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Principles of Management

Instructor: Navaid M. Khan

A program of
Institute of Business Management

FALL 2014

All students must carry to the class the course text book

All those who do not have the text book in the class, their marks will be deducted

Some Basic Definitions
• Management is the process of attaining organizational goals by effectively and efficiently Planning, Organizing, Leading/Motivating and Controlling
the Organization’s Human, Physical, Financial, and Information Resources

• Efficiency is
• Getting work done with a minimum of effort, expense, or waste
• Doings things right—most output for least input

• Effectiveness is
• Accomplishing tasks that help fulfill organizational objectives
• Doing the right things

Manager is:
Someone who participates in the management process by planning, organizing, leading, or controlling the organizations resources.

Entrepreneur is:
An individual who conceives an idea of what product or service to offer and launches and runs his business.

Organization is:
A group of two or more people who work together in a consciously structured setting to achieve group goals.

Customers are:
Individuals and organizations that buy the goods and services produced by an organization

Performance is:
The degree to which individuals and organizations achieve organizations goal with effectiveness and efficiency

Four Management Functions

• Determining organizational goals and a means for achieving them Organizing
• Deciding where decisions will be made
• Who will do what jobs and tasks
• Who will work for whom

Inspiring – Motivating

• Monitoring progress toward goal achievement and taking corrective action when needed

KATZ'S 3 Levels of Management

• Top Managers
• Middle Managers
• First-Line Managers/ Supervisors

Top Managers

 Responsible for providing the overall direction of an organization
 Develop goals and strategies for entire organization
 Spend most of their time planning and leading
 Communicate with key stakeholders—stockholders, unions, governmental agencies, etc., company policies
 Use of multicultural and strategic action competencies to lead firm is crucial

Responsibilities of top Managers Middle Managers
 Responsible for setting objectives that are consistent with top management’s goals and translating them into specific goals and plans for first-line managers to implement
 Responsible for coordinating activities of first-line managers
 Establish target dates for products/services to be delivered
 Need to coordinate with others for resources
 Ability to develop others is important
 Rely on communication, teamwork, and planning and administration competencies to achieve goals

• First-line Managers
 Directly responsible for production of goods or services
 Employees who report to first-line managers do the organization’s work
 Spend little time with top managers in large organizations
 Technical expertise is important
 Rely on planning and administration, self-management, teamwork, and communication competencies to get work done

Mintzberg's Ten Managerial Roles
• Figurehead: All social, inspiration, legal and ceremonial obligations. In this light, the manager is seen as a symbol of status and authority.
• Leader: Duties are at the heart of the manager-subordinate relationship and include structuring and motivating subordinates, overseeing their progress, promoting and encouraging their development, and balancing effectiveness.
• Liaison: Describes the information and communication obligations of a manager. One must network and engage in information exchange to gain access to knowledge bases.
• Monitor: Duties include assessing internal operations, a department's success and the problems and opportunities which may arise. All the information gained in this capacity must be stored and maintained.
• Disseminator: Highlights factual or value based external views into the organization and to subordinates. This requires both filtering and delegation skills. • Spokesman: Serves in a PR capacity by informing and lobbying others to keep key stakeholders updated about the operations of the organization.
• Entrepreneur: Roles encourage managers to create improvement projects and work to delegate, empower and supervise teams in the development process.
• Disturbance handler: A generalist role that takes charge when an organization is unexpectedly upset or transformed and requires calming and support.
• Resource Allocator: Describes the responsibility of allocating and overseeing financial, material and personnel resources.
• Negotiator: Is a specific task which is integral for the spokesman, figurehead and resource allocator roles.

Managerial Skills

Management is a challenging job. It requires certain skills to accomplish such a challenge. Thus, essential skills which every manager needs for doing a better management are called as Managerial Skills.

According to Professor Katz, there are three managerial skills, viz.,
1. Conceptual Skills,
2. Human Relations Skills, and
3. Technical Skills.

According to Prof. Katz, all managers require above three managerial skills. However, the degree (amount) of these skills required varies (changes) fromlevels of management and from an organisation to the organisation.

