E-COMMERCE

 

E-commerce is short for electronic commerce. It is similar to traditional commerce system which involves the activities of selling and buying, but it perform these operations using any electronic medium like, TV, fax, radio or internet. Today internet has captured all the e-trade demand with its comparatively greater features, so here we will consider only internet as an e-commerce source.

 

Categories of E-commerce

 

There are two basic categories of e-commerce:

 

• Business-to-Business (B2B)
  
• Business-to-Consumer (B2C)
  

 

Business-to-Business (B2B)

E-commerce plays an important role in enhancing and transforming relationships between and among businesses.

 

Some B2B applications are:

 

Supplier Management: Electronic applications in this area aid in expediting business partnerships through the reduction of purchase order (PO) processing costs and cycle times, and by maximizing the number of POs processed with fewer people.

 

Inventory Management: Electronic applications make the order-ship bill cycle shorter. For instance, if most of a business's partners are linked electronically, any information sent by mail can be transmitted instantly. Businesses can easily keep track of their documents to make sure that they were received. Such a system improves auditing capabilities, and helps reduce inventory levels, improve inventory turns, and eliminate out-of-stock occurrences.

 

Distribution Management: Electronic-based applications make the transmission of shipping documents a lot easier and faster. Shipping documents include bills of lading, purchase orders, advance ship notices, and manifest claims. E-commerce also enables more efficient resource management by certifying that documents contain more accurate data.

 

Channel Management: E-commerce allows for speedier dissemination of information regarding changes in operational conditions to trading partners. Technical, product and pricing information can be posted with much ease on electronic bulletin boards.

 

Payment Management: An electronic payment system allows for a more efficient payment management system by minimizing clerical errors, increasing the speed of computing invoices, and reducing transaction fees and costs.

 

Business-to-Consumer (B2C)

Business-to-Consumer e-commerce involves customers gathering information, purchasing, and receiving products over an electronic network.

The consumer uses electronic commerce in the following economic transactions:

 

Purchasing products and information: Electronic applications make it possible for consumers to look up online information about existing and new products/services.

Personal finance management: In this field, electronic applications aid the consumers in managing investments and personal finances through the use of online banking tools. Chow.net is a good example of B2C electronic commerce application, particularly of purchasing products online.

 

E-commerce benefits

 

Benefits to Organization

• Expends the marketplace to national and international markets.
  
• Decrease the cost of creating, processing, distributing, storing and retrieving paper-based information.
  
• Allows reduced inventories and overhead by facilitating "pull" type supply chain management.
  
• The pull type processing allows for customization of products and services which provides competitive advantages to its implementers.
  
• Reduce the time between the outlay of capital and the receipt of products and services.
  
• Support Business Processes Reengineering (BPR) efforts.
  
• Lowers telecommunication cost – the internet is much cheaper than Value Added Networks (VANs).
  

 

Benefits to Society

• Enables more individual to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution.
  
• Allows some merchandise to be sold at lower prices benefiting the poor ones.
  
• Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them.
  
• Facilities delivery of public services at reduced cost, increases effectiveness, and/or improves quality.
  

 

Benefits to Consumer

• Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location.
  
• Provides customers with more choices.
  
• Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.
  
• Allows quick delivery of products and services in some cases, especially with digitized products.
  
• Customers can receive relevant and detailed information in seconds; rather than in days or weeks.
  
• Makes it possible to participate in virtual auctions.
  
• Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences.
  
• Electronic commerce facilitates competition, which results in substantial discounts.
  

 

Limitations of E-commerce

 

Technical Limitations

• Lack of sufficient system's security, reliability, standards, and communication protocols.
  
• Insufficient telecommunication bandwidth.
  
• The software development tools are still evolving and changing rapidly.
  
• Difficulties in integrating the Internet and electronic commerce software with some existing applications and databases.
  
• The need for special Web servers and other infrastructures, in addition to the network servers (additional cost).
  
• Possible problems of interoperability, meaning that some E-commerce software does not fit with some hardware, or is incompatible with some operating systems or other components.
  

 

Non-Technical Limitations

• Cost and justification (35% of the respondents)
  

The cost of developing an EC in house can be very high, and mistakes due to lack of experience, may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.

• Security and Privacy (17% of the respondents)
  

These issues are especially important in the B2C area, and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the E-commerce industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure.

