BUSINESS OPERATION SKILLS- KIM

104 Session 01:Introduction to Business

Presented by Muhammad Mahbub Alam FCA
Learning Objectives from this session

After the session the learners will be able to

¨ identify the meaning of Organization and its types

¨ identify the reasons why businesses exist
¨ identify the meaning of Business and its objectives
¨ identify who the stakeholders are in an individual business
¨  understand the business’s vision, mission, goals of a business
¨ identify the managements and their Power, authority, responsibility, accountability and
delegationof
¨ able to know about management ,types of manager and management functions
¨ able to know The Business Model and also enhance knowledge on different Business Model
¨ Able to know about different management theories and its application in business
What is Organization?
Organization: A social arrangement for the controlled performance of
collective goals which has a boundary separating it from its environment.

There are many different types of organization in both the not-for-profit and business
sectors.Here are some examples of organizations, categorized as to whether they
are profit-oriented or not-for-profit.

¨ A multinational car manufacturer (e.g. Ford)

¨ An accountancy firm (e.g. KPMG)
¨ A charity (e.g. UNICEF)
¨ A trade union
¨ A local authority
¨ An army
¨ A club
Why do organization Exist?

¨ Overcome people's individual limitations, whether physical or

intellectual
¨ Enable people to specialize in what they do best
¨ Save time, because people can work together or do two aspects of a different
task at the same time
¨ Accumulate and share knowledge (e.g. about how best to build cars)
¨ Enable people to pool their expertise
¨ Enable synergy; the combined output of two or more individuals working
together exceeds their individual output ('None of us is as smart as all of us').
In brief, organizations enable people to be more productive.
  
How do organizations differ?
Factors Example
Private sector: owned by private investors/shareholders
Ownership (public vs private) Public Sector: Owned by the nation and managed by the government

Control By the owners themselves, by people working on their behalf, or

indirectly by government-sponsored regulators
Activity (i.e. what they do) Manufacturing, healthcare, services (and so on)
Profit or non-profit orientation Business exists to make a profit. An army or a charity, on the other
Size Small local business to multinational corporation
Legal status Company, or an unincorporated body such as a club, association,
Sources of finance Borrowing, government funding, share issues
Technology High use of technology (e.g. computer firms) v low use (e.g. corner shop)
Differences in what organizations do ?
Industry Activity
Agriculture Producing and processing food

Manufacturing Acquiring raw materials and, by the application of labour and technology, turning them
into a product (e.g. a car)

Extractive/raw materials Extracting and refining raw materials (e.g. mining)

Energy Converting one resource (e.g. coal) into another (e.g. electricity)

Retailing/distribution Delivering goods to the end consumer

Intellectual production Producing intellectual property e.g. software, publishing, films, music etc

Service industries These include banking, various business services (e.g. accountancy,
advertising) and public services such as education and medicine
Introduction to Business
 Business: A business is an organization which aims to maximize its owner’s wealth and it can
be regarded as an entity separate from its owner.

 A business is defined as an organization or enterprising entity engaged in commercial,

industrial, or professional activities.

 The term business also refers to the organized efforts and activities of individuals to produce
and sell goods and services for profit. Businesses range in scale from a sole proprietorship to an
international corporation. 

 Business’s Objective: Every business has a hierarchy of objectives :

 
Primary Objective: Secondary Objective:
Profit/Wealth Maximization, Market Position,
Profit Satisficing, Product Development,
Revenue Maximization Technology,
Employee and Management.
Social Responsibility
Stake Holder of Business
 Stake Holder: A stakeholder is a person who has some kind of interest or stake in the business.

Primary Stake Holders : Share holders/Partners/Proprietors

Directors, Managers, Employee, Trade Union,

Secondary Stakeholders :
Customers, Suppliers, and others BP, Lenders, Government and its agencies,
The local community The public at large and The natural environment.
Business’s Vision, Mission and Goals
Vision

Mission

Goals

Non-operational Operational
/Qualitative Goals /Quantitative Goals

Aims Objectives

SMART
 Vision
A vision is a vivid mental image of what you want your business to be at some point in the
future, based on your goals and aspirations. Having a vision will give your business a clear
focus, and can stop you heading in the wrong direction.