The diagram I showed in class has the managerial skills which are required by managers working at different levels of management. The top-level managers require more conceptual skills and less technical skills. The lower-level managers require more technical skills and fewer conceptual skills. Human relations skills are required equally by all three levels of management.

1. Conceptual Skills
Conceptual skill is the ability to visualise (see) the organisation as a whole. It includes Analytical, Creative and Initiative skills. It helps the manager to identify the causes of the problems and not the symptoms. It helps him tosolve the problems for the benefit of the entire organisation. It helps the manager to fix goals for the whole organisation and to plan for every situation. According to Prof. Katz, conceptual skills are mostly required by the top-levelmanagement because they spend more time in planning, organising andproblem solving.

2. Human Relations Skills
Human relations skills are also called Interpersonal skills. It is an ability to work with people. It helps the managers to understand, communicate and work with others. It also helps the managers to lead, motivate and develop team spirit. Human relations skills are required by all managers at all levels of management. This is so, since all managers have to interact and work with people.

3. Technical Skills
A technical skill is the ability to perform the given job. Technical skills help the managers to use different machines and tools. It also helps them to use various procedures and techniques. The low-level managers require more technical skills. This is because they are incharge of the actual operations. Apart from Prof. Katz's three managerial skills, a manager also needs (requires) following additional managerial skills.

4. Communication Skills
Communication skills are required equally at all three levels of management. A manager must be able to communicate the plans and policies to the workers. Similarly, he must listen and solve the problems of the workers. He must encourage a free-flow of communication in the organisation.

5. Administrative Skills
Administrative skills are required at the top-level management. The top-level managers should know how to make plans and policies. They should also know how to get the work done. They should be able to co-ordinate different activities of the organisation. They should also be able to control the full organisation.

6. Leadership Skills
Leadership skill is the ability to influence human behaviour. A manager requires leadership skills to motivate the workers. These skills help the Manager to get the work done through the workers.

7. Problem Solving Skills
Problem solving skills are also called as Design skills. A manager should know how to identify a problem. He should also possess an ability to find a best solution for solving any specific problem. This requires intelligence, experience and up-to-date knowledge of the latest developments.

8. Decision Making Skills
Decision-making skills are required at all levels of management. However, it is required more at the top-level of management. A manager must be able to take quick and correct decisions. He must also be able to implement his decision wisely. The success or failure of a manager depends upon the correctness of his decisions.


Twenty first century is different from the last century in every way.

1. It is a century of look a like products and services. This has resulted on account of technological development worldwide. To top it all we have WTO in operation for last decade. Here we have to work at product/service differentiation and creating our competitive advantages. We need to do everything better and faster.

2. It is a century where CHANGE dominates our businesses. Change has always been there ever since Adam and Eve came down on this earth but what makes twenty first century unique is the speed and quantum of Change which has multiplied a hundred times. Twenty first century is not about managing Change, it is about staying ahead of Change. Today we have to learn to do things differently or do different things.

3. There will be five key words in the twenty first century for all businesses. These will be:


All those who are winners in these areas will be the Success stories - others history or statistics.

Twenty first century will see two kinds of Managers. The Quick Manager and the Dead Manager - Tom Peters 2 •


Harrington Emerson Twelve Principles of Efficiency
• 1. Clearly defined ideals: Managers must know what they want to accomplish
2. Common sense: Managers must develop the ability to differentiate the woods from trees.
3. Competent counsel: Managers must actively seek advice from knowledgeable others
4. Discipline: Managers should set up the organization so the employees can obey the rules
• 5. The fair deal: Managers must seek out justice and fairness
6. Reliable, immediate and adequate records: Managers should have facts available to them to make decisions
7. Dispatching: Managers should use scientific planning of each function so the organization as a whole can function smoothly and achieve its goals
8. Standards and schedules: Managers must develop methods for performing their tasks and establish a time to perform each one
• 9. Standardized conditions: Managers must maintain a uniformity of environment
10. Standardized operations: Managers must maintain a uniformity of method
11. Written standard-practice instructions: Managers must systematically and accurately reduce each practice to writing
12. Efficiency-reward: Managers should reward employees for tasks successfully completed

