Principles of

Management
Definition
What is Management?

"Management is the process of achieving goals and objectives

effectively and efficiently through and with the people.

Management defined

As managers, people carry out the managerial

functions of planning, organizing, staffing,
leading and controlling.
Management applies to any kind of
organization.
Organization: a group of people working
together to create a surplus.
Profit making / business organization
Nonprofit / service organization
Management defined

Management applies to managers at all

organizational levels.
The aim of all managers is the same: to create
a surplus.
Managing is concerned with productivity,
which implies effectiveness and efficiency.
WHAT IS MANAGEMET??

Acc. To Taylor: Management is the art

of knowing what you want to do and
then seeing that it is done in the best
and cheapest way.

Acc. To Fayol: Management is to

manage is to forecast and plan, to
organize, to command, to coordinate
and control
Management is

Efficiency
Getting work
done through
others Effectiveness
www.themegallery.com
Productivity.

The output-input ratio within a time period with

due consideration for quality.

Is a function of effectiveness and efficiency.

Effectiveness: the achievement of objectives.

Efficiency: the achievement of the ends with

least amount of resources.
Levels of management
Organizational hierarchy

Top
Management
President, CEO,
Executive
Vice Presidents

Middle Management
Plant Managers, Division Managers,
Department Managers

First-Line Management
Foreman, Supervisors, Office Managers

Non- Managerial Employees

TYPES OF MANAGER
Decision making
Plans
TOP
Strategy
Goals
Conveys
strategies, plans
and goals to
lower level
MIDDLE Manages the
lower level
Conveys
messages to Top
level
Get work done
LOWER Conveys problem
to Middle level
www.themegallery.com
 Levels of management

Top Level: Top management sets the mission and goals,

develops policies, evaluates the overall performance of
various departments, responsible for the business as a whole
and is concerned mainly with long-term planning

Middle Level: Middle level management develops

departmental goals, executes the policies, plans and
strategies determined by top management, develops
medium- term plans and supervises and coordinate lower-
level managers activities
Levels of management

Lower (Supervisory, frontline) Level: Lower level

management takes charge of day-to-day operations, is
involved in preparing detailed short-range plans, is
responsible for smaller segments of the business, executes
plans of middle management , guides staff in their own
subsections and keep close control over their activities.
Importance of management functions to
managers in each level
 Roles of manager

Role: a set of expectation for ones behavior

Roles of Manager

Interpersonal Decisional Informational

Figurehead Entrepreneur Recipient
Leader Disturbance handler Disseminator
Liaison Resource allocator Spokesperson
Negotiator
www.themegallery.com
 Roles of manager Contd

Inter-personal Role

Figurehead: Represents the company on social occasions. Attending the flag

hosting ceremony, receiving visitors or taking visitors for dinner etc.

Leader: In the role of a leader, the manager motivates, encourages, and

builds enthusiasm among the employees. Training subordinates to work under
pressure, forms part of the responsibilities of a manager.

Liaison: Consists of relating to others outside the group or organization. Serves

as a link between people, groups or organization. The negotiation of prices
with the suppliers regarding raw materials is an example for the role of liaison.
www.themegallery.com
www.themegallery.com
 Roles of manager Contd

Decisional Role:

Entrepreneur: Act as an initiator and designer and encourage changes

and innovation, identify new ideas, delegate idea and responsibility to
others.

Disturbance handler: Take corrective action during disputes or crises;

resolves conflicts among subordinates; adapt to environmental crisis.

Resource allocator: Decides distribution of resources among various

individuals and groups in the organization.

Negotiator: Negotiates with subordinates, groups or organizations- both

internal and external. Represents department during negotiation of union
contracts, sales, purchases, budgets; represent departmental interests.
 Roles of manager Contd

Informational role:

Recipient: Receives information from the external environment.

Disseminator: Transmits information received from other employees

to members of the organization.

Spokesperson: Transmits information to the people who are external

to the organization, i.e., government, media etc. For instance, a
manager addresses a press conference announcing a new product
launch or other major deal.
Managerial skills

Robert L Katz identified three kinds of skills for

managers.
Technical skills
Human skills
Conceptual skills

Design skills
 Managerial skills Contd

Technical skills:

These skills include the knowledge, abilities of and proficiency

in activities involving methods, processes and procedures in
the relevant fields as accounting, engineering, manufacturing
etc.

Or in short:

The ability to use the knowledge or techniques of a particular

discipline to attain ends
 Managerial skills Contd

Human skills:

This includes the ability to understand other people and

interact effectively with them. The human skills are also
important in creation of an environment in which people feel
secure and free to express their opinions.

In short it is:

The ability to work with other people in teams

 Managerial skills Contd

Conceptual skills:

This refers to the ability to think and conceptualize abstract

situations. These abilities are required for making complex
decisions.