Vision Statement is a statement of what is possible, the picture of the future you want to create.
Example of Vision

Google's corporate vision is “to provide access to the world's information in one

click.”

Microsoft (at its founding): A computer on every desk and in every home.

Facebook: Connect with friends and the world around you on Facebook.

LinkedIn: Connect the world's professionals to make them more productive and
successful.

Amazon: Our vision is to be earth's most customer-centric company; to build a

place where people can come to find and discover anything they might want to buy
online.
Our Vision
 Mission
 Mission Statement will turn your vision into practice. A sentence describing a company's function,
markets and competitive advantages; a short written statement of your business goals and
philosophies.

 A mission statement defines what an organization is, why it exists, its reason for being.

 ORGANIZATIONAL MISSION is the purpose for which the Organization exists. The

firms organizational mission reflects such information as what types of products or services it
produces, who its customers tend to be, and what important values it holds.

 The elements of mission:

 Purpose : Why do organization exist and for whom

 Strategy : What and how we do it
 Policies and standards of behavior :
 Values : What the organization believes to be important
Example of Business Mission

Google: Our mission is to organize the world's information and make it universally accessible and
useful.

Microsoft :is technology company whose mission is to empower every person and every

organization on the planet to achieve more. We strive to create local opportunity, growth, and impact
in every country around the world.

Facebook:"bring the world closer together". Our full mission statement is: give people the power
to build community and bring the world closer together.

LinkedIn: mission statement is to “connect the world's professionals to make them more productive
and successful.” 

Amazon: Our mission is to continually raise the bar of the customer experience by using the
internet and technology to help consumers find, discover and buy anything, and empower
businesses and content creators to maximize their success. We aim to be Earth's most customer
centric company.
 Goal
 Goals: The intentions behind decisions or actions or a desired end result. Goals give flesh to the
mission. Goals are two types:

o Non-Operational _Qualitative goals (Aims).

o Operational _ Quantitative goals (Objectives)

Operational goals (Objectives) should be SMART

Specific
Measurable
Achievable
Relevant
Time-bound
Managing a Business
Management: Management means getting things done through other people. Managers act on
behalf of owners in the organization.
The need for Management:

 Objectives have to be set for the organization.

 Somebody has to monitor progress and results to ensure that objectives are met.
 Somebody has to communicate and sustain corporate values, ethics and operating principles.
 Somebody has to look after the interests of the organisation's owners and other stakeholders

Governance: Governance is the system by which an organisation is directed and controlled.

Governance incorporates concepts of ethics, risk management and stakeholder protection,
extending way
beyond management alone.

What is needed for effective management: Businesses have a large number of different
activities to be co-ordinated, and large numbers of people whose co-operation and support is
necessary for a manager to get anything done. There are a number of significant forces at work in an
organisation, which need to be managed by managers.
Forces of an organization
Power, authority, responsibility, accountability and delegation (Forces of an
organization):

Power: The ability to get things done. Power is not something a manager 'has' in isolation: it is
exercised over other individuals or groups, and to an extent – depends on their recognising the
manager's power over them.

Delegation: The principle of delegation is that a manager may make subordinates responsible for
work, but remains accountable to his or her own manager for ensuring that the work is done, that
s/he retains overall responsibility.

Authority: The right to do something, or to ask someone else to do it and expect it to be done.
Authority is thus another word for position or legitimate power.

Responsibility: The obligation a person has to fulfil a task which s/he has been given.

Accountability: A person's liability to be called to account for the fulfilment of tasks s/he
has been given by persons with a legitimate interest in the matter.
Manager’s Types
French and Raven classified power into six types or sources:

Types of manager: Manager in a business can be classified according to the

types of authority they hold.

i A line manager - A line manager has authority over a subordinate.

