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CHAPTER II

2.1. MANAGEMENT CONCEPT


2.1.1 Etymology
The verb 'manage' comes from the Italianmaneggiare (to handle, especially tools),
which derives from the Latinword manus (hand). The French word mesnagement (later
mnagement) influenced the development in meaning of the English word management
in the 17th and 18th centuries.
2.1.2 Definition of Management
Stoner (1982) in his book Management defined
Management has been calledthe art of getting things done
through people.This definition, by Marry Parker Follet,
calls attention to the fact that managers achieve organization
goals by arranging for other to perform whatever tasks may
be necessary.
Pal (2014) in his journal said there are some management expert who define
management, as follows :
Peter F. Drucker defines, "management is an organ; organs can be described and
defined only through their functions".
According to Terry, "Management is not people; it is an
activity like walking, reading, swimming or running. People
who perform Management can be designated as members,
members of Management or executive leaders."
According to Mc Farland, "Management is defined for
conceptual, theoretical and analytical purposes as that
process by which managers create, direct, maintain and
operate purposive organization through systematic, coordinated co-operative human effort."
Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to coordinate and to control."
Koontz and O'Donnel, "Management is the creation and
maintenance of an internal environment in an enterprise
where individuals, working in groups,
can perform
efficiently and effectively toward the attainment of group

goals. It is the art of getting the work done through and with
people in formally organized groups."
Mary Parker Follett defines management as the "art of getting things done through
people". This definition calls attention to the fundamental difference between a
manager and other personnel of an organization. A manager is one who contributes to
the organizations goals indirectly by directing the efforts of others not by performing
the task himself. On the other hand, a person who is not a manager makes his
contribution to the organizations goals directly by performing the task himself.
The term concepts of Management has been interpreted in several ways, some of
which are given below :
1. Management is an Activity
Managemet is an activity just like playing, studying, teaching. As an activity has
been defined as the art of getting things done throught the efforts of other people.
The activities of management are :
a. Interpesonal activities
b. Decisional activities
c. Informative activities
2. Management is a Processs
Management is considered a process, because it involves a series of interrelated
functions. It consists of getting the objectives of an organization and taking steps to
achieve objectives.
Managemet as a process has the following implications :
a. Social Process, management involves interaction among people. Goals can be
achieved only when relations between people are productive. Human factor is
the most important part of the management.

b. Integrated process, management brings human, physical, and financial resources


together to put ito effort.
c. Continous process, management involves continuous identifying and solving
problems. It is repeated every now and the till he goals is achieved.
d. Intercative process, management are contained within each other. For example,
when a manager prepares plans. He is also laying down standard for control.
3. Management as an Economic Resources
Management is an important factor of production. Management occupies the central
place among productive factors as it combine and coordinate all other resources.
4. Management as a Team
Management consists of all those who have the responbility of guiding and
coordinating the efforts of other as a group of persons. The persons are called as
managers who operate at different levels of authority, top, middle, and operating.
5. Management as an Academic Dicipline
Management has emerged as a specialized branch of knowledge. It comprises
principles and practices for effective management of organization. Management
offers a very rewarding and challenging career.
6. Management as a Group
Management means the group of person occupying managerial positions. It refers to
all those individuals who perform managerial functions. All the managers for
example chief executive, departmenta; heads, supervisors and so on are collectively
known as management.(Murugan, 2014)
Conclusion: Managements is an activities through the process of planning,
organizing, staffing, directing, and controlling by a group of organization to achieve its
inteded goals.

2.1.3 Characteristics of Management


1. Management is goal oriented
Management goals are called group goals or organization goals. Management is a
purposeful activity workers to achieve organizational goals specified. The
achievement of these goals serve as a measure of the success of management.
Management has no justification to exist without goals. The basic goals of
management is to ensure efficiency and economy in the utilization of human,
physical, and financial resources. Thus, management is purposefull.
2. Management is universal
Management is universal in character.Management is a essential element of every
organized activity ireespective of the size or type of activity. Thus management is a
pervasive activity. The fundamental principles of management are applicable in all
areas of organized effort.
3. Management is an Integrative Force
The essence of management lies in the coordination of individual efforts into a team.
Management reconciles the individual goals with organizational goals. As unifying
force, management creates a whole that is more than the sum of individual parts. It
integrates human and others resources.
4. Management is a Social Process
Management is a social process because it is concerned with interpersonal relations.
Human factor is the most important element in management. According to Apply,
Management is the development of people not the direction of things.
5. Management is Multidiciplinary
Management as to deal with human behavior under dynamic conditions. Therefore,
it depends upon wide knowledge derived from several disciplines like engineering,

sociology, psychology, economics, anthropology. The vast body of knowledge in


management drwas heavily upon other fields of study.
6. Management is a Continous Process
Management is a dynamic and an on-going process. The cycle of management
continues to operate so long as there is organized action for the achievement of
group goals.
7. Management is Intangible
Management is an unseen or invisible force. It cannot be seen but its presence can be
felt everywhere in the form of result. Hiwever, the managers who perform the
function of management are very much tangible and visible.
8. Management is an Art as well as Science
Art implies the application of knowledge and skills to bring about the desired result.
The desired results. The essential elements of arts are : practical knowledge,
personal skill, result oriented approach, creativity, and improvement through
continuous practice. Meanwhile, science means a systematic body of knowledge
pertaining to a specific field of study. It contains general principles and facts which
explains phenomenon. These principles and theories help to explain past event and
may be used to predict the outcome of actions. It contains a systematics body of
theoretical knowledge and it also involves the pratical application of such
knowledge. Management is also discipline involving specialized training and an
ethical code arising out of is social obligantions.
Conclusion : On the basic of these nature management, can be defined as the
process of a continuous and getting done through in social process involving the
coordination of human and material resources in order to accomplishment group of

organization goals for example family, club, team or business, university,


government.
2.1.4 Management Functions
The meaning of management functions is the role of management. Pal (2014) said
in his journal there are some management expert who divided management functions,
namely:
Fayol identifies five functions of management are planning, organizing,
commanding, coordinating and controlling.
Koontz and O'Donnell divide these functions into planning, organizing, staffing,
directing and controlling.

1.

Gulick states seven such functions under the catch word


"POSDCORB' which stands for planning, organizing, staffing,
directing, coordinating, reporting and budgeting.
Planning
Planning is the most fundamental and the most pervasive of all management
functions. If people working in groups have to perform effectively, they should
know in advance what is to be done, what activities they have to perform in order
to do what is to be done, and when it is to be done.

2.

Organizing
The design of pattern of roles and relathionships that constribute to the goal.
Roles are assigned, authority, and responsibility are determined, and provision is
made cooedination. Organizing typically involves the development of the
organization chart, job descriptions, and statements of work flow. (Jones and
Barlett, 2014)

3.

