Economics & Principles of Management

1. Economics & Principles of Management Management By Objectives

2. What is MBO? 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.

3. What is MBO? Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The Practice of Management'. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, 90% of the time you don't."

4. Benefits of MBO Improvement of managing Clarification of Organisation Encouragement of Personal commitment Development of Effective control

5. Benefits of MBO MBO programs continually emphasize what should be done in an organization to achieve organizational goals. MBO process secures employee commitment to attaining organizational goals.

6. Weakness of MBO The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work. The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program increase the volume of paperwork in an organization.

7. Weakness of MBO Failure to teach the philosophy of MBO Failure to give guidelines to goal setters Difficulty of setting goals Emphasis on short run goals Danger of Inflexibility

8. Economics & Principles of Management MANAGEMENT BY EXCEPTIONS

9. Controlling as a Management Function • Controlling • A process of monitoring performance and taking action to ensure desired results. • It sees to it that the right things happen, in the right ways, and at the right time.

10. Controlling as a Management Function • Controlling • Done well, it ensures that the overall directions of individuals and groups are consistent with short and long range plans. • It helps ensure that objectives and accomplishments are consistent with one another throughout an organization.

11. Controlling as a Management Function • Controlling • It helps maintain compliance with essential organizational rules and policies.

12. Controlling as a Management Function • Cybernetic Control System • One that is self-contained in its performance monitoring and correction capabilities. (thermostat) • The control process practiced in organizations is not cybernetic, but it does follow similar principles.

13. The Control Process Establish objectives and standards. Measure actual performance. Compare results with objectives and standards. Take necessary action.

14. Measuring Actual Performance Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired. Without measurement, effective control is not possible.

15. Comparing Results with Objectives and Standards • The comparison of actual performance with desired performance establishes the need for action. • Ways of making such comparisons include: • Historical / Relative / Engineering • Benchmarking

16. Taking Corrective Action Taking any action necessary to correct or improve things. Management-by-Exception focuses managerial attention on substantial differences between actual and desired performance.

17. Economics & Principles of Management SWOT ANALYSIS

18. Strength Strength is the power and excellence with the resources, skills and advantages in relation to the competitors. A strength is a distinct technical superiority with best technical know-how, financial resources and skill of the people in the organization, goodwill and image in the market for the product and services, company’s access to best distribution network, the discipline, morale, attitude and mannerisms of the employees at all levels with a sense of belonging.

19. Weakness Weakness is the incapability, limitation and deficiency in resources such as technical, financial, manpower, skills, brand image and distribution pattern. It refers to constraints or obstacles, which check movement in a certain direction and may also inhibit an organization in gaining a distinct competitive advantage.

20. Opportunities Environmental opportunity is an alternative area for company’s action in which the particular company would enjoy a competitive advantage. An opportunity is a major favorable advantage to a company. Proper analysis of the environment and identification of new market, new and improved customer group with better product substitutes or supplier’s relationship could represent opportunities for the company.

21. Threat Environmental threat is the challenge posed by the unavoidable trend or development that would lead, in the absence of purposeful action to the erosion of the company’s position. Slow market growth, entry of resourceful multinational companies, increase bargaining power of the buyers or sellers because of a large number of options, quick rate of obsolescence due to major technological change and adverse situation because of change of government policy rules and regulation is disadvantageous to any company and may pose a serious threat to business operation.

22. Economics & Principles of Management SUPPLY CHAIN MANAGEMENT

23. Supplier } Supplier Storage Mfg. Storage Dist. Retailer Customer Supplier Supply Chain Management

24. Supplier } Storage Service Customer Supplier Supply Chain Management

25. Introduction A supply chain is a sequence of organizations – their facilities, functions and activities - that are involved in producing and delivering a product or service

26. Introduction Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible

27. Introduction Supply chain management deals with linking the organizations within the supply chain in order to meet demand across the chain as efficiently as possible. In a supply chain, virtually all of the members serve as both customers as well as suppliers.