A staff manager - has authority in giving specialist advice to another manager or

department, over which they have no line authority.

A functional manager has functional authority, a hybrid of line and staff authority,
whereby the manager has the authority.

A project manager has authority over project team members in respect of the project in
progress; this authority is likely to be temporary (for the duration of the project) and the
project team are likely still to have line managers who also have authority over them.
Business’s Functions
The key function of any Business are
The key functions in any business are:
Marketing ,including sales and customer services
Operations orProduction,including R&D and procurement(R&D)
Human resource
Finance
What is Management
“Management is the art of getting things done through and with people in formally organized groups.’’

- Harold Koontz. “ The Management Theory Jungle”

“To manage is to forecast and to plan, to organize, to command, to co-ordinate and to control.’’

- Henri Fayol. “Industrial and General Administration”

“Management is a multi-purpose organ that manages business and manages managers and manages
workers and work.’’

- Peter Drucker. “The Principles of Management”

Features of Management
 Continuous and never ending process.
 Getting things done through people.
 Result oriented science and art.
 Multidisciplinary in nature
 A group and not an individual activity
 Follows established principles or rules
 Aided but not replaced by computers.
 Situational in nature.
 Need not be an ownership
 Both an art and science.
 Management is all pervasive
 Management is intangible
 Uses a professional approach in work
 Dynamic in nature
Functions of Management
 Fayol's six primary functions of management, which go
hand in hand with the Principles, are as follows:
1.Forecasting. we can describe
2.Planning. following function
3.Organizing. as management
4.Commanding. function:
5.Coordinating.
6.Controlling.
 According to George & Jerry, “There are four
fundamental functions of management i.e. planning,
organizing, actuating and controlling”.  Planning and Forecasting
 Whereas Luther Gullick has given a keyword  Organizing
’POSDCORB’ where P stands for Planning, O for  Staffing
Organizing, S for Staffing, D for Directing, Co for Co-  Co ordination
ordination, R for reporting & B for Budgeting.
 Motivation
 But the most widely accepted are functions of  Direction
management given by KOONTZ and O’DONNEL i.e.
 Controlling
Planning, Organizing, Staffing, Directing and
Controlling.
Planning and Forecasting
The plan is the synthesis of the various forecasts; annual, long-term , mid term short term,
special, etc. Planning without forecasting proves to be wasteful and useless.

Planning Process: The

development of goals, strategies, task
lists and schedules required to
achieve the objectives of a business.
The planning process is a
fundamental function of management
and should result in the best possible
degree of need satisfaction given the
resources available.
Organizing
Organizing is a systematic process of structuring, integrating, coordinating task goals, and
activities to resources in order to attain objectives.

The process of organizing refers to identifying and grouping of activities to be performed,

defining and delegating authority, casting responsibility and establishing relationships to
enable people to work together effectively in accomplishing objectives.

Process of Organizing
The process of organizing consists of the following steps:

1. Determining the activities to be performed to achieve the objectives of the organization.

2. Identification of major functions to which these activities relate.
3. Grouping and sub-dividing the activities within each function on the basis of similarity
or relatedness.
4. Establishing relationship among individuals and groups.
Staffing
Staffing is an operation of recruiting the employees by evaluating their skills, knowledge ,
experience and then offering them specific job roles.
Staffing process involves determination of manpower requirements, recruitment, selection,
placement, training, development, job transfer and appraisal of personnel to fill the various
positions in an organization.
Co Ordination
Coordination leads to unity of action. It is essential at every level of management in order to
achieve the organizational goal. Coordination is a process of binding the activities of various
departments and persons in the organization so that the desired goal can be easily achieved.
Motivation
Motivation is an inner motive that encourages human behavior. Motivation can be activated by various stimuli
(stimulating or motivating factors). Motivation is closely related to human performance.
Direction
DIRECTING is said to be a process in which the managers instruct, guide and oversee the
performance of the workers to achieve predetermined goals. Directing is said to be the heart of
management process. Planning, organizing, staffing have got no importance
if direction function does not take place.
Controlling
Control, or controlling, is one of the managerial functions like planning, organizing, staffing and
directing. Control in management means setting standards, measuring actual performance and taking
corrective action.
What is a Business Model?
A business model is a conceptual structure that supports the viability of the business and explains how it operates,
makes money, and how it intends to achieve its goals.