In short it is:

The mental capacity to develop plans, strategies and vision

 Managerial skills Contd

Design skills:

These skills enable a manager to handle and solve any kind of

unforeseen or actual problems, that may crop up in the
organization. Such problems could arise due to internal factors
or external factors and/or both.

In short it is:

The problem solving skill

Skill distribution at various
management levels
Characteristics of Excellent
Companies

In Search of Excellence Thomas peters &

Robert Waterman.
1. Were oriented toward action.
2. Learned about the needs of their customer.
3. Promoted managerial autonomy and Thomas Peters
entrepreneurship.
4. Achieved productivity by paying close
attention to the needs of their people.

Robert Waterman
Characteristics of Excellent
Companies

5. Were driven by a company philosophy often

based on the values of their leaders.
6. Focused on the business they knew best.
7. Had a simple organization structure with a
lean staff.
8. Were centralized as well as decentralized,
depending on appropriateness.
Management: Science or Art?

Science is a collection of systematic knowledge, collection of

truths and inferences after continuous study and experiments. It
has fundamental principles discovered.

Art uses the known rules and principles and uses the skill,
expertise, wisdom, experience to achieve the desired result.

Management has got two faces like a coin; on one side it is art
and on the other it is science. Management has got scientific
principles which constitute the elements of Science and Skills
and talent which are attributes of Art.

Management is both art and science.

 Evolution of Modern
Management
1. Classical management approaches focus on developing universal
principles for use in management situations.

2. Behavioural (or human resource) management approaches focus on

human needs, the work group and the role of social factors in the
workplace.

3. Quantitative management approaches focus on applying mathematical

techniques to assist managerial decision making and problem solving.

4. Modern (or systems/contingency) approaches to management view

organisations as a collection of interrelated parts, requiring management
practices to adapt to situational demands.
 Classical Approaches to
Management
There are three main branches within the classical management
approach:

Scientific management (Taylorism)

Administrative principles (Fayolism)

Bureaucratic organisation

Each of these approaches shares a common assumption that

employees in the workplace act in a rational manner, and are primarily
driven by economic concerns. That is, employees rationally consider
opportunities made available to them and then do whatever is
necessary to achieve the greatest personal and financial gain.
www.themegallery.com
Classical Approaches to
Management

Prominent classical management theorists of the late 19th and

early 20th centuries included Frederick Taylor, Frank and Lillian
Gilbreth, Henry Fayol, Mary Parker Follett and Max Weber.
Frederick Taylor
Scientific Management

Known as father of scientific management

(Taylorism).
Published Principles of Scientific Management
1911.
Focus heavily on individual worker productivity.
Contributions:
Time and Motion Studies
(Time study- Taylor; Motion study- Frank & Lillian Gilbreth)
Scientific selection of workers
One best way of doing a job
www.themegallery.com
Frederick Taylor
Scientific Management

Fundamental principles:
Replacing rules of thumb with science (organized
knowledge).
Obtaining harmony, rather than discord, in group action.
Achieving cooperation of human beings, rather than
chaotic individualism.
Working for maximum output, rather than restricted output.
Developing all workers to the fullest extent possible for their
own and their companys highest prosperity.
 SCIENTIFIC MANAGEMENT THEORY
-TAYLORs

Scientific Management, also called Taylorism, is a theory

of management that analyzes and synthesizes workflows. Its main
objective is improving economic efficiency, especially labor
productivity.
DEMERITS OF TAYLORISM

It ignores the functional areas of management such

as marketing, finance and so on
Individual creativity is ignored by favoring one best
way Workers is reduced to a cog in the machines.
Mobility among workers gets restricted because of
narrow specialization.
Workers are not involved in the planning part of the
job which was controlled by the management.
Exploitation by management
 Later SM evolved into Job engineering
It deals with product/process and tool design/layout
design etc
Without ability and training , good work is not
expected out of a person
jobs-specialised (does one task) & standardised (
same method every time)

www.themegallery.com
Fayols Principles of
Management

Father of Modern Management Theory

Focus on general or higher managerial levels.

He has proposed that there are six primary functions of

management and 14 principles of management,
Forecasting, Planning, Organizing, Commanding, Henri Fayol
Coordinating, controlling (1841-1925)

There are 14 Principles of Management (Fayolism)

described by Henri Fayol.
www.themegallery.com
14 Principles of Henri Fayol

Division of Labor

Work of all kinds must be divided & subdivided and allotted to

various persons according to their expertise in a particular area.

Authority & Responsibility

Authority refers to the right of superiors to get exactness from their

sub-ordinates.

A manager may exercise formal authority and also personal power.

A manager must be prepared to bear responsibility to perform the

work in the manner desired.
14 Principles of Henri Fayol Contd

Unity of Command

A sub-ordinate should receive orders and be accountable to one and

only one boss at a time.

