Principles of Management

BBA _ Semester I
2024
Unit I

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Unit I
Part A

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What is Business?
• Business is a wide term.
• It includes all occupations in which people are busy in earning income
either by production or purchase and sale or exchange of goods and
services to satisfy the needs of other people with the main objective of
earning profit.

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What is Business?
• Creating a customer for itself
• Converting economic resources into goods and services keeping in
mind the preferences of customers.
• Innovating new products or services
• Marketing these innovative products and services so that these can
reach the customer.

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Nature of Business
• An economic activity
• Production or procurement of goods and services
• Sales or exchange of goods and services for the satisfaction of human
needs
• Dealing in goods or services on a regular basis
• Profit earning
• Uncertainty of return/risk

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Business Objectives
Economic Objectives Survival, profit, and growth

Social Objectives Supply of desired quality of products, avoidance

of unfair trade practices, employment generation,
Social Service, Avoidance of pollution

Human or Personal Objectives Good working condition, competitive salary,

personal growth

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Classification of Business Activities
Industry Industry refers to an activity which converts raw materials into
useful products.

Commerce Commerce refers to all those activities which help directly or

indirectly in the distribution of goods to the ultimate consumer.

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Industry
• Primary industry
• Secondary industry
• Tertiary industry

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Commerce

Trade 1. Buying and selling of goods and services

2. A link between the manufacturer and the consumer
Aids to Trade Which help in smooth flow of trade
1. Transport and communication
2. Banking and Finance
3. Insurance
4. Warehousing
5. Advertising

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Business Risk
• It refers to the probability of losses or inadequate profits due to
uncertainties or unexpected events.
• A chance of incurring losses or less profit than expected

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Emerging Modes of Business
• Globalization
• Technology
• e-Business
• Outsourcing

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Benefits of e-Business
• Convenience
• Speed
• Global reach
• Cost Saving
• Paperless society
• Round the clock

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Discussion question (s)
• Difference between e-Business and Traditional Business

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Small Business
• Any enterprise which employs not more than 50 persons when using
power and 100 when not using power and with capital assets not
exceeding Rs 5 lakh.
• Industries and Development Act, 1951
• Revised in 1959, 1960, 1966, 1975, 1980, 1990
• Meaning and new classification of small business as per MSMED Act,
2020 (Micro Small and Medium Enterprise Act)

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Role of Small Business
• Employment Generation
• Improve Economic Condition
• Rural Development
• Supply of variety of products
• Provide opportunity for entrepreneurship
• Mobilization of local resources
• Promotion of Artistic and Creative Sense

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Business Environment
• Business environment refers to forces, factors, individuals and
institutions which are outside the control of business enterprise but
these may affect its performance.
• Business environment is the surroundings in which business exists.
• The economic, social, political, technological, legal and other forces
which operate outside business enterprise are part of business
environment.
• Increase in taxes by government makes things expensive to buy.
• Technological changes may make existing products obsolete.

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Importance of understanding business
environment
• Business environment provide constraints as well as opportunities for
the businessman.
• Constraints or threats refer to conditions which restrict business
activities.
• Opportunities refer to conditions which allow growth and expansion
of business activities.

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Importance of understanding business
environment
• Enables the firm to identify opportunities and getting first mover advantage.
• Maximum benefits or profit by grabbing the opportunity at the earliest.
• Helps the firm to identify the threats and early warning signal
• Come to know in advance for the coming constraints or threats of
business due to scan of environment

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Importance of understanding business
environment
• Helpful in tapping and assembling resources
• Collecting right type of resources as per present requirement of business
by foreseeing the requirement due scan of business environment.
• Helps to adjust and adapt with the rapid changes
• Bringing changes in your organizations per changes in environment.
• Being innovative and adopt latest technology and latest method of
production, etc.

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Importance of understanding business
environment
• Assisting in planning and policy making
• Making plans and policies keeping in mind conditions prevailing in
environment.
• Improvement in performance
• With timely changes and innovation performance improves.

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Dimensions of Business Environment
• Major components of General Environment are:
• Economical Environment
• Social Environment
• Political Environment
• Legal Environment
• Technological Environment

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Economical Environment
• Economic Environment refers to all the forces and factors which directly
influence the economy of the country.
• Some aspects of Economic Environment are:
• Increase in GDP results in rise in disposable income of people and further
increases demand for product.
• High inflation rates set as constraints as they increase the cost of production.
• Decrease in interest rate is beneficial and increase demand for home loans and
borrowing money.