Staffing
The determination of personnel needs and the selection, orientation, training,
and continuing evaluation of the individuals who hold the required positions

identified in the organizing process. Some theorists class the staffing function
within the organizing function, rather than viewing it as a separate function. (Jones
and Barlett, 2014)
4.

Directing
Directing is the function of leading the employees to perform efficiently, and
contribute their optimum to the achievement of organizational objectives. Jobs
assigned to subordinates have to be explained and clarified, they have to be
provided guidance in job performance and they are to be motivated to contribute
their optimum performance with zeal and enthusiasm. The function of directing
thus involves the following sub-functions :

5.

a.

Communication

b.

Motivation

c.

Leadership

Coordinating
Coordinating is the function to establish relationships among various parts of the
organization that they all together pull in the direction of organizational objectives.
It is thus the process of tying together all the organizational decisions, operations,
activities and efforts so as to achieve unity of action for the accomplishment of
organizational objectives.

6.

Reporting
Management reporting is a system of communication, essentially a mechanism for
monitoring the mission of an organization. Normally in the written form of facts
which should be brought to the attention of various levels of management who use
them to take suitable action.

7.

Budgeting
Management Budgeting is a process of measuring and converting plans for the use
of real (i.e. physical resources) into financial values. It is the classic problem of
how to add together quantities of apples and oranges into a meaningful economic
measurement, the only practical way for everyday use is to express their economic
values in terms of monetary costs and revenues.

2.1.5 Management Process


Management is a process of the quality of both physical as well as human resources
to seek objectives. It is a human and social process directed at individuals to get things
get things done. Like other processess, it consist of many actions or functions which are
to be carried cut in a logical sequence. It is a result oriented process, direcly related
with the task of determining objectives and devising ways and means to accomplish
them efficiently. Process of management can description, as follow:
1.

Planning
Planning is concerned with 'what', 'how, and 'when' of performance. It is
deciding in the present about the future objectives and the courses of action for
their achievement. It this involves:
a. Determination of objectives
b. Forecasting and choice of a course of action
c. Formulation of policies, programmes, budgedts, schedules, to achieve objectives
d. Laying down of procedures and standards of performance.

2.

Organizing
Organizing process results in a structure of the organization. It comprises
organizational positions, accompanying tasks and responsibilities, and a network of
roles and authority-responsibility relationships. Organizing is thus the basic

process of combining and integrating human, physical and financial resources in


productive interrelationships for the achievement of objectives.
The process of organizing consists of the following steps :
a.

Determining and defining the activities required for the achievement of


planned goals

b.

Grouping the activities into logical and convenient units

c.

Assignment the duties and activities to specific positions and people

d.

Delegation of authority so as to enable them to perform their jobs and to


command the resources needed for their performance.

e.

Establishing horizontal and vertical authority relationships throughout the


organization.

3.

Actuating
Actuating can be called by various names leading, directing, motivating.
Actuating involves getting the members of the organization to perform in ways that
will help it achieves organizations goals
Task of directing are:

4.

a.

Issuing orders and instructions.

b.

Guilding and leading the subordinates and finally.

c.

Supervising the affairs of the subordinates.

Controling
Controlling implies that objectives, goals and standards of performance exist
and are known to employees and their superiors. It also implies a flexible and
dynamic organization which will permit changes in objectives, plans, programmes,
strategies, policies, organizational design, staffing policies and practices,
leadership style, communication system, for it is not uncommon that employees

failure to achieve predetermined standards is due to defects or shortcomings in any


one or more of the above dimensions of management. Thus, controlling involves
the following process :

a.

Measurement of performance against predetermined goals.

b.

Identification of deviations from these goals.

c.

Corrective action to rectify deviations.

The Difference between function and process of management


Function of Management
Process of Management
Management is a doing function because
- Management decides who should do it
managers get work done under their
and how they should do it.
supervision.
- Using POAC
Using POSDCORB
Planning : defining goals, establishing
Planning : working out, in broad outline :
strategy, and developing subplans to
the things that need to be done, the
coordinate activities.
methods for doing them, and to
accomplish the purpose set for the
Organizing : determining what needs to
enterprise.
be done, how it will be done and who is
to do it.
Organizing : the establishment of the
formal structure of authority, subdividing
Actuating : directing and motivating all
of work, defining andcoordinating it for
involved parties and resolving conflicts.
the defined objective.
Controlling : monitoring activities to
Staffing : the whole personnel function of
ensure that they are accomplished as
bringing in, training the staff, and
planned.
maintaining favourable conditions of
work.
Directing : continous task of making
decision, embodying them in specific and
general orders and instruction, serving as
the leader of the enterprise.
Coordinating : the all important duty of
interelating the various part of the work.
Reporting : keeping those to whom the
executive is responsible informed as to
what is going on, which thus includes:
keeping himself and his subordinates
informed, through record, research and
inspection.
Budgeting : exercise of fiscal planning,
accounting and controlling.

Conclusion : Functions and process of management tend to coalesce, and it


sometimes becomes difficult to separate one from the other. Butalthough it can notbe
separated, functionsandmanagementprocesseshave different.Management functionisthe
roleofmanagement, while managementprocessis an activityin themanagement.
2.1.6 Level of Management
Levels of management refer to a line of demarcation between various managerial
positions in an enterprise. The levels of management depend upon its size, technical
facilities, and the range of production.
The real significance of levels is that they explain authority relationships in group of
organization. These positions are created through the process of delegation of authority
from top to lower levels. Considering the hierarchy of authority and responsibility, one
can identify three levels of management,such as thefollowingpyramid:

Characteristics of Top Level :


Characteristics of Middle
level:
Top
Report to top level
Oversee first-line
managers
Develop and implement
activities
Allocate resource

Middle
Characteristics of Lower Level:

Lower

1.

Set objectives
Scan environment
Plan and make decisions

Report to middle level


Supervise employees
Coordinate activities
Involved in day to day operation

Top Level
Top level is the ultimate source of authority and it lays down goals, policies and
plans for the group of organization. It devotes more time on planning and
coordinating functions. It is accountable to the owners of the business of the

overall management. It is also described as the policy making group responsible for
the overall direction and success of all company activities. The authorityof top
management include :
a.

To establish the objectives or goals of the enterprise.

b.

To make policies and frame plans to attain the objectives laid.

c.

To set up an organizational frame work to conduct the operations as per plans.

d.

To assemble the resources of money, men, materials, machines and methods to


put the plans into action.

e.

To exercise effective control of the operations.

f.

To provide overall leadership to the enterprise.


Top level consists of owners or shareholders, Board of Directors, its

Chairman, Managing Director, or the Chief Executive, or the General Manager or


Executive Committee having key officers.
2.

