Management

 

 

Organizing is the process of identification and grouping of activities, assigning duties and delegating authority to the managers, allocating necessary resources and establishing coordination among individuals and department of an organization with a view to attain its objectives.

 

PROCESS OF ORGANIZING :

 

The process of organising consists of the following steps –

 

1. Identification of activities: Every enterprise is created with a specific purpose. Based on this, the activities involved can be identified. For example, in a manufacturing firm, producing goods and selling them are the major activities in addition to routine activities like, paying salary to employees; raising loans from outside, paying taxes to the government etc. and these activities vary when the organisation is a service concern or a trading firm.

 

2. Grouping of activities: Once activities are identified, then they need to be grouped. They are grouped in different ways. The activities which are similar in nature can be grouped as one and a separate department can be created. For example – activities undertaken before sale of a product, during the sale of the product and after the sale of the product can be grouped under the functions of a marketing department. Normally, all activities of a manufacturing unit can be grouped into major functions like purchasing, production, marketing, accounting and finance, etc. and each function can be subdivided into various specific jobs.

 

 

3. Assignment of Responsibilities: Having completed the exercise of identifying, grouping and classifying all activities into specific jobs, they can be assigned to individuals to take care of.

 

4. Granting authority: On the basis of responsibilities given to specific individuals, they are also to be given the necessary authority to ensure effective performance.

 

5. Establishing relationship: This is a very important job of management as everybody in the organisation should know as to who he/she is to report, thereby establishing a structure of relationships. By doing so, relationships become clear and delegation is facilitated.

 

ORGANIZATION STRUCTURE

 

Organization structure is a network of formal authority relationships among people within which behaviour and activities of people are regulated for the accomplishment of organizational objectives.

 

Forms of Organizational Structure

 

• Line Organization

 

• Pure Line: – Activities at a particular level are same, every employee performs by & large the same type of work.

 

• Departmental Line: – Whole work divided into functional Departments. Each Department works as a self-sufficient unit under the supervision & direction of a department manager who himself work under the immediate boss.

 

• Line and Staff Organization

 

It is one that has line managers with direct vertical relationships between different levels in the organization in addition to the specialist responsible for advising and assisting the line managers.

 

• Functional Organization

 

According to this, Line authority is channelized through the staff specialists. In such an organizational structure, Line authority runs through many functional experts who have authority to issue orders in their respective areas of specialisation.

 

• Project Organization

 

It is a temporary structure designed to accomplish a specific task or project with the help of specialists drawn from different functional departments within the organization.

 

 

• Matrix OR Grid Organization

 

It is permanent Organizational Structure designed to accomplish specific project or result by using using teams of specialists drawn from different functional departments within the organization.It is a combination of project organization and functional organization.

 

• Committee Organization

 

It is a group of 2 or more appointed, nominated or elected persons to consider, discuss decide, recommend or report on some issue or matter assigned to it.

 

 

Informal & Formal Organization

 

Formal organisation refers to the officially established pattern of relationships among departments, divisions and individuals to achieve well-defined goals and is a consciously designed structure of roles.

 

Informal organisations on the other hand, refers to relationship between individuals in the organisation based on personal attitudes, likes and dislikes and originates to meet their social and emotional needs and develops spontaneously.

 

Delegation

 

The active process of entrustment of a part of work or responsibility and authority to another and the creation of accountability for performance is known as delegation. Thus, there are three elements of delegation as follows-

 

• Assignment of Responsibility: This is also known as entrustment of duties. Duties can be divided into two parts: one part, that the individual can perform himself and the other part, that he can assign to his subordinates to perform.

 

• Granting Authority: Authority refers to the official powers and position required to carry on any task. When duties are assigned to subordinates then the required authority must also be conferred to him

 

• Creating Accountability: The delegatee is fully answerable to his superior for performance of the task assigned to him. Thus, the superior ensures performance through accountability by his subordinate.