He should not receive instructions from more than one person

Unity of Direction

People engaged in the same kind of business or same kind of activities

must have the same objectives in a single plan.

Without unity of direction, unity of action cannot be achieved.

14 Principles of Henri Fayol Contd

Equity

Equity means combination of fairness, kindness & justice.

The employees should be treated with kindness & equity if devotion is

expected of them.

Order

This principle is concerned with proper & systematic arrangement of

things and people.

Arrangement of things is called material order and placement of

people is called social order.
14 Principles of Henri Fayol Contd

Discipline

Discipline means sincerity, obedience, respect of authority & observance

of rules and regulations of the enterprise.

Subordinate should respect their superiors and obey their order.

Initiative

Initiative means eagerness to initiate actions without being asked to do

so.

Management should provide opportunity to its employees to suggest

ideas, experiences & new method of work.
14 Principles of Henri Fayol Contd

Remuneration

Remuneration to be paid to the workers should be fair, reasonable,

satisfactory & rewarding of the efforts.

It should accord satisfaction to both employer and the employees.

Stability of Tenure

Employees should not be moved frequently from one job position to

another i.e. the period of service in a job should be fixed.
 14 Principles of Henri Fayol Contd

Scalar Chain

Scalar chain is the chain of superiors ranging from the ultimate authority to the
lowest.

Communications should follow this chain. However, if following the chain

creates delays, cross-communications can be allowed if agreed by all parties
and superiors are kept informed.

Sub-ordination of Individual Interest to common goal

An organization is much bigger than the individual it constitutes, therefore

interest of the undertaking should prevail in all circumstances.

The interests of any one employee or group of employees should not take
precedence over the interests of the organization as a whole.
14 Principles of Henri Fayol Contd

Espirit De Corps

It refers to team spirit i.e. harmony in the work groups and mutual
understanding among the members.

Espirit De Corps inspires workers to work harder.

Centralization

Centralization refers to the degree to which subordinates are involved

in decision making. Whether decision making is centralized (to
management) or decentralized (to subordinates) is a question of
proper proportion. The task is to find the optimum degree of
centralization for each situation.
Hawthorne Studies

By Elton Mayo & F.J. Reothlisberger during1924-1927 Elton Mayo

Funded by Western Electric
Conducted by The National Research Council (NRC) of the
National Academy of Sciences with engineers from MIT
Measured Light Intensity Vs. Worker Output
Result :
Higher worker productivity and satisfaction at all light
levels
Conclusions:
Light intensity has no conclusive effect on output
Productivity has a psychological component
Concept of Hawthorne Effect was created
Hawthorne Effects

The major finding was that almost regardless of the experimental

manipulation (brightness of lights, humidity, breaks, group
pressure, working hours, managerial leadership), the production
of the workers seemed to improve.

One reasonable conclusion is that the workers were pleased to

receive attention from the researchers who expressed an
interest in them.

Work-group norms affect productivity.

The workplace is also a social system.

 Bureaucratic Organizations

Suggested by Max Weber

Bureaucratic organisation approaches can be described as an organisation

striving for maximum efficiency based on the following principles:

A clear division of labour with jobs being well defined and done by people
who are (or can become) highly skilled at performing the tasks of the
particular job

A clear hierarchy of authority

Formal rules and procedures that are impartially and universally applied to
guide staff behaviour

Employee selection and promotion based on merit.

Bureaucratic Organizations

Division Authority
Rational-Legal
of Labor
Hierarchy

Max
Career Formal
Orientation Webers Selection
Bureaucracy
Impersonal Rules and
Rationality Regulations
Rules, SOPs and Norms

Rules formal written instructions that specify actions to be

taken under different circumstances to achieve specific
goals

Standard Operating Procedures (SOPs) specific sets of

written instructions about how to perform a certain aspect of
a task

Norms unwritten, informal codes of conduct that prescribe

how people should act in particular situations
 Bureaucratic Organizations

Board of
Directors

Chief Executive

Production Marketing & Accounting & Personnel Quality Health &

Department Sales Finance Department Department Safety
Department Department
Approaches to Management

Empirical or Case Approach

Managerial Roles Approach
Contingency or Situational Approach
Mathematical or Management Science
Approach
Decision Theory Approach
Reengineering Approach
Systems Approach
Approaches to Management

Socio-technical Systems Approach

Cooperative Social Systems Approach
Group Behavior Approach
Interpersonal Behavior Approach
McKinseys 7-s Framework
Total Quality Management Approach
Management Process or Operational
Approach
 Empirical or Case Approach

Studies experience through cases.

Identifies successes and failures.
No principles are identified.