• Lack of trust and user resistance (4%)
  

Customers do not trust an unknown faceless seller, paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult.

 

• Other limiting factors
  
  • Lack of touch and feel online.
    
  • Many unresolved legal issues.
    
  • Rapidly evolving and changing E-commerce.
    
  • Lack of support services.
    
  • Insufficiently large enough number of sellers and buyers.
    
  • Breakdown of human relationships.
    
  • Expensive and/or inconvenient accessibility to the Internet.
    

 

TRADITIONAL COMMERCE VS E-COMMERCE

 

Some major comparisons between the traditional commerce methods and modern E-Commerce are listed below:

	Traditional Commerce	E-Commerce
Cost	Cost is greater due to taxes, advertisement and employees.	Average cost is much lower than traditional type.
Market	Product market is limited because of geo-graphical constraints.	Product market is across the world because of non-physical aspects.
Advertisement	It requires product advertisement on various mediums.	Developers of the websites also makes adds on domains.
Time	It requires more time to go outside, to choose, compare and evaluate product.	It takes less time to choose and make comparison between several products.
Accessibility	Less accessible due to time or geo-graphical constraints.	Products can be accessed at any time and from almost anywhere.
Reliability	People trust it more because of physical transactions.	Due to lake of awareness this is less popular among people.
Support	Customers support centers support their customers.	No physical support centers available.
Feedback	Feedback from customers takes a lot of time.	Feedback is immediate by certain website features.
Interactivity	Fewer customers can be interacting with at a time because of less physical limitations.	Websites are especially designed for multi-users.

 

ECONOMIC SYSTEMS

Macroeconomics

 

TWO BIG ECONOMIC SYSTEMS

Capitalism and Communism

In the world there are many economic systems exists among the countries such as:

1. Socialism
   
2. Communism
   
3. Capitalism
   
4. Islamic Economic System
   
5. Mixed Economy Systems
   

 

There are also many other economic systems developed by human society like Stalinism, Maoism and Feudalism but 'Capitalism' and 'Communism' are the most important from all of them. Both have exactly opposite economical, social and political chrematistics.

COMMUNISM

Communism is an economic system that stands for total public ownership and rejects private property and personal profit. Its main idea of communism had been taken from socialism, thus these has many common characteristics. It enforces the equality of common people in their wealth and power. It can be said as:

"A system of government in which the state plans and controls the economy and a single, often authoritarian party holds power, claiming to make progress toward a higher social order in which all goods are equally shared by the people."

 

About

Karl Marx became the prophet and teacher of socialism whose writings transformed socialist thinking all over the world. Marx was a philosopher and an idealist who studied history and was greatly influenced by the writings of Georg Hegel, the famous German philosopher. In 1848 Karl Marx published, with the help of his long-time friend and collaborator Friedrich Engels, "Manifest der Kommunistischen Partei," more commonly known as "The Communist Manifesto". The Communist Manifesto was a summary of his entire social and political philosophy. The publication of this book occurred at a most propitious time. The book appeared on the eve of the 1848 revolution in France and less than one year before an attempted revolution in Germany. After the failure of the 1848 revolution in Germany he was expelled from his country of origin and moved to London. He later published "das Kapital" or Capital, an analysis of the economics of capitalism. Marxism, a doctrine developed by Marx and to a lesser extent by Engels, consists fundamentally of two interrelated ideas: a philosophical view of man and a theory of history.

 

Countries

Following countries are the leading as communist countries:

• China
  
• Cuba
  
• Laos
  
• North Korea
  
• Russia
  
• Vietnam
  

 

CAPITALISM

Capitalism is a political system in which all the property and factors of productions are owned privately in order to create profit for the owner. Prices of goods and services fluctuate depending on the desire of the desire of consumer and availability of goods and services. There will be significant difference of wealth and power between those who have capital and those who don't have it. Hence its definition can be:

"An economic system in which all or most of the means of production are privately owned and operated, and where investment and the production, distribution and prices of goods and services are determined privately by producers, rather than by the state. The means of production are usually operated in pursuit of profit".

About

No one can say when capitalism first began. Clearly the development of capitalism was not revolutionary like that of communism. Instead it emerged gradually without anyone making a plan of what it should become.

In 1776 Adam Smith, a Scottish university professor, produced a book which described the workings of a capitalist society. He believed that a country's wealth depends on all people pursuing their own interests. If a person promotes his own interest he or she is unintentionally promoting his country's interest. Smith thought that governments should promote free trade and not interfere by protecting certain industries from competition. The only duty of governments, Smith wrote, was to provide services that couldn't be profitable like the building of roads, schools and churches.

