INTRODUCTION TO BUSINESS

MANAGEMENT & ETHICS

CONCEPT OF BUSINESS

 Literally, the word “business” means the state of being

busy. Generally, the term business includes all human
activities concerned with earning money. In other
words, business is an activity in which various persons
regularly produce or exchange goods and services for
mutual gain or profit. The goods and services
produced or purchased for personal use are not
included in “business”.
DEFINITION

 According to L. H. Haney
“Business may be defined as human activities directed toward
providing or acquiring wealth through buying and selling of goods.”
James Stephenson says that:
“Every human activity which is engaged in for the sake of earning
profit may be called business.”
In the words of B. W. Wheeler
“An institution organized and operated to provide goods and
services to the society, under the incentive of private gain” is
business.
CHARACTERSTICS OF A GOOD BUSINESS
 Capital
Capital is the lifeblood of every business. It is the most essential and important
element of business. In case of deficiency, loans can be taken from various financial
institutions.
 Creation of Utility
Utility is an economic term referring to that characteristic of a certain commodity,
which can satisfy any human need. Business creates utility, which gives benefit to
the entire society as well as the businessmen.
Dealing in Goods and Services
 Every business deals with sale, purchase, production and exchange of goods and
services for some consideration.
Employment
 Business is a good source of employment for its owners as well as for other
people, for example, employees, agents, transporters etc.
CHARACTERSTICS OF A GOOD BUSINESS
Motive
The motive of business is to earn profit. Otherwise it will not be
termed as business.
Organization
Every business needs an organization for its successful working. A
proper organization is helpful in the smooth running of business
and achieving the objectives.
Productions or Purchase of Goods
A businessman deals in production or purchase of goods. These
goods are supplied to the people. So, it is necessary that more
goods should be produced so that demand of people may be
fulfilled.
CHARACTERSTICS OF A GOOD BUSINESS
 Regular Transaction
Business has a nature of regular dealings and series of transactions. So, in
business, only those transactions included which have regularity and
continuity.
 Risks and Uncertainty
Business involves a large volume of risk and uncertainty. The risk element
in business keeps a person vigilant and he tries to ward off his risk by
executing his policies properly.
 Sale or Transfer for value
Another characteristic of business is the sale or transfer of goods for value.
 Social Welfare
Business does not only satisfy the producer, but also the consumer when
products are offered for sale at low prices in markets.
DEFINITION OF MANAGEMENT
Management is the process of achieving goals and
objectives effectively and efficiently through and
with the people.

Management is a process of designing and

maintaining an environment in which individuals
work together in groups to effectively and efficiently
accomplish selected aims".
DEFINITION OF MANAGEMENT
 Management is the process of achieving organizational goals and
objectives effectively and efficiently by using management functions
i.e.
 Planning

 Organizing

 Staffing

 Controlling

Management is a set of activities directed at an

organization's resources with the aim of achieving
organizational goals in an efficient and effective
manner.
These definitions when expanded have
these implications:
Management is thus a continuous effort aimed at shaping an

organization and contributing to its overall growth.

The functions of managers include planning, organizing,

staffing, leading and controlling.

These functions are essential to any kind of organization.

It applies to managers at all hierarchical levels.

The aim of managers is to increase productivity, effectiveness

and efficiency.
ELEMENTS OF DEFINITION
 Process - represents ongoing functions or primary activities engaged in by managers

 Efficiency - getting the most output from the least amount of inputs
 “doing things right”
 concerned with means
 Achieving the objectives in time

 Effectiveness - completing activities so that organizational goals are attained

 “doing the right things”
 concerned with ends
 Achieving the objectives on time
Management: Science or Art?
Science is a collection of systematic knowledge,
collection of truths and inferences after
continuous study and experiments. It has
fundamental principles discovered.

Art uses the known rules and principles and uses

the skill, expertise, wisdom, experience to achieve
the desired result.
Principles of Management
Fayol’s Principles of Management
He has proposed that there are six primary
functions of management:
Forecasting, Planning, Organizing,
Commanding, coordinating and controlling
There are 14 Principles of Management described
by Henri Fayol.
14 Principles of Henri Fayol

 Division of Labor
Work of all kinds must be divided & subdivided and allotted to
various persons according to their expertise in a particular area.
Authority & Responsibility

Authority refers to the right of superiors to get exactness from

their sub-ordinates. Responsibility means obligation for the
performance of the job assigned.
Note that responsibility arises wherever authority is exercised
14 Principles of Henri Fayol Cont’d

Unity of Command

A sub-ordinate should receive orders and be accountable to

one and only one boss at a time. He should not receive
instructions from more than one person.
 Unity of Direction

People engaged in the same kind of business or same kind of

activities must have the same objectives in a single plan.
Without unity of direction, unity of action cannot be achieved.
14 Principles of Henri Fayol Cont’d

• Equity

Equity means combination of fairness, kindness &

justice. The employees should be treated with kindness
& equity if devotion is expected of them.