Case
situation

Failure Success

Why?
Managerial Roles Approach

Henry Mintzberg studied the activities of five CEOs in

a variety of organizations.
Observed what managers actually do and from
such observations came to conclusions as to what
managerial activities (roles) are.
Executives do not perform the classical managerial
functions.
10 managerial roles.
 Managerial Roles Approach

Interpersonal roles
1. The figurehead role
2. The leader role
3. The liaison role
Informational roles
4. The recipient role
5. The disseminator role
6. The spokes person role
Decision roles
7. The entrepreneurial role
8. The disturbance-handler role
9. The resource-allocator role
10. The negotiator role
 Roles of manager

Role: a set of expectation for ones behavior

Roles of Manager

Interpersonal Decisional Informational

Figurehead Entrepreneur Recipient
Leader Disturbance handler Disseminator
Liaison Resource allocator Spokesperson
Negotiator
 Roles of manager Contd

Inter-personal Role

Figurehead: Represents the company on social occasions. Attending the flag

hosting ceremony, receiving visitors or taking visitors for dinner etc.

Leader: In the role of a leader, the manager motivates, encourages, and

builds enthusiasm among the employees. Training subordinates to work under
pressure, forms part of the responsibilities of a manager.

Liaison: Consists of relating to others outside the group or organization. Serves

as a link between people, groups or organization. The negotiation of prices
with the suppliers regarding raw materials is an example for the role of liaison.
 Roles of manager Contd

Decisional Role:

Entrepreneur: Act as an initiator and designer and encourage changes

and innovation, identify new ideas, delegate idea and responsibility to
others.

Disturbance handler: Take corrective action during disputes or crises;

resolves conflicts among subordinates; adapt to environmental crisis.

Resource allocator: Decides distribution of resources among various

individuals and groups in the organization.

Negotiator: Negotiates with subordinates, groups or organizations- both

internal and external. Represents department during negotiation of union
contracts, sales, purchases, budgets; represent departmental interests.
 Roles of manager Contd

Informational role:

Recipient: Receives information from the external environment.

Disseminator: Transmits information received from other employees

to members of the organization.

Spokesperson: Transmits information to the people who are external

to the organization, i.e., government, media etc. For instance, a
manager addresses a press conference announcing a new product
launch or other major deal.
Contingency or Situational
Approach
Contingency approach to management views organisations as a
collection of interrelated parts requiring management practices to
adapt to situational demands.

Contingency thinking tries to match managerial responses with

problems and opportunities unique to different situations, with the
underlying principle that there is no one best way to manage; the
appropriate way to manage depends on the situation.

An appreciation of how management thinking has evolved over

time provides a useful framework for managers to apply a
contingency approach.
Mathematical or Management Science
Approach

Purely logical analysis.

Expressed in mathematical symbols and relationships.
Quantitative Management approaches focus on applying
mathematical techniques and analysis to assist
managerial decision making and problem solving.
Today, these quantitative applications are increasingly
driven by computer technology and software programs.
Many aspects can not be modeled.
Decision Theory Approach

Decisions decide the future.

Manager Decision maker.
Organization Decision making unit
Focuses on decision making and people
involved in it.
Features
Management is decision making.
Members of Organization - decision makers and
problem solvers.
Decision making - control point in management
Increasing efficiency - the quality of decision

Focuses only on one aspect.

Reengineering Approach

"the fundamental rethinking and radical redesign of

business processes to achieve dramatic
improvements in critical, contemporary measures of
performance, such as cost, quality, service and
speed.- Hammer & Champy

James Champy

Michael Hammer
Systems Approach

Organizations are open systems.

Recognizes the importance of studying the interrelations
of the managerial functions in an organization.

Reenergizing the
system

Inputs and Transformation Outputs

Claimants process

External
environment
 System Approach

An airport is a system of interrelated parts that cannot be dealt with

separately

Impossible to make a change in one area without potential for creating

problem in other areas

System will generally have these four basic characteristics

Operate within an environment
Composed of subsystems
Have a central purpose
Components are interrelated

Constantly interact with environment and community

System Approach
Sociotechnical Systems
Approach

Relates technical systems and social systems.

Focuses on production systems.
Ignores other managerial functions.
Cooperative Social Systems
Approach

Concerned with both interpersonal and group

behavioral aspects leading to a system of co-
operation.
Group Behavior Approach

Focuses on behavior of people in group.

Related to organizational structure, staffing.,
Interpersonal Behavior
Approach

Focuses on interpersonal behavior.