 

 

Decentralization

 

Decentralisation refers to a systematic effort to delegate authority at all levels of management and in all departments. This shifts the power of decision making to lower level under a well considered plan.

Decentralisation has number of benefits. Firstly, it reduces the workload of the top level management. Secondly, it motivates the employees and gives them more autonomy. It promotes initiative and creativity. It also helps employees to take quick and appropriate decisions. In this process, the top management is freed from the routine jobs and it enables them to concentrate on crucial areas and plan for growth.

 

Distinction between Delegations and Decentralisation

 

Decentralisation is not same as delegation. The points of differences are –

• While delegation is the process of assigning responsibility and authority and thereby creating accountability; decentralisation is the ultimate outcome of planned delegation.
• Delegation of authority takes place between the manager and his subordinates while decentralisation involves the entire organisation, and is between top management and divisions/departments.
• Delegation is done to speed up the work and is essential in trace; while decentralisation is optional and is usually done in large scale organisations.
• In case of delegation the responsibility and authority delegated may be withdrawn by the delegator; which is not so easy in case of decentralisation.

 

 

Functions of Management:-

Planning

Organizing

Staffing

Direction

Coordination and control

Decision making

OUTPUT Attainment goals effectively & efficiently

INPUTS/RESOURCES Human Finance

CONTROLLING Measuring performance with standards & taking corrective actions

PLANNING Setting of objects & selecting ways

ORGANIZING Establishing relationships, Delagting authority & assign tasks

DIRECTING Leading & motivating employees to attain objectives

 

FUNCTIONS OF MANAGEMENT

 

PLANNING

Planning is a process of determination of organization’s objectives and selecting the courses of actions. i.e. Plans for attaining them.

Planning is the primary or basic management function.

 

Planning Process

Environmental scanning

Setting Objectives

Establishing Planning Premises

Searching alternatives

Evaluating alternatives

Selecting the most appropriate alternative

Formulating derivative plans

Budgeting i.e. Committing Resources

Implementing Plans

Follow – up actions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Types/Dimensions of Planning

 

• Corporate Planning : Business product line

 

• Long term Planning : > 5years

 

• Short term Planning : 1 year

 

• Medium term Planning : 2-5 years

 

• Strategic planning : Long term, corporate planning for dealing with the organization Competitive environment.

 

• Operational or Tactical Planning : Plans that specified detail operations needed to achieve The overall organizational goals. (Short range planning)

(Administrative Plans)

 

• Functional Planning : Production, Marketing, Personnel, Finance.

 

 

Components/Elements of Planning

 

Objectives :    The basic tools that underline all planning and strategic activities.

 

Strategy:         The Long term action plan to attain objectives.

 

Policies:           These are general statements or understanding that guide or channel thinking in decision making.

 

Procedure:      A Chronological Sequence of steps or actions to be taken to accomplish a  Specific task or job.

 

Method:          It is a prescribed way of completing a step in a procedure.

 

Rules:            Specific recored statements that direct what must or must not be done in a Given situation.

 

Standards:      It is a measure against whuch the level of performance is measured or  Evaluated.

 

Programmes: An action plan consisting sequence and timing of steps necessary to achieve Objectives.

 

Schedules:        A plan which indicates the time of commencement of task, passing through Different stages or process and finalising the task.

 

Budgets:        Numerical Plan containing expected result in quantative way.

 

Project:          It is smaller action plan and a distinct part of a programme.

Tactics:          Short term action plan for implementing strategy.

 

 

 

Concept:

 

 

Wealth maximization is the concept of increasing the value of a business in order to increase the value of the shares held by stockholders. The concept requires a company’s management team to continually search for the highest possible returns on funds invested in the business, while mitigating any associated risk of loss.

 

Wealth maximization simply means maximization of shareholder’s wealth. It is a combination of two words viz. wealth and maximization. A wealth of a shareholder maximizes when the net worth of a company maximizes.