Middle Level
The job of middle level is to implement the policies and plans framed by the top
level. It serves as an essential link between the top level and the lower level or
operative management. They are responsible to the top level for the functioning of
their departments. They devote more time on the organization and motivation
functions of management. They provide the guidance and the structure for a
purposeful enterprise. Without them the top management's plans and ambitious
expectations will not be fruitfully realized. The following are the main authoritesof
middle level :
a. To interpret the policies chalked out by top level.
b. To prepare the organizational set up in their own departments for fulfilling the
objectives implied in various business policies.

c. To recruit and select suitable operative and supervisory staff.


d. To assign activities, duties and responsibilities for timely implementation of the
plans.
e. To compile all the instructions and issue them to supervisor under their control.
f. To motivate personnel to attain higher productivity and to reward them
properly.
g. To cooperate with the other departments for ensuring a smooth functioning of
the entire organization.
h. To collect reports and information on performance in their departments.
i. To report to top level.
j. To make suitable recommendations to the top level for the better execution of
plans and policies.
Middle levelconsists of heads of functional departments are Purchase Manager,
Production Manager, Marketing Manager, Financial controller, etc. and Divisional
and Sectional Officers working under these Functional Heads.
3.

Lower level
It is placed at the bottom of the hierarchy of management, and actual operations are
the responsibility of this level of management. Lower level is in direct touch
withthe rank and file or workers. Lower levels authority and responsibility is
limited, as follow:
a. To pass on the instructions of the middle level to workers.
b. To interpret and divide the plans of the management into short-range operating
plans.
c. To involved in the process of decisions-making.
d. To get the work done through the workers.

e. To allot various jobs to the workers, evaluate their performance and report to the
middle level management.
f. To more concerned with direction and control functions of management.
g. To devote more time in the supervision of the workers.
Lower level managementconsists of Superintendents, Foremen, Supervisors.
2.2. SCOPE OF MANAGEMENT SCIENCE
The field of management is very wide, so its needs to be classified into following
categories. Its consists of : financial management, marketing management, production
management, personnel management, total quality management and inventory management.
2.2.1 Financial Management
Financial management seeks to ensure the right amount and type of funds to
business at the right time and at reasonable cost. It comprises the following activities:
1. Estimating the volume of funds required for both long-term and short-term needs of
business.
2. Selecting the appropriate source of funds.
3. Raising the required funds at the right time.
4. Ensuring proper utilisation and allocation of raised funds so as to maintain safety
and liquidity of funds and the creditworthiness and profitability of business, and
5. Administration of earnings
Thus, financial management involves the planning, organising and controlling of the
financial resources.
Financial and accounting management deals with managerial activities related to
procurement and utilization of fund for business purpose. Its sub areas are as follows:

1. Financial accounting: It relates to record keeping of various financial transactions


their classification and preparation of financial statements to show the financial
position of the organization.
2. Management accounting: It deals with analysis and interpretation of financial record
so that management can take certain decisions on investment plans, return to
investors and dividend policy.
3. Taxation: This area deals with various direct and indirect taxes which organization
has to pay.
4. Costing: Costing deals with recording of costs, their classification, analysis and cost
control.
5. Estimating the volume of funds required for both long term and short term needs of
business.
6. Selecting the appropriate source of funds.
7. Raising the required funds at the right time.
8. Ensuring proper utilization and allocation of raised funds so as to maintain safety
and liquidity of funds and the creditworthiness and profitability of business.
To be a successful, a company must meet its first main goals: identifying, creating,
and delivery highly valued products and services to its customers.
Just as a tool needs all three legs to stand, a successful company must have all three
attributes : skilled people, strong external relationships, and sufficient capital.
The financial Management decided to:
1. Financial securities
The variety of financial securities is limited only by human creativity, ingenuity,
and governmental regulations.
2. The cost of money

The fundamental factors affecting the cost of money are: production


opportunities, time preferences for consumption, risk, and inflation.
Economic conditions and policies also effect the cost of money. These
include:
a.

Federal Reserve Policy.

b.

Budget deficits or surpluses

c.

Business activity

d.

International trade deficits or surpluses

3. Financial Institution
a. Investment banks and brokerage activity
b. Deposit taking financial intermediaries
1) Saving and loan associations (S&Ls)
2) Credit unions
3) Commercial banks
c. Investment funds
At some financial institutions, savers have an ownership interest in a pool of
funds rather than owning deposit account. Examples include mutual funds,
hedge funds, and private equity funds.
d. Life insurance companies and pension funds
4. Financial market
There are many differnt financial markets in a developed economy. Each market
deals with a somewhat different type of instrument, customer, or geographic
location.
2.2.2 Marketing Management
Marketing is about identifying and meeting human and social needs. One of the shortest
good definitions of marketing is meeting needs profitably.

The American Marketing Association offers the following formal definition:Marketing is


the activity,set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings thathave value for customers, clients, partners, and society at large.
Coping with these exchange processes calls for a considerable amount of work and skill.
Marketing management takes place when at least one party to a potential exchange thinks
about the means of achieving desired responses from other parties.
Thus we see marketing management as the art and science of choosing target markets and
getting, keeping,and growing customers through creating, delivering, and communicating
superior customer value.
Marketers market 10 main types of entities: goods, services, events, experiences, persons,
places, properties, organizations, information, and ideas.

1.

Goods
Physical goods constitute the bulk of most countries production and marketing efforts.
Each year, U.S. companies market billions of fresh, canned, bagged, and frozen food
products and millions of cars, refrigerators, televisions, machines, and other mainstays of a
modern economy.

2.

Services
As economies advance, a growing proportion of their activities focuses on the production
of services. The U.S. economy today produces a 7030 services-to-goods mix. Services
include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance
and repair people, and accountants, bankers, lawyers, engineers, doctors, software
programmers, and management consultants. Many market offerings mix goods and
services, such as a fast-food meal.

3.

Events
Marketers promote time-based events, such as major trade shows, artistic performances,
and company anniversaries. Global sporting events such as the Olympics and the World
Cup are promoted aggressively to both companies and fans.

4.

Experiences
By orchestrating several services and goods, a firm can create, stage, and market
experiences. Walt Disney Worlds Magic Kingdom allows customers to visit a fairy
kingdom, a pirate ship, or a haunted house. There is also a market for customized
experiences, such as a week at a baseball camp with retired baseball greats, a four-day rock
and roll fantasy camp, or a climb up Mount Everest.

5.

Persons
Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other
professionals all get help from celebrity marketers. Some people have done a masterful job
of marketing themselves David Beckham, Oprah Winfrey, and the Rolling Stones.
Management consultant Tom Peters, a master at self-branding, has advised each person to
become a brand.

6.

Places
Cities, states, regions, and whole nations compete to attract tourists, residents, factories,
and company headquarters.

7.

Properties
Properties are intangible rights of ownership to either real property (real estate) or
financial property (stocks and bonds). They are bought and sold, and these exchanges
require marketing. Real estate agents work for property owners or sellers, or they buy and
sell residential or commercial real estate. Investment companies and banks market
securities to both institutional and individual investors.

8.

