PRINCIPLES OF MANAGEMENT

Chapter# 01 Introduction to management

Who Are Managers?
Manager
Someone who works with and through other people by coordinating their work activities in order to accomplish organizational goals changing nature of organizations and work has blurred the clear lines of distinction between managers and non-managerial employees

Managerial Titles
First-line managers - manage the work of non-managerial individuals who are directly involved with the production or creation of the organizations products (The lowest level of managers) e.g. supervisors. Middle managers - all managers between the first-line level and the top level of the organization manage the first-line managers. They are known as the bridge between the top managers and first line managers. e.g. Human Resource Manager or Marketing Manager etc. Top managers - responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization. The highest level of the managers. e.g. Chief Executives, Director etc.

What is Management?
Management
It is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. Or The process of coordinating work activities so that they are completed efficiently and effectively with and through other people Process - represents ongoing functions or primary activities engaged in by managers Coordinating - distinguishes a managerial position from a non-managerial one

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Efficiency - getting the most output from the least amount of inputs doing things right concerned with means Effectiveness - completing activities so that organizational goals are attained doing the right things concerned with ends

What Do Managers Do?

Management Functions and Process

Planning - defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities. Selecting missions and objectives and the actions to achieve them; it requires decision making i.e. choosing future courses of action from given alternatives.

Most useful conceptualization of the managers job

Organizing - determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are made. People working together in groups to achieve some goal must have roles to play, much like the parts actors fill in a drama. The role means that what people do has a definite purpose or objective.

Staffing- involves filling and keeping filled the positions in the organization structure. This is done by identifying work force requirements and developing both the new and current job holders so that tasks are accomplished effectively and efficiently.

Leading - directing and motivating all involved parties and dealing with employee behavior issues. Influencing people so that they will contribute to organization and group goals. Leading involves motivation, leadership styles and approaches and better communication.

Controlling - monitoring activities to ensure that they are going as planned. Measuring and correcting individuals and organizational performance to ensure that events conform to plans. It involves measuring performance against goals and plans. Controlling facilitates the accomplishment of plans.

Management Skills
Technical - knowledge of and proficiency in a certain specialized field involving methods, processes and procedures. It involves working with tools and specific techniques. For example mechanics work with tools and their supervisors should have the ability to teach them how to use those tools.

The relative importance of these skills may differ at various levels in the organization hierarchy.

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Human - ability to work well with other people both individually and in a group. It is cooperative effort, teamwork and it is creation of an environment in which people feel secure and free to express their opinions.

Conceptual - ability to think and to conceptualize about abstract and complex situations (big picture). To recognize significant elements in a situation and to understand the relationship among the elements. See the organization as a whole, understand the relationships among subunits and visualize how the organization fits into its broader environment.

Design - ability to solve problems in ways that will benefit the organization. Manager must be able to do more than see a problem. Managers must have valuable skills of being able to design a workable solution to the problem in the light of the realities they face. Skills Needed At Different Management Levels

Diagnostic - The managers ability to visualize the most appropriate response to a situation. Communication - The managers abilities both to effectively convey ideas and information to others and to effectively receive ideas and information from others. Decision Making - The managers ability to correctly recognize and define problems and opportunities and to then select an appropriate course of action to solve problems and capitalize on opportunities.

Time Management - The managers ability prioritize work to work efficiently and to delegate appropriately.

Management Roles
The managers perform ten (10) different, highly interrelated roles, or sets of behaviors attributable to their jobs. Role Interpersonal 1. Figurehead Description Examples status requests,

Symbolic head; required to perform a Ceremonies, number of routine duties of a legal or social solicitations. nature. Responsible

2.

Leader

for

the

motivation

and Virtually all managerial activities

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3.

Liaison

direction of employees. involving employees Maintains a network of outside contracts Acknowledges mail, external board who provide favor and information work.

Informational 4. Monitor

Receives

wide

variety

of

information. Handling al mail and contracts as categorized as

Information serves as nerve center of categorized organization. Transmits information

internal and external information of the concerned primarily with receiving

5.

Disseminator

received

information. from Forwarding mail into organization contracts involving information flow to subordinates such as review sessions. on Board meetings, handles contracts transmission of information to outsiders.

Outsiders or from other employees to for informational purposes; verbal Members of the organization.

6.

Spokesperson

Transmits

information

to

outsiders

organizations plans, policies, actions and involving results; serves as expert on organizations industry. Decisional 7. Entrepreneur Searches organization and its Environment Strategy

and

review

sessions

for opportunities and Initiates projects to involving initiation or design of

8.