14 principles of Henry Fayol
• 1. Division of work: Division of work and specialization produces more and better work with the same effort.
2. Authority and responsibility: Authority is the right to give orders and the power to exact obedience. A manager has official authority because of her position, as well as personal authority based on individual personality, intelligence, and experience. Authority creates responsibility.
3. Discipline: Obedience and respect within an organization are absolutely essential. Good discipline requires managers to apply sanctions whenever violations become apparent.
• 4. Unity of command: An employee should receive orders from only one superior.
5. Unity of direction: Organizational activities must have one central authority and one plan of action.
6. Subordination of individual interest to general interest: The interests of one employee or group of employees are subordinate to the interests and goals of the organization. This is necessary to maintain unity and to avoid friction among the employees
• 7. Remuneration of personnel: Salaries - the price of services rendered by employees - should be fair and provide satisfaction both to the employee and employer.
8. Centralization: The objective of centralization is the best utilization of personnel. The degree of centralization varies according to the dynamics of each organization.
9. Scalar chain: A chain of authority exists from the highest organizational authority to the lowest ranks.
• 10. Order: Organizational order for materials and personnel is essential. The right materials and the right employees are necessary for each organizational function and activity.
11. Equity: In organizations, equity is a combination of kindliness and justice. Both equity and equality of treatment should be considered when dealing with employees.
12. Stability of tenure of personnel: To attain the maximum productivity of personnel, a stable work force is needed.
• 13. Initiative: Thinking out a plan and ensuring its success is an extremely strong motivator. Zeal, energy, and initiative are desired at all levels of the organizational ladder.
14. Esprit de corps: Teamwork is fundamentally important to an organization. Work teams and extensive face-to-face verbal com 3 •
Different perspectives of Management

1. The Classical Management Perspective
2. The Behavioral Management Perspective
3. Contemporary Management Perspectives

The Classical Management Perspective
A set of management theories that focus on increasing the efficiency of the organization as a whole

Focus on one best way to do it. Focuses on rational, scientific study of work situations to improve employee efficiency.

Frederick Taylor
The Father of Scientific Management

The Evolution of Management Theory
• The travel of a straight line is an absolute model of efficiency at its purest.
• The fastest way from point A to point B is a straight line.
• Scientifically, it is a proven fact.
• Mathematically, it is the shortest distance, therefore takes the less time.

• Four Principles of Scientific Management and increased efficiency

1. Study the ways jobs are performed now and determine new ways to do them.
• Gather detailed time and motion information.
• Try different methods to see which is best.
2. Codify the new methods into rules.
• Teach to all workers the new method.
3. Select workers whose skills match the rules.
4. Establish fair levels of performance and pay a premium for higher performance.

The Behavioral Management Perspective

When individuals are made to feel special their physical and intellectual performance improves. Psychologists call this the Hawthorne effect. Successful coaches, fitness trainers, and instructors often use this effect by providing members of their group with as much support and sense of importance as possible.

It was found that productivity varied due to other factors such as the weekly cycle of work or the seasonal temperature, lighting and so the initial conclusions were overstated and the effect was weak or illusory

Hawthorne experiments brought to light ideas concerning motivational influences, job satisfaction, resistance to change, group norms, worker participation, and effective leadership.

From the leadership point of view today, organizations that do not pay sufficient attention to people and the deep sentiments and relationships connecting them are consistently less successful than those that do.

This was the start of Human Relations Movement


Hierarchy of Needs

Hierarchy of five human motivational needs arranged by ascending order of importance, developed by Abraham Maslow.

The five ascending needs are

(1) Physiological,
The physiological needs of the organism, those enabling homeostasis, take first precedence. These consist mainly of:

