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Module 1

Introduction to Management
Management is the process of designing and maintaining an environment in which individuals, working
together in groups, efficiently and effectively accomplish selected aims. The definition needs to be expanded:
1. As managers, people carry out managerial functions of planning, organizing, staffing, directing and
controlling.
2. Management applies to any kind of organization.
3. It applies to managers at all levels of organization.
4. Management is concerned with productivity which implies effectiveness and efficiency.
5. The aim of all managers is the same, i.e creating surplus.
Nature of Management
1. Management as an activity
2. Management as a process
3. Management as an economic resource
4. Management as a team
5. Management as an academic discipline
6. Management as a group
7. Management as a profession
Characteristics of Management
1. Management is goal oriented
2. Management is universal
3. Management is a social process
4. Management is multidisciplinary
5. Management is a continuous process
6. Management is science as well as art
Role or Importance of Management
1. Achievement of organizational goals
2. Optimum utilization of resources
3. Minimization of cost
4. Survival and growth
5. Generation of employment
6. Development of the nation
Organizational Levels/ Levels of Management

Top Level: Top-level managers are empowered to make major decisions affecting the present and future of the
firm. Only a top-level manager, for example, would have the authority to purchase another company, initiate a
new product line, or hire hundreds of employees. Top-level managers are the people who give the organization
its general direction; they decide where it is going and how it will get there. The terms executive and top-level
manager can be used interchangeably.
Middle Level: Middle-level managers conduct most of the coordination activities within the firm, and they
disseminate information to upper and lower levels. The jobs of middle-level managers vary substantially in
terms of responsibility and income. A branch manager in a large firm might be responsible for over 100
workers. Other important tasks for many middle-level managers include helping the company undertake
profitable new ventures and finding creative ways to reach goals. Quite often the middle-level manager
conducts research on the Internet to gather ideas for new ventures.
First Level or Lower Level: Managers who supervise operatives are referred to as first-level managers, first-line
managers, or supervisors. Historically, first level managers were promoted from production or clerical positions
into supervisory positions. Rarely did they have formal education beyond high school. A dramatic shift has
taken place in recent years, however. Many of todays first level managers are career school graduates who are
familiar with modern management techniques. The current emphasis on productivity and quality has elevated
the status of many supervisors.
Managerial Skills

Technical Skills: Technical skills refer to the ability and knowledge in using the equipment, technique and
procedures involved in performing specific tasks. These skills require specialised knowledge and proficiency in
the mechanics of particular job. Ability in programming and operating computers is, for instance, a technical
skill. There are two things a manager should understand about technical skills. In the first place, he must know
which skills should be employed in his particular enterprise and be familiar enough with their potentiality to ask
discerning questions of his technical advisors. Secondly a manager must understand both the role of each skill
employed and interrelations between the skills.
Human Skills: Human skills consist of the ability to work effectively with other people both as individual and
as members of a group. These are required to win cooperation of others and to build effective work teams. Such
skills require a sense of feeling for others and capacity to look at things from others point of view. Human skills
are reflected in the way a manager perceives his superiors, subordinates and peers. An awareness of the
importance of human skills should be part of a managers orientation and such skills should be developed
throughout the career. While technical skills involve mastery of things human skills are concerned with
understanding of People.
Conceptual & Design Skills: Conceptual skills comprise the ability to see the whole organisation and the
interrelationships between its parts. These skills refer to the ability to visualise the entire picture or to consider a
situation in its totality. Such skills help the manager to conceptualise the environment, to analyse the forces
working in a situation and take a broad and farsighted view of the organisation. Conceptual skills also include
the competence to understand a problem in all its aspects and to use original thinking in solving the problem.
Such competence is necessary for rational decision-making. Thus technical skills deal with jobs, human skills
with persons and conceptual skills with ideas