Psychological training is not enough for becoming
an effective manager.
McKinseys 7-s Framework

1. Strategy
2. Structure Hard elements
3. Systems
4. Style
5. Staff
Soft elements
6. Shared values
7. Skills
1980s by Tom Peters and Robert Waterman
Ensure that all parts of the organization work in harmony.
Takes the company from current position to next higher level.
McKinseys 7-s Framework
Shared Values

Involves creating economic value in a way

that also creates value for society by
advertising its needs and challenges.
Business should reconnect company success
with social progress.
Adidas low cost shoes
BMW mobile laboratory
Micronutrient campaign
Total Quality Management
Approach

Quality = features and attributes

= absence of deficiencies
People committed to employ organizational resources to
provide value to the customer by doing the right things, right
at the first time, every time.
management approach to longterm success through
customer satisfaction.
US Navy in 1984,to improve the operational effectiveness.
Philip B Crosby, W Edwards Deming, Joseph M Juran
all members of an organization participate in improving
processes, products, services, and the culture in which they
work.
Total Quality Management
Approach
Depends on feedback system
Performance superiority in delighting customers
Management Process or Operational
Approach

Management is a process.
Emphasizes on management functions and various
concepts and principles involved in performing these
functions.
Management functions are universal irrespective of the
type of organizational or level of management in an
organization, though there may be differences on
emphasis on a particular function in a particular
organization or at particular level.
central core of managing - planning, organizing, staffing,
directing and controlling
 Characteristics of
Management
Management as a continuous process

It consists of planning, organizing, activating and controlling the

resources (personnel and capital) of an organization.

None of the managerial functions would produce the ultimate

results in the absence of all other basic functions.

Management as a discipline

Its status as a discipline increases because it continuously discovers

many aspects of business enterprises and also passes on the
verified knowledge to the practitioners of the managerial process.
Characteristics of
Management
Management as a career:

Management itself can be regarded as a career, but it also presents a

variety of interesting and challenging careers focused on specialized
occupations in the fields such as marketing, finance and personnel.

Management as an Applied Science:

It possesses a systematized body of knowledge and uses scientific

methods of research

Universal Application:

Management is a universal activity, applied to any form of activity,

economic or otherwise.
Characteristics of
Management

Goal Oriented:

Management has the task of attaining certain objectives. The success or

failure of the management depends on how far it is able to attain the
desired goals. It is judged by the extent to which it achieves its targets.

Guidance:

The main task of the management is guidance in the utilization of material

and human resources in the best possible way.

The essential element of management is that it gets the work done by

coordinating the performance of those who actually perform diverse and
specific jobs.
Characteristics of
Management
Divorced from proprietorship(Single Owner):

Management does not signify proprietorship. It refers to a specialized

group of people who have acquired the ability to carry out a project.

An activating factor:

A manager's skill lies in motivating his workers through guidance,

training, incentives, rewards, status, security, control, etc.

Management is a human activity:

Management functions are discharged only by individuals. No

corporate body or an artificial being can perform the work of a
management
 Characteristics of
Management
Management signifies authority:

Authority is the power to compel others to work and behave in a

particular manner. Management cannot discharge its function
without authority. It is the foundation of management.

Leadership:

The management has to lead a team of workers. It must be

capable of inspiring, motivating and winning their confidence.
Manager

A manager is someone whose primary

responsibility is to carry out the management
process within an organization to achieve the
organizational goals.
 Functions of management

1
Planning is the process of setting goals, and charting the
Planning
best way of action for achieving the goals. This function
also includes, considering the various steps to be taken to
encourage the necessary levels of change and
innovation.

2 Organizing is the process of allocating and arranging

Organizing
work, authority and resources, to the members of the
organization so that they can successfully execute the
plans.
 Functions of management
3
A: Staffing is the process of filling the positions in the
Staffing organization and keeping them filled.
B: Staffing is the process of recruiting and selecting the
right person for the right job at the right time in the right
place.
4
Leading involves directing, influencing and motivating
Leading
employees to perform essential tasks. This function
involves display of leadership qualities, different
leadership styles, different influencing powers, with
excellent abilities of communication and motivation.
 Functions of management
5
Controlling is the process of devising various checks to
Controlling ensure that planned performance is actually achieved. It

involves ensuring that actual activities conform to the

planned activities. Monitoring the financial statements,
checking the cash registers to avoid overdraft etc., form
part of this process.
 PLANNING
Planning Organizing Staffing Directing Controlling
 PLANNING

Selection of missions and objectives as well as the actions

to achieve them, which requires decision-making, that is,
choosing a course of action from among alternatives.
PLANNING
What IS PLANNING?

Planning is the process of deciding in advance what

is to be done, where, how and by whom it is to be
done.

It is basically a process of thinking before acting.

Planning is a continuous process.

It is called as the principle of navigational change.

Decision making is the integral part of planning.

What IS PLANNING?

Planning is one of the executive function of the

brain.

Planning is a key component of the problem solving

skills necessary to achieve the objective.

It holds the relationship with forecasting.

The counterpart to planning is spontaneous order.