Disturbance handler

bring about change. improvement projects. Responsible for corrective action when Strategy and review disturbances. Makes or

session

Organization faces important, unexpected involving disturbances and crises.

9.

Resource allocator

approves

significant

Scheduling, authorization;

requests budgeting ;

for The

Organizational decisions.
10.

Negotiator

Responsible

for

representing

programming of employees work the Contract negotiation.

organization at major negotiations. These above mentioned 10 roles can be grouped as being primarily concerned with interpersonal relationship, the transfer on information and decision making. Interpersonal Roles Involve people and duties that are ceremonial and symbolic in nature All managers are required to perform duties that are ceremonial and symbolic in nature. All managers have a leadership role. This role includes hiring, training, motivating, and disciplining employees. The liaison activity as contacting outsiders who provide the manager with information. These may be individuals or groups inside or outside the organization. The sales manager who obtains information from the quality control manager in his own company has an internal liaison relationship. When that sales manager has contracts with other sales executives through a marketing trade association, he has an outside liaison relationship. Informational Roles Receiving, collecting, and disseminating information

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The managers usually collect information from organizations and institutions outside their own. Typically they get information by reading magazines and talking with other people to learn of changes in the publics tastes, what competitors may be planning, and the like. This is also called monitor role. Managers also act as a conduit to transmit information to organizational members. This is the disseminator role. In addition, managers perform a spokesperson role when they represent the organization to outsiders. Decisional Roles Revolve around making choices, emphasis that managers give to the various roles seems to change with their organizational level Finally four roles that revolve around the making of choices. In the entrepreneur role manager initiates and oversee new projects that will improve their organizations performance. As disturbance handlers manager takes corrective action in response to unforeseen problems. As resource allocators, managers are responsible for allocating human, physical and monetary resources. Last managers perform a negotiator role in which they discuss issues and bargain with other units to gain advantages for their own unit. Who is Manager? M = Motivator A = Activator N = Negotiator A= Achiever G = Goal setter E = Energetic (accumulator) R = Risk Taker

The system approach to Management

Managing Systems a. System - a set of interrelated and interdependent parts arranged in a manner that produces a unified whole provides a more general and broader picture of what managers do than the other perspectives provide b. Closed system - not influenced by and do not interact with their environment c. Open system - dramatically interact with their environment d. Inputs and Claimants- the inputs from the external environment can be people, capital, managerial as well as technical skills and knowledge etc. The external environment may also include various groups and their demands like employee wants higher pay, more benefits and job security. On the other hand consumers demands safe and reliable products at reasonable price. So all these factors may be inputs for any organization. e. The managerial transformation process- the task of the mangers to transform the inputs in an effective and efficient manager into outputs. The transformation process can be viewed by different ways so the focus area can be the functions of the organization like production, finance, Management and Marketing etc. f. The Communication process- the communication is important to all phases of the managerial process. It put together the managerial functions. It enables the managers to communicate
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effectively. Helps them to define the events or activities that are important for any performance that matches the standards. For example the objectives set in planning are communicated so that the appropriate organization structure can be devised/defined. The communication system links the organization with its external environment. E.g. needs of the customers can be identified with the help of communication system. It also helps to identify the market/competitors and other potential threats to the organization. g. External variables- effective managers will regularly scan the external environment. Managers may have little or no power to change the external environment. They have no alternatives and have to respond or react against the external environment. E.g. opportunities, constraints or others. h. Outputs- it is the task of the mangers to utilize inputs of the organization, to transform them through the managerial functions under the consideration for external variables into outputs. The outputs may vary with the organization to organization e.g. products, services, profits, satisfaction and integration of the goals of various claimants to the enterprise. i. Reenergizing the system- its importance to notice that some of the outputs become inputs again. The satisfaction and new knowledge or skills of employees become important human inputs. Similarly, profits and income etc.

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Chapter# 03 Management and society: the external environment, social responsibility and ethics
The external environment: Economic
The economic environment is of concern only to businesses whose socially approved mission is the production and distribution of goods and services that people want and can pay for. The economic environment may include the followings

Capital
Almost every kind of organization needs capital-machinery, building, inventories and cash etc. Some of this may be produced by the organization itself. Cash resources may also be generated within an organization to buy capital items outside. All kinds of operations are dependent on the availability and price of needed capital items.

Labor
Another important input from the economic environment is the availability, quality and price of labor. The skillful and technical sound full labor is key for success for any organization. The price of labor is also an important economic factor for an organization. The highly trained labor may be short in supply while untrained common labor may be abundant.