Managerial Roles
1. Interpersonal Role
a. Figure head role
b. Leader role
c. Liaison role
2. Informational Role
a. Recipient role
b. Disseminator role
c. Spokesperson role
3. Decisional Role
a. Entrepreneur role
b. Disturbance Handler role
c. Resource Allocator role
d. Negotiator role
Functions of Management
1. Planning: It involves selecting missions and objectives and the actions to achieve them. Decision making is
usually a component of planning, because choosing future courses of action from the alternatives have to be
made in the process of finalizing plans.
2. Organizing: It is the process of making sure that necessary human and physical resources are available to
carry out a plan and achieve organizational goals. Organizing also involves assigning activities, dividing
work into specific jobs and tasks, and specifying who has the authority to accomplish certain tasks. Another
major aspect of organizing is grouping activities into departments or some other logical subdivision.
3. Staffing: It involves making sure there are the necessary human resources to achieve organizational goals.
Hiring people for jobs is a typical staffing activity. This is done by identifying work-force requirements,
inventorying the people available; and recruiting, selecting, placing, promoting, appraising, compensating,
training both candidate and current jobholders so that tasks are accomplished effectively and efficiently.
4. Directing: Leading or Directing is influencing others to achieve organizational objectives. As a
consequence, it involves energizing, directing, activating, and persuading others. Leadership involves
dozens of interpersonal processes: motivating, communicating, coaching, and showing group members how
they can reach their goals. Leadership is such a key component of managerial work that management is
sometimes seen as accomplishing results through people.
5. Controlling: It is ensuring that performance conforms to plans. It is comparing actual performance to a
predetermined standard. If there is a significant difference between actual and desired performance, the
manager must take corrective action. He or she might, for example, increase advertising to boost lowerthan-anticipated sales. A secondary aspect of controlling is determining whether the original plan needs
revision, given the realities of the day. The controlling function sometimes causes a manager to return to the
planning function temporarily to fine-tune the original plan.
Approaches to Management
1.
2.
3.
4.
5.
6.

Empirical or Case Based Approach


Managerial Role Approach
Contingency or Situational Approach
Mathematical or Operational Approach
Decision Theory Approach
McKinsey Framework

7. Total Quality Management Approach


8. Reengineering Approach
9. Systems Approach
Systems Approach to Management

1. Input and Claimants: Inputs are manpower, money, materials, and machines. Claimants are employees,
investors, customers, suppliers, government etc.
2. Managerial Transformation Process: It includes planning, organizing, staffing, directing and controlling.
3. Outputs: Outputs could be profits, products, services, new skills and knowledge, satisfaction and others.
4. Communication System: There is couple of purposes of communication system. First is to integrate the
managerial functions. The second purpose is to link the enterprise with its external environment, where
many of the claimants are present.
5. Reenergizing the system: It is important that some of the outputs become inputs again. So profits, the
surplus of income over costs, are reinvested in cash and capital goods, such as machinery, equipment,
building, and inventory.
6. External Variables and Information: Effective managers will regularly scan the external environment for
opportunities and threats.
Social Responsibilities of Manager / Business
Every business operates within a society. It uses the resources of the society and depends on the society for its
functioning. This creates an obligation on the part of business to look after the welfare of society. So all the
activities of the business should be such that they will not harm, rather they will protect and contribute to the
interests of the society. Social responsibility of business refers to all such duties and obligations of business
directed towards the welfare of society. These duties can be a part of the routine functions of carrying on
business activity or they may be an additional function of carrying out welfare activity.