- the need to breathe
- the need to regulate homeostasis
- the need to eat
- the need to dispose of bodily wastes
(2) Safety Needs
When physiological needs are met, the need for safety will emerge. Safety and security rank above all other desires. These include:
- Physical security - safety from violence, delinquency, aggressions
- Security of employment
- Security of revenues and resources
- Moral and physiological security
- Familial security
- Security of health
- Security of personal property against crime
(3) Social Needs
After physiological and safety needs are fulfilled, the third layer of human needs is social. This involves emotionally-based relationships in general, such as:
- friendship
- love and intimacy
- having a supportive and communicative family
(4) Esteem Needs
All humans have a need to be respected, to have self-respect, and to respect others. People need to engage themselves in order to gain recognition and have an activity or activities that give the person a sense of contribution and self-value, be it in a profession or hobby. Imbalances at this level can result in low self-esteem, inferiority complexes
(5) Self-Actualization.
Some characteristics of Self Actualized people
- They embrace the facts and realities of the world (including themselves) rather than denying or avoiding them.
- They are spontaneous in their ideas and actions.
- They are creative.
- They are interested in solving problems; this often includes the problems of others. Solving these problems is often a key focus in their lives.
- They feel a closeness to other people, and generally appreciate life.
- They have a system of morality that is fully internalized and independent of external authority.
- They judge others without prejudice, in a way that can be termed objective.
In short, self-actualization is reaching one's fullest potential.
Only unsatisfied needs are motivators. Once a need is satisfied, the next level emerges as a motivator. Only unsatisfied needs are motivators. Once a need is satisfied, the next level emerges as a motivator.

Implications for Management of Theory of Hierarchy

(1) Physiological Needs: Provide lunch breaks, rest breaks and wages that are sufficient to purchase the essentials of life
(2) Safety Needs: Provide a safe working environment, retirement benefits and job security
(3) Social Needs: Create a sense of community via team based projects
(4) Esteem Needs: Recognizing achievements to make employees feel appreciated and valued. Offer job titles that convey the importance of position
(5) Self Actualization: Provide employees a challenge and opportunity to reach their full career potential.


Theory X

With Theory X assumptions, management's role is to coerce and control employees.
- People have an inherent dislike for work and will avoid it whenever possible.
- People must be coerced, controlled, directed, or threatened with punishment in order to get them to achieve the organizational objectives.
- People prefer to be directed, do not want responsibility, and have little or no ambition.
- People seek security above all else.

Theory Y

With Theory Y assumptions, management's role is to develop the potential in employees and help them to release that potential towards common goals.
- Work is as natural as play and rest.
- People will exercise self-direction if they are committed to the objectives (they are NOT lazy).
- Commitment to objectives is a function of the rewards associated with their achievement.
- People learn to accept and seek responsibility.
- Creativity, ingenuity, and imagination are widely distributed among the population. People are capable of using these abilities to solve an organizational problem.
- People have potential.

Theory A: the American approach

1. Short term employment
2. Individual decision making
3. Individual responsibility
4. Rapid evaluation and promotion
5. Explicit formalized control
6. Specialized career path
7. Segmented concern

Theory J: the Japanese approach

1. Lifetime employment
2. Consensual decision making
3. Collective responsibility
4. Slow evaluation and promotion
5. Implicit inform control
6. Non-Specialized career path
7. Holistic concern

Theory Z: the Modified American & Japanese approach

1. Long term employment (American + Japanese)
2. Consensual decision making (Japanese)
3. Individual responsibility (American)
4. Slow evaluation and promotion (Japanese)
5. Implicit informal control with explicit formalized measures (American + Japanese)
6. Moderately Specialized career path (American + Japanese)
7. Holistic concern, including family (Japanese)

The Organizational Environment & Working

Organizational Environment

Organizational Environment: those forces outside its boundaries that can impact it.
Forces can change over time and are made up of Opportunities and Threats.

Opportunities: openings for managers to enhance revenues or open markets.
• • New technologies, new markets and ideas.

Threats: issues that can harm an organization.
• • economic recessions, oil shortages.

• Managers must seek opportunities and avoid threats.

Knowledge base for Managers

Managers need a relevant, fairly extensive knowledge base for their particular managerial job. This may be in several areas e.g.:

Knowledge of industry
Knowledge of product
Knowledge of market
• Knowledge of technology



Five elements:
• Customers and clients
Individuals and organisations purchasing products/services
• Competitors
Other organisations offering (or with a high potential to offer) rival products/services
• Suppliers
Organisations and individuals supplying resources an organisation needs to conduct its operations
• Labour supply
Individuals potentially employable by an organisation
• Government agencies
Agencies providing services and monitoring compliance with laws and regulations at local, state or regional and national levels


• Commercial databases
• Specialty trade publications
• Local newspaper clippings
• Advertised vacancies
• Published market research
• Trade shows & product literature
• Personal contacts

