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INDUSTRIAL MANAGEMENT
DM
INDUSTRIAL MANAGEMENT
DM
INDUSTRIAL MANAGEMENT
DM
Businesses must adapt to changes in the environment. The key to business survival
is often this ability to adapt effectively to changing conditions. In business, systems theory
provides a powerful tool to help managers conceptualize the relationship between their
companies and their external environments.
A system is a set of parts connected together for a specific end. Each part of
the system is one of the necessary means to achieving that end. In the case of an
industrial system, the parts are the different processes which are networked together to
provide a good or a service according to customers specifications.
Important properties of systems are:
Synergy: a system is more than a simple accumulation of parts. Most of the
value of the system resides in the seamless integration of the different parts.
In other words, the whole is greater than the sum of the parts.
Hierarchy: systems are structured in hierarchies. A market is an economic
system. A firm producing goods in this market is a subsystem of the
economic system, and a system itself. The finance, marketing and
operations departments are three subsystems of the organizational system.
Boundary: systems have boundaries delimiting where a system ends and
where the external environment starts.
Behavior: a system exhibits behaviors which are the result of the dynamic
interactions of its parts. For example, a system can exhibit an adaptive
behavior. This is an extremely important behavior for a firm faced with
intense competition and fast-changing customer demands. A key mechanism
in adaptation is learning through a feedback. Some systems behavior may
be less desirable, as for example resistance to change. As a systems
behavior is not easily predictable, the managers use planning activities to
guide and direct future behavior. In system theory, planning is the application
of a feed forward loop.
Openness: open systems interact to a great extent with their environment.
Open systems need to process signals from their external environment and
adapt to keep themselves aligned with external requirements.
The simple expression of a system is portrayed in figure 4. A feedback loop
indicates that a system is capable of self-adjustment. Feedback or system adjustment
is triggered in control nodes where managers check that products conform to
specifications (are represented in the figure by circles). The upper half of figure 4 displays
three connections between the system and the external environment (are represented by
triangles). These connections symbolize either a transfer of control from the system to the
environment (an upward triangle) or from the environment to the system (a downward
triangle). Triangle 1 symbolizes that the systems performance depends on the suppliers.
Triangle 2 symbolizes the transfer of control rights from the environment to the
organization (the external environment includes customers, regulators, and the public at
large). Triangle 3 symbolizes the transfer of control from the system to its customers.
The manner in which the environment can shape the organizations behavior is very
simple. For instance, by switching to a new technology, an industry can indicate to a
company that it is time to update its operating resources. The processes will be managed
according to standard national expectations implying, for example, low pollution levels and
no child labor.
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Types of systems
The two basic types of integration are horizontal and vertical.
Vertically integrated systems involve all the processes from the extraction of raw
material to the manufacture of a final consumer good.
Horizontally integrated systems involve two or more similar organizations that
group together to form a larger entity, primarily in an effort to capture a larger market
share. Horizontally integrated systems are able to take advantage of economies of scale,
such as leveraging buying power from vendors.
STAKEHOLDERS PERSPECTIVE
The main purpose of the firm is to maximize returns to shareholders (ownership
perspective). In this perspective shareholders interests are paramount and take
precedence over the interests of others. The stakeholder theory of the firm argues that
corporations serve a broader public purpose: to create value for society. All companies
must make a profit for their owners; indeed, if they did not, they would not long survive.
However, corporations create many other kinds of value as well, such as professional
development for their employees and innovative new products for their customers. In this
view, corporations have multiple obligations, and all stakeholders interests must be
considered.
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The term stakeholder refers to persons and groups that affect, or are affected
by, an organizations decisions, policies, and operations. The word stake, in this
context, means an interest inor claim ona business enterprise. Those with a stake in
the firms actions include such diverse groups as customers, employees, stockholders,
the media, governments, professional and trade associations, social and
environmental activists, and nongovernmental organizations.
The commercial and noncommercial stakeholders of a business firm are
represented in figure 5.
a.