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation
of the different interest groups. As you have already learnt, the interest groups may be owners, investors,
employees, consumers, government and society or community. But the question arises, why the business should
come forward and be responsible towards these interest groups. Let us consider the following points:
1. Goodwill and reputation for the business
2. Government Policies & Regulation
3. Survival and growth
4. Employee satisfaction
5. Consumer Awareness
6. Attracting and retaining employees
7. Gaining competitive advantage
After getting some idea about the concept and importance of social responsibility of business let us look into the
various responsibilities that a business has towards different groups with whom it interacts.
1. Responsibility towards owner
2. Responsibility towards investors
3. Responsibility towards employees
4. Responsibility towards suppliers
5. Responsibility towards customers
6. Responsibility towards competitors
7. Responsibility towards government
8. Responsibility towards society
Japanese Management
It deals with two common Japanese practices: lifetime employment and consensus decision making.
1. Lifetime Employment: It is a concept where the Japanese management focuses on lifelong employment for
permanent employees (relating to staffing function), great concern for the individual employee, and
emphasis on seniority. Typically, employees spend their working life with a single enterprise, which in turn
gives employee security and feeling of belonging. However, it also adds to business costs, because
employees are kept on the payroll even though there may be insufficient work or even if the worker is
inefficient. Closely related to lifelong employment is the seniority system, which has provided privileges for
older employees who have been with the enterprise for a long time.
2. Consensus Decision Making: Japanese management uses decision making by consensus to deal with
everyday problems; lower level employees initiate an idea and submit it to the next higher level, until it
reaches the desk of the top executive. If the proposal is approved, it is returned to the initiator for
implementation.
3. Seniority System: It provides privileges for older employees who have been with the enterprise for a long
time.

Theory Z
In this theory, selected Japanese managerial practices are adapted to the environment of the United States. This
approach is practiced by companies like IBM, HP and other retail companies. Here the emphasis is on the
interpersonal skills needed for group interaction. Yet, despite the emphasis on group decision making,
responsibility remains with the individual (which is quite different from the Japanese practice, which
emphasizes on collective responsibility).

Evolution of Management Thoughts


1. Scientific Management
a. Fredrick W. Taylor is acknowledged as the father of scientific management. His primary concern
was to increase productivity through greater efficiency in production and increased pay for workers,
through application of scientific method. His principles emphasized using science, creating group
harmony and cooperation, achieving maximum output, and developing workers.
b. Henry L. Gantt (1901) called for scientific selection of workers and harmonious cooperation
between the labor and management.
c. Lillian Gilbreth (1900) was an industrial psychologist, focused on human aspects of work and the
understanding of workers personalities and needs.
2. Modern Operational Management Theory
a. Henri Fayol (1916) is referred to as the father of modern management theory. He formulated 14
principles of management such as authority and responsibility, utility of command, scalar chain, etc.
3. Behavioral Sciences
a. Elton Mayo, F J Roethlisberger, conducted experiments in Hawthrone plant of Western Electric
Company between 1927 and 1932, and found that improvement in productivity was due to social
factors such as morale, satisfactory relationships between members of a work group (sense of
belonging), and effective management- a kind of managing that would understand human behavior,
especially group behavior, and serve it through such interpersonal skills as motivating, counseling,
leading and communicating. This phenomenon arising basically from people being noticed, has
been known as the Hawthorne effect.
4. Systems Theory
a. Chester Barnard (1938) said that the task of managers is to maintain a system of cooperative effort in
a formal organization. He suggested a comprehensive social systems approach to managing.

Planning
Planning involves selecting missions and objectives and the actions to achieve them; it requires decision
making, which is, choosing from the alternatives available the future courses of action. Plans thus provide a
rational approach to achieve preselected objectives.
Types of Plans
1. Purposes or Missions: It identifies the basic function or task of an enterprise or agency or any part of it. Eg:
In 1960s, NASA mission was to get on moon before the Russians. The mission of oil companies like
ONGC, Cairn India is to search for oil and produce it. Walmarts mission is to become the worlds largest
retailer. The purpose of a university is teaching, research, and provides consultancy service. Amul mission
to become Indias largest producer of dairy products.
2. Objectives or Goals: These are ends towards which activity is aimed. So for example, getting to a mission
may constitute a number of objectives or goals. A specific result that a person or an organization aims to
achieve with a time frame and with available resources. Eg: Minimizing expenses, providing good quality
products and services, setting up a quality IT network, customer satisfaction and loyalty etc.
3. Strategies: It is the adoption of courses of action and allocation of resources necessary to achieve these goals
or objectives. It is generally used in battle fields to counter enemies.