Countries

These countries are the capitalist in all terms:

• United Kingdom
  
• Finland
  
• Canada
  
• Norway
  
• United States of America
  

 

CAPITALISM VS COMMUNISM

Gross Domestic Production (GDP)

For the Year 2005 (in billions $US)
Communist Countries		Capitalist Countries
Country Name	GDP	Country Name	GDP
China	1843.12	United Kingdom	2295.04
Cuba	125.71	Finland	204.38
Laos	2.66	Canada	1098.45
North Korea	720.77	Norway	285.60
Russia	755.44	United States	12438.87
Vietnam	47.11

Reference: IMF World Economic Outlook (WEO)

 

The above chart shows that overall capitalist countries are creating high GDP rates.

 

Characteristics

The following are the comparative characteristics of these systems based on criticism and favors on them:

Capitalism

• Only private sector operates all business.
  
• People can have their own properties and factors of productions.
  

 

• Each business has been operated to have personal profits.
  
• Those who have capital, they have more wealth and power than others who doesn't have.
  
• There is great competition among private businesses.
  
• Investors take risks in investments as the self-organization.
  
• The existence of markets (including the labor market.
  

 

 

 

Communism

• Communist party holds as Government to operate all kinds of businesses.
  
• There is no concept of private property and all the means of productions are owned by Government.
  
• People work for common welfare and grades not for personal profit.
  
• All the peoples are same in power and wealth.
  

 

• No competition exists. Only Government is the monopolist in all businesses.
  
• No entrepreneurship exists.
  

 

• There are no markets.

 

WHAT I SHOULD SAY

As being a Muslim I must say that Islamic Economic System is the best from all of these economic systems. It enforces a total interest free economy, but it has not been applied successfully in any country across the globe. In Pakistan we are facing a mixed economy system. All the major businesses are owned by Government or had been owned by Government and it didn't have any competitor in these businesses. Pakistan Tele Vision (PTV), Pakistan Railways, Pakistan Tele Communications Ltd. (PTCL), Pakistan International Airlines (PIA), WAPDA, Water and Sewerage Authority (WASA), Sui Northern Gas Pvt. Ltd. and State Bank of Pakistan are the kind of business those had been monopolist under the Government authorization. Now a day only some of them have been privatized or have been facing competitors and other of them are still monopolist and these are still owned by Government.

 

Communism, as it exists in the world today, and capitalism are the same things. True communism doesn't, and can't, exist. True communism depends on human nature being basically altruistic. For communism to work, the members of the society either need to be altruistic enough to want to work for the benefit of their neighbors, or they need to be forward thinking enough to see that what benefits the whole benefits themselves. They must be very far-sighted indeed, because large-scale social benefits tend to be more abstract in nature, and more difficult to recognize. Communism was a major cause in break down of Russia.

 

Capitalism encourages non-contributing, support structure industry. Many organizations make fortunes simply by shifting money back and forth, from one place to another. While this is all very integral to our economy, it only exists as a side effect -- it doesn't actually produce anything.

Capitalism allows people to starve. However, unlike communism, capitalism also allows people to better themselves and their situation. Capitalism also allows people to ensure a better future for their offspring, should they have any, and to contribute surplus resources to organizations that they believe in. To quote the old hack, it may not be a perfect system, but it is the best one we have.

INTRODUCTION TO BUSINESS RESEARCH

What is Business Research?

A systematic Inquiry whose objective is to provide information to solve managerial problems.

Why Study Research?

Research provides you with the knowledge and skills needed for the fast-paced decision-making environment

Why Managers need Better Information

• Global and domestic competition is more vigorous
  
• Organizations are increasingly practicing data mining and data warehousing
  

The Value of Acquiring Research Skills

• To gather more information before selecting a course of action
  
• To do a high-level research study
  
• To understand research design
  
• To evaluate and resolve a current management dilemma
  
• To establish a career as a research specialist
  

Types of Studies Used to do Research

• Reporting
  
• Descriptive
  
• Explanatory
  
• Predictive
  

Exploratory study

• An exploratory study is undertaken when not much is known about the situation at hand, or no information is available on how similar problems or research issues have been solved in the past.
  
