book recommended peter drucker purpose of business … · mgmt study material created/ compiled by...

Mgmt study material created/ compiled by - Commander RK Singh [email protected]

of 16 - Principles of Management II

Jamnalal Bajaj Institute of Mgmt Studies

Book Recommended – Peter Drucker

Purpose of Business

Create a customer

Customer satisfaction is profit

Profit is investment for future

= Peter Drucker

Customer

Needs – A state of felt deprivation

Wants – Forms of needs shaped by culture, personality, etc

Demand –Wants backed by buying power

Customers with same needs will want new thus creating demand

Ways of Doing Business (four ways of satisfying)

Self production

Coercion

Supplication

Exchange/barter

Stages of Demand (Ashtavasu)

(a) (-)ve Demand – Like attempting to sell non veg in a predominantly Veg

community. Eg – Roz Khao Ande

(b) No demand – Before Maggi Noodles were launched no body thought of demand

for fast cooking noodle.

(c) Latent Demands – There is an existing demand in the market, like a low nicotine

cigarette.

(d) Irregular Demands – Like hotels in Hill stations which have occupancy only in

summer/tourist season.

(e) Faltering Demand – Like George Fernandes. From the years of Railway Strike to

post Emergency cabinet berth in VP Singh cabinet, to NDA Defence Minister,

Tehelka episode and back and now in wilderness. It is story replete with

disappearance and come backs. Similarly, Mohinder Amarnath was the great come

back man of Indian Cricket.

(f) Full Demand – Supply = demand

(g) Overfull Demand – Supply > Demand




(h) Unwholesome Demand – Vices like cigarettes, drugs, liquor, etc

Sales = Trend, Season, Cycle and Random. (In the case of Faltering demands Random

factor is very high. Unlike Irregular demands where demand can be varying to a large

extent in different part of the year but the demand pattern is predictable, here the demand

rises and falls at random without any predictability, like share markets movement)

Demand Tackling

Tackle the demands with 6 management orientations: -

(a) Product Orientation – Nelco TV, Mera Nam Joker etc. Hoping to catch

customer by sheer quality of the product without caring for the sensibilities

of the customer or the market forces.

(b) Selling – Concentrate on selling the product by sales gimmicks. Reliance

Telecom, Water purifiers, etc

(c) Marketing – Assess the needs and wants of the people and design the

product as per that. Eg Titan, Jet Airways etc

(d) Social Marketing – Build the brand name with the help of social work. Eg

Tata building the TATA Nagar (Jamshedpur)

(e) Production – Keep producing

(f) Customer – Keeping customer welfare as the prime objective.




Principles of Management (Mr Samant)

Suggestions Made: -

1. Invite alumni for guest lectures. (Mr Patil for corporate governance)

2. Convention to be organised after MMS convention in End Jan/early Feb every

year by evening batch. Papers to be presented by 3-4 batches of 5-8 students to

be evaluated by a panel of Corporate bigwigs.

3. Starting of consultancy cell by alumni of JBIMS with active participation of

students.

Philosophy of Management

Why there are so many management institutes opening in the country? Why were Greek

pyramids built? Why was Tajmahal built?

Answer lies in the man’s desire to perpetuate his/his loved ones’ memory long after them.

And there lies the genesis of so many management schools in the name so many

personalities as Jains, Jamnalal Bajaj, Nirma etc.

History of Management Studies.

First book on accounts is believed to have been written in sixteenth century. The book was

on cost accounting.

Single side entry book keeping is practised by Marwaries till date . It still gives cash profit

by the day.

BOM – Bill of Material

First Model Input Output

Dw – Domestic Worker worked at home and provided with all the inputs. He was observed

on work for 7 years before being given a promotion and permission to venture out of the

Market

Apprentice

Dw




house. The product manufactured by him was marketed in the open market by the employer

who was called the FACTOR.

After 7 years he was allowed to go out of home and was promoted to Journey Man. He was

allowed to travel and learn further. He was observed in this state for another 7 years after

which he was to appear for an exam which was conducted by a body called GUILD. Result

was barely 5-10 % as is the case for CAs today. On passing this exam he was promoted to

MASTER rank. He was then free to open his own factory.

Fence

The custom in the olden days was to travel with cattle and families to the work site called

factory early in the morning. The work day began at 0800 Hrs and finished at 2000 Hrs.

Often able bodied family members were also emplyed in the work. The cattle were allowed

to graze inside the fence of the factory. The area which was fenced around the factory often

use to be illegal encroachment and was an excuse for land grabbing. Thus these people also

came to be called land lords.

Such anarchy and uncontrolled exploitation of the workers led to Workers Revolution in

1756-57.

