Part 1

Content:
Starting up a business
Introduction to Management
Business and its environment
 Size and growth of business
Starting up a Business
 Introduction
Factors of Production
Land
Labor
Capital
Entrepreneur
 Business Plan
It’s a working document which
helps the owner to monitor
current operations, plan the
future of the business and to
evaluate the actions necessary
for the success of the business
 In essence it is a
statement of
Current situation (a situational audit)
Where the business is
going?(objective)
How it will get there? (strategy)
The financial implication of the
proposed activities
The viability of the proposal
Content of a business
plan
Summary
A description of the business
The product or service
The market
Marketing plan
 Pricing policy
 Advertising & other form of promotion
 Selling and distribution
 Product launch and product development
Manufacturing and Operation plan
Financial Information
Choosing the right
Location
Choice of the region
Choice of particular site within the region
Questions to consider
Availability of material
Cost and availability of suitable labor
Location of the market
Transport cost
Cost of the land
Government grants or regulation (If any)
 Option for starting up a
business
Buying
Renting
Work from Home
E-business / virtual existence
Franchise
Introduction to
Management
Objectives:
To explain the functional areas
of the management
Identify and analyze the tasks
that are common to all
managers
Analyze the process of
decision making
 The Functional Areas of
Management
Personnel Functions Marketing Function
 Employee resourcing
 Researching the
 Training and
development market
 Compensation & Pay  Product Development
 Employee relations
 Development of
 Welfare
Production Function strategies
 Purchasing & inventories Accounting & Finance
R & D Function
 Production Planning
 Financial accounting
 Operations
 Quality Control  Cost accounting
 Distribution  Management
accounting
Management Functions and
Process
 most useful conceptualization of the
manager’s job
 Planning - defining goals, establishing
strategies for achieving those goals, and
developing plans to integrate and coordinate
activities
 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
 Leading - directing and motivating all involved
parties and dealing with employee behavior
issues
 Controlling - monitoring activities to ensure
The Decision-Making
Process
Problem Identification of
Allocation of
Weights to Development of
Identification Decision Criteria Criteria Alternatives

“My salespeople Price Reliability 10 Acer

need new computers” Weight Screen size 8 Compaq
Warranty Warranty 5 Gateway
Screen type Weight 5 HP
Reliability Price 4 Micromedia
Screen size Screen type 3 NEC
Sony
Toshiba

Analysis of Selection of an Implementation

Alternatives Alternative of an Alternative

Acer Acer
Compaq Compaq Evaluation
Gateway Gateway Gateway
of Decision
HP HP
Effectiveness
Micromedia Micromedia
NEC NEC
Sony Sony
Toshiba Toshiba
 Decisions in the
Management Functions

© Prentice Hall, 2002 6-14

 The Manager As Decision
Maker
Rational Decision Making
 decisions are consistent, value-maximizing choices
within specified constraints
 managers assumed to make rational decisions
 Assumptions of Rationality - decision maker
would:
 be objective and logical
 carefully define a problem

 have a clear and specific goal

 select the alternative that maximizes the likelihood of

achieving the goal
 make decision in the firm’s best economic interests

 managerial decision making seldom meets all the tests

© Prentice Hall, 2002 6-15

 Rationality
Single, well-
defined goal
is to be achieved
All alternatives Problem is
and clear and
consequences unambiguous
are known
Rational
Decision Final choice
Preferences Making will maximize
are clear
payoff

Preferences
No time or cost
are constant
constraints exist
and stable

© Prentice Hall, 2002 6-16

 The Manager As Decision
Maker (cont.)
 Bounded Rationality
behave rationally within the parameters of
a simplified decision-making process that is
limited by an individual’s ability to process
information
satisfice - accept solutions that are “good
enough”
escalation of commitment - increased
commitment to a previous decision despite
evidence that it may have been wrong
refusal
© Prentice Hall, 2002 to admit that the initial decision
6-17
 The Manager As Decision
Maker (cont.)
Role of Intuition
intuitive decision making -
subconscious process of making
decisions on the basis of
experience and accumulated
judgment
does not rely on a systematic or
thorough analysis of the problem
generally complements a
rational analysis
© Prentice Hall, 2002 6-18
What Is
Intuition? Decisions based
on experience
Decisions based
on ethical values Experienced- Decisions based
or culture on feelings and
based decisions
emotions
Values or Affect-
ethics-based initiated
decisions Intuition decisions