• Extensive interviews with many people might have to be undertaken to get a handle on the situation and understand the phenomena.
  
• More rigorous research could then proceed.
  

Exploratory studies are also necessary when some facts are known, but more information is needed for developing a viable theoretical framework

Descriptive study

• Descriptive studies are undertaken to understand the characteristics of organizations that follow certain common practices such as the age, educational level, job status, sex, length of service, and working in the system.
  

Different Styles of Research

(1) Applied Research

(2) Pure Research/Basic Research

What is Good Research?

• Following the standards of the scientific method
  
  • Purpose clearly defined
    
  • Research process detailed
    
  • Research design thoroughly planned
    
  • Limitations frankly revealed
    
  • High ethical standards applied
    

The Manager-Researcher Relationship

• Manager's obligations
  
  • Specify problems
    
  • Provide adequate background information
    
  • Access to company information gatekeepers
    
• Researcher's obligations
  
  • Develop a creative research design
    
  • Provide answers to important business questions
    

Manager-Researcher Conflicts

• Management's limited exposure to research
  
• Manager sees researcher as threat to personal status
  
• Researcher has to consider corporate culture and political situations
  
• Researcher's isolation from managers
  

When Research Should be Avoided

• When information cannot be applied to a critical managerial decision
  
• When managerial decision involves little risk
  
• When management has insufficient resources to conduct a study
  
• When the cost of the study outweighs the level of risk of the decision
  

 

 

 

SETTING THE PRICE

When develops a new product or introduces regular product into new distribution channel or geographical area. It is a six step procedure.

STEP 1: Selecting the Pricing Objective

Each firm operates with some objectives and sets its products price which aligns with its objectives.

Survival.

When intense competition exists, or consumer wants changes. Price only covers variable cost and some fixed cost and company stays in business. It is a short-run objective.

Maximum Current Profit.

Tries to produce maximum current profit or cash in-flows by estimating the demand and cost. Difficult in the long-run because of marketing-mix variables, competitors, and legal constraints.

Maximum Market Share. Market-penetration pricing. Mass production involves. Higher sales volume leads to lower unit cost and higher long-run profit. Benefits can be achieved:

(1) When the market is highly price sensitive and low price stimulates market growth.

(2) With mass production cost of production and distribution will decrease.

(3) Competitive advantage. Low price discourage actual and potential competition.

Maximum Market Skimming. Market-skimming-pricing. Monopoly. Higher price in the start and then low. In 1990 Sony introduced High Definition Television (HDTV) at $43,000. In 1993, 28" was of $6,000 and in 2004; 42" was in $1,200. Condition must exist:

1. High current demand.
   
2. Low unit cost at small volume.
   
3. High initial price will discourage competition.
   
4. Superior product image.
   

Product-Quality Leadership. Making the brand high quality and affordable by creating value and setting just high enough prices.

Other Objectives. Nonprofit or public organizations have different objectives, like nonprofit hospital aim to full cost recovery, or social agencies set a price according to client income.

STEP 2: Determining Demand

Price and demand has an inverse relationship. If price is high demand level will be fall and if the price is low demand will be ultimately high.

Price Sensitivity.
People have different price sensitivities. Customers are more prices sensitive to products that cost a lot or are bought frequently and less sensitive to low-cost items or items that buy infrequently. Companies prefer less price sensitive customers.

Estimating Demand Curves.

• Statistical analysis by statistical techniques gathering data from past prices, sale volumes.
  
• Price experiments by charging different prices for a product to see how sales affects.
  
• Surveys can explore what price consumer will accept.
  

Price Elasticity of Demand. Need to know the change in price brings how much change in demand.

 

 

 

 

 

 

STEP 3: Estimating Costs

Amount incurred on producing, distributing and selling the product

Types of Cost and Level of Production.

Management should know how costs vary with the different levels of production.

• Fixed cost that does not vary with production.
  
• Variable cost varies with the level of output.
  
• Total Cost = sum of fixed and variable costs for given level of production.
  
• Average cost = Total Cost / No. of Units Produced.
  

Accumulated Production.

With time experiences the production techniques become better, the methods improve and average cost falls with this accumulated production experiences. It is called the experience curve or learning curve. Some chains have different learning curves so profits. Activity-based cost (ABC) accounting should be used to estimate the real profitability.

Target Costing.