Industry Life Cycle

• Reflects the changes that take place in an industry over time.
• Birth stage: firms seek to develop a winning technology.
• Intel in hardware, or Microsoft in software or Apple in products
• Growth stage: Product gains customer acceptance and grows rapidly.
• New firms enter industry, production improves, distributors emerge.
• Shakeout stage: at end of growth, there is a slowing customer demand.
• Competitor rivalry increases, prices fall.
• Least efficient firms fail and leave industry.
• Maturity stage: most customers have bought the product, growth is slow.
• Relationships between suppliers, distributors more stable.
• Usually, industry dominated by a few, large firms.
• Decline stage: falling demand for the product.
• Prices fall, weaker firms leave the industry.

• The General Environment

• Consists of the wide economic, technological, demographic and similar issues.

• Managers usually cannot impact or control these.
• Forces have profound impact on the firm.
• Economic forces: affect the national economy and the organization.

• Includes interest rate changes, unemployment rates, economic growth.
• When there is a strong economy, people have more money to spend on goods and services.
• Technological forces: skills & equipment used in design, production and distribution.

• Result in new opportunities or threats to managers.
• Often make products obsolete very quickly.
• Can change how we manage.
• Socialcultural forces: result from changes in the social or national culture of society.

• Social structure refers to the relationships between people and groups.
• Different societies have vastly different social structures.
• National culture includes the values that characterize a society.
• Values and norms differ widely throughout the world.
• These forces differ between cultures and over time.


Ethical, Social and Moral responsibilities of Business

1. Actions defined by Law that are permissible and which are not
2. Actions that are defined as permissible or otherwise under Organization's policy and procedures.
3. Actions on which individual takes moral stance under his own conscience which are not governed by formal rules.

- The "Bad Apple"
- The Bad "Barrel"
- Moral Blindness
- Competitive Pressures
-Opportunity Pressures


Decision: The choice made from available alternatives that is expected to lead to favorable solution to problem

Decision Making: The process of recognizing a problem, generating and weighing alternatives, coming to a decision, taking action and assessing the results.


- The Decision Makers
- Goals to be served
- Relevant Alternatives
- Order of the Alternatives
- Choice of alternative

Types of Problems:
- Crisis problem
- Non crisis problem
- Opportunity problem

Types of Decisions:
- Programmed Decisions
- Non programmed decisions

Conditions of Decision Making:
- Certainty
- Risk
- Uncertainty
- Ambiguity

Group Decision Making
Advantages and Disadvantages

Processes of making group decisions
• Brainstorming
• Nominal Group technique
• Delphi Group technique
Rational Decision Making Process

Step 1: Identify the problem
- Recognize the problem
- Defining the problem
- Diagnosis of problem

Step 2: Generate alternatives

- Do not critisize while ideas are being generated
- Freewheel. Let the wildest ideas be generated
- Work on as many ideas as possible
- Combine and improve the ideas

Step 3: Evaluate Alternatives

- If they are feasible
- If they will provide Quality results
- If these will be acceptable
- If these will be cost effective
- If these have reversibility if required
- Do these meet needed ethical standards

Step 4: Implement and monitor the chosen Decision and provide feedback

- Chose the final alternative
- Plan the implementation of the solution
- Be sensitive to the decision's effects on the others
- Develop the followup mechanism and feedback
Few Barriers to decision making:

- Imperfect or incomplete information
- In accurate identification of problem or alternatives
- Biases such as


Planning is deciding in advance what to do and how to do. It is one of the basic managerial functions. Before doing something, the manager must formulate an idea of how to work on a particular task. Thus, planning is closely connected with creativity and innovation. It involves setting objectives and developing appropriate courses of action to achieve these objectives.

"Planning bridges the gap from where we are to where we want to go. It makes it possible for things to occur which would not otherwise happen" - Koontz and O'Donnel.