4. Policies: These are general statements or understanding for decision making. 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. Eg: Company policy is to recruit people through campus interview, policy of an organization says
that an employee can take vacation for 15 days in a year; the policy of the university is not to throw
someone out immediately.
5. Procedures: These are chronological sequences of required actions. They are guide to action, rather than to
thinking, and they detail the exact manner in which certain activities must be accomplished. Eg: a company
policy would be to give vacation, but the procedure is different; completing a sales order, procedure for
campus interview starts with written test, followed by group discussion and finally technical and personal
interview.
6. Rules: It spell out specific required actions or non-actions, allowing no discretion. They are usually the
simplest type of plan. The essence of rule is that it reflects a managerial decision that some certain action
must or must not be taken. No smoking is rule without deviation.
7. Programmes: These are a 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; they are
ordinarily supported by budgets.
8. Budgets: It is a statement of expected results expressed in numerical terms. A budget is a quantitative
expression of a plan for a defined period of time. It may include planned sales volumes and revenues,
resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of
business units, organizations, activities or events in measurable terms. Eg: Marketing Budget, HR Budgets,
Union Budget, and Railway Budget.
Steps in Planning

Being Aware
of
Opportunities

Setting
Objectives or
Goals

Developing
Planning
Premises

Identifying
Alternative
Courses

Numberizing
Plans by
Budgeting

Formulating
Derivative/
Support Plans

Selecting a
Course

Evaluating
Alternative
Courses

1. Being Aware of Opportunities: All managers should take a preliminary look at possible future opportunities,
and see them clearly and completely, and know where they stand in light of their strength and weakness,
understand what problems they wish to solve and why, and know what they expect to gain. It is essentially
doing a SWOT analysis of the organization.
2. Establishing Objectives: It establishes objectives for the entire enterprise and then for each subordinate work
unit. Objectives specify the expected results and indicate the end points of what is to be done, where the
primary emphasis is to be placed, and what is to be accomplished by the network of policies and procedures.
3. Developing Premises: The third logical step in planning is to establish, circulate, and obtain agreement to
utilize critical planning premises such as forecast and other company plans. The premises would include the

4.

5.

6.

7.
8.

kind of market, target market, volume of sales, technical developments, wage rates, tax rates, and policies
with respect to dividend, socio-political environment, expansion plans, and long term trends.
Determining Alternative Courses: This step involves search for alternative courses of action, especially
those not immediately apparent. There is seldom a plan for which reasonable alternatives do not exist, and
quite often an alternative that is not obvious proves to be the best.
Evaluating Alternative Courses: The next step is to evaluate the alternatives by weighing them in the light of
premises and goals. There are so many alternatives courses in most situations and so many variables and
limitations to be considered that evaluation can be difficult. Because of the complexities, newer
methodologies and applications such as CPM, PERT etc are used for analysis.
Selecting a Course: Once all the alternatives are evaluated, decision is made to pick the best alternative for
implementation. Occasionally, an analysis and evaluation of alternative courses will disclose that two or
more courses are advisable, and the manager may decide to follow several courses rather than the best
course.
Formulating Derivative Plans: These plans are almost invariably required to support the basic plan.
Numberizing Plans by Budgeting: The overall budgets of an enterprise represent the sum total of income
and expenses, with resultant profits or surplus, and the budgets of major balance sheet items such as cash
and capital expenditures.

Management by Objective (MBO) Concept


MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic
manner that is consciously directed towards the effective and efficient achievement of organisational and
individual objectives.
Management by objectives can be described as a process whereby the superior and subordinate managers of an
organisation jointly identify its common goals, define each individuals major area of responsibility in terms of
results and use these measures as guides for operating the unit and assessing the contribution of each of its
member.
Management by objectives (MBO) is a systematic and organized approach that allows management to focus on
achievable goals and to attain the best possible results from available resources. It aims to increase
organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally,
employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing
tracking and feedback in the process to reach objectives.
MBO Process