Set a target cost to be achieved through production scale, experience, and efforts by designers, engineers, and purchasing agents by reducing the current cost. Cost elements---design, engineering, manufacturing, sales---must be examined to bring down cost in target cost range.

SWOT Analysis

			Project on
			SWOT		Analysis

 

SWOT analysis is an important key step in strategic management process. It is an analysis of organization's strengths, weaknesses, opportunities, and threats. Strengths - Any activities the organization does well or any unique resources that it has. Weaknesses – Activities the organization does not do well or resources it needs but does not posses. Opportunities – Positive trends. Threats – Negative trends.

In the light of SWOT analysis it is easy to evaluate the any organization's current missions and goals and easy to evaluate whether they need any modification or not. Also the overall direction can be observed and if necessary changes can be made.

Introduction

Mobilink is the market leader in providing state-of-the-art communications solutions in Pakistan. Mobilink started operations in year 1994 and now it is a biggest cell phone family in Pakistan. It provides coverage in more than 400 cities and towns nationwide including northern, central and southern regions of Pakistan. It deals in JAZZ prepaid service and indigo post-paid cellular service. Its competitors are UFone, Paktel, Insta phone, Telenor, and Warid Telecom.

Strengths

Financial Strength. This has involved an investment in the company of more than US$ 1 Billion including assets, network, equipment, and so on.

Skilled Management Team. Staff Mobilink with world class Professionals and ensure that the right systems are in place to encourage them to develop to their full potential.

Product Categories. Its product lines are both pre-paid and post-paid. Other servers have yet only prepaid, so it is generating revenues rapidly.

Competitive Advantages. Due to its positive market image it had captured a major portion of market demand and suddenly become the biggest cell phone family.

Lower Cost. The cost it is bearing is lower because it is being operated at a very large scale.

Market Image. For last five years it has developed a very positive image through its activities and operations by doing what we say and saying what we do.

Weaknesses

Facilities Obsolete. Some of the features desired by the consumers are not yet given by committed. Such as GRPS service has been launched.

Lower Profitability. Although is operates on large scale so its cost is lower than others, yet it is taking low profits to get competitive advantages.

Lack of Management Departments. It still needs more management departments to handle wildly growing organization.

Services Diversification. Its products categories are both per-paid and post-paid so there is a little diversification of the features, billing methods, franchising and controlling them.

Opportunities

Global Market. Recently it has extended it IR (international roaming coverage) in Jordon, Nigeria, UK Japan, Cambodia, Hong Kong, Germany and many other countries. It has the aim to roam the world by its promotions.

Internet Advertising Growth. It can be grow up more in international business by marketing itself via internet on world's popular domains, e-mail servers.

Increasing Demand. Fashion, Trends are changing rapidly. Now the cellular phone become more affordable in out country, so the demand of the cellular services will ultimately increase.

Market Growth. Hence, the voice communication technology is spreading widely then. Continuously more and more people are taking interest in it. It can occupy a big share of growing market with its strategies.

Under-Establishing Competitors. Although there are many other companies which are competing with Mobilink, but more of them are yet new in the market and under establishing. These companies can't get competitive advantages. Mobilink has the opportunity to compete them because it is well established.

Threats

Government Restrictions. It is a multinational company being operated in Pakistan. It pays tariff to government. As being a outsider company government imposed some service and production restrictions on it also.

Production and Services Limits. Because it is a multinational company and it has to pay tariff to government to operate in Pakistan it has no privileges to render unlimited services.

Increasing Competition. Because of the population growth and the profitability in voice communication industry there are many competitor are being raised gradually.

Rapidly Changing Trends. The necessities and trends are changing with great speed. These changes might cause the absolution of the old technology. May some other time there will be a better system get connected with outside world.

Substitute Products. There are many other substitutes in voice communication technology such as PTCL land line phones or wireless phones.

D E C I S I O N - M A K I N G

    A decision is a choice from two or more alternatives. Making good decisions is something that every manager should have. Decisions have a major influence in organizational success or failure. Top-level managers make decisions about their organization's goals, middle and lower-level managers make decisions about setting production schedules, handling problems and employee hiring and firing.

D E C I S I O N - M A K I N G P R O C E S S

    Decision making process is a set of eight steps that are following:

    STEP 1: IDENTIFYING A PROBLEM

The decision-making process begins with the existence of a problem. A problem is a discrepancy between an existing and a desired state of affairs.

