Business Management & Ethics

Chapter 1 Introduction To Business Management & Ethics:

Definition of Business:

Human activities directed toward providing or acquiring wealth through buying and
selling of goods. - L. H Henry
An organization or enterprising entity engaged in commercial, industrial or professional
activities. A business can be a for-profit entity, such as a publicly-traded corporation, or
a non-profit organization engaged in business activities, such as an agricultural
cooperative.

An organization or economic system where goods and services are exchanged for one
another or for money.

Characteristics of a Good Business:

Capital: A stock of accumulated goods which provide income or profit.

Creation of Utility: Service offered by the business.
Dealings in goods and services.
Employment
Motive
Organization
Production and purchase of goods
Regular transactions
Risks and uncertainty
Sales or transfer for value
Social welfare

Definition of Management:

It is the process of achieving goals effectively and efficiently through and with the
people.
Four components of management include: Planning, Organizing, Staffing and
Controlling.
(Additional Info: These four components of management were derived by Luther
Gullicks classical management theory in which he coined the word POSDCoRB.
POSDCoRB stands for: Planning, Organizing, Staffing, Directing, Coordinating, Reporting
and Budgeting. This theory covers major aspects of Public and Business Management.)

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Management also includes a set of activities directed at utilizing a businesss resources.

Productivity -> Efficiency -> Effectiveness
Where efficiency is doing things right and effectiveness is doing the right things.

Henri Fayols Principles of Management:

Henri Fayol was a French mining engineer. He has been credited with the formulation of
general theory of management & business administration during the end of 19 th
century. The theory has 6 functions and 14 principles.
Fayols 6 Functions of Business Management:
o Forecasting
o Planning
o Organizing
o Commanding
o Coordinating
o Controlling
Fayols 14 Principles of Business Management:
o Division of Labor
o Authority and Responsibility
o Unity of Command
o Unity of Direction
o Equity
o Order
o Discipline
o Initiative
o Remuneration
o Stability of Tenure
o Scalar Chain
o Sub-ordination of Industrial Interest to Common Goal
o Espirit De Corps
o Centralization of Decision Making.

Douglas Mcgregors Theory X and Theory Y:

Douglas Mcgregor was a management profession at MIT Sloan School in the US. 'Theory
X' and 'Theory Y' are theories of human motivation created and developed by Douglas
McGregor in the 1960s. These theories describe two contrasting models of workforce
motivation in human resource management, organizational behavior, organizational
communication and organizational development.

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Theory X: People who are lazy and unhappy with their jobs. They require constant
motivation and regulation or strictness to perform in their jobs.
Theory Y: People who are active and happy with their jobs. They have an inert
motivational will for their job and require little regulation or strictness.

Organization:

An organization is a systematic arrangement of interdependent group of people working

together to achieve a common goal. It can also be said as an organized group of people
with a particular purpose, such as a business or government department.

Managers:

A manager is responsible for controlling or administering an organization or group of

staff. He is a person regarded in terms of their skill in managing resources, especially
those of a household. Or a person is said to be a manager if he carries out managerial
tasks to achieve goals.

Managerial Skills:

Conceptual Based on ideas and concepts

Interpersonal Based on relationship with staff and employees
Technical Based on technical knowledge
Design Based of designing a strategy or plan
Communication Based on communication skills
Leadership Based of leadership qualities

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Managerial Skills Distribution:

Henry Mintzbergs Managerial Roles:

Henry Mintzberg in 1960, defined a number of managerial roles. These are:

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Levels of Management:

Ethics:

Values an individual uses to interpret whether any particular action is good or bad.
These are the moral principles that govern a person's behavior or the conducting of an
activity.

Sources of Ethics:

Society, Family, Law, Religion, Individual Conscience, Office rules and regulations etc.

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