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Social Environment
• Social environment consists of the customs and traditions of the
society in which business is existing.
• It includes the standard of living, taste, preferences, and education
level of people living in the society where business exists.
• The celebrations of Diwali, Id, Christmas, Guruparv, etc. increase the
sale of sweets, greeting-cards, etc.

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Social Environment
• Some aspects of Social Environment are:
• Tradition, custom and habits of people
• Education and literacy rates
• Birth and death rates and population
• Importance of women in workforce
• Health and fitness trend
• The social movements to improve the education level of girl child

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Political Environment
• Political environment constitutes all the factors related to government
affairs such as type of government in power, policy changes
implemented by different governments, etc.
• The political environment has immediate and great impact on the
business transactions so businessman must scan this environment very
carefully.

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Political Environment
• Attitudes of elected government representatives
• General stability and peace in political condition of country
• Policy changes implemented by different government
• Agenda of political parties
• Political ideology and practices of ruling party
• Relation of our country with foreign country
• Constitution of the country

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Legal Environment
• The management of every business enterprise has to obey the law of
land.
• It is essential for every business enterprise to have adequate
knowledge of rules and regulations framed by government.

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Legal Environment
• Various laws and legislative act.
• Administrative order issued by government authorities.
• Court judgements
• Legal policies related to licensing and foreign trade
• Statutory warnings essential to be printed on label
• Foreign exchange regulation and management act.

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Technological Environment
• Technological environment includes forces related to scientific
improvements and innovations which provides new ways of producing
goods and services and new way of operating business.
• Change in method of production
• New method of working for improvement
• Scientific innovations such as robotics, biotechnology, etc.
• New techniques and methods of operating business
• Online sale of products
• Online booking of tickets
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Topics
• Concept of management
• Effectiveness and efficiency
• Importance of management
• Characteristics of management
• Management: Science, Art, Profession
• Management: top, middle and operational level
• Managers-planning, organizing, staffing, directing, controlling
• Coordination

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Unit I
Part B

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Organization
• An organization is a deliberate arrangement of people brought together
to accomplish some specific purpose.
• College, University
• All organizations share three common characteristics
• Goals
• People
• Structure
• A group of people working together to create a surplus.

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Management
• Management is the process of getting things done, effectively and
efficiently, with and through other people.
• Management is the process of designing and maintaining an
environment in which individuals, working together in groups,
efficiently accomplish selected aims.

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Effectiveness
• It is concerned with doing the right task
• Completing activities and achieving goals
• It is concerned with end result.
• Being effective means finishing the given task or achieving the goal on
time.

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Efficiency
• It refers to do the task in the right way
• With minimum cost and optimum utilization of resources.
• Efficiency involves cost benefit analysis

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Difference between effectiveness and efficiency

Basic of Difference Effectiveness Efficiency

Meaning It refers to completing the task on It refers to completing the task with
time, no matter whatever the cost. minimum cost, optimum utilization
of resources and in cost effective
manner.

Objective To achieve end result To conduct cost benefit analysis

Main consideration Doing the right task Doing the task in right way

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Efficiency and effectiveness
• Efficiency-resource usage
• Effectiveness-goal attainment
• Concepts are different but interrelated
• Productivity : the output–input ratio within a time period with due
consideration for quality.

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Good vs Poor Management
• Poor management
• Both inefficiency and ineffectiveness
• Effectiveness achieved without regard for efficiency
• Good management is concerned with both attaining goals
(effectiveness) and doing so as efficiently as possible.

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Discussion question (s)
• Why it is important to study management?

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Importance of Management
• Management helps in achieving group goal
• Integrate employee’s objectives with organization’s objectives.
• Management increases efficiency
• Minimum cost, optimum utilization of resources
• Management creates a dynamic organization
• Convincing employees to accept change updating and modifying objectives
and other activities of organization from time to time.
• Management helps in achieving personal objectives
• Giving due importance to goals of employees
• Management helps in development of society
• Contribution towards society

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Characteristics of Management
Management is a goal-oriented process Management functions aim towards goal of the organization.
Management is pervasive Management is required in all organizations.
Management is multi-dimensional Management does not mean one single activity. It includes
management of work, management of people and management of
operations
Management is a continuous process Never ending ongoing process
Management is a Group activity Together everyone achieves more as a team
Management is a dynamic function
Management is an intangible force Management function cannot be physically seen but its presence
can be felt

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Managing: science or art?
• Managing as practice is an art; the organized knowledge underlying
the practice is science.