• Order

This principle is concerned with proper & systematic

arrangement of things and people. Arrangement of
things is called material order and placement of people
is called social order.
14 Principles of Henri Fayol Cont’d

• Discipline
Discipline means sincerity, obedience, respect of
authority & observance of rules and regulations of the
enterprise. Subordinate should respect their superiors
and obey their order.
• Initiative
Initiative means eagerness to initiate actions without
being asked to do so. Management should provide
opportunity to its employees to suggest ideas,
experiences& new method of work.
 14 Principles of Henri Fayol Cont’d

• Remuneration
Remuneration to be paid to the workers should be fair,
reasonable, satisfactory & rewarding of the efforts. It
should accord satisfaction to both employer and the
employees.
• Stability of Tenure

Employees should not be moved frequently from one

job position to another i.e. the period of service in a
job should be fixed.
14 Principles of Henri Fayol Cont’d

• Scalar Chain

Scalar chain is the chain of superiors ranging from the

ultimate authority to the lowest. Communications should
follow this chain. However, if following the chain creates
delays, cross-communications can be allowed if agreed to

by all parties and superiors are kept informed.

• Sub-ordination of Individual Interest to common goal
An organization is much bigger than the individual it
constitutes therefore interest of the undertaking should prevail
in all circumstances. The interests of any one employee or
group of employees should not take precedence over the
interests of the organization as a whole.
14 Principles of Henri Fayol Cont’d
• Espirit De’ Corps
It refers to team spirit i.e. harmony in the work groups
and mutual understanding among the members.
Espirit De’ Corps inspires workers to work harder.
• Centralization
Centralization refers to the degree to which subordinates
are involved in decision making. Whether decision
making is centralized (to management) or decentralized
(to subordinates) is a question of proper proportion. The
task is to find the optimum degree of centralization for
each situation.
• Theory X and Y Douglas McGregor
Theory X Theory Y
• Average worker is lazy • Workers are not inherently lazy
• Dislikes work • Do not naturally dislike work
• Will try to do as little as possible • If given the opportunity, will do what
• Have little ambition and avoid
is good for the organization.
responsibility
Theory Z
In the 1970s and 1980s, many U.S industries lost market share to
international competitors, particularly Japanese companies.

• Ouchi contrasted American types of organizations (Type A) that were

rooted in the United States' tradition of individualism with Japanese
organizations (Type J) that drew upon the Japanese heritage of
collectivism.

• Modified American approach to management with the best

characteristics of Japanese organizations while retaining aspects of
management that are deeply rooted in U.S. traditions of individualism.

Ouchi proposed that a Theory Z management approach could lead to;

1. Greater employee job satisfaction

2. Lower rates of absenteeism and turnover

3. Higher quality products

4. Better overall financial performance for U.S. firms.

Organization
Organizations are groups of people, with ideas and resources, working
toward common goals.
OR
A systematic arrangement of people brought together to accomplish some
specific purpose is called organization.

Characteristics of Organization

Deliberate
Distinct Purpose
Structure

People
Manager
 A manager is someone whose primary
responsibility is to carry out the
management process within an organization
to achieve the organizational goals.
 Changing nature of organizations and work
has blurred the clear lines of distinction
between managers and non-managerial
employees
Managerial skills

Managerial Skills

Primary Skills Secondary Skills

• Conceptual Skill • Design Skill
• Technical Skill • Communication Skill
• Human Skill • Leadership Skill
Managerial skills Cont’d

 Conceptual skills:
This refers to the ability to think and conceptualize
abstract situations. These abilities are required for
making complex decisions.
In short it is:
The mental capacity to develop plans, strategies and
vision

 Human or interpersonal skills:

This includes the ability to understand other people and
interact effectively with them. The human skills are also
important in creation of an environment in which people
feel secure and free to express their opinions.
In short it is:
The ability to work with other people in teams
 Managerial skills Cont’d
 Technical skills:
These skills include the knowledge, abilities of and proficiency
in activities involving methods, processes and procedures in the
relevant fields as accounting, engineering, manufacturing etc.
Or in short:
The ability to use the knowledge or techniques of a particular
discipline to attain ends
 Design skills:
These skills enable a manager to handle and solve any kind of
unforeseen or actual problems, that may crop up in the
organization. Such problems could arise due to internal factors
or external factors and/or both.
In short it is:
The problem solving skill
Managerial skills Cont’d
 Communication skills:
The abilities of exchanging ideas and information
effectively. To understand others and let others
understand comprehensively.

 Leadership skills
The abilities to influence other people to achieve the
common goal.
Skill distribution at various management
levels
Roles of manager
Role: a set of expectation for one’s behavior

In 1960, Henry Mintzberg conducted a study to understand about the

managerial roles. He identified 10 managerial roles that are common to all
managers. These 10 managerial roles are grouped under: Interpersonal,
decisional, and informational roles.