Price levels
The inputs side of an organization is clearly affected by the price levels. If the prices go up that may cause the organization to increase the prices of its production or goods or services. When organization gets inputs on higher cost ultimately the prices of output may also be changed. Inflation not only upset businesses but also has highly disturbing influences on every kind of organization through its effects on the costs of labors, materials and other items.

Government fiscal and tax policies

The nature of government fiscal and tax policies an important input for any organization. Government policies, rules and regulation play an important role for any organization. The tax policies, taxable income rate or the credit through fiscal policy has considerable impact on the business. For example, if taxes on business profits are too high the incentives to go into business or stay in it tend to drop and investors will look else where to invest their capital. If heavy taxes are placed on real estate people may find it too expensive to own a house and may go to cheaper and less comfortable living quarters.

Customers
One of the most important factors for the success of an organization is customers. Without them a business cannot exist. To capture customers a business must try to find out what people want and will buy. The income level may change the buying power and spending patterns of the customers which may influence the purchasing decisions and ultimately it effects the organization.

The external environment: Technology

The most persistent factor in the environment is technology. It is science that provides knowledge and it is technology that uses it. The term technology refers to the sum total of the knowledge we have of ways to do things. It may be in form of inventions, innovation, techniques etc. but its main influence is on ways of doing things on how we design, produce, distribute and sell goods as well as services.
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The impact of technology: benefits and problems The impact of technology is seen in new products or services, new machines, new tools and new materials. The benefits of the technology can be productivity, higher living standards and greater variety of products and services. E.g. cars, computers and mobiles phones etc. On the other hand the technology also has lot of problems associated with it. Like traffic jams, polluted air and shortage of water, energy and loss of privacy through the application computer technology. For example the Microsoft Word 2007 is not compatible on the Microsoft Windows 95 or 98 etc. Quantum and radical changes in the technology also influence and effects the organization as well as the customers preferences.

The external environment: Social

The social environment is made up of the attitudes, desires, expectations, degrees of intelligence and education, beliefs and customs of people in a given group or society. The political and legal environment is primarily that complex of laws, regulations and government agencies and their actions that affects all kinds of organization often to verify degrees. The concept of social responsibility requires organizations to consider the impact of their actions on society. The complexity of environmental forces Social desires, expectations, and pressure give rise to laws and standards of ethics. Social forces including ethics normally arise before laws are passed. So the linking of these elements makes their study and knowledge and command very difficult. Social attitude, beliefs and values Social attitude, beliefs and values differ among workers and employees, rich and poor people, college students and graduates etc. This variety makes it difficult for manger to design an environment that is favorable to performance and satisfaction. It is even more difficult to respond to these forces when they are outside the enterprise. So managers have no choice but to take them into account in their decision making.

The external environment: Political and Legal

The political and legal environment also linked with the social environment. It has great influence on the organization. The political environment The political situation and environment of the country effects the organization. The stability of the government, rules and regulation, policies and procedures etc govern by that government may influence the organization. The attitude and actions of political and government leaders and legislators do change with the flow of social demands and beliefs. Government affects virtually every organization and every aspect of life. It acts in two main roles; it promotes and constrains business. For example, it promotes business by economic expansion and development by providing assistance through the small business administration by subsidizing selected industries by giving tax advantages in certain situations (supporting research and development). Government is also the biggest customers, purchasing goods and services. The Legal environment The legal environment of any country plays a vital role for any organization. Every manager is encircled by a web of laws, regulations and court decisions not only on the national level but also on the sate and local levels. Some
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are designed to protect workers, consumers and communities. The legal system of the country may ultimately effects the operation of any organization.

The social responsibility of mangers (Social responsibility and social responsiveness)

Managements only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the owners of the organization. The Socioeconomic View defined the social responsibility as: Managements social responsibility goes beyond making profits to include protecting and improving societys welfare. Firms have a moral responsibility to larger society to become involved in social, legal, and political issues. To do the right thing The ability of the organization to relates its operation and policies to the social environment in ways that are mutually beneficial to the company and to the society. The concept of social responsibility protects the new generation and the resources for the new generation. This concept is also known as the sustainable development (example vision 20 20 recycling of different items and green city concepts). Today, most of the organizations are planning to utilize environmental based resources in such a way that in coming years the resources will not become scarce. It is not only responsibility of an organization to protect the nature but each and every individual and group is responsible for the protection of environment, country and new generation. The mangers respond to environment and become active participants in the community to improve the quality of life. This is what they must do for the survival of their organization. Social responsiveness on the other hand is the progress and implementations of different programs or the response of the organizations. The mission of the organization is not only produce and to sell but also to protect the environment, the privacy of the consumers, the right of the consumers as well as provide them with up-to-date information and also act to their response. Most of the organizations are proactive in their working approach and forecasts the developments before they become problems for the organization. Social Obligation-The obligation of a business to meet its economic and legal responsibilities and nothing more. Social Responsiveness-The capacity of a firm to adapt to changing societal conditions through the practical decisions of its managers in responding to important social needs. Social Responsibility-A firms obligations as a moral agent extends beyond its legal and economic obligations, to the pursuit of long-term goals that are good for society. The Greening of Management The recognition of the close link between an organizations decision and activities and its impact on the natural environment. Global environmental problems facing managers: Air, water, and soil pollution from toxic wastes. Global warming from greenhouse gas emissions. Natural resource depletion