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Management: Both Science and Art

Management as a Management as an Art

Science

Systematic body of Present in management Systematic body of Present in management

knowledge knowledge/existence of
theoretical knowledge
Principles are based on Partially present in Personalized application Present in management
observation and management
experimentation

Universal validity Not present in Based on practice and Present in management

management creativity

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 Management as an Profession
• Well defined body of knowledge
• Restricted entry
• Presence of professional association
• Existence of ethical code
• Service motive

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Levels of Management
Top level management Chairman, Board of Directors, Planning and organizing
Managing Director, General
Manager, President, Vice President

Middle level management Departmental heads such as Staffing and coordination

purchase department head, sales
department head, finance manager,
marketing manager

Supervisory level, operational or Supervisors, superintendent, clerk Directing and controlling as they
lower level management give direction to workers

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Managers
• Managers are individuals who work in an organization directing and
overseeing the activities of other people.
• All managers share one common element: they work in an
organizational setting.
• Any person who performs managerial function i.e., planning,
organizing, staffing, directing and controlling is considered as
manager.

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What managers do
• Helping others do their work
• Functions-planning, organizing, leading, controlling [ P-O-L-C]
• Roles-Interpersonal relationships, transfer of information, decision-
making
• Skills/Competencies-conceptual, interpersonal, technical, political
• The aim of all managers should be to create a surplus by establishing
an environment in which people can accomplish group goals with the
least amount of time, money, materials, and personal dissatisfaction.

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Manager

Planning • First function performed by every manager.

• Planning bridges the gap between where we stand today and where we want to reach
• Planning is the base of all other functions of management.
Organizing Setting up organizational structure means deciding the framework of working how many units
and subunits or departments are needed, how many posts or designations are needed in each
department, how to distribute the authority and responsibility among different people.
Staffing It refers to recruiting, selecting, appointing the employees, assigning them duties, maintaining
cordial relations, and taking care of grievances of employees.
Directing Directing refers to giving directions or instructions to employees by motivating them,
supervising the activities of employees, communicating with them.
Controlling Controlling functions refer to all the performance measurements and follow up actions that
keep the actual performance on the path of plan.

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Coordination

• The process by which manager synchronizes the activities of different

departments is known as coordination.
• Coordination is the force that binds all the other functions of
management.
• Coordination is needed to perform all the functions of management.
• Coordination is required at all the levels.
• Coordination is not only the most important function of an
organization but also the essence of management.

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Nonmanagerial employees
• Persons who have no subordinates
• People who work directly on a job or task and have no responsibility
for overseeing the work of others.
• Professionals, creative, technical

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Unit I
Part C

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Discussion question (s)
• Explain why studying management history is important.

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Management History
• Henry Ford once said, “History is more or less bunk.”
• How the field of study called management has evolved.
• Today’s managers still use many elements of the historical approaches
to management.
• Effects of the past on present thought and action.
• Learning from past mistakes and successes.

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Early Management (3000 BC-1776)
• Indus Valley Civilization
• Employing tens of thousands of people
• Who told each worker what to do?
• Who ensured there would be enough bricks/stones at the site to keep
workers busy?
• Someone had to plan what was to be done, organize people and
materials to do it, make sure those workers got the work done, and
impose some controls to ensure that everything was done as planned.

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Industrial revolution
• Starting in the late eighteenth century when machine power was
substituted for human power
• These large, efficient factories needed “someone” to forecast demand,
ensure that enough material was on hand to make products, assign
tasks to people, direct daily activities, and so forth.
• That “someone” was a manager.

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Division of labor
• Job specialization
• The breakdown of jobs into narrow and repetitive tasks

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Classical approach (1911-1947)
• First studies of management
• Emphasized rationality and making organizations and workers as
efficient as possible.
• Two major theories compose the classical approach:
• Scientific management [Frederick W. Taylor, Frank and Lillian Gilbreth]
• General administrative theory [Henri Fayol and Max Weber].

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Scientific Management
• Year 1911
• Frederick Winslow Taylor’s Principles of Scientific Management was
published.
• Described the theory of scientific management
• Scientific Management: An approach that involves using the scientific
method to find the “one best way” for a job to be done.
• Modern management theory was born

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Taylor’s Scientific Management Principles
• Develop a science for each element of an individual’s work to replace
the old rule-of-thumb method.
• Scientifically select and then train, teach, and develop the worker.
• Heartily cooperate with the workers to ensure that all work is done in
accordance with the principles of the science that has been developed.
• Divide work and responsibility almost equally between management
and workers. Management does all work for which it is better suited
than the workers.

