Chapter 2 Managing a business

Question 1

1.1 What is management

Answer 1

Management can be defined as the process of dealing with or controlling things or people. Management plans (look forward to setting the direction of the business, setting strategies), organising (allocating resources and processes to meet plans), controls (corrective action if direction of business differs from expectations) and leads (how managers exercise their authority and influence people to contribute to the organisational objectives).
Management have a number of key role including informational, interpersonal, and decisional.

Question 2

1.2 Power

Answer 2

Power is the ability to get things done. Managements form of power includes:
- Reward power: reward others for carrying out orders and meeting requirements
- Coercive power: punish others for not meeting requirements
- Referent power: desire to identify with or imitate another
- Expert power: perception that a person has some relevant expertise or special knowledge that others do not
- Legitimate power: power derived from being in a position of authority within the organisation
- Negative power: ability to disrupt operations (industrial actions, refusal to communicate information or sabotage)

Question 3

1.3 Management concepts

Answer 3

Authority is the right to do something or the right to request and expect another person to do something. Authority allows individuals to make decisions (within the scope of their authority) and to assign tasks.
Responsibility is the obligations a person has to fulfil a task assigned to them. Accountability is a person’s liability to be called to account for the fulfilment of a task.
Authority and responsibility is a person’s liability to be called to account for the fulfilment of a task. They can be delegated to subordinates, but accountability cannot.
Delegation involves giving a subordinate responsibility and authority on a given task, while the manager retains overall responsibility. The subordinate is granted appropriate authority to act and is also accountable for their actions to their superior.
Delegation means quicker decisions are made, more flexibility, more interesting for subordinate, allows career development, brings together skills and ideas, greater motivation, allows performance appraisal and relieves senior of less important tasks. The cons are over supervision wastes time, under supervision could decrease quality, managers can delegate boring or impossible tasks and inadequate training.

Question 4

2.1 Types of manager

Answer 4

There are four types of manager in an organisation:
- Line manager: direct authority over subordinates
- Staff manager: authority in advisory capacity
- Functional manager: hybrid of the two above, have authority in certain circumstances to direct, design or control activities or procedures in another department
- Project manager: temporary team manager

Question 5

2.2 Management hierarchy

Answer 5

• Top management: manage the whole business
• Middle management: manage other managers of the business
• First-line management: manage operational parts of the business
• Direct operation staff: supervisors and operational staff, delivering the product or service

Question 6

3.1 Organisational structure: culture

Answer 6

Culture is the common assumptions, values and beliefs that people share that become the way we do things in a place. Managers must understand the culture of the organisation to operate effectively.

Question 7

3.2 Features of a business culture

Answer 7

• Flexible: does the business allow change or initiative
• Controlled: does the business seek stability and order
• Inward-looking: does the business focus on internal operations
• Outward-looking: does the business adapt to external change and opportunities

Question 8

3.3 Types of business culture

Answer 8

• Human relations culture: this is flexible and inward-looking. The business focuses on being flexible to internal needs
• Open systems culture: flexible and outward-looking. The business is flexible internally and adapts to the changing environment constantly.
• Rational goal culture: controlled and outward-looking. The business is procedurally driven and adapts to external conditions
• Internal process culture: controlled and inward-looking. The business is rigid and stable and driven by procedures

Question 9

3.4 Organisational behaviour

Answer 9

This is the understanding of individual behaviour, group behaviour and patterns of structure to improve organisational efficiency and performance. The organisational iceberg states the overt (visible) parts of the business include rules, products, finance, and resources. The covert (invisible) behaviours of the business include attitudes, personalities, conflict, and informal communication.

Question 10

4.1 Business functions

Answer 10

The key functions of the business consist of human resource management, marketing, IT, operations (R+D and procurement) and finance.

Question 11

5.1 Human resource management

Answer 11

Defined as the creation, development, and maintenance of an effective workforce, matching the requirements of the organisation, and responding to the environment. Functions of HRM:
- Personnel planning and control
- Job analysis and design
- Recruitment and selection
- Training and development
- Performance appraisal
- Discipline, demotion, and dismissal
- Remuneration and compensation schemes
- Meeting legal and ethical standards
- Personnel records
- Communication/counselling
- Workforce diversity issues (equal opportunities)

Question 12

5.2 Approaches to HRM

Answer 12

Hard v soft approaches to HRM:
- Emphasis on resource element v emphasis on human element
- Goal to meet organisational objectives v goal to create human assets
- Dictatorial/control business culture v flexibility culture
- Management style top down v management style participative
- Training focused on meeting current needs v training focuses on personal and career development
- Centralised structure v devolved, delegation and autonomy
- Short-term perspective v long-term perspective

Question 13

5.3 Effectiveness of HRM

Answer 13

• Commitment: assess employee’ motivation, loyalty and job satisfaction
• Competence: look at skills, abilities, and potential
• Congruence: do management and employees share the same vision and goals
• Cost-effectives: operational efficiency and productivity

Question 14

6.2 Motivation and scientific management

Answer 14

Fredrick Taylor stated people can be treated in a standardised fashion, his scientific approach consisted of development of a true science of work and scientific selection and development of staff. He assumed people are mainly concerned with economic gain, people respond as individuals not groups and everyone can be treated in the same way. Workers do as they are told; high wages is a main motivator and little team emphasis.