Advantages of MBO
1. Better management of organizational activities.
2. Clarity in organizational actions.
3. Maximum personal satisfaction
Disadvantages of MBO
1. Lack of guidelines
2. Difficulty in setting objectives
3. Time consuming
Porters Industry Analysis & Generic Competitive Strategies
Professor Michael Porter suggested that strategy formulation requires an analysis of the industry and the
companys position within that industry. This analysis becomes the basis for generic strategies.
Industry Analysis: In analysis of the industry, Porter identified five forces:
1. The competition among the companies.
2. The threat of new companies entering the market.
3. The threat of substitute products or services entering the market.
4. Bargaining power of the suppliers.
5. Bargaining power the buyers or customers.
Cost Leadership Strategy: Cost Leadership Strategy is based on the concept that you can produce and market a
good quality product or service at a lower cost than your competitors. These low costs should translate to profit
margins that are higher than the industry average. Some of the conditions that should exist to support a cost
leadership strategy include an on-going availability of operating capital, good process engineering skills, and
close management of labor, products designed for ease of manufacturing and low cost distribution.
Differentiation Strategy: The strategy attempts to offer something unique in the industry in respect to products
and services. Products can be differentiated based on quality, specification, variety, design, durability,
reparability, reliability etc, and services can be differentiated based on ordering ease, installation, delivery on
time, customer service, customer training etc.
Focused Strategy: It is not a separate strategy per se, but describes the scope over which the company
should compete based on cost leadership or differentiation. The firm can choose to compete in the mass
market (like Wal-Mart) with a broad scope, or in a defined, focused market segment with a narrow scope.

Portfolio Matrix: Tool for Allocating Resources

There are four categories:


Dogs: These are units with low market share in a mature, slow-growing industry. These units typically "break
even", generating barely enough cash to maintain the business's market share. Though owning a break-even unit
provides the social benefit of providing jobs and possible synergies that assist other business units, from an
accounting point of view such a unit is worthless, not generating cash for the company. They depress a
profitable company's return on assets ratio, used by many investors to judge how well a company is being
managed. Dogs, it is thought, should be sold off.
Cash Cows: It is where a company has high market share in a slow-growing industry. These units typically
generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and
boring, in a "mature" market, yet corporations value owning them due to their cash generating qualities. They
are to be "milked" continuously with as little investment as possible, since such investment would be wasted in
an industry with low growth.
Stars: They are units with a high market share in a fast-growing industry. They are graduated question
marks with a market or niche leading trajectory. The hope is that stars become next cash cows. Stars require
high funding to fight competitions and maintain a growth rate. When industry growth slows, if they remain a
niche leader or are amongst market leaders its have been able to maintain their category leadership stars become
cash cows, else they become dogs due to low relative market share.
Question Marks: These (also known as problem children) are business operating in a high market growth, but
having a low market share. They are a starting point for most businesses. Question marks have a potential to
gain market share and become stars, and eventually cash cows when market growth slows. If question marks do
not succeed in becoming a market leader, then after perhaps years of cash consumption, they will degenerate
into dogs when market growth declines. Question marks must be analyzed carefully in order to determine
whether they are worth the investment required to grow market share.
Example of Tata Group

Decision Making
It is defined as the selection of a course of action from amongst alternatives; it is the core of planning. A plan
cannot be said to exist unless a decision-a commitment of resources, direction, or reputation-has been made.

Define the
problem

Identify limiting
factors

Develop potential
alternatives

Analyze the
alternatives

Establish a control
and evaluation
system

Implement the
decision

Select the best


alternative

Evaluation of Alternatives
Quantitative & Qualitative Factors: Quantitative factors can be measured in numerical terms, such as time or
various fixed and operating costs. Qualitative or intangible factors are factors that are difficult to measure
numerically, such as quality of labour relations, the risk of technological change, or the international political
climate.
Marginal Analysis: It refers to an evaluation of the additional benefits of an activity contrasted to the additional
costs of that activity. Marginal analysis is used by companies as a decision making tool to provide help in
increasing the profits. Moreover, marginal analysis is used instinctively to make a host of everyday decisions.
Cost Effective Analysis: It is also know as cost benefit analysis. It seeks the best ratio of benefits and costs; for
example, finding the least costly way of reaching an objective or getting the greatest value for given
expenditures.
Selecting an Alternative: Three approaches

Experimentation

Experience

How to select from


among alternatives?

