COURSE DESCRIPTION: ORGANIZATION AND MANAGEMENT

CHAPTER 1: NATURE AND CONCEPT OF MANAGEMENT

LESSON 1: MEANING AND FUNCTIONS OF MANAGEMENT

 Came from Italian word “maneggiare” – means “to handle (tools or equipments)”
o Maneggiare derives from latin word:
 manus- means “hand”
 agree – means “to act”
 Mary Parker Follet – mother of modern management
o It is the art of getting things done through people.
 Henri Fayol – father of principles of management
o To manage is to forecast and to plan, to organize, to command, to coordinate
and to control.
 Frederick Taylor – father of scientific management
o It is the art of knowing what to do, when to do and see that it is done in the
best and cheapest way.
 Peter Ferdinand Drucker –management consultant, educator and author and
considered as the Father of modern management.
o It is a multi-purpose organ that manages the business and manages
managers and manages workers and work.
 It is a process of managing the resources effectively and efficiently.
 The process of planning, organizing, leading and controlling.
Process-represents the continuous and ongoing activities of a manager.
Efficient- means minimal waste of resources or inputs in achieving the goal
(Bateman & Snell, 2008).
- Doing things right.
Effective-refers to accomplishing a task or achieving a goal. Determined without
reference to cost, effort and time.
- Doing the right thing.
Manager- Is the person responsible for achieving organizational goals and
objectives and responsible in utilizing the firm’s resources.
Organization- Is a group of people working together towards a common goal.
 Management is both science and art.
o It is considered as a science because managers need facts and information
based on gathered data to come up with a sound solution.
o It is considered an art because managers need specific skills which are innate
in a manager.

FOUR TYPES OF RESOURCES:

 Physical Resources
-tangible resources owned and used by the company. Examples: equipment,
building, machinery
 Human Resources
- the personnel of a business or organization. Examples: employees, managers
 Financial Resources
- money available to a business in order to operate efficiently and sufficiently.
Examples: cash, credit lines, account receivables, sales
 Information Resources
- are the data and information used by an organization. Examples: customers
information, financial statement, survey data results

FUNCTIONS OF MANAGEMENT
1. PLANNING
 It refers to the formulation of objectives, programs, policies, procedures, rules and
regulations, in order to achieve the goals of the business.
  It is the process of determining objectives and organizational goal, establishing
strategies and integrating coordinated activities in the organization to achieve the
goals and objectives. Planning provides a clear direction to the organization, it
requires decision making with the purpose of anticipating the future. Top
management is often responsible in handling or creating a plan for the company.
Deciding in advance:
What to do
How to do
When to do
Who is going to do it.
 Bridges a gap between where we are today and where we want to reach.
 Sets the goal of an organization.
2. ORGANIZING
 It is the grouping together of people, establishing relationship among them, and
defining the authority and responsibility that personnel have in the use of
company’s material resources to attain predetermined goals and objectives.
 It is the process of establishing a structure by assigning tasks, assembling and
allocating resources to achieve the organizational goals and objectives. It is the
process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals.
 Establishing the framework of working:
o How many units or sub-units or departments are needed?
o How many posts or designations are needed in each department?
o How to distribute authority and responsibility among employees?
 Once these decisions are taken, organizational structure gets set up.
 Organizing as a process involves:
o Identification of activities
o Classification of grouping of activities
o Assignment of duties
o Delegation of authority and creation of responsibility
o Coordinating authority and responsibility relationship
3. STAFFING
 Involves filling and keeping filled the positions provided in the organization
structure.
 It is the function of manning the organization structure and keeping it manned. The
main purpose of staffing is to put right man on right job.
 Involves:
a. Manpower Planning
b. Recruitment, selection and placement
c. Training and Development
d. Remuneration
e. Performance Appraisal
f. Promotion and Transfer
4. LEADING/DIRECTING
 Has to do with the predominantly interpersonal aspect of managing.
 Influencing is also known as motivating, leading or directing by guiding the
activities of organization members towards the fulfillment of the goals.
 The purpose of influencing is to increase productivity in human-oriented work
situations to generate higher levels of production over the long term than do
task-oriented work situations.
 It is the process of influencing people to work in achieving the organizational goal
(Weihrich & Koontz, 2004, p.26) Direction is the inert-personnel aspect of
management which deals directly with influencing, guiding, supervising, motivation
subordinates for the achievement of organizational goal.
5. CONTROLLING
 It is the process of measuring and correcting the activities of subordinates and the
company itself to assure conformity to plans.
 Controlling is both a managerial function and a continuous process where the
manager performs the following roles:
o gathers information that measures performance;
o compares present performance to pre-established performance norms;
and
o determines the next action plan and modifications for meeting the
desired performance parameters.
 It is the process of monitoring performance and taking a corrective action when
necessary to ensure that the objectives of the organization will be achieved.
Matching actual performance with the planned goal and making necessary
connections where there is deviation from the plans.
 Accdg to Theo Haimann “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation.”
 Therefore, controlling has following steps:
a. Establishing of standard performance;
b. Measurement of actual performance;
c. Comparison of actual performance with the standards and finding out deviation
if any; and
d. Corrective action
COURSE DESCRIPTION: ORGANIZATION AND MANAGEMENT
CHAPTER 1: NATURE AND CONCEPT OF MANAGEMENT
LESSON 2: TYPES OF MANAGEMENT THEORIES

APPROACHES TO MANAGEMENT
1. CLASSICAL APPROACHES TO MANAGEMENT
Classical theory of management is built on principles. Classical theorists believed
and prescribed certain principles that would aid in setting up and managing
organization.