    STEP 2: IDENTIFYING DECISION CRITERIA

Once a manager has identified a problem that needs attention, the decision criteria important to resolving the problem must be identified. That is, managers must determine what's relevant in making a decision.

    STEP 3: ALLOCATING WEIGHTS TO THE CRITERIA

The decision maker must weight the items in order to give them the correct priority in the decision. A simple approach of allocating weights is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard.

    STEP 4: DEVELOPING ALTERNATIVES

Then the decision maker should list the variable alternatives that could resolve the problem. In this step the manager doesn't has to evaluate the alternatives. He only has to list out them.

    STEP 5: ANALYZING ALTERNATIVES

Once the alternatives have been identified, the decision maker must critically analyze each one. Each alternative is evaluated by appraising it against the criteria established. From his comparison, the strengths and weaknesses of each alternative become evident.

    STEP 6: SELECTING AN ALTERNATIVE

The sixth step is the important act of choosing the best alternative from among those considered. We have determined all the pertinent criteria in the decision, weighted them, and identified and analyzed viable alternatives. Now we merely have to choose the alternatives that generated the highest score in previous step.

    STEP 7: IMPLEMENTING THE ALTERNATIVE

Although the choice process is completed in the previous step, the decision may still fall if it isn't implemented properly.

    Implementation involves conveying the decision to those affected by it and getting their commitment to it.

    STEP 8: EVALUATING DECISION EFFECTIVENESS

The last step in decision-making process involves appraising the outcome of the decision see if the problem has been resolved. Did the alternative chosen and implemented accomplish the desired results?

If the problem still exists then the manager would need to carefully assess what went wrong. Was the problem incorrectly defined? Were errors made in the evaluation of the various alternatives? Was the right alternative selected but poorly implemented. It might even require starting the whole decision process over.

D E C I S I O N - M A K I N G S T Y L E S

    Four decision making styles are evident: directive, analytical, conceptual and behavioral.

• Directive style. People using the directive style have tolerance for ambiguity and are rational in their way of thinking. They're efficient and logical. Directive types make fast decision and focus on the short run. Their efficiency and speed in making decisions often results in their making decisions with minimal information and assessing few alternatives.
  

 

• Analytical style. Decision makers with an analytical style have much greater tolerance for ambiguity than do directive types. They want more information before making a decision and consider more alternatives than a directive-style decision maker does. Analytical decision makers are best characterized careful decision makers with the ability to adopt or cope with unique situations.
  

 

• Conceptual style. Individuals with conceptual style tend to be very broad in their outlook and will look at many alternatives. They focus on the long run and are very good at finding creative solutions to problems.
  

 

• Behavioral style. Decision makers with behavioral style work well with others. They're concerned about the achievements of subordinates and are receptive to suggestions from others. They often use meetings to communicate, although they try to avoid conflicts.
  

Management process

PLANNING

Planning involves defining the organization's goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate organizational work. Planning can be either formal or informal.

 

In informal planning, nothing is written down, and there is little or no sharing of goals with others in the organization. This type of planning often is down in many small businesses and also exists in some large organizations as well.

 

When we use the term planning, we mean formal planning. In formal planning; specific goals covering a period of years are defined. Those goals are written down and shared with organizational members. Finally, specific action programs exist for the achievement of these goals.

PURPOSES OF PLANNING

1. Direction to managers.

   Planning establishes coordinated effort. It gives direction to managers and non-managers alike. When employees know where the organization or work unit is going and what they must contribute to reach goals, they can coordinate their activities, cooperate with each other, and do what it takes to accomplish those goals.

2. Reduce un-certainty.

   Planning also reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses.

3. Reduce overlapping.

   Planning reduces overlapping and wasteful activities. When work activities are coordinated around established plans, wasted time and resources and redundancy can be minimized.

4. Improve efficiency.

   When means and ends are made clear through planning, inefficiencies become obvious and can be corrected or eliminated.

5. Minimum wastage of sources.
6. Standardizes the controlling process.

   Planning establishes goals or standards that are used in controlling. If we're unsure of what we're trying to accomplish, how can we determine whether we have actually achieved it?

 

Planning depends upon two elements:

I – Goals: Goals are desired outcomes for individuals, groups, or entire organization. There are two types of goals:

Stated Goals: Official statements of what an organization says, and what it wants its various stakeholders to believe, its goals are.

Real Goals: Goals that an organization actually pursues, as defined by the actions of its members.