Organizations
Organizations work to build a strong, favorable, and unique image in the minds of their
target publics. In the United Kingdom, Tescos Every Little Helps marketing program
reflects the food marketers attention to detail in everything it does, within the store and in
the community and environment. The campaign has vaulted Tesco to the top of the UK
supermarket chain industry. Universities, museums, performing arts organizations,

corporations, and nonprofits all use marketing to boost their public images and compete
for audiences and funds.

9.

Information
The production, packaging, and distribution of information are major industries.
Information is essentially what books, schools, and universities produce, market, and
distribute at a price to parents, students, and communities.

10. Ideas
Every market offering includes a basic idea. Charles Revson of Revlon once observed: In
the factory we make cosmetics; in the drugstore we sell hope. Products and services are
platforms for delivering some idea or benefit. Social marketers are busy promoting such
ideas as Friends Dont Let Friends Drive Drunk and A Mind Is a Terrible Thing to
Waste.
A marketer is someone who seeks a response attention, apurchase, a vote, a donation from
another party, called the prospect. If two parties are seeking tosell something to each other, we
call them both marketers. Marketers are skilled at stimulating demand for their products, but
thats a limited view of whatthey do. Just as production and logistics professionals are
responsible for supply management, marketersare responsible for demand management. They
seek to influence the level, timing, and compositionof demand to meet the organizations
objectives. Eight demand states are possible:

1. Negative demand
Consumers dislike the product and may even pay to avoid it.

2. Nonexistent demand
Consumers may be unaware of or uninterested in the product.

3. Latent demand
Consumers may share a strong need that cannot be satisfied by an existing product.

4. Declining demand
Consumers begin to buy the product less frequently or not at all.

5. Irregular demand
Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis.

6. Full demand
Consumers are adequately buying all products put into the marketplace.

7. Overfull demand
More consumers would like to buy the product than can be satisfied.

8. Unwholesome demand
Consumers may be attracted to products that have undesirable social consequences.

Marketing management not only involves distribution of the product to the buyers,
but also identifying of consumers needs. It may need number of steps. Sub areas are as
follows:
1. Market research: It involves in collection of data related to product demand and
performance by research and analysis of market.
2. Planning and developing suitable product.
3. Setting appropriate prices.
4. Selecting the right channel of distribution.
5. Advertising: This area deals with advertising of product, introducing new product in
market by various means and encourage the customer to buy thee products.
6. Sales management: Sales management deals with fixation of prices, actual transfer
of products to the customer after fulfilling certain formalities and after sales
services.
Key Customer Market
Consider the following key custumer markets:

1.

Consumer markets
Companies selling mass consumer goods and services such as juices,cosmetics, athletic
shoes, and air travel spend a great deal of time establishing a strong brand imageby

developing a superior product and packaging, ensuring its availability, and backing it
withengaging communications and reliable service.

2.

Business markets
Companies selling business goods and services often face well-informedprofessional
buyers skilled at evaluating competitive offerings. Business buyers buy goods to makeor
resell a product to others at a profit. Business marketers must demonstrate how their
productswill help achieve higher revenue or lower costs. Advertising can play a role, but
the sales force, theprice, and the companys reputation may play a greater one.

3.

Global markets
Companies in the global marketplace must decide which countries to enter;how to enter
each (as an exporter, licenser, joint venture partner, contract manufacturer, or
solomanufacturer); how to adapt product and service features to each country; how to price
productsin different countries; and how to design communications for different cultures.
They face differentrequirements for buying and disposing of property; cultural, language,
legal and politicaldifferences; and currency fluctuations. Yet, the payoff can be huge.

4.

Nonprofit and government markets


Companies selling to nonprofit organizations withlimited purchasing power such as
churches, universities, charitable organizations, and governmentagencies need to price
carefully. Lower selling prices affect the features and quality the seller canbuild into the
offering. Much government purchasing calls for bids, and buyers often focus onpractical
solutions and favor the lowest bid in the absence of extenuating factors.

2.2.3 Production Management:


Production or operations management is the process, which combines and transforms
various resources used in the production or operations sub system of the organization into value
added product or services in a controlled manner as per the policies of the organization.
Therefore, it is that part of an organization, which is concerned with the transformation of a
range of inputs into the required (products or services) having the requisite quality level.

The set of interrelated management activities, which are involved in manufacturing certain
products, is called as production management. If the same concept is extended to services
management, then the corresponding set of management activities is called as operations
management.

1. Concept Of Production
Production function is that part of an organization, which is concerned with the
transformationof a range of inputs into the required outputs (products) having the requisite
quality level.Production is defined as the step-by-step conversion of one form of material
intoanother form through chemical or mechanical process to create or enhance the utility
ofthe product to the user. Thus production is a value addition process. At each stage
ofprocessing, there will be value addition.

2. Historical Evolution of Production Management


For over two centuries operations and production management has been recognised as
an important factor in a centurys economic growth.
The traditional view of manufacturing management began in eighteent century when
Adam Smith recognised the economic benefits of specialisation of labour. He recomended
breaking of jobs down into subtask and recognisesn workers to specialised tasks in which

they would become highly skilled and officient. In the early twentieth century, F.W.tylor
implemented Smiths theories and developed scientific management. From then till 1930,
many techniques were developed prevailing the traditional view. Brief information about the
contributions to manufacturing management is shown in the Tabel.
TABLE Historical Summary Of Operations Management
Date
1776

Contributtion
Specialization of labour in manufacturing

Contributor
Adam Smith

1799

Interchangeable parts, cost accounting

Eli Whitney and others

1832

Division of labour by skill; assignment of jobs by skill;


basics of time study

Charles Babbage

1900

Scientific management time study and work study


developed; dividing planning and doing of work

Frederick W. Taylor

1900

Motion of study of jobs

Frank B. Gilbreth

1901

Scheduling techniques for employees, machines jobs


in manufacturing

Henry L. Gantt

1915

Economic lot sizes for inventory control

F.W. Harris

1927

Human relations; the Hawthorne studies

Elton Mayo

1931

Statistical inference applied to product quality: quality


control charts

W.A. Shewart

1935

Statistical sampling applied to quality control:


inspection sampling plans

H.F. Dodge & H.G. Roming

1940

Operations research applications in World War II

P.M. Blacker and others.

1946

Digital computer Linear programming

John Mauchlly and J.P. Eckert

1947

Mathematical programming, on-linear and stochastic

1950

Commercial digital computer: large-scale


computations available.

G.B. Dantzig, Williams &


others
A. Charnes, W.W. Cooper
processes & others

1951

Organizational behaviour: continued study of people at


work

Sperry Univac

1960

Integrating operations into overall strategy and policy,


Computer applications to manufacturing,

L. Cummings, L. Porter

1970

Scheduling and control, Material requirement planning


(MRP)

W. Skinner J. Orlicky and


G. Wright

1980

Quality and productivity applications from Japan:


robotics, CAD-CAM

W.E. Deming and J. Juran.