Choice Made

Research & Analysis

Experience: Reliance on the past experience probably plays a larger part that it deserves in decision making.
Experienced managers usually believe, often without realizing it, that the things they have successfully
accomplished and the mistakes they have made furnish almost infallible guides to the future.
Experimentation: It is often used in scientific inquiry. It is likely to be the most expensive of all techniques,
especially if a program requires heavy expenditures of capital and personnel and if the firm cannot afford to
vigorously attempt several alternatives.
Research & Analysis: This approach solves a problem by comprehending it. It thus involves a search for
relationships among the more critical of the variables, constraints, and premises that bear upon the goal sought.
A major step in research and analysis approach is to develop a model simulating the problem.

Module 2
Organizing is one of the managerial functions which follow planning. It is a function in which the
synchronization and combination of human, physical, and financial resources takes place. The following
activities take place in organizing:
1. Identification and classification of required activities.
2. Grouping of activities necessary to attain objectives.
3. Assignment of each grouping to a manager with necessary authority to supervise it.
4. Provision for coordination among the employees horizontally and vertically.
5. Deciding on the organizational structure.
Formal Organization
Informal Organization
1. Formal Organisation is formed when two or more 1. Informal Organisation exists within the formal
persons come together. They have a common
organisation. An informal organisation is a
objective or goal. They are willing to work
network of personal and social relationships.
together to achieve this similar objective.
People working in a formal organisation meet and
interact regularly. They work, travel, and eat
together. Therefore, they become good friends and
companions. There are many groups of friends in a
formal organisation. These groups are called
informal organisation.
2. Formal Organisation has its own rules and 2. An informal organisation does not have its own
regulation. These rules must be followed by the
rules and regulation. It has no system of comembers (employees and managers). A formal
ordination and authority. It doesn't have any
organisation has a system of co-ordination. It also
superior-subordinate relationship or any specific
has a system of authority. It has a clear superiorand well-defined objectives. Here in informal
subordinate relationship. In a formal organisation,
organisation, communication is done through the
the objectives are specific and well-defined. All
grapevine.
the members are given specific duties and
responsibilities. Examples of formal organisation
are: - a company, a school, a college, a bank, etc.
3. A formal organisation is formed by the top level 3. An informal organisation is formed by social
management.
forces within the formal organisation.
4. In
a
formal
organisation,
the
duties, 4. In an informal organisation, there are no fixed
responsibilities, authority and accountability of
duties, responsibilities, authority, accountability,
each member is well-defined.
etc. for the members.
5. In a formal organisation, the objectives or goals 5. In an informal organisation, the objectives are not
are specific and well-defined. The main objectives
specific and well-defined. The main objectives of
of a formal organisation are profitability,
an informal organisation are friendship, security,
productivity, growth, and expansion.
common
interest,
individual
and
group
satisfaction, etc.
6. A formal organisation uses formal channels of 6. An informal organisation uses informal channels
communication such email, telephones etc.
of communication (i.e. grapevine)
7. A formal organisation is shown on the organisation 7. An informal organisation is not shown on the
chart.
organisation chart.
8. The members of the formal organisation get 8. The members of informal organisation get social
financial benefits and perks like wages or salaries,
and personal benefits like friend circle,
bonus, travelling allowances, health insurance, etc.
community, groups, etc.

Organizational Structure or Division


Functional Structure

Advantages:
1. It is a logical reflection of functions.
2. Maintains power and prestige of major functions.
3. Follows principle of occupational specialization.
4. Simplifies training.
5. Tight control at the top.
Disadvantages:
1. De-emphasis of overall company objectives.
2. Reduces coordination among the functions.
3. Responsibility of profit is at the top only.
4. Slow adaptation to changes in the environment.
5. Limits development of general managers.
Division by Territory or Geography

Advantages:
1. Places responsibility at the lower level.
2. Places emphasis on local market and problems.
3. Takes advantages of economies of local operations.
4. Better face-to-face interaction with local interests.
Disadvantages:
1. Requires more persons with general manager abilities.
2. Increases problem of top management control.

