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Business Management & Ethics

Chapter 1 – Introduction To Business Management & Ethics:

Definition of Business:

“Human activities directed toward providing or acquiring wealth through buying and

selling of goods.” - L. H Henry

An organization or enterprising entity engaged in commercial, industrial or professional

activities. A business can be a for-profit entity, such as a publicly-traded corporation, or

a non-profit organization engaged in business activities, such as an agricultural

cooperative.

An organization or economic system where goods and services are exchanged for one

another or for money.

Characteristics of a Good Business:

Capital: A stock of accumulated goods which provide income or profit.

Creation of Utility: Service offered by the business.

Dealings in goods and services.

Employment

Motive

Organization

Production and purchase of goods

Regular transactions

Risks and uncertainty

Sales or transfer for value

Social welfare

Definition of Management:

It is the process of achieving goals effectively and efficiently through and with the

people.

Four components of management include: Planning, Organizing, Staffing and

Controlling.

(Additional Info: These four components of management were derived by Luther

Gullick’s classical management theory in which he coined the word POSDCoRB.

POSDCoRB stands for: Planning, Organizing, Staffing, Directing, Coordinating, Reporting

and Budgeting. This theory covers major aspects of Public and Business Management.)

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Management also includes a set of activities directed at utilizing a business’s resources.

Productivity -> Efficiency -> Effectiveness

Where efficiency is ‘doing things right’ and effectiveness is ‘doing the right things’.

Henri Fayol’s Principles of Management:

Henri Fayol was a French mining engineer. He has been credited with the formulation of

general theory of management & business administration during the end of 19th

century. The theory has 6 functions and 14 principles.

Fayol’s 6 Functions of Business Management:

o Forecasting

o Planning

o Organizing

o Commanding

o Coordinating

o Controlling

Fayol’s 14 Principles of Business Management:

o Division of Labor

o Authority and Responsibility

o Unity of Command

o Unity of Direction

o Equity

o Order

o Discipline

o Initiative

o Remuneration

o Stability of Tenure

o Scalar Chain

o Sub-ordination of Industrial Interest to Common Goal

o Espirit De Corps

o Centralization of Decision Making.

Douglas Mcgregor’s Theory X and Theory Y:

Douglas Mcgregor was a management profession at MIT Sloan School in the US. 'Theory

X' and 'Theory Y' are theories of human motivation created and developed by Douglas

McGregor in the 1960s. These theories describe two contrasting models of workforce

motivation in human resource management, organizational behavior, organizational

communication and organizational development.

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Theory X: People who are lazy and unhappy with their jobs. They require constant

motivation and regulation or strictness to perform in their jobs.

Theory Y: People who are active and happy with their jobs. They have an inert

motivational will for their job and require little regulation or strictness.

Organization:

An organization is a systematic arrangement of interdependent group of people working

together to achieve a common goal. It can also be said as an organized group of people

with a particular purpose, such as a business or government department.

Managers:

A manager is responsible for controlling or administering an organization or group of

staff. He is a person regarded in terms of their skill in managing resources, especially

those of a household. Or a person is said to be a manager if he carries out managerial

tasks to achieve goals.

Managerial Skills:

Conceptual – Based on ideas and concepts

Interpersonal – Based on relationship with staff and employees

Technical – Based on technical knowledge

Design – Based of designing a strategy or plan

Communication – Based on communication skills

Leadership – Based of leadership qualities

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Managerial Skills Distribution:

Henry Mintzberg’s Managerial Roles:

Henry Mintzberg in 1960, defined a number of managerial roles. These are:

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Levels of Management:

Ethics:

Values an individual uses to interpret whether any particular action is good or bad.

These are the moral principles that govern a person's behavior or the conducting of an

activity.

Sources of Ethics:

Society, Family, Law, Religion, Individual Conscience, Office rules and regulations etc.