Production management becomes the acceptable term from 1930s to 1950s. As


F.W. Taylors works become more widely known, managers developed techniques
that focussed on economic efficiency in manufacturing. Workers were studied in
great detail to eliminate wasteful efforts and achieve greater efficiency. At the same
time, psychologists, socialists and other social scientists began to study people and
human behaviour in the working environment. In addition, economists,
mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches.
With the 1970s emerges two distinct changes in our views. The most obvious
of these, reflected in the new name operations management was a shift in the
service and manufacturing sectors of the economy. As service sector became more
prominent, the change from production to operations

emphasized the

broadening of our field to service organizations. The second, more suitable change
was the beginning of an emphasis on synthesis, rather than just analysis, in
management practices.
3. Production System
The production system of an organization is that part, which produces products of an
organization. It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance with the
policies communicated by management. A simplified production system is shown above.
The production system has the following characteristics:

a.

Production is an organized activity, so every production system has an objective.

b.

The system transforms the various inputs to useful outputs.

c.

It does not operate in isolation from the other organization system.

d.

There exists a feedback about the activities, which is essential to control and improve
system performance.

4. Classification of Production System


Production systems can be classified as Job Shop, Batch, Mass and Continuous
Production systems.
Continous
Production
Mass Production
Production/
operations volume
Batch Product

Output Product Variety

a.

Job shop production


Job shop production are characterised by manufacturing of one or few quantity of
products designed and produced as per the specification of customers within prefixed
time and cost. The distinguishing feature of this is low volume and high variety of
products. A job shop comprises of general purpose machines arranged into different
departments. Each job demands unique technological requirements, demands
processing on machines in a certain sequence.

1) Characteristics
The Job-shop production system is followed when there is:

a) High variety of products and low volume.


b) Use of general purpose machines and facilities.
c) Highly skilled operators who can take up each job as a challenge because
of uniqueness.

d) Large inventory of materials, tools, parts.


e) Detailed planning is essential for sequencing the requirements of each
product, capacities for each work centre and order priorities.

2) Advantages
a) Following are the advantages of job shop production: Because of
general purpose machines and facilities variety of products can be
produced.
b) Operators will become more skilled and competent, as each job
gives them learning opportunities.
c) Full potential of operators can be utilised.
d) Opportunity exists for creative methods and innovative ideas.
3) Limitations
Following are the limitations of job shop production:
a) Higher cost due to frequent set up changes
b) Higher level of inventory at all levels and hence higher inventory
cost
c) Production planning is complicated
d) Larger space requirements.
b.

Batch Production
Batch production is defined by American Production and Inventory Control
Society (APICS) as a form of manufacturing in which the job passes through
the functional departments in lots or batches and each lot may have a different
routing. It is characterised by the manufacture of limited number of products
produced at regular intervals and stocked awaiting sales.
1) Characteristics
Batch production system is used under the following circumstances:
a) When there is shorter production runs.
b) When plant and machinery are flexible.

c) When plant and machinery set up is used for the production of item in a
batch and change of set up is required for processing the next batch.
d) When manufacturing lead time and cost are lower as compared to job
order production.
2) Advantages
Following are the advantages of batch production:
a) Better utilisation of plant and machinery.
b) Promotes functional specialisation.
c) Cost per unit is lower as compared to job order production.
d) Lower investment in plant and machinery.
e) Flexibility to accommodate and process number of products.
f)

Job satisfaction exists for operators.

3) Limitations
a) Following are the limitations of batch production:
b) Material handling is complex because of irregular and longer flows.
c) Production planning and control is complex.
d) Work in process inventory is higher compared to continuous
production.
e) Higher set up costs due to frequent changes in set up.
c.

Mass Production
Manufacture of discrete parts or assemblies using a continuous process are
called mass production. This production system is justified by very large
volume of production. The machines are arranged in a line or product layout.
Product and process standardisation exists and all outputs follow the same path.
1) Characteristics

Mass production is used under the following circumstances:


a) Standardisation of product and process sequence.
b) Dedicated special purpose machines having higher production capacities
and output rates.
c) Large volume of products.
d) Shorter cycle time of production.
e) Lower in process inventory.
f)

Perfectly balanced production lines.

g) Flow of materials, components and parts is continuous and without any


back tracking.
h) Production planning and control is easy.
i)

Material handling can be completely automatic.

2) Advantages
Following are the advantages of mass production:
a) Higher rate of production with reduced cycle time.
b) Higher capacity utilisation due to line balancing.
c) Less skilled operators are required.
d) Low process inventory.
e) Manufacturing cost per unit is low.
3) Limitations
Following are the limitations of mass production:
a) Breakdown of one machine will stop an entire production line.
b) Line layout needs major change with the changes in the product design.
c) High investment in production facilities.
d) The cycle time is determined by the slowest operation.

d.

Continuous Production
Production facilities are arranged as per the sequence of production operations
from the first operations to the finished product. The items are made to flow
through the sequence of operations through material handling devices such as
conveyors, transfer devices.
4) Characteristics
Continuous production is used under the following circumstances:
a) Dedicated plant and equipment with zero flexibility.
b) Material handling is fully automated.
c) Process follows a predetermined sequence of operations.
d) Component materials cannot be readily identified with final product.
e) Planning and scheduling is a routine action.
5) Advantages
Following are the advantages of continuous production:
a) Standardisation of product and process sequence.
b) Higher rate of production with reduced cycle time.
c) Higher capacity utilisation due to line balancing.
d) Manpower is not required for material handling as it is completely
automatic.
e) Person with limited skills can be used on the production line.
f) Unit cost is lower due to high volume of production.
6) Limitations
Following are the limitations of continuous production:
a) Flexibility to accommodate and process number of products does not
exist.

b) Very high investment for setting flow lines.


c) Product differentiation is limited.
5. Objective of Production Management
The objective of the production management is to produce goods services of right
quality and quantity at the right time and right manufacturing cost.
a. Right Quality
The quality of product is established based upon the customers needs. The right
quality is not necessarily best quality. It is determined by the cost of the product
and the technical characteristics as suited to the specific requirements.
b. Right Quantity
The manufacturing organization should produce the products in right number. If
they are produced in excess of demand the capital will block up in the form of
inventory and if the quantity is produced in short of demand, leads to shortage of
products.
c. Right Time
Timeliness of delivery is one of the important parameter to judge the
effectiveness of production department. So, the production department has to
make the optimal utilization of input resources to achieve its objective.
d. Right Manufacturing Cost
Manufacturing costs are established before the product is actually manufactured.
Hence, all attempts should be made to produce the products at pre-established
cost, so as to reduce the variation between actual and the standard (preestablished) cost.
2.2.4 Personnel Management

The terms Human Resource Management (HRM) and Human Resources (HR)
have largely replaced the term personnel management as a description of the
processes involved in managing people in organizations.
Human resource management is defined as a strategic and coherent approach to the
management of an organizations most valued assets the people working there who
individually and collectively contribute to the achievement of its objectives.
1.