Ethics in managing
The rules and principles that define right and wrong conduct. Everyone in the society may directly or indirectly have concerned with ethics. Ethics is defined as the discipline dealing with what is good and bad and with moral duty and obligations. Personal ethics are the rules by which an individual lives his or her personal life. Business ethics is concerned with truth and justice and has a variety of aspects such as the expectations of society, fair competition, advertising, public relations, social responsibilities, and corporate behavior.
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Ethical theories Utilitarian theory-suggests that plans and actions should be evaluated by their results. Ethical decisions are made solely on the basis of their outcomes such that the greatest good is provided for the greatest number. Encourages efficiency and productivity and is consistent with the goal of profit maximization. Theory based on rights-hold that all people have basic rights. Examples are the rights of freedom of consciences (sense of right and wrong), free speech and due process. Concerned with respecting and protecting individual liberties and privacy. Seeks to protect individual rights of conscience, free speech, life and safety and due process. Theory of justice-demands that decisions makers be guided by fairness and equity as well as impartiality (fairness). Organizational rules are enforced fairly and impartially and follow all legal rules and regulations. Protects the interests of underrepresented stakeholders and the rights of employee. Institutionalizing ethics Top managers have responsibility to promote and look after the ethical standards of the organization. This can be done by applying and integrating ethical concepts with daily actions like Develop code of conduct which guides everyone at work to perform ethically and show responsive behavior The ethical committee is also developed for the purpose of proper implementations of ethical standards and codes in the organization. By teaching ethics in management development programs so that the top level teaches middle and then to the bottom (from top to bottom). Ethical decisions should be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong. Based on integration of the general social contract and the specific contract between community members.

How managers can improve ethical behavior in an organization?

Hire individuals with high ethical standards. Establish codes of ethics and decision rules. Lead by example. Delineate job goals and performance appraisal mechanisms. Provide ethics training. Conduct social audits. Provide support for individuals facing ethical dilemmas.

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Chapter# 05 The nature and purpose of planning

Planning
Involves defining the organizations goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work. Informal planning - nothing is written down, little or no sharing of goals, general and lacking in continuity Formal planning - written, defines specific goals, specific action programs exist to achieve goals

Types of Plans
Strategic plans Operational plans

Strategic plans
Apply to the entire organization, establish organizations overall goals and seek to position the organization in terms of its environment. Strategic plans are long term duration/purpose based plans, shows direction and also known as single use/one time plans. Strategic Plans are the means used to achieve strategic goals. Developed by the top manager. Strategic plans usually have a significant impact on the organization. The means of pursuing strategic goals. 1. Long term duration/purpose Plans-Time frame beyond three years or more than three years. Definition of long term has changed with increasingly uncertain organizational environments. 2. Directional Plans-flexible plans that set out general guidelines. Provide focus without limiting courses of action. 3. Single use Plans-one-time plans specifically designed to meet the needs of a unique situation.

Strategic Planning

Top Executives

Middle-Level Managers Operational Planning

First-Level Managers

Planning in the hierarchy of organizations

Operational plans
Specify the details of how the overall goals are to be achieved and tend to cover short time periods. The specific plans are usually short term duration/purpose based plans, specific in nature and are standing based plans. The means of pursuing the operational goals. Operational plans developed by middle and first level
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mangers. Operational plans that means for achieving the organizations operational goals. Operational plans cover brief periods than tactical plans and they include the day to day operation of the organization. 4. Short term duration/purpose plans-Cover one year or less than one year. 5. Specific Plans- specific in nature i.e. clearly defined with little room for interpretation. Required clarity and predictability often do not exist 6. Standing plans - ongoing plans that provide guidance for activities performed repeatedly. It includes policies, procedures, and rules.