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Gilbreths
• The Gilbreths invented a device called a microchronometer that
recorded a worker’s hand-and-body motions and the amount of time
spent doing each motion.
• The Gilbreths also devised a classification scheme to label 17 basic
hand motions (such as search, grasp, hold), which they called
therbligs.
• This scheme gave the Gilbreths a more precise way of analyzing a
worker’s exact hand movements.

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Discussion question (s)
• How today’s managers use scientific management

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General Administrative Theory
• General administrative theory focused more on what managers do and
what constituted good management practice.
• Principles of management
• Fundamental rules of management that could be applied in all
organizational situations and taught in schools.

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Fayol’s 14 Principles of Management
• Division of work. Specialization increases output by making
employees more efficient.
• Authority. Managers must be able to give orders, and authority gives
them this right.
• Discipline. Employees must obey and respect the rules that govern the
organization.

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Fayol’s 14 Principles of Management
• Unity of command: Every employee should receive orders from only
one superior.
• Unity of direction: The organization should have a single plan of
action to guide managers and workers.
• Subordination of individual interests to the general interest: The
interests of anyone employee or group of employees should not take
precedence over the interests of the organization as a whole.

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Fayol’s 14 Principles of Management
• Remuneration: Workers must be paid a fair wage for their services.
• Centralization: This term refers to the degree to which subordinates
are involved in decision making.
• Scalar chain: The line of authority from top management to the
lowest ranks is the scalar chain.

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Fayol’s 14 Principles of Management
• Remuneration: Workers must be paid a fair wage for their services.
• Centralization: This term refers to the degree to which subordinates
are involved in decision making.
• Scalar chain: The line of authority from top management to the
lowest ranks is the scalar chain.

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Fayol’s 14 Principles of Management
• Order: People and materials should be in the right place at the right
time.
• Equity: Managers should be kind and fair to their subordinates.
• Stability of tenure of personnel: Management should provide orderly
personnel planning and ensure that replacements are available to fill
vacancies.

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Fayol’s 14 Principles of Management
• Initiative: Employees allowed to originate and carry out plans will
exert high levels of effort.
• Esprit de corps: Promoting team spirit will build harmony and unity
within the organization.

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Max Weber
• Max Weber was a German sociologist who studied organizations.
• He developed a theory of authority structures and relations based on
an ideal type of organization he called a bureaucracy.
• Bureaucracy
• A form of organization characterized by division of labor, a clearly
defined hierarchy, detailed rules and regulations, and impersonal
relationships.
• His theory became the structural design for many of today’s large
organizations

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 Division of labor Jobs broken down into simple, routine, and well-defined tasks

Authority hierarchy Positions organized in a hierarchy with a clear chain of command

Formal selection People selected for jobs based on technical qualifications

Formal rules and regulation System of written rules and standard operating procedures

Impersonality Uniform application of rules and controls , not according to

personalities

Career orientation Managers are career professionals, not owners of units they manage

Characteristics of Weber’s Bureaucracy

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Discussion question (s)
• Do bureaucracies still exist today?
• How today’s managers use general administrative theory.

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Behavioral approach (Late 1700s – 1950s)
• Organizational Behavior (OB)
• The study of the actions of people at work
• Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester
Barnard.
• Hawthorne Studies

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Quantitative approach
• Use of quantitative techniques to improve decision making.
• This approach also is known as management science.
• Applying statistics, optimization models, information models,
computer simulations, and other quantitative techniques to
management activities.
• Linear programming is a technique that managers use to improve
resource allocation decisions

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Total quality management, or TQM
• Total quality management, or TQM, is a management philosophy
devoted to continual improvement and responding to customer needs
and expectations.
• Quality of goods and services is continually improved
• Uses statistical techniques to measure every critical variable in the
organization’s operations. These are compared against standards to
identify problems, trace them to their roots, and eliminate their causes

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Contemporary approaches
• Two contemporary management perspectives— systems and
contingency—are part of this approach.
• Systems theory is a basic theory in the physical sciences.
• However, it wasn’t until the 1960s that management researchers began
to look more carefully at systems theory and how it related to
organizations.

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Contemporary approaches
• A system is a set of interrelated and interdependent parts arranged in a
manner that produces a unified whole.
• An organization takes in inputs (resources) from the environment and
transforms or processes these resources into outputs that are
distributed into the environment.
• The organization is “open” to and interacts with its environment.

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Contemporary approaches
• The contingency approach (sometimes called the situational
approach) says that organizations are different, face different
situations (contingencies), and require different ways of managing.
• A good way to describe contingency is “if, then.” If this is the way my
situation is, then this is the best way for me to manage in this situation.

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