A. SCIENTIFIC MANAGEMENT
 Spearheaded by Frederick Winslow Taylor (1856- 1915) a young
engineer who started his working career at Midvale Steel Company.
He is also the Father of Scientific Management.
 He focused on analyzing the work and how to complete a task
efficiently. He believed that a “mental revolution” would have to take
place before management and workers could see that their positions were
compatible. He pointed out that as productivity rose, the salaries of both
managers and employees would also rise.
 Advocated the concept of units, a worker would be paid higher rate
per unit for any additional units he proceeds.
 Uses scientific techniques in improving performance of the people in
the production, emphasizing in the maximizing of outputs.
 Taylor’s Principles of Scientific Management
Management should:
1. Develop a precise, scientific approach to replace general
guidelines;
2. Scientifically select, train, teach and develop each worker so
that the right person has the right job;
3. Cooperate with workers to ensure that jobs match plans and
principles;
4. Ensure an appropriate division of work and responsibility
between managers and workers.
 Taylor’s Ideas Led to Two Managerial Practices:
1. Piece-rate incentive system. The purpose of piece-rate incentive
system is to reward the workers who produced the maximum
output. Under the system, if the worker met the established standard
of performance, he earned the base rate set by the management
using scientific methods. If the worker’s output exceeded the set
standards, his wage would go up. Increase in output, increase in
profits even though they would be paying more in wages.
2. Time-and-motion study. Taylor relied primarily on the
stopwatch, to focus on the amount of time required to
complete a particular job. Thus, he is called the “father of time
study.”
 Henry Gantt (1861-1919)- recognized the value of non-monetary
rewards to motivate workers. He developed a system of scheduling
called Gantt Charts.
Gantt Charts- It provides a mechanism in controlling and monitoring
work progress of employees or workers.
 Henry Ford- one of the great industrialists. His major contributions
dare the following:
1. The introduction of the moving assembly line.
 2. Mass Production Method - It is a method of production in which
large volumes of standardized goods are produced by workers
using highly advance equipment.
3. Division of Labor - It is the breaking up of jobs into small tasks.
B. MOTION STUDY- is the reducing or breaking a task to its basic physical
motions and eliminating unnecessary or redundant motions.
 Frank Gilbreth- Father of Motion Study
 Lillian Gilbreth- First Lady of Management
 Concept of Therblig- classification scheme to label 17 basic hand
motion. Analysis of task in terms of physical motions. Frederick Taylor
emphasized work through efficiency while Frank and Lillian emphasized
in managing motion.
C. ADMINISTRATIVE MANAGEMENT
 Emphasized the perspective of senior managers within the
organization. It also argues that management is a profession and
could be taught.
 HENRY FAYOL- is a French mining engineer. Also known as the
Father of Principles of Management. He identified the 5 management
functions: planning, organizing, commanding, coordinating and
controlling.
 FAYOL’s 14 Principles of Management:
1. DIVISION OF WORK- divide work into specialized tasks and
assign responsibilities to specific individuals.
2. AUTHORITY- delegate authority along with punish
responsibility.
3. DISCIPLINE- makes expectations clear and punishes violations.
4. UNITY OF COMMAND- each employee should be assigned to
only one supervisor.
5. UNITY OF DIRECTION- employee’s efforts should be focused
on achieving organizational objectives.
6. SUBORDINATION OF INDIVIDUAL INTEREST- the general
interest must predominate.
7. REMUNERATION- systematically rewards efforts that support
the organization’s direction.
8. CENTRALIZATION- determines the relative importance of
superior and subordinates’ roles.
9. SCALAR CHAIN- keeps communication within the chain of
command.
10. ORDER- order jobs and materials so they support the
organization’s direction.
11. EQUITY- fair discipline and order enhance employee
commitment.
12. STABILITY AND TENURE OF PERSONNEL- promotes employee
loyalty and longevity.
13. INITIATIVE- encourages employees to act on their own in
support of organization’s direction.
14. ESPRIT DE CORPS- promote a unity of interests between
employees and management.
D. BUREAUCRACY – introduced by MAX WEBER, a German sociologist. The
Father of Bureaucracy.
 Can be defined as a rational and efficient form of organization founded on
logic, order, and legitimate authority.
 It is characterized with a high degree of division of labor and has
principles of rationality and impersonal relationship. More suitable in
government organization.
2. BEHAVIORAL MANAGEMENT THEORY/ HUMANS RELATIONS MANAGEMENT
Emphasizes the importance of human element in a workplace. In today setting this
is also known as Organizational Behavior which can be defined as the study of
human behavior in organizational settings, of the interface between human
behavior and the organization and of the organization itself. Theorist believed that a
better understanding of human behavior while at work, improved productivity and that
employees are not machines but are considered to be valuable assets in the organization.
•ELTON MAYO (1880- 1949) is a researcher who conducted studies at
Hawthorne Works Plant of Western Electric in Chicago.
HAWTHORNE EFFECT- concluded that psychological and
social factors are more important than physical condition of the
workplace and financial incentives in motivating workers.
• ABRAHAM MASLOW (1908-1970) is a professor and psychologist who
developed a motivational theory in which it is considered to be the best-
known theory of motivation.
• Maslow’s Hierarchy of Need:
1. PHYSIOLOGICAL THEORY- known as the basic needs.
2. SAFETY NEEDS- need for security and protection from physical
and emotional needs.
3. SOCIAL NEEDS- known as Belongingness needs. Need for love
and affection, acceptance and friendship.
4. ESTEEM NEEDS- involves self-respect, recognition and
achievements.
5. SELF- ACTUALIZATION NEEDS- highest level and also known
as self- fulfilment; are realizing one’s full potential and abilities.
 FREDERICK HERZBERG (1923-2000) –developed the Two Factor
Theory or better known as Motivation-Hygiene Theory. It proposes
that employees are more motivated by intrinsic factors rather than
extrinsic factors.
 Intrinsic or Motivation factors- job satisfaction such as
achievement and recognition.
 Extrinsic or Hygiene factors- job dissatisfaction such as working
conditions, company policies, pay and job security.
 DOUGLAS McGREGOR (1906-1964)- developed Theory X and Theory Y
assumptions that represents how employees view work.
 THEORY X represents a negative end or view of people who:
Avoid work responsibility
Have a little ambition
Need to be controlled (reward and punish) and supervised.
 THEORY Y represents a positive end of view of workers who:
Accept and seek responsibility.
Enjoy the physical and mental aspect of work
More committed to work
Exercise self-control and Self-direction towards organizational
objectives.
3. QUANTITATIVE APPROACHES TO MANAGEMENT
Uses quantitative techniques in decision making particularly in planning and controlling.
Includes application of statistics, optimization models, information models and
computer simulations. According to theorists who belong to this, management simply make a
series of decision. There are wide variety of quantitative tools for analyzing information in the
decision-making process. It contributes to managerial decision making, particularly in planning
and controlling.
A. Management Science
 Is an approach that emphasizes the use of mathematics or quantitative
techniques to analyze and support management decisions and problems.
  Includes areas of finance and operations management (forecasting and
inventory management)
B. Operations Management
 It is the function or field of expertise that is primarily responsible for the
production and delivery of an organization’s products and services.
 It focuses on managing the process of transforming materials, labor, and
capital into useful goods and/or services.