All the business processes and policies that a company adopts and follows are part of the business model.

According to management guru Peter Drucker:

“A business model is supposed to answer who your customer is, what value you can create/add for the
customer and how you can do that at reasonable costs.”

Thus, a business model is a description of how a company creates, delivers, and captures value for itself as well as
the customer.

In more simple terms, every business model intrinsically has three parts –
 everything related to designing and manufacturing the product
 everything related to selling the product, from finding the right customers to distributing the product
 everything related to how the customer will pay and how the company will make money
Business Model
A business model describes the rationale of how an organization creates, delivers, and captures value, in
economic, social, cultural or other contexts. The process of business model construction and modification is also
called business model innovation and forms a part of business strategy.

Business model innovation:

Types of Business Model
# Business Model Description Examples

Makes physical assets and sells directly to the consumer Nike, Dell, Apple
1 MANUFACTURER
Makes physical assets and sells to Distributors or Retailers Intel, Sony, Johnson & Johnson

To create an intangible good and sell it to others. The sale of

This business model is virtually non-
2 INVENTOR the Intangible Asset can be conducted directly by the Inventor
existent for a public company.
or through Distributors or Brokers.

This business model (creating a company

An Entrepreneur is either a company or individual that
3 ENTREPRENEUR then selling it) is very rarely pursued by
creates and sells companies
public companies as a business model.

A Wholesaler/Retailer is a Distributor who buys and sells

WHOLESALER/RETAILE Wal-Mart, Amazon, Meena Bazar, Fair
4 physical assets without changing the fundamental nature of
R distribution
those assets.

A Financial Trader buys and sells financial assets without Alliance Capital Asset Managment Ltd,
5 FINANCIAL TRADER
significantly altering them. Shanta Asset Management Ltd.

Where a person or entity either creates or purchases a

6 PHYSICAL LANDLORD physical asset and sells (rent, lease or admission) a limited Hotel Radisson blu, Rent-a-Car
right to a customer to use that property.
Types of Business Model
# Business Model Description Examples
INTELLECTUAL Publishers provide limited use of information assets (software, video,
7 PROPERTY LANDLORD- audio, database) in return for a purchase price, subscription or Netflix, Microsoft, Apple (iTunes).
Publisher license fee.
INTELLECTUAL
A Brand Manager (Franchisor) leases the limited use of a trademark
PROPERTY LANDLORD-
8 or other elements of a brand (trade secrets, process knowledge) to a McDonald’s, KFC
Brand Manager
customer (Franchisee).
( Franchisor)
INTELLECTUAL
An Attractor publishes information IP products to gain the attention
9 PROPERTY LANDLORD- Prothom alo, Bdnews24.com
of potential customers.
Attractor
A Contractor sells a service provided primarily by people to a
CONTRACTOR –
customer. Common contractor services are, but not limited to:
10 LANDLORD OF HUMAN Accenture, KPMG
consulting, construction, education, tax and legal services, personal
LABOR
care, package delivery, live entertainment and healthcare. 
A lender provides cash to a customer on the condition that, within a
FINANCIAL LANDLORD-
11 predetermined timeframe, the customer agrees to pay back the Sonali bank, SCB, HSBC
Lender
amount borrowed plus a fee (interest).
FINANCIAL LANDLORD- Insurers provide their customers conditional financial reserves in
12 Met Life, Green delta
Insurance exchange for a fee (premium). 
13 FINANCIAL BROKER Financial Brokers match buyers and sellers of financial assets. Brokarage house, Marchent bank
Types of Business Model
# Business Model Description Examples
A Physical Broker matches buyers and sellers of physical assets. A
14 PHYSICAL BROKER physical broker may connect buyers and sellers of physical assets or Bikroy.com, Airbnb.
owners and renters of physical assets.
LinkedIn, BD jobs
HUMAN RESOURCES A Human Resources (HR) Broker matches buyers and sellers of human
15
(HR) BROKER services.
Management Theories
Scientific Theory by Fredrik W. Taylor
Scientific management is a theory of management that analyzes and synthesizes workflows. Its
main objective is improving economic efficiency, especially labor productivity