The Matching Model of HRM (Human Resource Management)


One of the first explicit statements of the HRM concept was made by the
MichiganSchool (Fombrunet al, 1984). They held that HR systems and the
organization structurs should be managed in a way that is congruent with
organizational strategy(hence the name matching model). Which consists offour
generic processes or functions that are performed in all organizations. These are:
a. Selection : matching available human resources to jobs;
b. Appraisal : performance management;
c. Rewards : the reward system is one of the most under-utilized and mishandled
managerial tools for driving organizational performance; it must reward short s
well as long-term achievements, bearing in mind that business must perform in
the present to succeed in the future;
d. Development : developing high quality employees.

2.

Aims of HRM (Human Resource Management)


The overall purpose of human resource management is to ensure that the
organization is able to achieve success through people. As Ulrich and Lake (1990)
remark: HRM systems can be the source of organizational capabilities that allow
firms to learn and capitalize on new opportunities. Specifically, HRM is
concerned with achieving objectives in the areas summarized below:

a. Organizational effectiveness
Extensive research has shown that such practices can make a significant impact
on firm performance. HRM strategies aim to support programmes for improving
organizational effectiveness by developing policies in such areas as knowledge
management, talent management and generally creating A great place to
work.
b. Human capital management
Human capital can be regarded as the prime asset of an organization and
businesses need to invest in that asset to ensure their survival and growth. HRM
aims to ensure that the organization obtains and retains the skilled, committed
and well-motivated workforce it needs. This means taking steps to assess and
satisfy future people needs and to enhance and develop the inherent capacities
of people their contributions, potential and employability by providing
learning and continuous development opportunities.
c. Knowledge management
Knowledge management is any process or practice of creating, acquiring,
capturing, sharing and using knowledge, wherever it resides, to enhance
learning and performance in organizations (Scarborough et al, 1999). HRM
aims to support the development of firm-specific knowledge and skills that are
the result of organizational learning processes.
d. Reward management
HRM aims to enhance motivation, job engagement and commitment by
introducing policies and processes that ensure that people are valued and
rewarded for what they do and achieve and for the levels of skill and
competence they reach.

e. Employee relations
The aim is to create a climate in which productive and harmonious relationships
can be maintained through partnerships between management and employees
and their trade unions.
f. Meeting diverse needs
HRM aims to develop and implement policies that balance and adapt to the
needs of its stakeholders and provide for the management of a diverse
workforce, taking into account individual and group differences in employment,
personal needs, work style and aspirations and the provision of equal
opportunities for all.
g. Bridging the gap between rhetoric and reality
The research conducted by Grattonet al (1999) found that there was generally a
wide gap between the sort of rhetoric expressed above and reality.
Managements may start with good intentions to do some or all of these things
but the realization of them theory in use is often very difficult. This arises
because of contextual and process problems: other business priorities, shorttermism, limited support from line managers, an inadequate infrastructure of
supporting processes, lack of resources, resistance to change and lack of trust.
3.

Policy Goals of HRM (Human Resource Management)


The models of HRM, the aims set out above and other definitions of HRM
have been distilled by Caldwell (2004) into 12 policy goals:
a. Managing people as assets that are fundamental to the competitive advantage of
the organization.
b. Aligning HRM policies with business policies and corporate strategy.
c. Developing a close fit of HR policies, procedures and systems with one another.

d. Creating a flatter and more flexible organization capable of responding more


quickly to change.
e. Encouraging team working and co-operation across internal organizational
boundaries.
f. Creating a strong customer-first philosophy throughout the organization.
g. Empowering employees to manage their own self-development and learning.
h. Developing reward strategies designed to support a performance-drivenculture.
i. Improving employee involvement through better internal communication.
j. Building greater employee commitment to the organization.
k. Increasing line management responsibility for HR policies.
l. Developing the facilitating role of managers as enablers.
4.

Characteristics of HRM (Human Resource Management)


The characteristics of the HRM concept as they emerged from the writings of
the pioneers and later commentators are that it is:
a. Diverse;
b. Strategic with an emphasis on integration;
c. Commitment-oriented;
d. Based on the belief that people should be treated as assets (human capital);
e. Unitarist rather than pluralist, individualistic rather than collective in its
approachto employee relations;
f. A

management-driven

activity

managementresponsibility;
g. Focused on business values.

2.2.5 Total Quality Management

the

delivery

of

HRM

is

line

In recent years, Total Quality Management (TQM) has received worldwide attention
and is being adopted in many industries, particularly in developed economies. TQM
may be defined as a continuous quest for excellence by creating the right skills and
attitudes in people to make prevention of defects possible and satisfy customers/users
totally at all times. TQM is an organization-wide activity that has to reach every
individual within an organization.
Oakland has defined Total Quality Management (TQM) is an approach to improving
the effectiveness and flexibility of business as a whole. It is essentially a way of
organizing and involving the whole organization; every department, every activity,
every single person at every level.
TQM is regarded as an integration of various processes characterizing the
behavioural dynamics of an organization. For this, an organization is referred to as a
total system (socio-technical), where all the activities carried out are geared towards
meeting the requirements of customers with efficiency and effectiveness.
Zaire and Simintiras have propounded this viewpoint by stating: Total Quality
Management is the combination of the socio-technical process towards doing the right
things (externally), everything right (internally) first time and all the time, with
economic viability considered at each stage of each process.

Price and Gaskill have identified three dimensions of TQM. They are:
1. The product and service dimension: the degree to which the customer is satisfied
with the product or service supplied;
2. The people dimension: the degree to which the customer is satisfied with the
relationship with the people in the supplying organizations;

3. The process dimension: the degree to which the supplier is satisfied with the internal
work processes, which are used to develop the products and
services supplied to the customers.
2.2.6 Inventory Management
In dictionary meaning of inventory is a detailed list of goods, furniture etc. Many
understand the word inventory, as a stock of goods, but the generally accepted meaning
of the word goods in the accounting language, is the stock of finished goods only.
Inventory management is a science primarily about specifying the shape and
percentage of stocked goods. It is required at different locations within a facility or
within many locations of a supply network to precede the regular and planned course of
production and stock of materials. All organizations keep inventory. Inventory
includes a companysraw materials, work in process, supplies used in operations,and
finished goods. Inventory can be something as simple as a bottle of glass cleaner used
as part of a buildings custodial program or something complex such as a mix of raw
materials and subassemblies used as part of a manufacturing process.
The primary objectives of inventory management are:
1. To minimize the possibility of disruption in the production schedule of a firm for
want of raw material, stock and spares.
2. To keep down capital investment in inventories.
A.

Inventory Costs
Inventory brings with it a number of costs. These costs can include:
1.

Dollars

2.

Space

3.

Labor to receive, check quality, put away, retrieve, select, pack, ship, and account
for

4.

Deterioration, damage, and obsolescence

5.