28. Importance of supply chain management To gain efficiencies from procurement, distribution and logistics To make outsourcing more efficient To reduce transportation costs of inventories To meet competitive pressures from shorter development times, more new products, and demand for more customization

29. Importance of supply chain management To meet the challenge of globalization and longer supply chains To meet the new challenges from e-commerce To manage the complexities of supply chains To manage the inventories needed across the supply chain

30. Supply chain management difficult Different organizations in the supply chain may have different, conflicting objectives Manufacturers: long run production, high quality, high productivity, low production cost Distributors: low inventory, reduced transportation costs, quick replenishment capability Customers: shorter order lead time, high in-stock inventory, large variety of products, low prices Supply chains are dynamic - they evolve and change over time

31. Supply chains and vertical integration For any organization vertical integration involves either taking on more of the supplier activities (backward) and/or taking on more of the distribution activities (forward) An example of backward vertical integration would be a peanut butter manufacturer that decides to start growing peanuts rather than buying peanuts from a supplier An example of forward vertical integration would be a peanut butter manufacturer that decides to start marketing their peanut better directly to grocery stores In supply chains, some of the supplying and some of the distribution might be performed by the manufacturer

32. Supply chains and vertical integration The significance of vertical integration in the supply chain is that the activities that are performed by the manufacturer are typically more easily managed than those which are performed by other organizations Therefore, the degree of vertical integration can have an impact on the structure and relationships between members of a supply chain

33. ACTIVITY BASED MANAGEMENT Economics & Principles of Management

34. Activity-Based Management The use of activity analysis to help management make decisions

35. Activity-Based Management • Approach to management that aims to maximize the value adding activities while minimizing or eliminating non-value adding activities. The overall objective of ABM is to improve efficiencies and effectiveness of an organization in securing its markets. It draws on activity based-costing (ABC) as its major source of information and focuses on (1) reducing costs, (2) creating performance measures, (3) improving cash flow and quality and, (4) producing enhanced value products.

36. Keys to Successfully Implementing ABM 1. Organizational Culture 2. Top-Management Commitment 3. Change Champion 4. Change Process 5. Continuing Education

37. ENTREPRENUER RESOURCE PLANNING Economics & Principles of Management

38. Definition A cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company (or Transactional Backbone)

39. Detailed Definition A business strategy and set of industry-domain- specific applications that build customer and shareholder communities value network system by enabling and optimizing enterprise and inter- enterprise collaborative operational and financial processes”

40. ERP Application Componentts

41. ERP Beneffiitts Quality and Efficiency Decreased Costs Decision Support Enterprise Agility Security (Firewall & VPN)

42. Causes of ERP Faillures Business mangers and IT professionals underestimate the complexity of the planning, development, and training needed Failure to involve affected employees in the planning and development phases Trying to do too much too fast in the conversion process Failure to do enough data conversion and Testing

43. Implement an ERP System To support business goals Integrated, on-line, secure, self-service processes for business Eliminate costly mainframe/fragmented technologies Improved Integration of Systems and Processes Lower Costs Empower Employees Enable Partners, Customers and Suppliers

44. Implement an ERP System Obtain the right mix of people, processes and technology

45. Requirement for implementation ERP Systems People Project Structure Should be aligned to processes Process Implementation Process (outlined in detail) Adapt your processes to those of the ERP. Technology Hardware Software Integrated Systems

46. STRATEGIC MANAGEMENT Economics & Principles of Management

47. Why Strategic Management? Strategic management provides the route map for the firm. It lends a framework, which can ensure that decisions concerning the future are taken in asystematic and purposeful way. Strategic management also serves as a hedge against uncertainty, a hedge against totally unexpected developments on the business horizon. It lends a frame of reference for investment decisions. It aids the concentration of resources on vital areas of best potential. It offers a methodology by which the firm could anticipate and project the future and be internally equipped to face it. It helps to develop processes, systems, mechanisms and managerial attitude that are essential for this purpose

48. Defining Strategy Chandler defined strategy as: "The determination of the basic long term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out this goals". Andrews defined strategy as: "The pattern of objectives, purposes, goals and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of the company it is or it is to be".

49. Hierarchy of strategy Corporate strategy Business strategy Functional strategy

50. Levels Of Strategy Corporate level Business level Functional level