4. MODERN APPROACHES TO MANAGEMENT

The contributors to modern management come from the behavioral sciences, operations
research, management science, and contingency or situational theory.
A. SYSTEM THEORY- focuses on viewing the organization as a whole and the
interrelationship of its parts. Organization is a part of a larger environment outside
its boundaries and is affected by social, technical and economic factors which are in
a form of a systems perspective. Knowing and using these system approach will help
managers visualize the organization as a whole and would help in coordinating the
work activities as one. Realizing that decision, actions and plans taken will affect the
entire organization.
 SYSTEM is a collection of interrelated elements that function as a whole
 SUBSYSTEM is small unit of a larger system.
 Two Basic Type of System:
o Open System – interacts with its environment
o Closed System – has no interaction with its environment.
B. Contingency Management- Helps managers determine on how to react in

situation by choosing proper strategy. “There is no best way to management” It

is difficult to identify one best way to manage and organize firms in all
circumstances because different factors may vary depends on the situation.
Contingency thinking recognizes that what may be good structure for one
organization may not work as well in another organization. It also recognizes that
what may work well at one time may not work as well in the future as
circumstances changes.
C. 5 M’s of Management
1. MAN- the most important “M” of management. It refers to the people or
human resource.
2. MATERIALS- The main component in producing a product commonly
known as raw materials.
3. MONEY- Any good or token that functions as a medium of exchange.
4. MACHINES- Important tool that helps improve the efficiency and
effectiveness in producing a goods or services of a firm.
5. METHODS- series of steps which managers use with the purpose of
creating systematic process in achieving the goals and objectives of the
firm.

D. Total Quality Management (TQM)

 Introduced by quality experts W. Edwards Deming (1990-1993) and
Joseph M. Juran (1904-2008) eventually became the foundation of
today’s quality management practices.
 It is a management philosophy that focuses on the satisfaction of
customers, their needs, and expectations.
COURSE DESCRIPTION: ORGANIZATION AND MANAGEMENT
CHAPTER 1: NATURE AND CONCEPT OF MANAGEMENT
LESSON 3: FUNCTIONS, ROLES, AND SKILLS OF A MANAGER

LEVELS OF MANAGEMENT:
Top Level Management
 Also known as the executive level.
 It is the highest level of management.
 Top managers are responsible for the overall direction of the entire
organization.
 Often called strategic managers (future vision)
Examples: CEO, COO, President, Vice-President, BOD

Middle Level Management

 They are the middle managers.
 They are responsible for translating the general goals and plans that are
developed by strategic managers into more specific objectives and activities
(Bateman and Snell, 2008, p.23)
 Often called tactical managers. (Actual steps)
 Examples: Division Manager, Branch Manager, Area Manager, General Manager,
Department Manager
Front Line Management
 Also called first line managers or operational managers.
 They are responsible in training and motivating employees.
 They supervise and monitor the operational activities of the firm and they report
directly to the middle managers. (day-to day output)
 Examples: Store Supervisor, Section Heads

ROLE- is a set of behaviors that people are expected to perform because they hold certain
positions in an organization. (McShane &Glinow, 2008 p. 272)
 MINTZBERG’s 10 MANAGEMENT ROLES
 INTERPERSONAL ROLES- Involves interacting within and outside the
organization. The managerial roles in this category
involve providing information and ideas.
1. FIGUREHEAD- As a manager, you have social, ceremonial and legal
responsibilities.
2. LEADER- This is where you provide leadership for your team, your
department or perhaps your entire organization; you need to motivate
workers to work hard.
3. LIAISON– Managers must communicate with internal and external
contacts.
 INFORMATIONAL ROLES- Involve managing information from receiving,
collecting and analyzing the information. The managerial roles in this category
involve processing information.
1. MONITOR – In this role, you regularly seek out information related to your
organization and industry, looking for relevant changes in the environment.
2. DISSEMINATOR – This is where you communicate potentially useful
information to your colleagues and your team.
3. SPOKESPERSONS – Managers represent and speak for their organization.
In this role you're responsible for transmitting information about your
organization and its goals to the people outside it.
  DECISIONAL ROLE-It involves in making use of the information in arriving to
better solution to the problem or opportunity. The managerial roles in this
category involve using information.
1. ENTREPRENEUR – As a manager, you create and control change within the
organization. This means solving problems, generating new ideas, and
implementing them.
2. DISTURBANCE HANDLER – When an organization or team hits an
unexpected roadblock, it's the manager who must take charge. You also
need to help mediate disputes within it.
3. RESOURCE ALLOCATOR– You'll also need to determine where
organizational resources are best applied. This involves allocating funding,
as well as assigning staff and other organizational resources.
4. NEGOTIATOR – You may be needed to take part in, and direct, important
negotiations within your team, department, or organization.
SKILL- Is an ability or capacity that one possesses which may translate knowledge into
action that result in desired performance. (Schermerhorn, 1999 p. 15)
 MANAGEMENT SKILLS:
1. TECHNICAL SKILL - It is the ability which involves expertise performing a
specialized task.
2. INTERPERSONAL SKILL- Also known as people skills is an ability to lead,
motivate, encourage, inspire, understand and communicate directly with
individuals or group
3. CONCEPTUAL SKILLS- This is the ability which include identifying, thinking in
abstract, conceptualizing analytical situations and solving complex problems
with broader scope.
4. DECISIONAL SKILLS- It involves an ability of making decisions or resolving
problems. All managers are expected to possess these skills most especially the
top-level management.
COURSE DESCRIPTION: ORGANIZATION AND MANAGEMENT
CHAPTER 2: THE FIRM AND ITS ENVIRONMENT
LESSON 1: ENVIRONMENTAL FORCES AND ENVIRONMENTAL SCANNING