Importance of Planning
• Planning provides directions
• Planning reduces the risks of uncertainty
• Planning reduces overlapping and wasteful activities
• Planning promotes innovative ideas
• Planning facilitates decision making
• Planning establishes standards for controlling

Features of planning
• Planning focuses on achieving objectives
• Planning is a primary function of management
• Planning is pervasive
• Planning is continuous
• Planning is futuristic
• Planning involves decision making
• Planning is a mental exercise

Planning Process

Setting objectives: Objectives may be set for the entire organization and each department or unit within the organization

1. Market Standing
2. Innovation
3. Productivity
4. Profitability
5. Managerial Performance and Development
6. Worker performance & attitude
7. Public Responsibility

- Developing premises: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in future.
- Identifying alternative courses of action: Once objectives are set, assumptions are made. Then the next step would be to act upon them.
- Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative.
- Selecting an alternative: The best plan has to be adopted and implemented. - Implement the plan: This is concerned with putting the plan into action. - Follow-up action: Monitoring the plans are equally important to ensure that objectives are achieved.



The organisation’s purpose or fundamental reason for existence


Future target or end result an organisation wishes to achieve Plan

Means devised for attempting to reach a goal


‘Setting goals & developing plans leads to goal attainment and ultimately, to organisational efficiency & effectiveness.’


‘Essentially, planning builds on the organisation’s mission, the organisation’s purpose or fundamental reason for existence.’

Mission Statement

An effective mission statement basically answers one question:

“How do we intend to win in this business?
It does not answer: What were we good at in the good old days?

The question “How do we intend to win in this business?” is defining. It requires companies to make choices about people, investments, and other resources, and it prevents them from falling into the common mission trap of asserting they will be all things to all people at all times. The question forces companies to delineate their strengths and weaknesses in order to assess where they can profitably play in the competitive landscape.

The question forces companies to delineate

- Their strengths and weaknesses in order to
- assess where they can profitably play in the competitive landscape.
- At the end of the day, effective mission statements balance the possible and the impossible. They give people a clear sense of the direction to profitability and the inspiration to feel they are part of something big and important.

The GE mission statement 1981-1995

We are going to be “The most competitive enterprise in the world” by being No. 1 or No. 2 in every Market – fixing, selling, or closing every Underperforming business that couldn’t get there.”

Some mission statements

- PEPSI - "Beat Coke"
- HONDA - "We will crush, squash,
and slaughter Yamaha"
- NIKE - "Crush Reebok“
- Wal-Mart "To give ordinary folk the chance to buy the same thing as rich people.“
- Merck "To preserve and improve human life."
- Boeing (1950) "Become the dominant player in commercial aircraft and bring the world into the jet age"
- 3M "To solve unsolved problems innovatively"

- Some mission statements – Pakistan
- HBL “To make our customers prosper, our staff excel and create value for shareholders”
- MCB: “We are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest with confidence in us.”
- IOBM: The Mission of IOBM is to foster a learning environment, where students are motivated to make learning an on-going life-long process.
- Silk Bank: To be the Leader in premier banking, trusted by customers for accessibility, service & innovation; be an employer of choice creating value for all stakeholders.
- National Foods: National Responding to the challenge of developing innovative food products based on convenience and quick preparation in line with modern lifestyles and yet retaining traditional values through its diverse collection of food products.


• Benefits of goals
• Increase performance
• Clarify expectations
• Facilitate control
• Increase motivation

• Levels of goals
• Operational goals (base)
• Tactical goals (mid)
• Strategic goals (top)

• Top managers
Organisational perspective

• Middle managers
Departmental perspective

• 1st level managers
Unit/individual perspective


Key aspects:

• Goal content
• Goal commitment
• Work behaviour
• Other process components
• Possible problems


It should be:
• Specific
• Measureable
• Attainable but Challenging
• Relevant
• Time bound

GOAL COMMITTMENT Is Influenced by:
• Supervisory authority
• Peer & group pressure
• Public display
• Expectations of success
• Incentives & rewards
• Participation


Goals & commitment affect work behaviour:

• Direction
• Effort
• Persistence
• Planning


• Excessive risk-taking
• Increased stress
• Undermined self-confidence
• Ignored non-goal areas
• Excessive short-run thinking
• Dishonesty & cheating

Job process components affect

• Job knowledge & ability
• Task complexity
• Situational constraints

• Levels of plans
• Extent of recurring use
• Time horizons of goals & plans
• Promoting innovation

Levels of plans:

• Strategic
• Operational
• Tactical

Recurring use:

• Single-use
• Standing plans: policies, procedures, rules

Time horizons of goals/plans:

• Short
• Intermediate
• Long range

Promoting innovation by:

• Mission statement
• Goal content & process
• Planning content & process



• Use of planning staff
Small group who assist managers in planning
• Use contingency planning
Development of alternative plans


• Process through which specific goals are set collaboratively for the organisation as a whole and every unit within it; the goals are then used as a basis for planning, managing organisational activities, and assessing and rewarding contributions.