 

Objectives:

 

 

1. Measurement of Wealth
2. Market Value of Shares
3. Common Goal
4.  D’s Of Financial Decisions
5. Shareholder’s Expectations

 

 

1. Measurement of Wealth

 

The main Principle of financial management is the Maximization of Shareholders Wealth. Shareholder’s Wealth is measured on the basis of economic value. Economic value is based on cash flows and not profit. Economic Value is defined as: “The present value of future cash flows generated by a decision, discounted at appropriate rate of discount which reflects the degree of associated risk“.

 

2. Market Value of Shares

 

The future cash flow is estimated for the present value. The present value is the Market price of share. As Shareholder’s wealth is equal to the market price of shares held by him, any increase in Market price of shares would result in an increase in Shareholder’s Wealth.

 

3. Common Goal

The Maximization of Shareholder’s Wealth is the common goal between the Shareholders and the Management. The recognition of this goal motivates the Management to allocate the available resources in an optimum way.

 

 

 

 

 

4. 3 D’s Of Financial Decisions

The Maximization of Shareholder’s wealth indicates that the Market price of share is related to three basic financial decisions:

The investment decisions,

The financing decision,

The dividend decision.

 

5. Shareholder’s Expectations

 

Shareholder’s expectations are about future cash flows based on current cash flows and projected future growth. The market price of share shows these expectations.

 

Marketing involves a number of activities. To begin with, an organisation may decide on its target group of customers to be served. Once the target group is decided, the product is to be placed in the market by providing the appropriate product, price, distribution and promotional efforts. These are to be combined or mixed in an appropriate proportion so as to achieve the marketing goal. Such mix of product, price, distribution and promotional efforts is known as ‘Marketing Mix’.

 

 

 

So, Marketing Mix consists of 4Ps They are :-

 

• Products,
• Price,
• Place (distribution) and

 

These 4 ‘P’s are called as elements of marketing and together they constitute the marketing mix. All these are inter-related because a decision in one area affects decisions in other areas.

 

PRODUCT:

 

Product refers to the goods and services offered by the organisation. A pair of shoes, a plate of dahi-vada, a lipstick, all are products. All these are purchased because they satisfy one or more of our needs.  The term product is defined as “anything that can be offered to a market to satisfy a want”. It normally includes physical objects and services. So, in simple words, product can be described as a bundle of benefits which a marketer offers to the consumer for a price.

 

Product can be broadly classified on the basis of

 

 (1) USE,    (2) DURABILITY,   and    (3)TANGIBLITY

 

• Based onUSE, the product can be classified as:

 

   (a) Consumer Goods and

(b) Industrial Goods.

 

• Consumer goods: Goods meant for personal consumption by the households or ultimate consumers are called consumer goods. This includes items like toiletries, groceries, clothes etc. Based on consumers’ buying behaviour the consumer goods can be further classified as :

 

(i) Convenience Goods;   (ii) Shopping Goods; and  (iii) Speciality Goods.

 

• Convenience Goods :

 

The convenience goods are bought frequently without much planning or shopping effort and are also consumed quickly. Buying decision in case of these goods does not involve much pre-planning. Such goods are usually sold at convenient retail outlets.

 

• Shopping Goods:

 

These are goods which are purchased less frequently and are used very slowly like clothes, shoes, household appliances. In case of these goods, consumers make choice of a product considering its suitability, price, style, quality and products of competitors and substitutes, if any. In other words, the consumers usually spend a considerable amount of time and effort to finalise their purchase decision as they lack complete information prior to their shopping trip. shopping goods involve much more expenses than convenience goods.

 

• Speciality Goods :

 

As  some special characteristics of certain categories of goods, people generally put special efforts to buy them. They are ready to buy these goods at prices at which they are offered and also put in extra time to locate the seller to make the purchase. Examples of speciality goods are cameras, TV sets, new automobiles etc.