Business is an organization that converts inputs or resources such as materials,

labor, and overhead into outputs which are usually either goods and services to earn
profit.
COMPETITIVE ADVANTAGE
 Pertains to the distinguishing features or characteristics of a business organization
that enable it to perform better than rival organization.
CHALLENGES IN GAINING COMPETITIVE ADVANTAGE
 Environmental Uncertainty - pertains to the lack of complete information
about the current and future environment of the firm.
 Environmental Complexity - is the presence of numerous factors prevailing
in the environment that change over time. Pertains to political, economic,
social and technological (PEST) conditions.
BUSINESS ENVIRONMENT
 Defined as the total surroundings, which have a direct or indirect bearing on
the functioning of business.
 Refers to the factors or elements affecting a business organization. It can be
divided into external and internal business environment.
CLASSIFICATION OF BUSINESS ENVIRONMENT
 External Business Environment- refers to the factors/ elements outside the
organization which may affect, either positively or negatively, the performance of
the organization. These are the uncontrollable forces outside of your organization.
 Internal Business Environment- refers to the factors/elements within the
organization which may affect, either positively or negatively, the performance of
the organization. comprises of the activities inside your organization. These refer to
your controllable variables to achieve a set of objectives.
COMPONENTS OF THE EXTERNAL BUSINESS ENVIRONMENT: GENERAL AND SPECIFIC
 Systematic monitoring of the major external forces influencing organization is
necessary to improve the management of the companies. Failure to consider a
company’s general and specific business environment may affect the strategies that
management will make use. General Business Environment includes:
1. Economics- Economic situations such as inflation, rates of interest, changing
option in stock markets, and people’s spending habits may affect management
practices in organization. Ex: companies may postpone expansion plans if bank loan
interests are too high.
2. Sociocultural- include the customer’s changing values and preferences; customs
could also affect management practices in companies. Ex: Filipino customers are
now conscious about the importance of avoiding fatty foods, so many food
companies now make sure that the products they offer are cholesterol free or are
low in cholesterol. In doing so, they avoid losing their customers.
3. Political and legal- refers to national or local laws, international laws, and rules
and regulations that influence organizational management. Ex: labor laws related to
preventing employees from firing their employees without due process require the
former to allow the latter to exercise the right to present their position during
disciplinary action before their employment can be terminated.
4. Demographic – such as gender, age, education level, income, number of family
members, geographic origin, etc. Ex: decision regarding hiring of human resources
may be affected by an organization’s management policy that shows the prejudice to
 the hiring of married females who are in child-bearing age because they would like
to minimize payment of maternity benefits.
5. Technological – involve the use of varies types of electronic gadgets and advanced
technology such as computers, robotics, microprocessors, and others that have
revolutionized business management; e-commerce, tele-conferencing, and
sophisticated information systems have rapidly changed the ways that business is
conducted in the 21st century.
6. World and ecological- are related to the increasing numbers of global competitors
and markets as well as the nature and conditions of the changing natural
environment. Products produced by companies must cater the changing needs of
people in the global community, while, at the same time, considering their impact on
the natural environment. Ex: car manufacturing managers must give the go signal
for the development of vehicles that are environmental friendly instead of only
being focused on the product’s speed, fuel economy, and design.
Specific Business Environment includes:
1. Stakeholders – are parties likely to be affected by the activities of the organization.
2. Customers- are those who patronize the organization’s product and services.
Increasing customer satisfaction makes it necessary to managers of organizations to
make crucial decisions regarding the development of products with higher value
and the improvement of their services to meet their patrons’ increasing demands.
Also, this has prompted companies to solicit feedback from their customers to avoid
the dissatisfaction that may lead to patronize another company offering similar
products and services instead.
3. Suppliers- are those who ensure the organization’s continuous flow of needed and
reasonably priced inputs or materials (financial and labor supply) required for
producing their goods and rendering their services. Managers decide what, where,
and when to buy their supplies and which supplier to favor with their organization’s
supply orders.
4. Pressure groups- are special-interest groups that try to exert influence on the
organization’s decision or actions. Ex: pressure from FDA on some department
stores and drug stores led them to stop selling beauty products containing lead and
to stop ordering or importing such products from their suppliers.
5. Investor’s or owners - provide company with the financial support it needs. The
company cannot exist without them; thus, they greatly influence organizational
management. Top-level, middle-level, lower-level managerial decisions are all
influenced, in one way or another, by the investors or owners of organizations.
Offering new products and services and applying for needed loans are all affected by
the investors’ or owners’ way of thinking.
6. Employees- are comprised of those who work for another or for an employer in
exchange of salaries/wages or other considerations. Employees execute the
company’s strategies and are important for the maintenance of the company’s
stability. Ex: managerial decisions are influenced by the company’s knowledge
workers.