Two schools of thoughts emerged from the revolution: -

1. Capitalists (Right Wingers)

2. Leftists/Socialists (Left Wingers)

PPF – Production Possibility Factor

C

H

O

I

C

E

1

Choice 2 (INC)

PPF Curve

Factory




Principles of Managements Mr Samant

Project:

A presentation on management lessons derived from one of the following: -

1. From any one of the List of authors (120 authors list given to MMM Batch I)

2. Any Novel

3. Any Movie

4. Case Study (Compulsory) – 24 Jul onwards

Following notes are to be read in conjunction with Power Point Presentation slides.

Robert Owen. He hailed from a very rich family. He was the first to introduce the

concept of lunch and tea breaks for the workers.

Charles Dulpin. He believed in the concept that human beings and technology are not

exclusive but are complimentary to each other.

FW Taylor. He is regarded as the father of perspective management and general

management.

There are 4 schools of management thoughts

1. Taylor/Fayol/Webber

2. Human Relations

3. Organisational School

4. Operational Thinking

Henry Fayol is considered to be the father of the process management. He was a Mining

Engineer by profession.

Taylor was prosecuted for his thinking on management.

He believed that

1. Vices are hindrances in the path to success.

2. Success is brought by character.

3. Ability is the capacity to do disagreeable things

4. Brain alone can not be winner.

5. Will to excel will win

6. Drive to achieve is necessary.




He refused to teach at Harward university and instead asked them to come to his shop floor.

He also refused to accept any honorarium for the teaching.

Henry Fayol. He became Manager by age of 25. In 1888 his company was heading

for bankruptcy. During the same time he was promoted as MD of the company. At the age

of 77, when he retired, the company was in extremely sound financial health. In 1900 he

presented a paper on management in an International Conference in which he laid down 14

general principles of management.

All his works were in French and it was much later that they were translated in

English separately by two different authors, Mr Coubrough and Mr Storrs. During the

translation some gross errors were made while defining management, administration and

Governance by Mr Storrs who was more widely read than other.

While Mr Coubrough defined the two schools as Administration and Management, Mr

Storrs wrongly translated them as Management and Governance respectively.

Max Webber. Unlike his other contemporary luminaries ie Taylor and Fayol, Mr

Webber was a pure academician with no hands on experience of the factory atmosphere.

He said that Bureaucracy is ideal way of management. Mgmt means management by my

office. He is considered to be the father of organisational theory based on authority. He

said that there are 3 types of authority: -

1. National – Legal authority – Drawn from the legal system of the country/factory

etc.

2. Traditional authority – Drawn from traditions, customs, status. Like Kingship

3. Charismatic authority – Devotion to specific

Webber refused to recognise traditional and charismatic authorities and emphasised only

legal authority.

He stated that there are 7 elements of management: -

1. Division of labour

2. Hierarchy

3. Selection through formal process

4. Officials should be appointed and not elected

5. Fixed salary and career opportunities

6. Administrative officials never as owners of the units

7. Strict enforcement of the rules, discipline and conduct




24 Jul 04

PRINCIPLES OF MANAGEMENT Prof Mahajan Samant

Chester Bernard

I - I/P (Taylor) - Work

II - People (Behaviour/Motivation - Worker

III - Organisation - Organisation

IV - Operation Research - OR

Mr Chester Bernard belonged to Organisational School of Management Philosophy.

(Mr Peter Drucker, the modern age Management Guru also belonged to the same school.)

Mr Bernard was a farm boy and worked his way up to be called the Erudite Executive.

He supported his education by tuning pianos and running a small dance band.

He completed his bachelor studies in Economics in 3 years from Harvard University but

could not get the degree due a quaint law which stipulated qualification in a Laboratory

subject which Mr Bernard did not do.

But without even getting a Bachelor’s Degree, Mr Bernard was decorated with 7 Doctorate

Degrees in his life for his Yeoman service in understanding the Organisation Behaviour.

He became President of the company he was working in in just 18 years when silver hairs

were norm for President ship of the companies.

Besides serving his own organisation he was also serving he society in various capacities.

He was

Advisor to the Atomic Energy Commission.

Advisor to the Reformatory.

President of the United Service Organisation.

President of the Rock Feller Foundation for 4 years.

President of the New Jersey Society.

He studied French to be able to study philosophy of Mr Wilfred Perrotto.

Then he studied German to be able to study Webber.




He died in 1961.

He propounded 5 Theories –

I. Organisations are in nature of co-operative systems.

II. Formal Organisations.

III. Informal Organisations.

IV. Theory of Authority.

V. Function of the Executive.

(I) Organisations are in nature of co-operative systems. 3 Goals: -

1. Survival of the organisation.

2. Adjustment to External Environment

3. Analyse function of Executives at all levels.

(a) Each individual is discrete individual

(b) Individual interact with others in social relationship but that is voluntary

involvement. Negative side is motives. Positive side is efficiency and

effectiveness.