Steps in the MBO process:

• Develop organisational goals
• Establish specific goals for departments
• Formulate action plans
• Implement & maintain ‘self-control’
• Review progress periodically
• Appraise performance

- Strengths:

 Helps link goals & plans
 Clarifies priorities, expectations
 Fosters organisational communication
 Builds member motivation


 Needs strong, enduring commitment
 Requires training of managers
 May be misused
(i.e. for punishment)  Risk of dominance of quantitative goals


- Strategic management is a ‘Process through which managers formulate and implement strategies geared to optimizing strategic goal achievement, given available environmental and internal conditions.’
- Strategic management determines mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.
- It paints a picture of the desired future and long term goals of the organization. Essentially, strategic management looks ahead to where the organization wants to be in three, five, even ten years.

• What are strategies

• A strategy is a plan of action designed to achieve a specific goal.

• Strategies are all about being prepared to gain a position of advantage over adversaries or best exploiting emerging possibilities.

- As there is always an element of uncertainty about future, strategy is more about a set of options

• Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision.

• The process of strategy formulation basically involves six main steps.

1. Setting Organizations’ objectives
2. Evaluating the Organizational Environment
3. Setting Quantitative Targets
4. Aiming in context with the divisional plans
5. Performance Analysis
6. Choice of Strategy

• Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives.

• Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance.

• IMPORTANCE OF STRATEGIC MANAGEMENT Strategic management helps organizations identify and develop Competitive Advantage
Strategic management directs organization members where to put their efforts to stay competitive in business.
Strategic management shows a need for Innovation giving an organized approach for encouraging new ideas.

 How the organization will operate, how the strategies of the business will be coordinated to strengthen the competitive position.

 Business level
While the organization may have many individually managed units called SBU, business level strategy concentrates on one business and supports corporate strategies.

 Functional level
Functional level strategy focuses on plans for managing functional area to support business level strategy

SWOT analysis
(Strengths, Weaknesses, Opportunities, Threats) relies upon:
– Porter’s five competitive forces model
– Organisational resources & capabilities
– Distinctive competencies

Porters five competitive forces model

• • Threat of new competition
• Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry.
• Threat of substitute products or services
• The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives.
• For example, tap water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar product.
• Bargaining power of customers (buyers)
The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.
• Bargaining power of suppliers
Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes.
• Intensity of competitive rivalry
For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Six Conclusions from Tom Peters video

1. Service & Quality pays
2. The real key is Taking up mundane activities by other peoples definitions and redefining them into something very different from what they were.
3. Listening, listening and listening and measure customer reaction on a regular basis.
4. Developing Shocking level of responsiveness – doing things in minutes, days which other people days, months or years.
5. Understanding that whole things depends on front line people not the top or senior management
6. Inspired in touch leadership that enjoys doing what they are doing.


The growth–share matrix is a chart that was created by the Boston Consulting Group to help corporations to analyze their business units, that is, their product lines.

To use the chart, analysts plot a scatter graph to rank the business units or products on the basis of their relative market shares and growth rates.

• Cash cows is where 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 to be "milked" continuously.
• Dogs, more charitably called pets, 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. Dogs, it is thought, should be sold off.
• Question marks (also known as problem children) are business operating in a high market growth, but having a low market share. 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.
• Stars are units with a high market share in a fast-growing industry. They are successful question marks and become a market leader in a high growth sector. The hope is that stars become next cash cows. Stars require high funding to fight competitions and maintain a growth rate.

My Life principles

  • - To succeed you need to be Daring, Different and the First
  • - Winnig is not Everything; it is the Only thing!
  • - The best way to predict your Future is to Invent it!
  • - Never be doomed to Mediocrity

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