Roles of Manager

Decisional Informational
Interpersonal
• Entrepreneur
• Figurehead • Monitor
• Disturbance handler
• Leader • Disseminator
• Resource allocator
• Liaison • Spokesperson
• Negotiator
Roles of manager Cont’d
A: Inter-personal Role

1. Figurehead: Represents the company on social occasions. Attending the flag

hoisting ceremony, receiving visitors or taking visitors for dinner etc.

2. Leader: In the role of a leader, the manager motivates, encourages, and builds
enthusiasm among the employees. Training subordinates to work under
pressure, forms part of the responsibilities of a manager.

3. Liaison: Consists of relating to others outside the group or organization. Serves

as a link between people, groups or organization. The negotiation of prices
with the suppliers regarding raw materials is an example for the role of liaison.
Roles of manager Cont’d
B: Decisional Role:

1. Entrepreneur: Act as an initiator and designer and encourage changes and

innovation, identify new ideas, delegate idea and responsibility to others.

2. Disturbance handler: Take corrective action during disputes or crises; resolves

conflicts among subordinates; adapt to environmental crisis.

3. Resource allocator: Decides distribution of resources among various individuals

and groups in the organization.

4. Negotiator: Negotiates with subordinates, groups or organizations- both

internal and external. Represents department during negotiation of union
contracts, sales, purchases, budgets; represent departmental interests
Roles of manager Cont’d
Informational role:

1. Monitor: Emerges as nerve center of internal and external information

about Information.

2. Disseminator: Transmits information received from other employees to

members of the organization.

3. Spokesperson: Transmits information to the people who are external to the

organization, i.e., government, media etc. For instance, a manager addresses a
press conference announcing a new product launch or other major deal.
 1
Functions of management

Planning is the process of setting goals, and charting the best way of action for
Planning achieving the goals. This function also includes, considering the various steps to be
taken to encourage the necessary levels of change and innovation.

2
Organizing is the process of allocating and arranging work, authority and resources,
Organizing to the members of the organization so that they can successfully execute the plans.

3 A: Staffing is the process of filling the positions in the organization and keeping
them filled.
Staffing B: Staffing is the process of recruiting and selecting the right person for the right job
at the right time in the right place.

4 Leading involves directing, influencing and motivating employees to perform

essential tasks. This function involves display of leadership qualities, different
Leading leadership styles, different influencing powers, with excellent abilities of
communication and motivation.

5 Controlling is the process of devising various checks to ensure that planned

performance is actually achieved. It involves ensuring that actual activities conform
Controlling to the planned activities. Monitoring the financial statements, checking the cash
registers to avoid overdraft etc., form part of this process.
Levels of management
 Top Level:
Top management sets the mission and goals, develops policies, evaluates the
overall performance of various departments, responsible for the business as a
whole and is concerned mainly with long-term planning
 Middle Level:
Middle level management develops departmental goals, executes the policies,
plans and strategies determined by top management , develops medium-
term plans and supervises and coordinate lower-level managers’ activities
 Lower (Supervisory, frontline) Level:
Lower level management takes charge of day-to-day operations, is involved in
preparing detailed short-range plans, is responsible for smaller segments of
the business, executes plans of middle management , guides staff in their own
subsections and keep close control over their activities
Levels of management

Top
Management
President, CEO,
Executives

Middle Management
Plant Managers, Division Managers,
Department Managers

First-Line Management
Foreman, Supervisors, Office Managers

Non- Managerial Employees

 Most

Least
Important
Important
Planning

Organizing

Top
Staffing

Managers
Directing
Controlling

Planning
Organizing
Staffing
Middle
Managers
Directing
Controlling

Planning
Organizing
Staffing
Managers
First-Line

Directing
Importance of management functions to managers in each level

Controlling
What is Ethics?
“ The values an individual uses to interpret whether
any particular action or behavior is considered right or
wrong.”
Values are the rules by which we make decisions about
right and wrong, should and shouldn't, good and bad.
They also tell us which are more or less important,
which is useful when we have to trade off meeting one
value over another
From where does society derive sense of what is right
or wrong wrong
 Sources of Ethics
 Genetic Inheritance : the qualities of goodness is a product of
genetic traits strengthened over time by the evolutionary process.

 Religion : religious morality is clearly a primary focus in shaping

our societal ethics.

 Philosophical Systems : the quality of pleasure to be derived

from an act was the essential measure of its goodness.

 Cultural Experience : individual values are shaped in large

measure by the norms of the society.

 The legal system : laws represent a rough approximation of

society’s ethical standards.
WHAT IS BUSINESS ETHICS?
Business Ethics is a specialized study of moral
right and wrong. It concentrates on moral
standards as they apply particularly to business
policies, institutions, and behavior.
 Recommended Text & Reference Books:
1. MANAGEMENT LEADING & COLLABORATING IN A COMPETITIVE WORLD
THOMAS S. BATEMAN AND SCOTT A. SNELL,
14TH EDITION, MCGRAW-HILL IRWIN,

2. BUSINESS ETHICS- CONCEPT AND CASES

VELASQUEZ
8TH EDITION