what are the contributions of peter drucker to management thought

7/22/2019 What Are the Contributions of Peter Drucker to Management Thought

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DEVELOPMENT OF MANAGEMENTTHOUGHTS

CONTRIBUTIONS BY:

PETER DRUCKER

MICHAEL PORTER

ELTON MAYO

ASSIGNMENT SUBMITTED BY

K.S.SUGANYA

07BIT51


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PETER DRUCKERWhat are the contributions of Peter Drucker to management thought?

Drucker was a genius whose ideas can help you be a better money manager, businessman

and citizen. Investors who followed Drucker's wise advice avoided Japan as an

investment (now, Japan is making a comeback after a 15-year slump).

Below, we 'll find three more bits of Peter Drucker's wisdom you can apply to your own

investing strategies today

1. Invest Like Peter Drucker by Investing in Entrepreneurial Companies

Invest in companies that are entrepreneurial, and avoid companies that are too

bureaucratic.

Drucker, an Austrian economist, was a big believer in entrepreneurship, innovation andcapital formation. He favored companies that took big risks and spent lots of capital on

R&D. He hated companies that had nothing better to do than repurchase their stock, or

pay out big dividends. He was born in Austria in 1909, and his roots stayed with him allhis life. His favorite economist was fellow Austrian Joseph Schumpeter, a believer in

entrepreneurship and a dynamic model of capitalism ("creative destruction").Drucker

would probably love our top three candidates for the new "Benny" award - Steve Jobs at

Apple Computers; Pierre Omidyar, founder of eBay; and John Mackey, CEO of WholeFoods Markets.

2. Spend Less, Save, and Invest More

You can never save and invest too much. Drucker disliked big spenders, heavy borrowers

and governments that couldn't balance budgets. The smart investor always lives withinhis means, and uses his savings productively - either in expanding his business, or

investing in other people's successful businesses (i.e., buying quality stocks).

He blamed Keynesian economics for an unhealthy anti-saving mythology, causing

"under-saving on a massive scale" in the West, both by individuals and government.

Government, Drucker said, is only good at three things: Inflation, taxation and makingwar! He once bluntly told a U.S. president, "government is obese, muscle-bound and

senile." Yet he wasn't against government, per se. He wanted a strong, healthy, vigorous

government. To accomplish this goal, he recommended privatization of many state

services.


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In fact, Peter Drucker and Robert Poole (founder of Reason magazine) invented the term

"privatization." Drucker was a longtime supporter of privatizing pension plans, both by

government and corporations (he preferred defined-contribution plans like 401k's andIRA's, rather than defined-benefit plans such as Social Security and corporate pensions).

3. Be an Optimist - Look for Bull Markets Around the World

Be an optimist. Drucker was encouraged by the collapse of the Soviet Marxist model in

the early 1990s, which helped developing countries privatize, denationalize and open uptheir domestic economies to foreign capital. He recommended investing in emerging

market economies. Not surprisingly, stock markets have boomed in Russia, Eastern

Europe, Asia and Latin America.

In the U.S., he was a big supporter of tax cuts, especially tax breaks for capital

investment and entrepreneurship. The corporate income tax, said Drucker, is the "most

asinine of taxes" and should be abolished.

Business According to Peter Drucker: the Ideal "Social Institution"

Finally, he felt that the private sector - major corporations and nonprofit institutions - was

the only "free, non-revolutionary way" to a stable, prosperous society. Business and

private charities provided a superior alternative to socialism and big government.According to Drucker, only business could assume the social responsibilities such as job

security, training and educational opportunities, and social benefits such as health care,

retirement, paid vacation, etc.When he first suggested the private sector as the ideal

"social institution" after World War II, Peter Drucker was considered a renegade. (EvenGeneral Motors thought he was nuts.) But once again, he was proven right.