Planning and Performance

Generally speaking, formal planning is associated with: higher profits, higher return on assets, quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning. The nature of Planning The nature of planning can be study with the help of four major aspects Purpose and objectives Every plan and its supporting plans should contribute to the accomplishment of the purpose and objectives of the organization. Every plan may have any purpose, reason or idea. To support or to justify that idea objectives are developed. Planning is the primary management function that establishes the basis for all other management functions. Planning establishes coordinated effort, reduces uncertainty, overlapping and wasteful activities. Planning establishes goals and standards used in controlling. What kind of organization structure to have? Which helps us know P

PLANS
Objectives and how to achieve them

What kind of people we need and when? Which affects the kind of leadership we have and direction

How to lead people effectively? In order to ensure success of plans By furnishing standards of control rimacy (dominance or power) among the mangers tasks Planning logically precedes the execution of all the other managerial functions. A manager must plan in order to know what kinds of organization relationships and personal qualification are needed and what kind of control is to be applied. All the other managerial functions must be planned if they are to be effective. Planning and controlling are indivisible.
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Planning

Implementation of plans

Controlling: comparing plans with results

No undesirable deviations from plans

Undesirable deviation Corrective action

Pervasiveness (occurrence or Incidence) Planning is function of al managers, through the character and breadth of planning will vary with each managers authority and with the nature of policies and plans outlined by superiors. If manager allowed a certain degree of discretion and planning responsibility they are not truly managers. If reputation of planning is being recognized then difference between policy making and administration or between the manager and the administrator or supervisor can be understand. One manager because of his/her position or authority in the organization may do more planning or more important planning than other. However, all managers from top to bottom plan according to their ability, knowledge and skills. Efficiency of resulting plans The effectiveness of a plan pertains to the degree to which it achieves the purpose or objectives. The efficiency of a plan refers to its contribution to the purpose and objectives, balance by the costs and other factors required to formulate and operate it. A plan may enhance the attainment of objectives but at an unnecessarily high cost. Plans are efficient if they achieve their purpose at a reasonable cost, when cost is measured not only in terms of time or money or production but also in the degree of individual and group satisfaction. Plans can even make it impossible to achieve objectives if they make enough people in an organization dissatisfied or unhappy. In short words its all about the managing expenditures in effective and efficient way.

Types of plans
There are several types of plans has often caused difficulty in making planning effective. Plans are varied and classified as:Purpose or mission The basic function or task of an enterprise or agency or any part of it. Every kind of organized operation has purpose or mission. For example the purpose of a business is the production and distribution of goods and services and it can accomplish this by fulfilling a mission of producing certain lines of products. The purpose of courts is the interpretation of laws and their application. The purpose of university if teaching and research etc. Objective is accomplished by undertaking activities going in clearly defined directions, achieving goals and accomplishing a mission. Objectives or goals The ends towards which activity is aimed. They represent not only the end point of planning but also the end towards which organizing, staffing, leading and controlling are aimed. The organizational objectives are the plans of the firm; a department may also have its own objectives. For example an objective of a business might be to make a certain profit by producing a given line of home entertainment equipment, while the goal of the manufacturing department might be to produce the required number of television set of a given design and
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quality at a given cost. The overall objective of the organization is consistent but they differ in the departmental level to ensure accomplishment of companys objectives. Strategies It is defined the determination of the basic long term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals. The purpose of strategies is to determine and communication through a system of major objectives and policies. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. Policies The plans in that they are general statements or understandings that guide or channel thinking in decision making. Not all policies are statement they are often merely implied form the actions of managers. Policies define an area within which a decision is to be made and ensure that the decision will be consistent with and contribute to an objective. Polices helps to decide issues before they become problems. Policies provide the guidance and helps in decision making. Examples include policies of hiring only university trained engineers, no compromise on discipline etc. Procedures The plans that establish a required method of handling future activities. They are guides to action, rather than to thinking and they details the exact manner in which certain activities must be accomplished. Procedures often cut across department lines. For example in a manufacturing company the procedure for handling orders will almost certainly involve the sales department. Similarly the finance department for acknowledgment of receipt of funds and for customer credit approval. Rules Rules spell out specific required actions or non-actions, allowing no discretion. They are the simplest type of plan. A rule may not be part of a procedure. For example NO SMOKING is a rule quite unrelated to any procedure but a procedure governing the handling of orders. The rules that all orders must be confirmed the day they are received. Programs Are the complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed and other elements necessary to carry out a given course of action. Some programs like hiring and training of personnel can be accomplished too soon as well as too late. On the other hand the cost is also associated with them. Program can be full fledge or it may consists many supporting programs. Budgets A budget is a statement of expected results expressed in numerical terms. It may be referred to as a numberized program. Since budget are also control devices. The budget is revenues, capital or labor or machines hours utilization. The budget is necessary for control but it cannot serve as sensible standard of control unless it reflects plans. Some budgets vary according to the organizations level of output these are called variable or flexible budgets. Government agencies often develop program budgets in which the agency identifies goals, develops detailed programs to meet the goals and estimates the cost of each program.