Ii – Plans: Documents that outline how goals are going to be met including resource allocations, schedules, and other necessary actions to accomplish the goals.

 

APPROACHES TO ESTABLISHING GOALS

TRADITIONAL GOAL SETTING

An approach to setting goals in which goals are set at the top level of the organization and then broken down into sub goals for each level of the organization.

    

Means-Ends Chain

An integrated network of goals in which the accomplishment of goals at one level serves as the means for achieving the goals, or ends, at the next level.

MANAGEMENT BY OBJECTIVIES (MBO)

A management system in which specific performance goals are jointly determined by employees and their managers, progress toward accomplishing those goals is periodically reviewed, and rewards are allocated on the basis of this progress.

TYPES OF ORGANIZATIONAL STRATEGIES

Organizational strategies include strategies at the corporate level, business level, and functional level. Managers at the top level of the organization typically are responsible for corporate-level strategies. Managers at the middle level typically are the responsible for business-level strategies. And managers at the lower levels of the organization typically are responsible for the functional-level strategies.

 

1. CORPORATE-LEVEL STRATEGY

A corporate-level-strategy seeks to determine what business a company should be in or want to be in. It refers to make strategies for multiple (more than one) products under an organization.

 

2. BUSINESS-LEVEL STRATEGY

A business level strategy seeks to determine how an organization should compete in each of its business. When you as a manager makes strategies for your own product-line from multiple products in which your organization deals.

 

1. STRATEGIC BUSINESS UNIT

When an organization is in several different businesses, these single businesses that are independent and that formulate their own strategies are often called strategic business units.

1. COMPETITIVE ADVANTAGES

Competitive advantage is what sets an organization apart, that is, its distinct edge. You can check the resource of your business that competes to other companies and you can facilitate your customers to compete them. In any industry, five competitive forces dictate the rule of competition. Managers access an industry's attractiveness using the following five factors.

1. Threat of new entrants. Factors such as economies of scale, brand loyalty, and capital requirements determine how easy or hard it is for new competitors to enter an industry.

2. Threats of substitutes. Factors such as switching costs and buyer loyalty determine the degree to which customers are likely to buy a substitute product.

3. Bargaining power of buyer. Factors such as number of customers in the market, customer information, and the availability of substitutes determine the amount of influence that buyer have in an industry.

4. Bargaining power of suppliers. Factors such as the degree of supplier concentration and availability of substitute inputs determine the amount of power that suppliers have over firms in the industry.

5. Existing rivalry. Factors such as industry growth rate, increasing or failing demand, and product differences determine how intense the competitive rivalry will be among existing forms in the industry.

 

3) COST LEADERSHIP STRATEGY

A business level strategy in which the organization is the lowest-cost produces in its industry.

4) DIFFERENTATION STRATEGY

The company that seeks to offer unique products that are widely valued by customers is following a differentiation strategy.

3. FUNCTIONAL-LEVEL STRATEGY

A functional-level strategy seeks to determine how to support the business-level strategy. It means all sub departments of your organization should have such kind of strategies that are supporting your business-level strategies. These strategies facilitate you to achieve both corporate level strategies and business level strategies.

CONTROL

Control is the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations. Three different approaches to designing control system have been identified.

1. MARKET CONTROL

Market control is an approach to control that emphasizes the use of external market mechanisms, such as price competition and relative market share, to establish the standards used in the control system.

1. BUEARUCRATIC CONTROL

Bureaucratic control is an approach to control that emphasizes organizational authority and relies on administrative rules, regulations, procedures, and policies.

1. CLEAN CONTROL

Under clean control, employee behaviors are regulated by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organization's culture.

 

WHY IS CONTROL IMPORTANT?

• To maintain quality.
• To achieve goals.
• To reduce cost.
• To keep standard output.

 

CONTOL PROCESS

The control process is a three-step process including measuring actual performance, comparing actual performance against a standard, and talking managerial action to correct deviations or inadequate standards.

 

STEP1: MEASURING

To determine what actual performance is, a manager must acquire information about it.

How We Measure Four common sources of information frequently used by managers to measure actual performance are personal observation, statistical reports, oral reports and written reports. Management by walking around (MBWA) is a phase used to describe when a manager is out in the work area, interacting directly with employees, and exchanging information about what's going on.