COMPONENTS OF THE INTERNAL BUSINESS ENVIRONMENT

The organization’s internal environment must be subjected to internal analysis. Internal
strengths and weaknesses, opportunities and threats (SWOT) with regards to its resources
(financial, physical, mechanical, technological and human resources), research and
development endeavors, production of goods, procurement of supplies (materials, inputs
and finance) and products and services must all be considered prior to organizational
planning.
Internal Business Environment includes:
 Resources
 Research and development
 Production or procurement of supplies
 Products and services it offers
ENVIRONMENTAL SCANNING

 It is a technique through which images or information are recorded or

gathered from conditions, situations and materials in the environment.
 It can be done through interviews, sharing ideas with others, reading,
observations and advertisement.
 It is a process to identify and assess all external and internal
factors/elements, which can affect the organization’s performance.
 Environmental scanning involves seeking for and sorting through data
about organization’s environment
 An analytical tool shows the interrelationships of important factors that
help one understand how things work. Since business enterprise
operates in a complex environment, analytical tool such as PEST and
SWOT analyses will help managers make right and relevant decisions.

ELEMENTS OF ENVIRONMENTAL SCANNING

 External Analysis examines the2 opportunities and threats in the firm based on
different forces in the environment (PEST). It also includes analysis of the
competitive forces in specific industry where the firms belong such as competitors,
buyers, suppliers, and substitutes for the firm’s product or service.
 Internal Analysis examines the strengths and weaknesses of a condition inside the
firm such as skills and competencies of employees, capacities of resources,
organizational culture, and team spirit.

PEST ANALYSIS
 PEST ANALYSIS- the most used detailed analysis of the environment. Refers to
Political, Economic, Sociocultural and Technological that describes a framework of
macro-environmental or the uncontrollable external factors used in doing an
environmental scanning for market research as part of the strategic management.
 It is said to be created by Francis Aguilar, a Harvard professor.
The letters in PEST denote the following things:
 P for Political factors- Pertain to legal regulations, political
orientations, government policies, and compliance procedures of
government bodies that affect or control the operation of the firm.
 takes the country’s current political position. Some political factors that
you can study are:
Government policies
Taxes laws and tariff
Stability of government
Entry mode regulations
 E for Economic factors- involves all the determinants of the economy
and its state. These include employment rates, income levels, inflation
rates, savings and investment rates, insurance rates, and monetary
policies. Some economic factors affecting your business are listed
below:
The inflation rates
The interest rates
 Disposable income of buyers
Credit accessibility
Unemployment rates
The monetary or fiscal policies
The foreign exchange rates
 S for Socio-Cultural factors- These are people’s characteristics and
lifestyles that impinge on the operation of the firm such as demographic
factors, social norms, customs, and values. It refers to the distinctive
mindset of each country. These might ultimately affect the sales of
products and services. Some of the social factors you should study are:
The cultural implications
The gender and connected demographics
The social lifestyles
The domestic structures
Educational levels
Distribution of Wealth
Five Cultural Dimensions by Geert Hofstede
 Power Distance- the degree to which a society accepts
or rejects the unequal distribution of people among
people in organization and the institution of society.
 Uncertainty Avoidance- the degree to which society is
uncomfortable with risk, change, and situational
uncertainty.
 Individualism-Collectivism- the degree to which
society emphasizes individual accomplishment versus
collective accomplishments.
 Masculinity-Femininity- the degree to which a society
values assertiveness and feeling of material success
versus concern for relationships.
 Time Orientation - the degree to which a society
emphasizes short-term thinking versus greater concern
for the future or long-term thinking.

 T for Technological factors – Recent advancements in technology

have led to great strides in product innovations, process improvements,
and integrated systems in manufacturing and service sector.
Innovations, access to technology, licensing, manufacturing, research
funding, global communications are technology advancement that
greatly influencing the business. Technological factors will help you
know how the customers react to various trends.
Firms can use these factors for their benefit:
New discoveries
Rate of technological obsolescence
Rate of technological advances
Innovative technological platforms
 NATURAL RISKS- Added to PEST analysis is the presence of natural
risks in the environment due to vulnerability to natural disasters.
Natural risks include strong typhoons that may cause massive flooding
and landslides, earthquakes, volcanic eruption, tsunamis, and storm
surges.

IMPORTANCE OF PEST ANALYSIS

 Pest Analysis helps the business spot opportunities and red flags on significant
threats. It guides the direction of change within business environment and
 contributes to avoid starting projects that are likely to fail for reasons beyond the
control of the business firm. It can also help loosen up unconscious assumptions
when for instance the firm plans to enter a new country, venture a market or region
because it helps to see the big picture of the environment.

SWOT ANALYSIS

 It is a planning tool used to understand the Strengths, Weaknesses, Opportunities

and Threats involved in a project or in a business. Albert Humprey, American
business and management consultant who first tested SWOT Analysis.

 Strengths- are the capital, knowledge, skill or other advantage that the
firm has or can acquire over its competitors in meeting the needs of its
customers. These the advantages or the internal attributes that support
a positive result, or edge that you have over your competitor.
 Weakness- refers to the internal defect or shortcoming which increases
the risk of the failure or lowering organizational performance. These
are the disadvantages or internal characteristics that work against a
successful outcome compared to the competitors.
 Opportunity- means good position, chance or prospect as for the
advancement or success. These refers to the current external factors or
trends that can be used to be taken advantage.
 Threats- refer to the negative external forces that inhibit the firm’s
ability to achieve its objective. These are current external factors which
cause a problem to cause a negative impact and can jeopardize the
business.

