision makers toward risk. Some decision makers are risk average i.e they normally minimize exposure to risk and also prefer mare information. On the other hand we have the risk takers who usually accept great exposure to risk and also in most cases they are likely to take in risky situation. They are also comfortable in the situation uncertainty.
3. Rationality- some decision makers may be objective others fair rational. PROCESS OF DECISION MAKING
1. Problem identification: implies that the problems have to be separated from their symptoms. It is important for decision makers to separate problems from their symptoms. The purpose of problem defraction is to ensure that the decision made will prevent problem from recurring.
2. Develop attenatives solutions to the problem
3. Evaluate causes of action (cost/benefit analysis), Identifying the consequences of choosing which alternative will solve the problem.
4. Select the alternative that is likely to solve the problem and implement a solution. Some of the problem of selecting an alternatives are:
-Conflicts of mind -Fee consequences -Whether it is profitable -Fear of mistakes
-Costly
5. evaluation and follow-up You address the following uses: 1. how the problem been solved
2. you examine results 3. has productivity increased
Under this condition you ensure that the decision has taken effect at the proper time. Ensure that there is documentation of every thing that happen during this process. However if it is found out that the problem has not been properly solved it is advisable to abandon the problem and start it over again.
PEOPLE REALTED PROBLEMS
1. when you are solving people related problem it is usually recommended that you listen carefully to all complaint
2. you get information from all sectors 3. you weigh all facts carefully
4. You communicate your decision and experience to all parties.
5. You follow up to restore any relationship that may have been damaged. When do we make decision?
1. We have decisions when something is wrong and need to be corsected. 2. When something is threatening and needs to be prevented.
3. When something is increasing and needs to be provided. Purpose of decision making
To ensure that the gap is usually field GROUP DECISIONS
Refers to all situations where individuals come together to address issues that cannot be solved individually. This is because individual decision making has certain limitations which may prevent optimal decisions.
1. Groups decisions have been found to take time but they are more accurate.
2. There is too much conformity and compromise in group decision making and there is no individual responsibility
The takes marer time and it requires a lot of conflicting solutions. In additional group decision can follow any of the following four ways:
1. The group arrives at decision made the majority (decision weighing scheme) this is where there is objective collective decision.
2. The group follows the 2/3 rate majority scheme
3. The truths wins scheme:- This is where after a duration the group discovers there is one approach which is objective.
4.The 1st shift rule: where the group tends to adopt the decision that reflect the 1st rule in opinion expresses by one member.
This is where the group will resist to change and stract to the status quo without making any amendments.
Risk Taking
A risk situation normally occurs when one is required to make a choice between two or more alternatives whose potential outcomes are not known and must but subjectively excuted.
A risk situation evolves potential loss and potential success. The greater the possible loss and or gain the greater the risk involved.
Choosing risk alternatives is influenced by: 1) The attractiveness of the alternative
2) The extend to which you are prepared to accept potential loss.
3) Your own effort that are likely to increase success or increase failure. 4) The relative probability of success or success.
Risk can be managed under 3 areas
i. Transfer risk- mainly done through --- under this the risk is usually unknown and the losses are usually shifted to an insurance co through payment
ii. Risk reduction – This is the process of reducing frequency of losses and …. Some examples of risk reduction
a) Training of employees b) Fire control
c) Good management practices iii. Risk absorption
It is usually impractical to avoid all risks and therefore there will always be risk in business that will not have greater consequences to the organization.
Business sometimes engage in what we call self insurance whereby they will build two reverse fund that may be utilized in case of unplanned for loses.
Assessing Risk
Business men earn assets risk by considering the following
factors:-1. Find out whether there is potential loss in choosing one particular alternatives. 2. Look at your goods and objectives in business operations
3. Make sure that you letify the alternatives. This involves specifying financial costs for alternatives
4. Should be able together information and weigh alternatives and this involves intensive data collection pertaining to the returns of each attenative to the business organization.
5. The alternatives should be assessed based on market information. (which shows the current business environment)
6. Plan and implement the alternative that you have choose so lawing best.
In conclusion the following are some of the basic risks that business organization face . 1. Robbery/ burglary
Strategies to manage a. Open design of premise b. Effective illumation at right. c. Security guards
d. Alarm system
e. Keep interior visible from outside e.g Banking process 2. Slop lifting pilferage
Strategies – burgler proof
3. Risk that emirate from employees – mostly acting related. Short changing customers Strategies
-Physical checking -Closed cirants
-Participatory management
-Prope reference checking when employing -Segregation of duties
-Training
-Proper record keeping -Purnsmets should be severe -One exist/entry
Conclusion
1. Business people must be will to accept personal responsibilities for the consequences of the decision they make whether the consequences are favorable or unfavorable
2. Risk taking is related to creativity and innovation, it helps to turn ides into reality.
3. Risk taking is related of self confidences. The more confidence you are in your abilities the better you will be in affecting the outcome of your decisions.