What We Measure What we measure is probably more critical to the control process than how we measure. Why? The selection of the wrong criteria can result in serious dysfunctional consequences.

STEP2: COMPARING

The comparing step determines the degree of variation between actual performance and the standard. Some variation in performance can be expected in all activities. It's critical, therefore, to determine the acceptable range of variation. The range of variation is the acceptable parameters of variance between actual performance and the standards.

STEP3: TAKING MANAGERIAL ACTION

The third and final step in the control process is taking managerial action. Managers can choose among three possible courses of action.

1. Do Nothing

Managers can leave the deviations. "Do nothing" is fairly self-explanatory.

1. Correct Actual Performance

If the source of the performance variation is unsatisfactory work, the manager will want to take corrective action such as changing strategy, structure, compensation practice, or training programs; redesigning jobs; or firing employees.

Immediate Corrective Action. Corrective action that corrects problems at once to get performance back on track.

Basic Corrective Action. Corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation.

1. Revise the Standard

It's possible that the variance was a result of an unrealistic standard; that is, the goal may have been too high or too low. In such cases, it's the standard that needs corrective attention, not the performance.

DECISION-MAKING

A decision is a choice from two or more alternatives. Making good decisions is something that every manager should have. Decisions have a major influence in organizational success or failure. Top-level managers make decisions about their organization's goals, middle and lower-level managers make decisions about setting production schedules, handling problems and employee hiring and firing.

DECISION-MAKING PROCESS

Decision making process is a set of eight steps that are following:

STEP 1: IDENTIFYING A PROBLEM

The decision-making process begins with the existence of a problem. A problem is a discrepancy between an existing and a desired state of affairs.

 

STEP 2: IDENTIFYING DECISION CRITERIA

Once a manager has identified a problem that needs attention, the decision criteria important to resolving the problem must be identified. That is, managers must determine what's relevant in making a decision.

 

STEP 3: ALLOCATING WEIGHTS TO THE CRITERIA

The decision maker must weight the items in order to give them the correct priority in the decision. A simple approach of allocating weights is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard.

 

STEP 4: DEVELOPING ALTERNATIVES

Then the decision maker should list the variable alternatives that could resolve the problem. In this step the manager doesn't has to evaluate the alternatives. He only has to list out them.

 

STEP 5: ANALYZING ALTERNATIVES

Once the alternatives have been identified, the decision maker must critically analyze each one. Each alternative is evaluated by appraising it against the criteria established. From his comparison, the strengths and weaknesses of each alternative become evident.

 

STEP 6: SELECTING AN ALTERNATIVE

The sixth step is the important act of choosing the best alternative from among those considered. We have determined all the pertinent criteria in the decision, weighted them, and identified and analyzed viable alternatives. Now we merely have to choose the alternatives that generated the highest score in previous step.

 

STEP 7: IMPLEMENTING THE ALTERNATIVE

Although the choice process is completed in the previous step, the decision may still fall if it isn't implemented properly. Implementation involves conveying the decision to those affected by it and getting their commitment to it.

 

STEP 8: EVALUATING DECISION EFFECTIVENESS

The last step in decision-making process involves appraising the outcome of the decision see if the problem has been resolved. Did the alternative chosen and implemented accomplish the desired results?

If the problem still exists then the manager would need to carefully assess what went wrong. Was the problem incorrectly defined? Were errors made in the evaluation of the various alternatives? Was the right alternative selected but poorly implemented. It might even require starting the whole decision process over.

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DECISION-MAKING STYLES

Four decision making styles are evident: directive, analytical, conceptual and behavioral.

• Directive style. People using the directive style have tolerance for ambiguity and are rational in their way of thinking. They're efficient and logical. Directive types make fast decision and focus on the short run. Their efficiency and speed in making decisions often results in their making decisions with minimal information and assessing few alternatives.
• Analytical style. Decision makers with an analytical style have much greater tolerance for ambiguity than do directive types. They want more information before making a decision and consider more alternatives than a directive-style decision maker does. Analytical decision makers are best characterized careful decision makers with the ability to adopt or cope with unique situations.
• Conceptual style. Individuals with conceptual style tend to be very broad in their outlook and will look at many alternatives. They focus on the long run and are very good at finding creative solutions to problems.
• Behavioral style. Decision makers with behavioral style work well with others. They're concerned about the achievements of subordinates and are receptive to suggestions from others. They often use meetings to communicate, although they try to avoid conflicts