Effectiveness- If organisational goal is achieved, it is Effectiveness.

Efficiency – Efficiency is achievement of individual goals.

(III) Informal Organisations

1. Communication

2. Maintenance of cohesiveness

3. Maintenance of feelings of integrity and self respect.

(IV) Theory of Authority

1. Authority should be accepted by people down the line. There are two aspect

to the authority –




(i) Subjective/Personal – Respecting the Chair

(ii) Objective – Assess the person objectively and accept the authority.

If the two aspects gel, it is good for the organisation.

(V) Function of the Executive

1. Provide a system of communication.

2. Promote the securing of personal efforts.

3. To formulate and define purpose.

(VI) Maintenance Methods

1. Morale and Moral

2. Scheme of inducement

3. Scheme of deterrents such as supervision control and inspection, education

training.

Decision Making 1. Analyse

2. Synthesise

3. Decision

Mr Cadbury Said - 4 Basics

1. Ownership – Somebody is owner and you are responsible to him

2. ROI – Return on investment of the owner

3. Performance Review

Mr Lipton – He was thrown out of his parents house at the age of 28. He then started a

grocery shop and continued to open up to 300 shops in next few years. At 40, he was one

the richest management persons. He also visited India (Calcutta) for purchasing tea

gardens.




31 Jul 04

Principals of Management

Mr Mahajan

Mission- What a company strongly believes in.

Mercedes – To be best engineering company in the world

Motorola - Once a Motorola always a Motorola

GTL – Total telecom solution

Wipro – Value based company

Creed – Reflection of philosophy of the company

Vision – It is where company wishes to go

Mission is journey to vision

Objectives is quantification of mission

Budgets

S W O T

STRENGTH WEAKNESS




OPPORTUNITY THREATS

The mantra is to

Consolidate the Strengths

Strengthen the weaknesses

Capitalise the opportunities, and

Protect against the threats

One should do a SWOT analysis of self to future career planning.

T O W S – It is reverse of SWOT but a much more detailed structure

S W

O

MAXI MAXI MINI MAXI

T

MAXI MINI MINI MINI

Check your quadrangle

If there is an opportunity and it is in the area of your strength, Maximise the investment and

growth.

If there is an opportunity but the area is your weakness, make a cautious approach.

Similar should be approach in case of threat existing in the area of your strength.

If there is threat in the market and it also happens to be your weak area, make a

hasty exit.

B O G – Boston consultancy Group

H

SO

ST

WO

WT




(1) Invest and grow (3) Sective Growth

Mkt (2) Milk the Market (4) Withdraw

Growth L

H L

Relative Market Share

Assessment of Quadrangles

(1) HH – You have a high Market Share in a high growth market. Invest further and grow

relentlessly.

(2) HL – You have a high market share in a low growth market. New players wont enter

the market. You have a virtual monopoly in the market. Milk the market. Go for regular

increase in the price, reduction in the dealer/retailers margins etc.

(3) LH – You have a low market share in a growing market. There would be many players

in a growing market and your position is risky. Go for selective growth.

(4) LL – You are in a sluggish market with low market share. Future is not bright.

Withdraw from the market.

P o r t e r

Cost – Least cost production

Differentiation Strategy –Like adopted by Maggi Ketchup (ITS DIFFERENT. No body,

including company, knew what is different).

Focus – Choose one area and master it

M a c’ s 7 S – Mackenzie Model




M N C M o d e l

H L

H

L

Company Strength

General Electric Model

General Electric Company is rated as the world’s best managed company.

STR AVG WEAK

S

Strategy

Structure

System

Staff

Style

Skill

Super-ordinate

Goals of org

Invest and

grow

Milk the

market

Selective

growth

Withdraw Mk

t A

ttra

ctiv

enes

s

MK

T A

TT

RA

CT

IVE

NE

SS

Protect position Invest to build Build

Selectively




A

W

BUSINESS STRENGTH

Build

Selectively

Manage

selectively

for earnings

Ltd expansion

or harvest

Protect and

refocus

Manage for

earnings Divest




ORGANISING

There are two types of organizations: -

a. Formal Organisations

b. Informal organizations

Levels

Span of control

Spans

Factors affecting span of control

a. Training

b. Delegation

c. Clarity of plan

d. Objective Standards

e. Rate of change

f. Communication Techniques

g. Amount of personal contact

h. Organisation level variation

i. Various other factors

j. Need for balance

Organisation Structure.

(a) Departments

(b) Functions

(c) Territory/geography

(d) Process/Equipment

(e) Procucts

(f) Matrix

(g) SBUs – Strategic Business units




(h) Other Factors/New Trends/amoeba Structure

Line and Staff Organisation

All functions which serve directly towards attainment of organization objectives are

Line Functions

Functions which are support systems helping in Line Functions are called Staff

Functions

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