NATURE OF PLANNING

Mental activity

Goal-oriented

Forward looking

Pervades all managerial activities

The primary function

Based on facts

Flexible

Essentially decision making

SIGNIFICANCE OF PLANNING

Minimizes uncertainty

Emphasis on objectives

Promotes coordination

Facilitates control

Improves competitive strength

Economical operation

Encourages innovation

Tackling complexities of modern business

 Planning and controlling

New plans
No
undesirable
deviations
Controlling:
from plans
Implementation Comparing
Planning
of plan plans
With results

Undesirable
deviation

Corrective
action
Types of plans

Missions or purposes
Objectives or goals
Strategies
Policies
Procedures
Rules
Programs
Budgets
Missions or purposes

The basic purpose or function or tasks of an enterprise or

agency or any part of it.

A Mission Statement defines the company's business, its

objectives and its approach to reach those objectives

A mission statement is a statement of the purpose of

company, organization or person, its reason for existing.

The mission statement should guide the actions of the

organization, spell out its overall goal, provide a path, and
guide decision-making.
Missions or purposes

COMPONENTS
Key market: Who is your target client or customer
(generalize if needed)?

Contribution: What product or service do you

provide to that client?

Distinction: What makes your product or service

unique, so that the client would choose you?
Vision

Vision is a picture of what the firm wants to be and,

in broad terms, what it wants to ultimately achieve.

A Vision Statement describes the desired future

position of the company.

Elements of Mission and Vision Statements are often

combined to provide a statement of the company's
purposes, goals and values.
 Companies use Mission and Vision
Statements to:

Clearly identify the corporate culture, values, strategy and

view of the future by interviewing employees, suppliers and
customers
Address the commitment the firm has to its key stakeholders,
including customers, employees, shareholders and
communities
Ensure that the objectives are measurable, the approach is
actionable, and the vision is achievable
Communicate the message in clear, simple and precise
language
Develop buy-in and support throughout the organization
Internal purposes

Guide management's thinking on strategic issues,

especially during times of significant change
Help define performance standards
Inspire employees to work more productively by
providing focus on common goals
Guide employee decision making
Help establish a framework for ethical behavior
External purposes

Enlist external support

Create closer linkages and better communication

with customers, suppliers and alliance partners

Serve as a public relations tool

McDonalds

McDonald's brand mission is to be our customers' favorite

place and way to eat and drink. Our worldwide operations
are aligned around a global strategy called the Plan to
Win, which center on an exceptional customer experience
People, Products, Place, Price and Promotion. We are
committed to continuously improving our operations and
enhancing our customers' experience.
Mission: Be the best employer for our people in each
community around the world and deliver operational
excellence to our customers in each of our restaurants .
Vision: Our vision is to be the worlds best quick service
restaurant
Nit Calicut

To develop high quality technical education and

personnel with a sound footing on basic
engineering principles, technical and managerial
skills, innovative research capabilities, and
exemplary professional conduct to lead and to use
technology for the progress of mankind, adapting
themselves to changing technological environment
with the highest ethical values as the inner strength..

International standing of the highest calibre.

Objectives or goals

The ends towards which activity is aimed.

What an organization wants to accomplish in a
future period of time.
A desired future state an organization wants to
realize.
Goals are general statement about profitability,
growth and survival of business for a longer period of
time.
Ends of all the managerial functions
Objectives or goals

Objectives are desired targets in specific relevant

areas that an organization wants to achieve during
a fixed time period.
Objectives are concrete , specific and quantitative.
Objectives are statement of results, a firm seeks to
achieve during a specified period of time.
Strategies

The determination of the basic long term objectives

of an enterprise and the adoption of courses of
action and allocation of resources necessary to
achieve these goals.
The art of working out how to win in business and
life.
Involves understanding the environment, crafting a
unique and valuable competitive position, and
using the resources in such a way that the best use
of the opportunities are made.
Policies

General statements or understandings that guide or

channel thinking in decision making.
Define an area within which a decision is to be
made and ensure that that the decision will be
consistent with and contribute to an objective.
Every policy statement must be definite, clear and
easily understandable.
Discretions are applicable.
Procedures

Plans that establish a required method of handling

future activities.
They are guide to action, rather than to thinking.
Chronological sequences of required actions.
May be inter-departmental.
A procedure has to be consistent with the
objectives and within the broad areas of a policy.
Procedures and policies

Example: granting employee vacations.

Rules

Spell out specific required actions or non-actions

allowing no discretion.
A rule is different from a policy, procedure or
method.
Example: Traffic rules, Exam rules.
Programs

A complex of goals, policies, procedures, rules, task

assignments, steps to be taken, resources to be
employed, and other elements necessary to carry
out a given course of action.
Programs are precise plans or definite steps in
proper sequence which need to be taken to
discharge a given task.
The essential ingredients of every program are time
phasing and budgeting.
Budgets

A statement of expected results expressed in

numerical terms.
A quantified plan.
May be expressed in: financial terms, labor-hours,
units of product, machine hours etc.,
Acts as a control device.
A fundamental planning instrument.
Forces a company to make in advance- whether
for a week or for five years- a numerical compilation
of expected cash flow, expenses and revenues,
capital outlays, labor or machine-hour utilization.
Steps in planning

Being aware Setting Considering

of objectives planning
opportunity or goals premises

Comparing
Identifying alternatives
alternatives in light of
goals
Quantifying
Formulating
Choosing an plans by
supporting making
alternative
plans budgets
 Being aware of opportunity
In light of:
The market
Competition
What consumers want
Strengths
Weaknesses
Pre-planning process
Internal and external opportunities
Helps to set the objectives
 Setting objectives or goals
Where we want to be and what we want
to accomplish

For entire enterprise and the subordinate work units
Long term and short term
Give direction to the major plans
Form a hierarchy
 Considering planning
premises
In what environment- internal or

external will our plans operate.?