Steps in planning
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Being aware of opportunities In the light of market, Competition, what customers wants and the SWOT (strengths, weakness and threats) to the organization etc.

Establishing objectives (setting goals) Answer the all Questions that comes in the mind specially the 5WS like what to be done? Where we want to be and what we want to accomplish and when?

Considering planning premises (Developing premises) To establish, circulate and obtain agreement to utilize critical planning premises such as forecasts, applicable polices and existing company plans. In what environment (external or internal) the plans should operate?

Determining (Identified) alternative courses What are the most promising or best alternatives to accomplishing our objectives? The search and examine for the alternative courses of action especially those not immediately obvious.

Evaluating alternatives Provide weighing in the light of premises and goals. Once course may appear to be the most profitable but it may require large cash outlay and have a slow payback another may look less profitable but may involve less risk. The basic aim or target while evaluating the selected alternatives is:

Which alternative will give us the best chance to meeting our goals at the lowest cost and highest profit? Selecting a course This is the real point of decision making. An analysis and evaluation of alternatives courses will disclose that two or more are advisable and the manger may decide to follow several courses rather than the one best course. Selecting the course of action we will pursue (follow or start working) Formulating supporting plans(derivative) This can be done by By equipment, buy materials, hire and train workers and develop new products or services. They are almost invariably required to support the basic plan. Formulating supporting plans(derivative) Develop such budgets as Volume and price of sales, operating expenses necessary for plans and expenditures for capital equipment etc. (converting them into budget)

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What is Strategic Management?

A set of managerial decisions and actions that determines the long-run performance of an organization. The Purposes of Strategic Management involved in many decisions that manager make. Companies with formal strategic management systems have higher financial returns than companies with no such system. Important in profit and not-for-profit organizations. The Strategic Management Process

Identifying the Organizations Current Mission, Objectives, and Strategies Mission - statement of the purpose of an organization. Important in profit and not-for-profit organizations. Important to identify the goals currently in place and the strategies currently being pursued. Analyzing the Environment Successful strategies are aligned with the environment. Examine both the specific and general environments to determine what trends and changes are occurring. Identifying Opportunities and Threats Opportunities - positive trends in the external environmental Threats- negative trends in the external environment Analyzing the Organizations Resources and Capabilities Examine the inside of the organization. Available resources and capabilities always constrain the organization in some way. Core Competence - a unique and exceptional capability or resource. The organizations major value-creating, competitive weapon. Identifying Strengths and Weaknesses Strengths - activities the organization does well or any unique resource Weaknesses - activities the organization does not do well or resources it needs but does not possess. Organizations culture has its strengths and weaknesses.
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Strong Culture - new employees easily identify the organizations core competencies may serve as a barrier to accepting change. Influence managers preferences for certain strategies. SWOT analysis - analysis of the organizations strengths, weaknesses, opportunities, and threats. Formulating Strategies Require strategies at the corporate, business, and functional levels of the organization. Strategy formulation follows the decision-making process. Implementing Strategies A strategy is only as good as its implementation. Evaluating Results Control process to determine the effectiveness of a strategy.

The SWOT Analysis of Telenor Pakistan (An example)