IMPORTANCE OF SWOT ANALYSIS:

 It will help you FOCUS or CAPITALIZE on your Strengths, OVERCOME Weaknesses,

MINIMIZE threats, and TAKES ADVANTAGE of the Opportunities available in the
community.
COURSE DESCRIPTION: ORGANIZATION AND MANAGEMENT
CHAPTER 2: THE FIRM AND ITS ENVIRONMENT
LESSON 2: THE LOCAL AND INTERNATIONAL BUSINESS ENVIRONMENT OF THE FIRM

THE LOCAL AND INTERNATIONAL BUSINESS ENVIRONMENT OF THE FIRM

 Competitive Advantage – pertains to the distinguishing features or characteristics
of a business organization that enable it to perform better than rival organization.
 Environmental uncertainty – pertains to the lack of complete information about
the current and future environment of the firm.
 Environmental complexity- is the presence of numerous factors prevailing in the
environment that change over time. Pertains to political, economic, social and
technological conditions.
 Local business environment – pertains to the specific industry to which the
companyg belongs an directly deals with.
 International business environment – pertains to business activities performed by
companies operating in foreign locations.
 Industry – is a group of companies offering the same or similar products or services.

ROLE OF BUSINESS IN RELATION TO THE ECONOMY

The surviving enterprise is responsible for providing the following:
1. Products and services for the consumers and producers.
 Products offered for sale reveals a wide choice provided to the customers.
 Services which were not previously available are now at the beck and call of
the customers.
 Continuously innovate and develop new products and services based on what
they perceive to be the needs of the society. They also look for ways by which
these goods and services could be efficiently produced. The development of
new product and the delivery of needed services make life easier and
comfortable for society.
2. Employment
 When entrepreneurs put up business, they often need to hire at least one or
two other people in order to get things done. A review of the statistical
reports by the government shows that the employment generated by the
business organized by entrepreneurs runs to billions of persons.
3. Taxes
 The taxes paid to the government in the form of licenses, fees and permits
applicable to the enterprises, as well as income taxes applicable to the
employees and the entrepreneurs, amount to billions of pesos. The taxes
collected are, in turn, poured into the development efforts of the government.
4. Demand for suppliers’ products and services
 Enterprises also make sure that the suppliers will have a ready market for
their products and services.
5. Training facilities for future entrepreneurs.
 A number of entrepreneurs were formerly employees of enterprising persons.
Many of them acquired skills in opening new business.
THE DIFFERENT PHASES OF ECONOMIC DEVELOPMENT
Developing Economic Phase: Reliance on Agricultural as the Primary Sector
 Agricultural sector typically plays a dominant role in the economy as compared to
other sectors (industry and service). Transformation of the agricultural sector lead
to higher productivity and increased in income of people.
Industrialization Phase: Decline in Agriculture and Shift in the Industry Sector
 Transition from “traditional” to “modern” economy, characterized by the following
factors:
 Increased in consumer demand
 Increased in incomes
 Growth in the labor force
 Accumulation of capital
 Introduction of new technologies.
Globalization Phase: Interdependence Among Countries and Worldwide
Competition.
 “Global economy” that is characterized by worldwide business competition and the
wide scope for markets and supply of resources that go beyond national borders.

FORMS OF BUSINESS ORGANIZATIONS

1. SOLE PROPRIETORSHIP- a sole proprietorship is a business owned and operated
by a single person.The individual or person who owns this type of business is
referred to as Proprietor.
Advantages of Sole Proprietorship:
1. Ease and cost of formation
2. Secrecy
3. Distribution and use of profits
4. Control of the business
5. Government regulation
6. Taxation
7. Closing the business
Disadvantages of Sole Proprietorship
1. The owner’s possible lack of ability and experience
2. The difficulty in attracting and keeping quality employees
3. The difficulty in raising the capital
4. The limited life of the firm
5. The unlimited liability of the proprietor
2. PARTNERSHIP- is a legal association of two or more persons as co-owners of an
unincorporated business. The group of individuals who own the partnership is
referred to as Partners.
Advantages of Partnership
1. Ease of formation
2. Pooling of knowledge and skills
3. More funds available
4. Ability to attract and retain employees
5. Tax advantage
Disadvantages of Partnership
1. Unlimited liability
2. Limited life
3. Potential conflict between partners
4. Difficulty in dissolving the business
TYPES OF PARTNERSHIP ACCORDING TO LIABILITY
 1. General Partnership-is an association of two or more persons, each
is unlimited liability, who are actively involved in the business.
2. Limited Partnership- is an arrangement in which the liability of one
or more partners is limited to the amount of assets they invested in
the business.
3. CORPORATION- this business form is initiated by individuals called incorporator,
numbering from minimum of five to a maximum of fifteen. A corporation is “a
legally chartered enterprise with most of the legal rights of a person, including the
right to conduct a business, to own and sell property, to borrow money and sue or
be sued.” To get additional capital, shares of stocks are sold to interested parties
called the stockholders. They are issued certificates of ownership called stocks.
Advantages of Corporations
1. Limited liability
2. Ease of expansion
3. Ease of transferring ownership
4. Relatively long life
5. Greater ability to hire specialized management
Disadvantages of Corporations
1. More expensive and complicated to organize
2. Double taxation
3. More extensive government restrictions and reporting requirements
4. Employees lack the personal identification with and commitment to
zcorporate goals than those for sole proprietorship and partnership.