Theft
Inventory costs generally fall into ordering costs and holdingcosts. Ordering, or

acquisition, costs come about regardless ofthe actual value of the goods. These costs
include the salaries ofthose purchasing the product, costs of expediting the
inventory,and so on.
B.

The Goals of Inventory


As discussed in a just-in-time manufacturing environment, inventory is considered
waste. However, in environments where an organization suffers from poor cash flow or
lacks strong control over : 1) electronic information transfer among all departments and
all significant suppliers, 2) lead times, and 3) quality of materials received, inventory
plays important roles. Some of the more important reasons for obtaining and holding
inventory are:
1.

Predictability: In order to engage in capacity planning and production scheduling,


you need to control how much raw material, parts, and subassemblies you process
at a given time. Inventory buffers what you need from what you process.

2.

Fluctuations in demand: A supply of inventory on hand is protection: You dont


always know how much you are likely to need at any given time, but you still need
to satisfy customer or production demand on time. If you can see how customers
are acting in the supply chain, surprises in fluctuations in demand are held to a
minimum.

3.

Unreliability of supply: Inventory protects you from unreliable suppliers or when


an item is scarce and it is difficult to ensure a steady supply. Whenever possible
unreliable suppliers should be rehabilitated through discussions or they should be
replaced. Rehabilitation can be accomplished through master purchase orders with

timed product releases, price or term penalties for nonperformance, better verbal
and electronic communications between the parties, etc. This will result in a
lowering of your on-hand inventory needs.
4.

Price protection: Buying quantities of inventory at appropriate times helps avoid


the impact of cost inflation. Note that contracting to assure a price does not require
actually taking delivery at the time of purchase. Many suppliers prefer to deliver
periodically rather than to ship an entire years supply of a particular stockkeeping
unit ( SKU) at one time. (Note: The acronym SKU, standing for stockkeeping
unit, is a common term in the inventory world. It generally stands for a specific
identifying numeric or alpha-numeric identifier for a specific item.)

5.

Quantity discounts: Often bulk discounts are available if you buy in large rather
than in small quantities.

6.

Lower ordering costs: If you buy a larger quantity of an item less frequently, the
ordering costs are less than buying smaller quantities over and over again.

A.

STRATEGIC MANAGEMENT
All organizations engage in the strategic management process either formally or
informally. Strategic management is equally applicable to public, private, not-for-profit,
and religious organizations.

1. Definition of Strategic Management


Strategic management is the process of managing the pursuit of organizational
mission while managing the relationship of the organization to its environment (James
M. Higgins).
Strategic management is defined as the set of decisions and actions resulting in the
formulation and implementation of strategies designed to achieve the objectives of the
organization (John A. Pearce II and Richard B. Robinson, Jr.).

Strategic management is the process of examining both present and future


environments, formulating the organization's objectives, and making, implementing,
and controlling decisions focused on achieving these objectives in the present and
future environments (Garry D. Smith, Danny R. Arnold, Bobby G. Bizzell).
Strategic management is a continuous process that involves attempts to match or fit
the organization with its changing environment in the most advantageous way possible
(Lester A. Digman)
2. The Scope of Strategic Management
J. Constable has defined the area addressed by strategic management as "the
management processes and decisions which determine the long-term structure and
activities of the organization". This definition incorporates five key themes:

a.

Management process. Management process as relate to how strategies are created


and changed.

b.

Management decisions. The decisions must relate clearly to a solution of perceived


problems (how to avoid a threat; how to capitalize on an opportunity).

c.

Time scales. The strategic time horizon is long. However, it for company in real
trouble can be very short.

d.

Structure of the organization. An organization is managed by people within a


structure. The decisions which result from the way that managers work together
within the structure can result in strategic change.

e.

Activities of the organization. This is a potentially limitless area of study and we


normally shall centre upon all activities which affect the organization.

3. The Strategic Decision Makers

Strategic management process involves the entire range of decisions. The strategic
management process requires competent individuals to ensure its success. Therefore, to
understand strategic management, we must know where strategic decisions are made in
organizations.
Inputs to strategic decisions can be generated in a number of ways. Overall, top
management, board of directors, and planning staff tend to be those positions that have
the most significant involvement and influence in the strategic management process of
organizations. The failure of an organization to achieve its objectives can often be
traced to a breakdown at the level of the board or top management. However, the final
responsibility rests with top management.
4. The Strategic Management Process
Strategic management process

can be defined as a combination of managerial

decisions and actions that determines the long run performance of a corporation. It
includes environmental observation, strategic planning, formulation, implementation,
evaluation and control.
Crucial considerations :
a) Demand
b) Competition
c) Technology
d) Scarcity
Major steps:
a. First stage ( definitions)
1) Preparations of missions
2) Setting of Objectives
3) Fixation of goals

4) Policies
5) Analysis of environment
b. Second stage ( formulation)
1) Formulation of strategies
2) Implementation of strategies
c. Third stage ( Evaluation)
1) SWOT Analysis
2) Evaluation
5. Strategic Management Models
a.

Andrews Models

b.

Gluecks Models

c.

The Schendel and Hofer Models

d.

The Thompson and Strickland Models

e.

Koreys Models

f.
B.

Schematic Models

Operation Management

1. Definition
Joseph G .Monks defines Operations Management as the process whereby
resources, flowing within a defined system, are combined and transformed by a
controlled manner to add value in accordance with policies communicated by
management.
The operations managers have the prime responsibility for processing inputs into
outputs. They must bring together under production plan that effectively uses the
materials, capacity and knowledge available in the production facility. Given a demand
on the system work must be scheduled and controlled to produce goods and/or services

required. Control must be exercised over such parameters such as costs, quality and
inventory levels.
2. Resources
Resources are the human, material and capital inputs to the production process.
Human resources are the key assets of an organisation. As the technology advances, a
large proportion of human input is in planning and controlling activities. By using the
intellectual capabilities of people, managers can multiply the value of their employees
into by many times. Material resources are the physical facilities and materials such as
plant equipment, inventories and supplies. These are the major assets of an
organisation. Capital in the form of stock, bonds, and or taxes and contributions is a
vital asset. Capital is a store of value, which is used to regulate the flow of the other
resources.
3. Systems
Systems are the arrangement of components designed to achieve objectives
according to the plan. The business systems are subsystem of large social systems.
In turn, it contains subsystem such as personnel, engineering, finance and
operations, which will function for the good of the organisation. A systems approach to
operations management recognises the hierarchical management responsibilities. If
subsystems goals are pursued independently, it will results in sub-optimization.
A consistent and integrative approach will lead to optimization of overall system
goals. The system approach to specific problems requires that the problem first be
identified and isolated from the maze of the less relevant data that constitute the
environment. The problem abstracted from the overall (macro) environment. Then it
can be broken into manageable (micro) parts and analysed and solutions proposed.
Doing this analysis is advantageous before making any changes. If the solution appears