Basic elements of scientific management:

1. Work Study
2. Standardization of Tools and Equipment
3. Scientific Selection, Placement and Training
4. Development of Functional Foremanship
5. Introducing Costing System
6. Mental Revolution
Scientific Theory by Fredrik W. Taylor
Principles of Scientific Management:

1. Replace working by "rule of thumb," or simple habit and common sense, and instead use the
scientific method to study work and determine the most efficient way to perform specific tasks.

2. Rather than simply assign workers to just any job, match workers to their jobs based on capability
and motivation, and train them to work at maximum efficiency.

3. Monitor worker performance, and provide instructions and supervision to ensure that they're using
the most efficient ways of working.

4. Allocate the work between managers and workers so that the managers spend their time planning
and training, allowing the workers to perform their tasks efficiently
Administrative Theory by Henri Fayol
Principles of management:
 Division of work
 Authority and responsibility
 Discipline
 Unity of command
 Unity of direction
 Subordination of Individual Interest to General Interest
 Remuneration of Personnel
 Centralization
 Scalar Chain
 Order
 Equity
 Stability of Tenure of Personnel
 Initiative
 Esprit de corps
Bureaucratic Theory by Max Weber's
According to the bureaucratic theory of Max Weber, bureaucracy is the basis for the systematic formation of any
organization and is designed to ensure efficiency and economic effectiveness.

Six principles of Bureaucratic management:

1. Specialization and Division of Labor;
2. Hierarchical Authority Structures;
3. Rules and Regulations;
4. Technical Competence Guidelines;
5. Impersonality and Personal Indifference;
6. A Standard of Formal, Written.
Human Relations Theory by Elton Mayo.
The human relations management theory is a researched belief that people desire to be part of a
supportive team that facilitates development and growth.
Features of the Human Relations Approach to management are the following:

1. Since management is getting things done through and with people, a manager must have a
basic understanding of human behavior in all respects—particularly in the context of
work groups and organizations.

2. The managers must study the inter-personal relations among the people at work.

3. Larger production and higher motivation can be achieved only through good human
relation.

4. The study of management must draw the concepts and principles of various behavioral
sciences like Psychology and Sociology.
Systems Theory by Ludwig Von Bertalanffy
The systems theory focuses on understanding the organization as an open system that transforms
inputs into outputs.
X & Y Theory by Douglas McGregor
X & Y theory describes two contrasting sets of assumptions that managers make about their people:
Theory X – people dislike work, have little ambition, and are unwilling to take responsibility
Theory Z by William Ouchi
Theory Z is a name for various theories of human motivation built on Douglas
McGregor's Theory X and Theory Y. For Ouchi, Theory Z focused on increasing employee
loyalty to the company by providing a job for life with a strong focus on the well-being of the
employee, both on and off the job.
Theory Z
Employee involvement is the key to increased productivity

Employee control is implied and informal

Employees prefer to share responsibility and decision making.

Employees perform better in environment that foster trust and cooperation.

Employees need guaranteed employment and will accept slow evaluations and promotions
Maslow's Hierarchy of Needs
Maslow's Hierarchy of Needs
Maslow's hierarchy of needs is a motivational
theory in psychology comprising a five-tier
model of human needs, often depicted as
hierarchical levels within a pyramid.

From the bottom of the hierarchy upwards, the

needs are: physiological, safety, love and
belonging, esteem and self-actualization.

Needs lower down in the hierarchy must be

satisfied before individuals can attend to needs
higher up.