4. Business men are usually exited an uncertainty and the desirable enthesiam to ensure that the consequences of their decisions are successful.
5. It should be noted that these is no risk involved where is no potential loss. ORGANIZATION DEVELOPMENT
It is looked as a top management effort to improve an organization decision making problem solving processes.
This is done through a more effective and collaborative ---- and the management of the organization or business. It also involves a continuous process of helping an organization to evolve new system, new procedure or methods of organization work in order to cope with the new situations.
Business therefore have to attempt to change value, belief, motivation or attitudes that may be supporting the current status.
In addition organization – is usually done because of changes that may be happening to the happening to the external environment. Some of the activities that can be done during the process of organization dev is
1.There must be leadership in the process
2. There must be Shared vision by the participants 3. There must be especially the key stake holder.
4. System / structures have to be changed using managerial functions.
5. Organization development must be motivated. This is where the standards are set and performance measured.
Other factors to consider is developing organizations from their current status to the next level includes issues of quality of work life. This is where employees and management attempt to improve conditions of work life.
Total quality management is also another aspect (also known as continuous quality improvement) Consumes quality product
1st concern customers
2nd dairy operations use of concept of internal customers -Whereby everybody is considered as a customer -Zero defect philosophy – od concept
-Participatory management -Teams and teamwork
BUSINESS POLICY
Is the process whereby a business unit attempts to answer the following: -What to produce- quality to produce
-Where to produce -How to produce -Who to produce What to produce:
----Where to produce: The question of location- market- cost of operation -Accessibility
-Resource availability How to produce
-The technology to use
-Balancing between labour and capital -Economies of scale
-Resource – time, finance and labour Who to produce
The type of employees and skills required skills determine the efficiency utilization of the factors of plan.
The concept of business policy normally leads into business operations which can be defined as: All activities that are undertaken to add value in the plan of goods and services.
Inputs in the business operation have to be converted into output through process we call operations. This operations determine the type of production.
TYPES OF PRODUCTION PROCESS
-Project approach in here you temporary arrangement of people and other resources that are brought together to complete an assignment
JOB ORDER PRODUCTION PROCESSES
-The process of producing one small number of products which are sometimes made according to order
-The business operator should be involved in order processing or order searching
-Production done on premise of the business and has to be transported to the buyer or customer. Examples furniture, cars productions
BUTCH PRODUCTION PROCESS
Under process smiles items are produced in a sed called a batch and they are usually made in specific quantities
Main pharmaceutical firms Line production
Production pass through a line during the plan process.
CURRENT ISSUES IN PRODUCTION OF GOODS AND SERVICES 1. Extensive use of ICT
2. A extensive use of Automation 3. Emphasis of quality production
a) Quality control – process of detecting products that are falling below. Stds. Done at the end of a production
b) Quality Assurance- process of discovering fault/errors during plan and after plan and taking collective action immediately
The purpose of quality assurance is to move toward zero defects level. c) Total quality management (TQM)
Process of creating a culture in the business such that every employee delivers quality to his customers who may be both internal and external.
Quality can be derived through quality cycle or sales – checking system This comes up again with business process reenfneering (BPR) cost control Examination process on what adds value
BEST PRACTICE BENCHMARKING (BPM)
This refers to best methods of carrying out process that may be available and being used in the organization.
Also may involve business working out to other organization that are rated as having best practices in their operators.
The BPM involve:
1) Determining what constitute customers perception of excellence
2) Setting out stds for your business processes and measuring them against these standards.
It should be observed that the business how to create std within the organization that meet or exceed the best currently available.
LEEN PRODUCTION
This is where you have to get morer output form less inputs by cutting down a lot of wastes (little staff equipment etc)
Flexible manufacturing systems
Mainly computer controlled where by a manufacturing process can be used to produce multiple products at afferent times.
E.g manufacturing feelity to produce 2 types of products at different times. Mainly in small scale enterprises
HUMAN RESOURCE MANAGEMENT Importance:
Human resource is important because of the following reasons: 1. It influences efficiently and effectiveness of an organization. 2. It is a major cost to the organization
3. It usually demands fairness and equity.
If equity is not guaranteed this may lend to the following: a) Low morale