Premises: Assumptions about the environment in which the plan is to

be carried out

Principle of planning premises: the more thoroughly individuals

charged with planning understand and agree to utilize consistent
planning premises, the more coordinated enterprise planning will be.
 Identifying alternatives
What are the most promising
alternatives to accomplish our
objectives.?

Reduce the number of alternatives
Mathematical techniques and computer can be used
 Comparing alternatives in
light of goals
Which alternative will give us the best
chance of meeting our goals at the
lowest cost and highest profit.?

Evaluate the strong and weak points.
 Choosing an alternative
Selecting the course of action we will
pursue.

Adoption of the plan.
It is decision making.
 Formulating supporting plans
Such plans are to:
Buy equipment
Buy materials
Hire and train workers
Develop a new product

 Quantifying plans by making
Budgets

Develop such budget as:

Volume and price of sales
Operating expenses necessary for plans
Expenditures for capital equipment

Sum total of income and expenses, with resultant profit
or surplus, and budgets of major balance sheet items
like cash and capital expenditures.
 Management By Objectives (MBO)

popularized by Peter F Drucker in his 1954 book The

Practice of Management
An objective is verifiable when at the end of the period
one can determine whether or not it has been
achieved.
A comprehensive managerial system that integrates
many key managerial activities in a systematic manner
and is consciously directed toward the effective and
efficient achievement of organizational and individual
objectives.
Not simply an appraisal tool, motivational technique or
a planning and control device, but a system of
managing
Benefits of MBO

Improvement of managing through results-oriented

managing
Clarification of organizational roles and structures as
well as delegation of authority according to the
results expected of the people occupying the roles
Encouragement of commitment to personal and
organizational goals
Development of effective controls that measure
results and lead to corrective actions
Strategic planning

Analyze the current and expected future situation

Determine the direction of the firm
Develop means for achieving the mission

Tactics: action plans through which strategies are

executed.
Strategic intent

The commitment to win in the competitive

environment

Komatsus intent to encircle Caterpillar

Canons idea to beat Xerox
Hondas intent to become a second Ford
Development of alternative strategies

Specialize or concentrate
Korean Hyundai produced lower priced cars
Diversify
International expansion
Joint ventures and strategic alliances
Liquidation- terminating an unprofitable product line
Retrenchment- curtail operations temporarily
 SWOT / TOWS analysis

A strategic planning tool that separates influences on a

businesss future success into internal and external factors.

Strength

Analyzing a Weakness
companys: Opportunities
Threats
 A TOWS Matrix

Internal
Separates and Strengths and weaknesses
compares internal
and external External
influences.
Threats and opportunities
 TOWS Analysis allows businesses to

Define realistic goals

Improve capability
Overcome weaknesses with strengths
Identify threats than can be turned into opportunities
A strength

Superior product quality

Can be a

competitive Lowest price

advantage Best expertise
like Location
 A weakness

A tired brand

Can be a Inferior location

disadvantage such High overheads
as A lack of R&D
An opportunity can be

A regulatory or tax change

A high-profile event (marketing opportunity)
An untapped market
A gap left by a failed competitor
 A threat can be

Unfavourable regulation changes

A new entrant into the market
Problems with the economy
Market shrinkage
TOWS matrix
Analyse Internal & External Environment
Helpful
STRENGTHS
Technological skills
Leading brands
Distribution channels
Customer Loyalty/Relationships
Product Quality
Management
OPPORTUNITIES
External
Changing customer tastes
Technological advances
Change in Government policies
Lower personal taxes
Change in demographics of
population
New distribution channels
WEAKNESSES
Lack of important skills
Weak brand image
Poor distribution channels
Low customer
satisfaction/retention
Unreliable product quality/service
Poor management
THREATS
Change in customer base
Closing of geographic markets
Technological advances
Change in Government policies
Increase in taxes
Change in demographics of
population
New distribution channels
Harmful
Strategies

SO
Strategies that WO
can come from ST
SWOT analysis W-T
Matching strengths to
opportunities

Otherwise known
as.

S-O or Maxi-Maxi strategy

Using a strength to maximise an opportunity
Matching weaknesses to
opportunities

Otherwise known
as.