The SWOT analysis test is necessary for any company or organization. This test shows that what are the Strengths of company and what are those factors and opportunities through which the company is progressing. Weaknesses are in every field and part of life. Due to these weaknesses every company has few threats. Strengths Goodwill and strong back ground of the company with 150 years can easily convince the customers. Innovative and pioneers brands and services with international quality system standards and updated technology are making the customers lives easier. Vast servicing network area which has covered the country more than 750 destinations and spreading day by day, resulting the increase in production as well as market share. Engineering and technical skills are continuously updated by the acquisition of known-how from world renowned technologies. The strong technical and engineering service force provides the facilitative environment in work to progress swiftly. Effectively planning and organizing of brands with non-stoppable schemes which persuade the customers to utilize the offers. Attractive packages for every class with best quality of services @ affordable price and user friendly environment. Hard working, supporting, cooperative and experience organization are easily achieving their targets. Take prompt actions in response of feedback of the customers by check and balance system, meeting, and problem solving approaches. Weakness Telenor, Pakistan is still in growing stage and the company will require time to establish its products and services in the cellular market. Excessive advertising or publicity of brands which is above than the budget as well as the competitors will play on their advertisements. Changing of marketing plans, target market and marketing strategies. Although its necessary for capture the market share and to beat the competition but the company is yet not able to stabilized. Unattractive postpaid packages which may not able to capture the market and needs more revised plan. On the other hand the International call rates are same for each and every postpaid or prepaid package.
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Few innovative services are costly and customers are unable to utilize them. It is a dissatisfaction factor for the customers. As there is increase in the number of customers the quality of network and customers are facing problems. A few staff is inexperienced at franchises, which are unable to resolve the problems of customers timely. Opportunities Telenor, Pakistan has facilitative and effective working environment (job and internship) to perform efficiently. Learning and training programmes conducted time to time for employees to enhance their attitude, knowledge, skills and abilities. Provide plate form for anyone who wants to grow up and progress. The effective and efficient opportunities for advancement are profitable for both company and employees. Team work, friendly environment and supportive management facilitate everyone to perform the best during work. Attractive and handsome salary packages, rewards and benefits for employees of Telenor, Pakistan will motivate them to perform their work with loyalty and sincerity. Due to vast servicing network area the company has better relationships and affiliation with other organizations which shows good opportunity to capture the market share and to earn profit. The brands are with totally new idea and good for those who want to start small business unit (SBU). Threats In case if company is unable to recover the investment and suffer loss then it may be changed its setup and merge up it setup which is unfair full for both customers and the employees of the organization. Employers are always in any kind of threat because they always looking for long life of the company, in any circumstances if company is not working well then it may be shut down its business and the employees of the company may bear unemployment. Lot of competitors operating in the market very actively, efficiently and status able and its a great threat for company. Because if the company is unable to beat the competitor then it may suffer loss in business. The government rules and regulations with excessive taxation and pricing policies as well as the religious issues are the threat for company. If the standard of quality of their brands, network and services not changes with the change in time then it may lost the market share and remains unprofitable. Conclusion Telenor, Pakistan is working marvelously and brilliantly. It has good position in its working field. Company is giving lot of facilities and opportunities to its employees due to them employees are working effectively. Company requires continuing its strength in the long-run. On the other hand company needs to overcome its weakness and threats to avoid suffering of great loss. So after viewing the SWOT Analysis we have a brief view which describes the whole scenario of the Telenor, Pakistan.

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Chapter # 08 Decision Making

Decision Making- is defined as the selection of a course of action from among alternatives. Or decision is making a choice from two or more alternatives. Choice made from amongst available alternative expected to lead favourable solution. In decision making we select a course of action by defining problem creating alternatives, selecting the best one and taking decision. Rationality It is frequently said that effective decision making must be rational. Managers make consistent, valuemaximizing choices with specified constraints. Assumptions are that decision makers: Are perfectly rational, fully objective, and logical, have carefully defined the problem and identified all viable alternatives, have a clear and specific goal, Will select the alternative that maximizes outcomes in the organizations interests rather than in their personal interests. People must have clear understanding of alternative courses by which a goal can be reached under existing circumstances and limitations. Must have information and ability to analyze and evaluate alternatives in the light of goal. Must have a desire to come to the best solution be selecting the alternative that most effectively satisfies goal achievement. Limited or Bounded Rationality Limitations of information, time and certainty limit rationality, even though a manger tries earnestly to be completely rational. Managers make decisions rationally, but are limited (bounded) by their ability to process information. Assumptions are that decision makers: Will not seek out or have knowledge of all alternatives, Will satisficechoose the first alternative encountered that satisfactorily solves the problemrather than maximize the outcome of their decision by considering all alternatives and choosing the best.

The Decision-Making Process

Identify the Problem Generate the alternatives Evaluate the alternatives Select the best one alternative Evaluate the best one alternative