 

(b) Industrial Goods:  Goods meant for consumption or use as inputs in production    of other products or provision of some service is termed as ‘industrial goods’. These are meant for non-personal and commercial use and include (i) raw materials, (ii) machinery, (iii) components, and (iv) operating supplies (such as lubricants, stationery etc). The buyers of industrial goods are supposed to be knowledgeable, cost conscious and rational in their purchase and therefore, the marketers follow different pricing, distribution and promotional strategies for their sale.

 

• Based on DURABILITY , the products can be classified as :

 

(a) Durable Goods and

 (b) Non-durable Goods

 

• Durable Goods : Durable goods are products which are used for a long period i.e., for months or years together. Examples of such goods are refrigerator, car, washing machine etc. In case of these goods, seller’s reputation and presale and after-sale service are important determinants of purchase decision.

 

• Non-durable Goods: Non-durable goods are products that are normally consumed in one go or last for a few uses. Examples of such products are soap, salt, pickles, sauce etc. These items are consumed quickly and we purchase these goods more often. Such items are generally made available by the producer through large number of convenient retail outlets. Profit margins on such items are usually kept low.

 

 

• Based on TANGIBLITY , the products can be classified as:

 

(a) Tangible Goods and

(b) Intangible Goods.

 

• Tangible Goods : Most goods, whether these are consumer goods or industrial goods and whether these are durable or non-durable, fall in this category as they have a physical form, that can be touched and seen. Thus, all items like groceries, cars, raw-materials, machinery etc. fall in the category of tangible goods.

 

• Intangible Goods : Intangible goods refer to services provided to the individual consumers or to the organisational buyers (industrial, commercial, institutional, government etc.). Services are essentially intangible activities which provide want or need satisfaction. Medical treatment, postal, banking and insurance services etc., all fall in this category.

 

PRICING

 

 

It is the exchange value of goods and services in terms of money. Pricing (determination of price to be charged) is another important element of marketing mix and It plays a crucial role in the success of a product in the market.

 

It has to be fixed after taking various aspects into consideration. The factors usually taken into account while determining the price of a product can be broadly described as follows:

 

• Cost: No business can survive unless it covers its cost of production and distribution. In large number of products, the retail prices are determined by adding a reasonable profit margin to the cost. Higher the cost, higher is likely to be the price, lower the cost lower the price.

 

• Demand: Demand also affects the price in a big way. When there is limited supply of a product and the demand is high, people buy even if high prices are charged by the producer. The price is dependent upon prospective buyers’ capacity and willingness to pay and their preference for the product. In this context, price elasticity, i.e. responsiveness of demand to changes in price should also be kept in view.

 

 

• Competition: The price charged by the competitor for similar product is an important determinant of price. A marketer would not like to charge a price higher than the competitor for fear of losing customers.

 

• Marketing Objectives: A firm may have different marketing objectives such as maximisation of profit, maximisation of sales, bigger market share, survival in the market and so on. The prices have to be determined accordingly.

 

• Government Regulation: Prices of some essential products are regulated by the government under the Essential Commodities Act. For example, prior to liberalisation of the economy, cement and steel prices were decided by the government. Hence, it is essential that the existing statutory limits, if any, are also kept in view while determining the prices of products by the producers.

 

METHODS OF PRICE FIXATION

Methods of fixing the price can be broadly divided into the following categories-

 

1. Cost based pricing
2. Competition based pricing
3. Demand based pricing
4. Objective based pricing

 

1. Cost Based Pricing: Under this method, price of the product is fixed by adding the amount of desired profit margin to the cost of the product. While calculating the price in this way, all costs (variable as well as fixed) incurred in manufacturing the product are taken into consideration.

 

2. Competition Based Pricing: In case of products where market is highly competitive and there is negligible difference in quality of competing brands, price is usually fixed closer to the price of the competing brands. It is called ‘young rate pricing’ and is a very convenient method because the marketers do not have to worry much about demand and cost and effect the change as per the changes by the industry leaders.