W-O or Mini-Maxi strategy

Improving capability to
maximise an opportunity
Matching strengths to threats

Otherwise known
as.

S-T or Maxi-Mini strategy

Minimising a threat with a
strength
Matching weaknesses to threats

Otherwise known
as.

W-T or Mini-Mini strategy

Minimising weaknesses and
threats at same time (often last
choice)
Blue Ocean Strategy

Blue Ocean Strategy- How to Create Uncontested Market Space

and Make the Competition Irrelevant W. Chan Kim and Renee
Mauborgne
Explore the uncontested waters (opportunities) in the blue
ocean
Competition in the existing market- red ocean
Create and develop new demand for products or services
Blue Ocean Strategy

Identify and eliminate those factors that may be

unimportant to the buyer
If elimination is not an option, consider reducing those
factors
Raise or strengthen those factors that are unique
Create new or unique factors that are wanted by the
buyers but are ignored by the competitors

Example: Southwest Airlines of America

Rates low in price, meals, connections at airport hubs
Rates high in service friendliness and frequency of flights
McDonald's Corporation or McDonalds
is the world's largest chain of
hamburger fast food restaurants.
It serves around 68 million customers
daily across 119 countries.
A McDonald's restaurant is operated by
a franchisee, an affiliate, or the
corporation itself.
The corporation's revenues come from
the rent, royalties and fees paid by the
franchisees, as well as sales in
company-operated restaurants.
Let us look at a basic SWOT Analysis of
McDonald's.
 SW
STRENGTHS
Ranks very high on the Fortune
Magazine's most admired list
Community oriented
Global operations all over the world
Cultural diversity in the foods
Excellent location
Assembly line operations
Use of top quality products
Opening more joint ventures
Being more responsive to healthier
options
Advertising Wi-Fi services in the branches
Expanding on the advertising on being more
OT
socially responsible
Expansions of business into newly
developed parts of the world
Open products up to allergen free
options such as peanut free
OPPORTUNITIES
WEAKNESSES
Failed the pizza test market
thus limiting the ability to
compete with pizza providers
High training costs due to high turnover
Minimal concentration on organic foods
Not much variation in seasonal products
Quality concerns due to franchised operations
Focuses on burgers/fried foods which
SWOT are not healthier options for their
Analysis of customers
McDonalds Marketing strategies that entice
people from small children to adults
Lawsuits for offering unhealthy foods
Contamination risks that include the threat of
e-coli containments
The vast amount of fast food restaurants that
open as competition
Down turn in economy affecting the
capability of consumer spending
Focus on healthier dieting by
consumers THREATS
Porters Industry Analysis and
Generic Competitive Strategies

Strategy formulation requires an analysis of the

attractiveness of an industry and the companys
position within that industry- Michael Porter
1. The competition among the companies
2. The threat of new companies entering the market
3. The possibility of using substitute products or services
4. The bargaining power of suppliers
5. The bargaining power of buyers or customers
Generic Competitive Strategies

Companies have to make a strategic choice

between differentiation by offering the customers
something special for which they are willing to pay a
premium price, or having a lower cost structure.

Overall Cost Leadership Strategy

Differentiation Strategy
Focused Strategy
Overall Cost Leadership Strategy

Aims at reduction in costs

Keep a close watch on costs in R&D, operation,
sales and service
Objective is to have a low cost structure compared
with competitors
Requires large market share and cost efficient
operation
Example: Walmart- Every Day Low Price, Ivory soap
Differentiation Strategy

Offer something unique

Can charge premium prices
Example:
1. Porsche sports car
2. Caterpillar- service and availability
3. Dial soap- use of deodorants
Focused Strategy

Concentrates on special groups of customers, a

particular product line, a specific geographic
region.,
Focused low-cost strategy
Focused differentiation strategy
Forecasting- Delphi Technique

Developed by Olaf Helmer

1. A panel of experts on a particular problem area is selected,
usually from both inside and outside the organization
2. The experts are asked to make (anonymously, so that they will
not be influenced by others) a forecast as to what they think
will happen, and when, in various areas of new discoveries and
developments
3. The answers are compiled, and the composite results are fed
back to the panel members
4. With this information on hand, further estimates of future are
made
5. This process may be repeated several times
6. When a convergence of opinion begins to evolve, the results
are then used as an acceptable forecast
How to manage..?

A father left 17 Camels as an Asset for his Three Sons.

When the Father passed away, his sons opened up

the will.

The Will of the Father stated that the Eldest son

should get Half of 17 Camels, The Middle Son should
be given 1/3rd of 17 Camels, Youngest Son should
be given 1/9th of the 17 Camels.
moral

The attitude of negotiation & problem solving is to

find the 18th camel i.e. the common ground. Once
a person is able to find the common ground, the
issue is resolved. It is difficult at times.