CHAPTER 3: PLANNING

PLANNING- is the process of determining objectives and organizational goals, establishing

strategies and integrating coordinated activities in the organization to achieve the goals
and objectives.
 It sets a direction for an organization in achieving its goals. It plays an important
part in the success of meeting organizational objectives.
TYPES OF PLANS
1. SINGLE USE PLANS- It is a set of activities designed for a specific goal that is
unlikely to be represented in the future.
 Are used once to meet the needs of well-defined situations in a
timely manner. Example: Budget (commit resources to activities,
projects or programs)
2. STANDING PLANS- It is an ongoing plan designed without a determined time
period. It is often created to achieve a continuing set of goals.
 These are usually policies, rules, procedures and programs
developed to serve as a guidelines or methods to be followed in
accomplishing particular objectives.
3. CONTINGENCY PLANS- Managers must be able to detect changes before they
happen. It’s about thinking ahead and preparing for the worst-case scenario.
 It involves identifying an alternative course of action to be taken
and implemented if the initial plans do not work due to
uncontrollable events.
BENEFITS OF PLANNING
1. Planning reduces uncertainty.
2. Planning create goals that is used in controlling.
3. Planning gives direction
4. Planning improves performance of the people within an organization.
5. Planning improves coordination of work.
PLANNING AT DIFFERENT LEVELS OF THE FIRM
LEVEL OF MANAGEMENT TIME HORIZON
Strategic Planning Top 3-7 years
Tactical Planning Middle 1-3 years or less
Operational Planning Frontline Less than 1 year

A. STRATEGIC PLANNING- involves analyzing and determining objectives and

deciding what actions are needed to be taken to achieve them.
 Top managers are responsible for the development of the plan.
The length of the planning horizon will cover 3-7 years that is why
it is called long range planning.
B. TACTICAL PLANNING- is a set of procedures for translating broad strategic goals
and plans into specific goals and plans that is relevant to distinct portion of the
organization.
 Middle managers are responsible in the creation of the tactical
plans length of horizon will cover 1-3 years or less.
 It is important that a tactical planning is aligned with the strategic
planning.
C. OPERATIONAL PLANNING- it deals with limited scope and focus on specific areas.
It process of setting short-range objectives and determining in advance how they
will be accomplished.
 Frontline or operational managers are the one responsible in
developing this plan. The length of horizon usually covers less
than one year.

THE NATURE OF A GOAL IN ORGANIZATION

GOALS- are desired outcome or targets that needs to be accomplished by an individual
or the entire organization. Before planning is set in an organization, it needs to establish
a set of goals or objectives to serve as a foundation of the planning.

CHARACTERISTICS OF GOAL
 A goal should be S.M.A.R.T.
SPECIFIC- it means that goal must be accurate and well defined.
MEASURABLE- it pertains that goal have to be quantifiable.
ATTAINABLE- it refer that goal need to be achievable and manageable.
RELEVANT- it means that goal be important and significant.
TIME-BOUND- it means that goal should have a target date or date of completion.

TYPES OF GOALS

SHORT-TERM GOAL- is a type of goal that needs to be achieved in a short period of time.
LONG-TERM GOAL- is a type of goal that deals in the future because it need to be achieve
over a longer period of time and typically not achievable in one simple step.

THE IMPORTANCE OF DECISION MAKING

DECISION MAKING- is a process of choosing and selecting best possible alternatives; a
decision is useless unless they are not acted on or implemented.

TYPES OF DECISIONS
A. PROGRAMMED DECISION- is a type of decision that is highly structured wherein
procedures in a decision are provided with predetermined decision rules.
 Are made in response to repetitive situation.
B. NON-PROGRAMMED DECISION- is a type of decision that is unstructured with no
clear procedures for making a decision.
  It deals with developing or creating a possible solution and all
alternatives should be evaluated.

BASIC DECISION-MAKING PROCESS

1. Identify the problem- this is the first stage of decision making. It involves the
assessment of the situation.
2. Gather information about the problem- to collect all the necessary information
related to the problem. In this stage, managers are expected to find source of the
problem to better understand the scenario in order to realize what kind of
information is needed.
3. Develop alternative solutions- to generate alternatives. Brainstorming is one of
the best decision making methods; it is also a good method in alternative solutions.
4. Analyze the alternatives- a manager needs to determine the advantages and
disadvantages of each alternative. It is necessary to include the different factors
such as the benefits, the costs, the acceptability, the impact and the risk involved.
5. Select the best alternative-to choose the best alternative. This is the most crucial
stage of decision making process. A manager needs to realize the best possible
alternative also known as maximizing and not just choosing an alternative that is
acceptable enough that meets the minimal requirements but not necessarily the
perfect one which is commonly known as satisfying.
6. Implement the alternative- to put things in action. For an implementation to be
able to succeed, commitment and proper motivation from the manager and other
people who are involved in a decision process is needed.
7. Evaluate the decision- this is the final step of the decision-making process. A
manager needs to examine the consequences of the decision both positive and
negative. An evaluation system should provide feedback especially if the desired
state was not achieved. A corrective action is necessary. This only proves that a
decision making is a ongoing process.

IMPORTANCE OF MISSION AND VISION

MISSION STATEMENT- is the reason for organization’s existence. It serves as a basis for
organizational goals which provides more detail. Managers often times use mission
statement as a guide in making decisions because it focuses on the company’s present state.

VISION STATEMENT- is a mental image of a possible and desirable future state of the
organization. The best visions are ideal and unique. It sets the direction to the organization.
It simply answers the question “Where do you want to go?”

CRITERIA IN PREPARING MISSION STATEMENT

 It should be clear and easily to be understood
 If possible keep it short the ideal mission statements tend to have three to four
sentences.
 It should describe what your company does, who does it for, how you do it and why.
 It should include the core competencies, values, moral, and ethical positions that are
expected in your business.
 It should be able to with stand the changes and aim for the substances by putting
your mission statement at work.