Evaluate the Performance of alternative

Implement the best one alternative

Step 1: Identifying the Problem: Manager must be aware of a problem and analyze its scope and nature before they can take any steps to solve it to identify the problem, manager first recognize that a problem exists, define it and then diagnose the situation or solve the problem. Problem: A discrepancy between an existing and desired state of affairs. Characteristics of Problems: A problem becomes a problem when a manager becomes aware of it. There is pressure to solve the problem. The manager must have the authority, information, or resources needed to solve the problem. Step 2: Identifying Decision Criteria Decision criteria are factors that are important (relevant) to resolving the problem. Costs that will be incurred (investments required). Risks likely to be encountered (chance of failure). Outcomes that are desired (growth of the firm). Step 3: Allocating Weights to the Criteria
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Decision criteria are not of equal importance: Assigning a weight to each item places the items in the correct priority order of their importance in the decision making process. Step 4: Developing and generating Alternatives Identifying viable alternatives. Alternatives are listed (without evaluation) that can resolve the problem. After the problem has been identified the second step is generate alternatives. In this step managers to try develop as many possible alternative courses of action as they can including the most obvious and most creative and then manager evaluate best one alternative. Step 5: Analyzing and evaluating the Alternatives Appraising each alternatives strengths and weaknesses. An alternatives appraisal is based on its ability to resolve the issues identified in steps 2 and 3. After the generate alternatives than evaluate alternatives by considering the implications. If one alternative not working well then we set the other alternative. Step 6: Selecting an Alternative Choosing the best alternative. The alternative with the highest total weight is chosen. The fourth step in decision making process. After evaluating the alternatives than make the decisions. They select the best one alternatives by weighting the risk and benefits of each one. More manager select risk. The manager can use three approaches Experience Experimentation Research and analysis Step 7: Implementing the Alternatives (Decision) Putting the chosen alternative into action. Conveying the decision to and gaining commitment from those who will carry out the decision. After they select the best alternative manager implement the decision. Implementation depends on the manager communication skill and sensitivity about people. Step 8: Evaluating the Decisions Effectiveness The soundness of the decision is judged by its outcomes. How effectively was the problem resolved by outcomes resulting from the chosen alternatives? If the problem was not resolved, what went wrong? The final step is to evaluate the results and provide feed back about the decisions and its implementation. This allows manager to see whether the results meet expectations and to make any changes needed to improve the decision or its implementation. If the original decision does not achieve desired results then perhaps the problem was incorrectly defined or perhaps another alternative implement.

Problems and Decisions

Structured or Routine Problems Involve goals that clear, Are familiar (have occurred before), Are easily and completely definedinformation about the problem is available and complete. Programmed Decision A repetitive decision that can be handled by a routine approach

Types of Programmed Decisions

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A Policy- A general guideline for making a decision about a structured problem. Accept all customer-returned merchandise. A Procedure- A series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem. Follow all steps for completing merchandise return documentation. A Rule- An explicit statement that limits what a manager or employee can or cannot do in carrying out the steps involved in a procedure. Managers must approve all refunds over $50.00. No credit purchases are refunded for cash. Unstructured or Non-Routine Problems Problems that are new or unusual and for which information is ambiguous or incomplete. Problems that will require custom-made solutions. Non-programmed Decisions Decisions that are unique and nonrecurring. Decisions that generate unique responses

Decision-Making Conditions
Certainty- A ideal situation in which a manager can make an accurate decision because the outcome of every alternative choice is known. Risk- A situation in which the manager is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives. Uncertainty- Limited or information prevents estimation of outcome probabilities for alternatives associated with the problem and may force managers to rely on intuition, hunches, and gut feelings. Maximax: the optimistic managers choice to maximize the maximum payoff Maximin: the pessimistic managers choice to maximize the minimum payoff Minimax: the managers choice to minimize his maximum regret.

Modern approaches to decision making under uncertainty

Risk Analysis: All intelligent decision makers dealing with uncertainty like to know the size and nature of the risk they are taking in choosing a course of action. One of the deficiencies in using the traditional approaches of operations research for problem solving is that many of the data used in a model are merely estimates and others are based on probabilities. Decision trees: One of the best ways to analyze a decision is to use a so called decision tree. These are in form of a tree the decision points, chance events and probabilities involved in various courses that might undertaken. The decision tree approach makes it possible to see at least the major alternatives and the fact that subsequent decisions may depend on events in the future. Preference theory: preference or utility theory is based on the concept that individual attitudes towards risk will vary, some individuals are willing to take only smaller risks than those indicated by probabilities (risk averters) and others are willing to take greater risks (gamblers). It might seem reasonable that if there were a 60% chance of a decisions being the right one a person would take it however the risk of being wrong is 40% the individual might not wish to take this risk.

Decision-Making Styles
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Dimensions of Decision-Making Styles Ways of thinking- Rational, orderly, and consistent. Intuitive, creative, and unique Tolerance for ambiguity Low tolerance: require consistency and order High tolerance: multiple thoughts simultaneously

Types of Decision Makers

Directive- Use minimal information and consider few alternatives. Analytic- Make careful decisions in unique situations. Conceptual- Maintain a broad outlook and consider many alternatives in making long-term decisions. Behavioral- Avoid conflict by working well with others and being receptive to suggestions.

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