Question 15

6.3 Masiow’s hierarchy of needs

Answer 15

He suggested people are motivated by a desire to satisfy unfulfilled needs including self-fulfilment needs, ego needs, social needs, safety needs and basic needs. Once they are satisfied, they no longer motivate unless threatened. The individual starts with basic needs and then moves up the level of needs.

Question 16

7.1 Group behaviour

Answer 16

A group is a collection of people with a common sense of identity, common aim, behavioural norms, communication between members and a leader. Groups are important to bring together skills, problem solve, plan and co-ordinate departments.
Tuckman formulated four stages through which groups proceed, most groups get stuck at storming stage:
- Forming: initially a collection of individuals
- Storming: member compete for group roles
- Norming: group norms emerge
- Performing: operating to full potential

Question 17

7.2 Belbin’s group roles

Answer 17

He observed people adopt one or more of the following roles in a team:
- Leader: co-ordinate the group
- Shaper: promotes activity
- Plant: thoughtful and thought provoking
- Monitor evaluator criticises ideas
- Resource-investigator adds to other ideas
- Company worker (implementor): administrator and scheduler
- Team worker: defuses potential conflicts
- Finisher: progress checker
- Specialist or expert: if required
Only one leader and/or shaper is required in a group, and it is likely one finisher is needed. There should be equal numbers of plants and evaluators, plus equal amounts of company workers and team workers.

Question 18

7.4 Likert’s leadership styles

Answer 18

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Question 19

8.1 Marketing

Answer 19

Is the management process which identifies, anticipates, and supplies customer requirements efficiently and profitably. The concepts include:
- Marketing orientation: business focuses on needs of potential customers. Success is dependent on marketing products to satisfy needs
- Sales orientation: purpose is sell more of the product than currently available. No attempt to identify customer needs
- Production orientation: aim is to make as many units as possible, customer needs secondary to increasing output
- Product orientation: obsessed with developing a sophisticated and expensive product beyond the customer need
Market segmentation is the division of the market into homogenous groups of potential customers. Allows for the organisation to vary its marketing to each segment.

Question 20

8.2 Consumer markets

Answer 20

Consumer markets are products bought for the use of individuals and their families. There are fast moving goods (low value, high volume), consumer durables (high value, low volume) and services.

Question 21

8.3 Industrial markets

Answer 21

Industrial markets are products and services bought for the use of companies, such as raw materials, capital goods and supplies. The characteristics of industrial marketing are being a small, number of large customers, large purchase size, expert buyers, high bargaining power and complex negotiation. This contrasts with consumer marketing.

Question 22

8.4 Marketing mix

Answer 22

This is the set of controllable marketing variables that a firm uses to produce the response from the target market. The model considers: product, promotion, place, and price. Additional factors include people, processes, and physical evidence.

Question 23

9.1 Operations

Answer 23

Operations involve the transformational process of changing inputs into outputs in order to add value. Operations management involves the design, creation, implementation, and control of these processes.
- Volume: high value operations are more capital intensive than low volume operations
- Variety: some operations have a range of different inputs/outputs. Some are more restricted to a specific range
- Variation in demand: some operations may see significant variation in demand, others may be consistent
- Visibility: a highly visible operations means employees have good communication skills and interpersonal skills in dealing with customers

Question 24

9.2 Research and development

Answer 24

Pure research is intended to gain new scientific or technical understanding although there is no commercial viewpoint in mind. Applied research is aimed at achieving an obvious commercial or practical viewpoint. Development takes existing knowledge and uses it to produce new products or systems intended for commercial production.

Question 25

9.3 Procurement

Answer 25

This is the acquisition of goods and services. Main factors to consider is quantity, quality, price, and lead times (time it takes from order to delivery of goods). The five rights of procurement highlight what must go well for a supply chain to be deemed effective. These are the right quality in the right quantity at the right price in the right place at the right time.

Question 26

9.4 Supply chain

Answer 26

This is the network of organisations, their systems, resources, and activities that are required to turn raw resources into a product or service for the end consumer. An integrated supply chain sees members of the chain working collaboratively with the shared goal of satisfying the ultimate consumer through quality and efficiency. This can be facilitated by integrated information systems.
Upstream supply chain members provide the raw materials and components for the production of goods or services. Downstream supply chain members are involved in getting the finished goods to the ultimate consumer and include wholesalers and retailers.

Question 27

10.1 IT management

Answer 27

The IT function has a number of considerations including planning in house IT activities, considering outsourcing, innovation and investment in service development and being aware of IT possibilities.
IT service delivery and service support can be two different teams in an organisation. Service delivery is data extraction and reports, capacity monitoring, customer billing and budgeting. IT service support is systems maintenance, security controls, prevention, and investigation of problems.