Division by Product

Advantages:
1. Places attention and effort on product line.
2. Facilitates use of specialized capital, facilities, skills, and knowledge.
3. Permits growth and diversity of products and services.
4. Places responsibility for profits at the division level.
5. Furnishes measurable training ground for general managers.
Disadvantages:
1. Requires more persons with general manager abilities.
2. Presents increased problem of top management.
Division by Customer

Advantages:
1. Encourages concentration on customer needs.
2. Gives customers feeling that they have an understanding supplier (banker).
3. Develops expertness in customer area.
Disadvantages:
1. Requires managers and staffs expert in customers problems.
2. Customers groups may not be clearly defined.
Matrix Structure

Advantages:
1. It is oriented towards en results.
2. Professional identification is maintained.
3. Pinpoints product-profit responsibility.
Disadvantages:
1. Conflict in organizational authority exists.
2. Requires manager effective in human relations.
Strategic Business Units (SBUs)

In business, a strategic business unit (SBU) is a profit center which focuses on product offering and market
segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even
though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business unto itself or a branch.
Corporations may be composed of multiple SBUs, each of which is responsible for its
own profitability. General Electric is an example of a company with this sort of business organization. SBUs are
able to affect most factors which influence their performance. Managed as separate businesses, they are
responsible to a parent corporation. General Electric has 49 SBUs
Virtual Organization: It is a rather loose concept of a group of independent firms or people that are connected
often through information technology. These firms may be suppliers, customers, and even competing
companies. The aim of virtual organization is to gain access to another firms competence, to gain flexibility, to
reduce risks, or to respond to market needs. Virtual organizations may have neither an organizational chart nor a
centralized office building. Eg: e-library, open university etc.
Hybrid Structure

Organizational Levels & the Span of Management


Organization level exists because there is a limit to the number of persons a manager can supervise effectively,
even though this limit varies depending on situations. A wide span of management is associated with few
organizational levels; a narrow span of management is associated with many levels.
Narrow Span of Management

Wide Span of Management

Advantages
Superiors are forced to delegate.

Clear policies must be made.


Subordinates must be carefully selected.

Disadvantages
Tendency of overloaded superiors to become
decision bottlenecks.
Danger of superiors loss of control.
Requires exceptional quality of managers.

Factors Influencing Span of Management


1. Qualification & Quality of the employees: If the superiors and subordinates are well-qualified, trained,
experienced, and if they are experts in their jobs then the span of control will be wide and vice-versa.
2. Level of Management: If the superiors are working at the top-level of management, then they have more
responsibilities. Therefore, their span of control will be narrow and vice-versa.
3. Nature of work: If the work is difficult then the span of control is narrow and vice-versa.
4. Supervisor-Subordinate Relationship: If there are good relations between the superior and subordinates, then
the span of control will be wide and vice-versa.
5. Degree of Centralization: Under decentralisation, the superior has to take fewer decisions. Therefore, he can
have a wide span of control. However, under centralisation, the superior has to take many decisions.
Therefore, he should have a narrow span of control.
6. Use of Communication Technology: If face-to-face communication is used, then the span of control will be
narrow. However, if electronic devices are used for communication then the span of control will be wide.
7. Financial Position of the organization: If the organisation has a good financial position, then it can have a
narrow span of control. This is because a narrow span requires more managers. More managers will increase
the compensation or wage bill of the organisation. However, if the organisation has a bad financial position,
then it will be forced to have a wide span of control.
8. Clarity of plans and responsibilities: If the plans are clear and if the responsibilities are well-defined, then
the span of control will be wide. This is because the subordinates will not have to go and consult their
superior repeatedly for getting orders and guidance.
9. Faith and Trust in Subordinates: If the superior has good faith, trust and confidence in his subordinates then
the span of control can be wider.