ELTON MAYO:

George Elton Mayo (26 December 1880 - 7 September 1949) was an Australian

psychologist, sociologist and organization theorist.Mayo is known as the founder of theHuman Relations Movement, and is known for his research including the Hawthorne

Studies and his book The Human Problems of an Industrialized Civilization (1933). The

research he conducted under the Hawthorne Studies of the 1930s showed the importanceof groups in affecting the behavior of individuals at work. Mayo's employees,

Roethlisberger and Dickinson, conducted the practical experiments. This enabled him to

make certain deductions about how managers should behave. He carried out a number of

investigations to look at ways of improving productivity, for example changing lightingconditions in the workplace. What he found however was that work satisfaction depended

to a large extent on the informal social pattern of the work group. Where norms of

cooperation and higher output were established because of a feeling of importance,physical conditions or financial incentives had little motivational value. People will form

work groups and this can be used by management to benefit the organization.
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He concluded that people's work performance is dependent on both social issues and job

content. He suggested a tension between workers' 'logic of sentiment' and managers'

'logic of cost and efficiency' which could lead to conflict within organizations.

Disagreement regarding his employees' procedure while conducting the studies:

The members of the groups whose behavior has been studied were allowed to

choose themselves.

Two women have been replaced since they were chatting during their work. They

were later identified as members of a leftist movement.

One Italian member was working above average since she had to care for her

family alone. Thus she affected the group's performance in an above average way.

Summary of Mayo's Beliefs:

Individual workers cannot be treated in isolation, but must be seen as members of

a group. Monetary incentives and good working conditions are less important to the

individual than the need to belong to a group.

Informal or unofficial groups formed at work have a strong influence on the

behavior of those workers in a group.

Managers must be aware of these 'social needs' and cater for them to ensure that

employees collaborate with the official organization rather than work against it.

Mayo's simple instructions to industrial interviewers set a template and remain

influential to this day i.e. A. The simple rules of interviewing:- 1. Give your full

attention to the person interviewed, and make it evident that you are doing so. 2.

Listen - don't talk. 3. Never argue; never give advice. 4. Listen to: what he wants

to say; what he does not want to say; what he can not say without help. 5. As youlisten, plot out tentatively and for subsequent correction the pattern that is being

set before you. To test, summarize what has been said and present for comment.

Always do this with caution - that is, clarify but don't add or twist.

MICHAEL PORTER:

Michael Porter has founded three major non-profit organizations: Initiative for a

Competitive Inner City - ICIC in 1994, which addresses economic development in

distressed urban communities; the Center for Effective Philanthropy, which createsrigorous tools for measuring foundation effectiveness; and FSG-Social Impact Advisors,

a leading non-profit strategy firm serving NGOs, corporations, and foundations in thearea of creating social value. He also currently serves on the Board of Trustees ofPrinceton University.His main academic objectives focus on how a firm or a region can

build a competitive advantage and develop competitive strategy. He is also a Fellow

Member of the Strategic Management Society. One of his most significant contributionsis the five forces. Porter's strategic system consists primarily of:

Competitive advantage
http://en.wikipedia.org/wiki/Bonushttp://www.icic.org/http://www.icic.org/http://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/Competitive_strategyhttp://en.wikipedia.org/wiki/Strategic_Management_Societyhttp://en.wikipedia.org/wiki/Porter_5_forces_analysishttp://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/Bonushttp://www.icic.org/http://www.icic.org/http://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/Competitive_strategyhttp://en.wikipedia.org/wiki/Strategic_Management_Societyhttp://en.wikipedia.org/wiki/Porter_5_forces_analysishttp://en.wikipedia.org/wiki/Competitive_advantage


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Porter's Five Forces Analysis

strategic groups (also called strategic sets)

the value chain

the generic strategies of cost leadership,product differentiation, and focus

the market positioning strategies of variety based, needs based, and access based

market positions global strategy

Porter's clusters of competence for regional economic development

Diamond model

His contributions:The Five Forces

The threat of the entry of new competitors

Profitable markets that yield high returns will attract new firms. This results in many new

entrants, which eventually will decrease profitability for all firms in the industry. Unlessthe entry of new firms can be blocked by incumbents, the profit rate will fall towards zero

(perfect competition).

The existence ofbarriers to entry (patents[1], rights, etc.) The most attractive

segment is one in which entrybarriers are high and exit barriers are low. Few newfirms can enter and non-performing firms can exit easily.