 

3. Demand Based Pricing: At times, prices are determined by the demand for the product. Under this method, without paying much attention to cost and competitor’s prices, the marketers try to ascertain the demand for the product. If the demand is high they decide to take advantage and fix a high price. If the demand is low, they fix low prices for their product

 

4. Objective Based Pricing: This method is applicable to introduction of new (innovative) products. If, at the introductory stage of the products, the organisation wishes to penetrate the market i.e., to capture large parts of the market and discourage the prospective competitors to enter into the fray, it fixes a low price. Alternatively, the organisation may decide to skim the market i.e., to earn high profit by taking advantage of a group of customers who give more importance to their status or distinction and are willing to pay even a higher price for it. In such a situation they fix quite high price at the introductory stage of their product and market it to only those customers who can afford it.

 

 

PLACE/DISTRIBUTION

 

A distribution channel consists of the set of people and firms involved in the transfer of title to a product as the product moves from producer to ultimate consumer or business user. Basically it refers to the vital links connecting the manufacturers and producers and the ultimate consumers/users. It includes both the producer and the end user and also the middlemen/agents engaged in the process of transfer of title of goods.

 

 

 

TYPES OF CHANNELS OF DISTRIBUTION

 

• Zero stage channel of distribution

 

Manufacturer —-> Consumer

 

Zero stage distribution channel exists where there is direct sale of goods by the producer to the consumer. This direct contact with the consumer can be made through door-todoor salesmen, own retail outlets or even through direct mail.

 

• One stage channel of distribution

 

Manufacturer—–>Retailer——–> Consumer

 

This type of distribution channel is preferred by manufacturers of consumer durables like refrigerator, air conditioner, washing machine, etc. where individual purchase involves large amount.

 

• Two stage channel of distribution

 

Manufacturer—->Wholesaler—>Retailer—>Consumer

 

This is the most commonly used channel of distribution for the sale of consumer    goods. In this case, there are two middlemen used, namely, wholesaler and retailer. This is applicable to products where markets are spread over a large area, value of individual purchase is small and the frequency of purchase is high.

 

• Three stage channel of distribution

 

Manufacturer—->Agents—-> Wholesaler—>Retailer—>Consumer

 

When the number of wholesalers used is large and they are scattered throughout the country, the manufacturers often use the services of mercantile agents who act as a link between the producer and the wholesaler. They are also known as distributor.

 

 

PROMOTION

 

Promotion refers to the process of informing and persuading the consumers to buy certain product. By using this process, the marketers convey persuasive message and information to its potential customers.

 

It is thus a persuasive communication and also serves as a reminder. A firm uses different tools for its promotional activities which are as follows:

 

– Advertising

– Publicity

– Personal selling

– Sales promotion

 

These are also termed as four elements of a promotion mix.

 

 

 

 

• Advertising: Advertising is the most commonly used tool for informing the present and prospective consumers about the product, its quality, features, availability, etc. It is a paid form of non-personal communication through different media about a product, idea, a service or an organisation by an identified sponsor. It can be done through print media like newspaper, magazines, billboards, electronic media like radio, television etc. It is a very flexible and comparatively low cost tool of promotion.

 

• Publicity: This is a non-paid process of generating wide range of communication to contribute a favourable attitude towards the product and the organisation. As the articles in newspapers about an organisation, its products and policies. The other tools of publicity are press conference, publication and news in the electronic media etc. It is published or broadcasted without charging any money from the firm. Marketers often spend a lot of time and effort in getting news items placed in the media for creation of a favourable image of the company and its products.

 

 

• Personal selling: It is a direct presentation of the product to the consumers or prospective buyers. It refers to the use of salespersons to persuade the buyers to act favourably and buy the product. It is most effective promotional tool in case of industrial goods.

 

• Sales promotion: This refers to short-term and temporary incentives to purchase or induce trials of new goods. The tool includes contests, games, gifts, trade shows, Discounts, etc. Sales promotional activities are often carried out at retail levels.