Subconscious Cognitive-
mental based
processing decisions
Decisions based Decisions based
on subconscious on skills,
data knowledge,
or training
© Prentice Hall, 2002 6-19
 The Manager As A Decision
Maker (cont.)
Types of Problems and Decisions
 Well-Structured Problems - straightforward,
familiar, and easily defined
 Programmed Decisions - used to address
structured problems
 minimize the need for managers to use discretion
 facilitate organizational efficiency

 procedure - series of interrelated sequential steps used

to respond to a structured problem
 rule - explicit statement of what to do or not to do

 policy - guidelines or parameters for decision making

© Prentice Hall, 2002 6-20

 The Manager As A Decision
Maker (cont.)
 Types of Problems and Decisions (cont.)
 Poorly-Structured Problems - new, unusual
problems for which information is ambiguous
or incomplete
 Nonprogrammed Decisions - used to
address poorly- structured problems
 produce a custom-made response
 more frequent among higher-level managers

 few decisions in the real world are either fully

programmed or nonprogrammed

© Prentice Hall, 2002 6-21

Decisions, And Level In The
Organization
Ill-structured Top

Nonprogrammed
Type of Decisions Level in
Problem Organization

Programmed
Decisions

Well-structured Lower

© Prentice Hall, 2002 6-22

 The Manager As A Decision
Maker (cont.)
 Decision-Making Conditions
Certainty - outcome of every
alternative is known
idealistic rather than realistic
Risk - able to estimate the probability
of outcomes stemming from each
alternative
expected value - the conditional
return from each possible outcome
multiply expected revenue from
each outcome by the probability
© Prentice Hall, 2002of each outcome 6-23
 Expected Value for Revenues from the Addition
of One Ski Lift

© Prentice Hall, 2002 6-24

 The Manager As A Decision
Maker (cont.)
 Decision-Making Conditions (cont.)
 Uncertainty - not certain about outcomes and
unable to estimate probabilities
 psychological orientation of decision maker
 maximax choice - optimistic
 maximizing the maximum possible
payoff
 maximin choice - pessimistic
 maximizing the minimum possible
payoff
 minimax - minimize the maximum
“regret”
© Prentice Hall, 2002 6-25
 The Manager As A Decision
Maker (cont.)
Decision-Making Styles
 two dimensions define the approach to decision
making
 way of thinking - differs from rational to intuitive
 tolerance for ambiguity - differs from a need for
consistency and order to the ability to process many
thoughts simultaneously
 define four decision-making styles
 Directive - fast, efficient, and logical
 Analytic - careful and able to adapt or cope with new
situations
 Conceptual - able to find creative solutions
 Behavioral - seek acceptance of decisions

© Prentice Hall, 2002 6-26

 Decision-Making Styles
High
Tolerance for Ambiguity

Analytic Conceptual

Directive Behavioral

Low

Rational Intuitiv
Way of Thinking
e
© Prentice Hall, 2002 6-27
 Managing Workforce
Diversity
Diversity in Decision Making
 Advantages - diverse employees:
 provide fresh perspectives
 offer differing interpretations of problem definition
 increase the likelihood of creative and unique solutions

 Disadvantages - diverse employees:

 require more time to reach a decision
 may have problems of communication
 may create a more complex, confusing, and ambiguous
decision-making process
 may have difficulty in reaching agreement

© Prentice Hall, 2002 6-28

 Overview Of Managerial
Decision Making
Decision-Making Approach
• Rationality
• Bounded Rationality
• Intuition

Types of Problems and Decisions

• Well-structured
Decision
- programmed
• Choose best
• Poorly structured
Decision-Making alternative
- nonprogrammed
Process - maximizing
- satisficing
• Implementing
Decision-Making Conditions • Evaluating
• Certainty
Decision Maker Style
• Risk
• Directive
• Uncertainty
• Analytic
• Conceptual
• Behavioral
© Prentice Hall, 2002 6-29