Economies of product differences

Brand equity

Switching costs orsunk costs Capital requirements

Access to distribution

Customer loyalty to established brands

Absolute cost advantages

Learning curve advantages

Expected retaliation by incumbents

Governmentpolicies

Industry profitability; the more profitable the industry the more attractive it will

be to new competitors

The intensity of competitive rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the

competitiveness of the industry.

Sustainable competitive advantage through innovation

Competition between online and offline companies; click-and-mortar-v- slags on

a bridge
http://en.wikipedia.org/wiki/Porter_5_forces_analysishttp://en.wikipedia.org/wiki/Strategic_grouphttp://en.wikipedia.org/wiki/Value_chainhttp://en.wikipedia.org/wiki/Porter_generic_strategieshttp://en.wikipedia.org/wiki/Product_differentiationhttp://en.wikipedia.org/wiki/Market_positioninghttp://en.wikipedia.org/wiki/Global_strategyhttp://en.wikipedia.org/wiki/Porter's_clusterhttp://en.wikipedia.org/wiki/Economic_developmenthttp://en.wikipedia.org/wiki/Diamond_modelhttp://en.wikipedia.org/wiki/Incumbentshttp://en.wikipedia.org/wiki/Perfect_competitionhttp://en.wikipedia.org/wiki/Barriers_to_entryhttp://en.wikipedia.org/wiki/Patentshttp://www.epo.org/index.htmlhttp://www.epo.org/index.htmlhttp://en.wikipedia.org/wiki/Rightshttp://en.wikipedia.org/wiki/Barriershttp://en.wikipedia.org/wiki/Brand_equityhttp://en.wikipedia.org/wiki/Sunk_costshttp://en.wikipedia.org/wiki/Customer_loyaltyhttp://en.wikipedia.org/wiki/Learning_curvehttp://en.wikipedia.org/wiki/Incumbentshttp://en.wikipedia.org/wiki/Policieshttp://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/Innovationhttp://en.wikipedia.org/wiki/Bricks_and_clickshttp://en.wikipedia.org/wiki/Porter_5_forces_analysishttp://en.wikipedia.org/wiki/Strategic_grouphttp://en.wikipedia.org/wiki/Value_chainhttp://en.wikipedia.org/wiki/Porter_generic_strategieshttp://en.wikipedia.org/wiki/Product_differentiationhttp://en.wikipedia.org/wiki/Market_positioninghttp://en.wikipedia.org/wiki/Global_strategyhttp://en.wikipedia.org/wiki/Porter's_clusterhttp://en.wikipedia.org/wiki/Economic_developmenthttp://en.wikipedia.org/wiki/Diamond_modelhttp://en.wikipedia.org/wiki/Incumbentshttp://en.wikipedia.org/wiki/Perfect_competitionhttp://en.wikipedia.org/wiki/Barriers_to_entryhttp://en.wikipedia.org/wiki/Patentshttp://www.epo.org/index.htmlhttp://en.wikipedia.org/wiki/Rightshttp://en.wikipedia.org/wiki/Barriershttp://en.wikipedia.org/wiki/Brand_equityhttp://en.wikipedia.org/wiki/Sunk_costshttp://en.wikipedia.org/wiki/Customer_loyaltyhttp://en.wikipedia.org/wiki/Learning_curvehttp://en.wikipedia.org/wiki/Incumbentshttp://en.wikipedia.org/wiki/Policieshttp://en.wikipedia.org/wiki/Competitive_advantagehttp://en.wikipedia.org/wiki/Innovationhttp://en.wikipedia.org/wiki/Bricks_and_clicks


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The bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of

raw materials, components, labor, and services (such as expertise) to the firm can be asource of power over the firm, when there are few substitutes. Suppliers may refuse to

work with the firm, or, e.g., charge excessively high prices for unique resources.

Supplier switching costs relative to firm switching costs

Degree of differentiation of inputs

Impact of inputs on cost or differentiation

Presence of substitute inputs

Supplier concentration to firm concentration ratio

Employee solidarity (e.g. labor unions)

Supplier competition - ability to forward vertically integrate and cut out the buyer

Ex. If you are making cookies and there is only one person who sells flour, you have no

alternative but to buy it from him.
http://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Labor_unionshttp://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Firmhttp://en.wikipedia.org/wiki/Labor_unions

what are the contributions of peter drucker to management thought

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