CHAPTER 4: ORGANIZING
 According to Robbins, organizing is defined as arranging and structuring work to
accomplish organizational goals. It is also defined as the management function that
determines how the firm’s resources are arranged and coordinated; the deployment
of resources to achieve strategic goals.
ORGANIZATIONAL STRUCTURE
 It is the formal arrangement of jobs within an organization. It is the arrangement of
people and tasks to accomplish organizational goals.
DEPARTMENTALIZATION
 It is the process of subdividing the work into departments.
 TYPES OF DEPARTMENTALIZATION
1. FUNCTIONAL DEPARTMENTALIZATION- is an arrangement that defines
departments by the function each one performs, such as accounting and
purchasing.
CEO and President

Vice President Vice President Vice Presidents

Marketing Operations Accounting

2. GEOGRAPHIC DEPARTMENTALIZATION- is an arrangement of departments

according to the geographic area and/or territory served

Country Sales Manager

Sales Supervisor Makati Sales Supervisor Vice Presidents

Area Manila Area Accounting
3. PRODUCT-SERVICE DEPARTMENTALIZATION- is the arrangement of
departments according to the products or services they provide.
Chairman and CEO of
ABC, Inc.

Real Estate Development Telecommunications Food and Beverages

ORGANIZATIONAL DESIGN
 It is a process that involves decisions about the following six elements: work
specialization, chain of command, span of control, centralization, decentralization
and formalization.
JOB DESIGN
 It is a process of laying out the job responsibilities and duties. It also includes the
description on how these are performed.
JOB SPECIFICATION
 It refers to the list of the knowledge, skills, abilities, and other characteristics that an
individual must have to perform a particular job.
FOUR DIMENSIONS OF JOB DESIGN:
1. TASK CHARACTERISTICS- refers to the focus on how the work itself is
accomplished, the range and nature of the tasks associated with a particular job. It
can be expressed in four sub-dimensions:
 a. AUTONOMY- refers to how much freedom and independence the incumbent
has to carry out in his or her work assignment.
b. TASK VARIETY- refers to the degree to which the job requires the worker to
use a wide range of tasks.
c. TASK IDENTITY- reflects the extent to which a job involves a whole piece of
work that can readily be identified.
d. FEEDBACK FROM JOB- refers to the extent to which the job provides direct
and clear information about task performance.
2. KNOWLEDGE CHARACTERISTICS- refers to an obvious job dimension. It is the
demand for knowledge, skill and ability placed on a job holder because of the
activities built into the job. It is expressed into five sub dimensions:
a. JOB COMPLEXITY- refers to the degree of the job tasks are. This measure the
complexity and difficulty the job is to perform.
b. INFORMATION PROCESSING- refers to the degree a job requires attending to
and processing of data and information.
c. PROBLEM SOLVING- refers to the degree a job requires unique ideas or
solutions. It also involves diagnosing and solving non-routine problems and
either preventing or fixing errors.
d. SKILL VARIETY- refers to the extent a job requires the incumbent to use a
variety of skills to perform the work.
e. SPECIALIZATION- refers to the extent a job involves performing specialize tasks
or processing specialized knowledge and skill.
3. SOCIAL CHARACTERISTICS-relate to the interpersonal aspects of a job or the
extent the job requires interaction with others. It can be expressed in three sub-
dimensions:
a. INTERDEPENDENCE- reflects the degree the job depends on others-and others
depend on the job- to accomplish the task.
b. INTERACTION OUTSIDE THE ORGANIZATION- refers to how much the job
requires the employee to interact and communicate with people outside the
organization.
c. FEEDBACK FROM OTHERS- refers to the extent other workers in the
organization provide information about performance.
4. CONTEXTUAL CHARACTERISTICS- refers to the setting or environment of the job,
such as working in extreme temperatures. It can be expressed in four sub-
dimensions:
a. ERGONOMICS- indicates the degree to which a job allows correct posture or
movement.
b. PHYSICAL DEMANDS- refer to the level of physical activity or effort required for
the job, particularly with respect to physical strength, endurance, effort and
activity.
c. WORK CONDITIONS- relate to directly to the environment the work is
performed. It includes the presence of health hazards, noise, temperature, and
cleanliness of the workplace.
d. EQUIPMENT USE- reflects the variety and complexity of the technology and
equipment incorporated in to the job.
JOB SPECIALIZATION
 According to Dubrin, job specialization is the degree a job holder performs a limited
number of tasks.
 Advantages:
1. When employees perform the same task repeatedly, they become highly
knowledgeable and highly skilled.
2. Many employees derived status and self-esteem from being experts at some task.
3. Specialize jobs at lower occupational levels require less training time and less
learning ability.
 Disadvantages:
 1. Coordinating the work force can be difficult when several employees do small
parts on the job.
2. Somebody must take responsibility for pulling together the small pieces of the
total task.
3. They become bored by performing a narrow range of tasks.
JOB DESCRIPTION
 It is a written statement of the key features of a job along with the activities
required to perform effectively by the job holder.
JOB ENRICHMENT
 It is an approach in including more challenges and responsibilities in jobs to make
them more appealing to employees.
 Characteristics of job enrichment:
1. DIRECT FEEDBACK- employees should receive immediate evaluation of their
work.
2. CLIENT RELATIONSHIP- A job is automatically enriched when an employee has
a client or customer to serve.
3. NEW LEARNING- enrichment allows its holder to acquire new knowledge.
4. CONTROL OVER METHOD- when worker has some control over which method
to choose to accomplish a task, his or her task motivation generally increases.
5. CONTROL OVER SCHEDULING- The ability to schedule one’s work contributes
to job enrichment.
6. UNIQUE EXPERIENCE- an enriched job exhibits unique qualities or features.
7. CONTROL OVER RESOURCES- Another contribution to enrichment comes from
having some control over resources such as money, material or people.
8. DIRECT COMMUNICATION AUTHORITY- An enriched job provides workers
the opportunity to communicate directly with people who use their output.
9. PERSONAL ACCOUNTABILITY- In an enriched job, workers take responsibility
for their results.