to solve the problem in a satisfactory way, changes can be made to the real system in an
orderly and predictable way.
The ability of any system to achieve its objective depends on its design and its
control. System design is a predetermined arrangement of components. It establishes
the relationships that must exist between inputs, transformation activities and outputs in
order to achieve the system objectives. With the most structured design, there will be
less planning and decision-making in the operations ofthe system. System control
consists of all actions necessary to ensure that activities conform to preconceived plans
or goals. It involves following four essential elements:
a. Measurement by an accurate sensory device.
b. Feedback of information in a timely manner.
c. Comparison with standards such as time and cost standards.
d. Corrective actions by someone with the authority and ability to correct.
A closed loop control system can automatically function on the basis of data from
within its ownsystem.
4. Transformation and Value Adding Activities
The objective of combining resources under controlled conditions is to transform
them into goodsand services having a higher value than the original inputs. The
transformation process applied willbe in the form of technology to the inputs. The
effectiveness of the production factors in thetransformation process is known as
productivity.The productivity refers to the ratio between values of output per work hour
to the cost of inputs.
The firms overall ratio must be greater than 1, then we can say value is added to
the product.Operations manager should concentrate improving the transformation
efficiency and to increase theratio.

5. Operation Management Objective


Objectives of Operations Management can be categorized into Customer Service and
ResourceUtilisation.
6. Customer Service
The first objective of operating systems is to utilize resources for the satisfaction of
customerwants. Therefore, customer service is a key objective of operations
management. The operatingsystem must provide something to a specification, which
can satisfy the customer in terms of costand timing. Thus, providing the right thing at a
right price at the right time can satisfy primaryobjective.

7. Resource Utilisation
Another major objective of operating systems is to utilize resources for the
satisfaction of customerwants effectively. Customer service must be provided with the
achievement of effective operationsthrough efficient use of resources. Inefficient use of
resources or inadequate customer serviceleads to commercial failure of an operating
system.Operations management is concerned essentially with the utilisation of
resources, i.e. obtainingmaximum effect from resources or minimising their loss, under
utilisation or waste.
The extent ofthe utilisation of the resources potential might be expressed in terms
of the proportion of availabletime used or occupied, space utilisation, levels of activity,
etc. Each measure indicates the extent towhich the potential or capacity of such
resources is utilised. This is referred as the objective ofresource utilisation.

Operations management is concerned with the achievement of both satisfactory


customer serviceand resource utilisation. An improvement in one will often give rise to
deterioration in the other.Often both cannot be maximized, and hence a satisfactory
performance must be achieved on bothobjectives. All the activities of operations
management must be tackled with these two objectives in mind, and because of this
conflict, operations managers will face many of the problems. Hence,operations
managers must attempt to balance these basic objectives.

8. Operations Objectives
The overall objective of the operations subsystem is to provide conversion
capabilities for meeting the organizations goals and strategy. The sub-goals of the
operations subsystem, must specify the following:
a.

Product or service characteristics.

b.

Process characteristics.

c.

Product or service quality.

d.

Efficiency

e.

Effective employee relations and cost control of labour.

f.

Cost control of material.

g.

Cost control in facility utilization.

h.

Customer service (schedule)

i.

Producing quantities to meet expected demand.

j.

Meeting the required delivery date for goods or services.

k.

Adaptability for future survival.


The priorities among these operations sub-goals and their relative emphases

should be direct reflections of the organizations mission. Relating these six operations
sub-goals to the broader strategic choices above, it is clear that quality, efficiency, and
dependability (customer service) are reflected in the sub-goals. Flexibility encompasses
adaptability but also relates to product/service and process characteristics: Once choices
about product and process are made, boundaries for meeting the other operations
objectives are set.
Acording to the strategic management and operation management, we can decide
that role of level management as follow:
STRATEGIC
DICISIONS

OWNERS/ BOARD
OF DIRECTORS

TACTICAL
DECISIONS

MANAGERS

OPERATIONAL
DECISIONS

MOST EMPLOYEES

2.3. THE EVOLUTION OF MANAGEMENT THEORY


Management has been progressively evaluated through the following three stages.
2.3.1 The Early Clasical Theory of Management
It has three streams :
1. Bureaucracy : 1900

2. Scientific management : 1900-1930


3. Administrative / Operational management: 1916-1940
2.3.2 The Neo-Classical Theory Of Management
It has one streams : Behavioral Approach: 1940-1950
2.3.3 Modern Theory of Management
It has three streams :
1. Quantitative Approach: 1950-1960
2. Systems Approach: 1960s on words
3. Contingency Approach: 1970s on words
A. The early classical theory of management
1. Bureaucracy
Bureaucracy management is a stream of classical theory of management. Max Weber
was the first of management theorists who were concerned the management structure with
the sets of rule and regulations. Bureaucracy management depends upon administration
devices. Max Weber presents the ideal organization structure. There are four major
characteristics of organizational structure.

a) Division of labour : Clearly defined authority and responsibility given as official


duties
b) Hierarchy of authority : Positions organized in a hierarchical manner resulting in a
scalar chain
c) Formal selection : Employees should be selected on the basis of technical skill,
formal examinations or by education or training
d) Formal rules : There must be formal rules and controls regarding the conduct of
official duties of administrators

Advantage of bureaucracy management:


a) Hierarchy of authority.
b) Employment is based on the technical efficiency.
c) Eliminate managerial inconsistencies.
d) A well understood system.
e) Maintain the consistency of working.
f) Rules and regulation of the duties are followed by the employees.
g) Records are kept for future references.
h) People are given authority according to their position in organization.
Disadvantage of bureaucracy management:
a) Human resources are not tackled.
b) Inter personal relations are discarded.
c) It does not allow for personal growth and development.
d) It does not possess adequate.
e) Organization becomes static and change is not anticipated.
f) Difficult to keep co-ordination and communication between employees.
g) It is a closed system.
2. Scientific management
Frederick Winslow Taylor was first person who gave Scientific Management in
1911. He also called the father of scientific management. Scientific Management was
concerned to improving the operational efficiency at the shop-floor level. According to
Taylor, scientific management means knowing exactly what you want men to do and
seeing that they do it in the best and cheapest way. Scientific management is based on
the analysis, planning and control functions. And job accomplished by analyzing, and
works can selected and trained scientifically. In this, management role is to determine the

kind of work for which an employee suited and hire and assign workers accordingly.
Management is not responsible for execution of work but they are responsible for how
the work is done. Co-operation between management and workers can enhance the work
and achieve the maximum output.
Taylor called it as Mental Revolution, because it creates the mutual
understanding, trust and confidence between the management and workers for achieving
goal (higher production).
Principles of scientific Management
Under scientific management, Taylor developed the following parameters for
organization.
a) Science not rule of thumb : the first principle of scientific management requires
scientific study and analysis of each element of a job in order to replace the old
rule of thumb approach development of a science for each element of a mans job
requires that decisions should be made on the basis of facts rather than opinions
and beliefs.
b) Scientific selection, training and development of workers : this principles requires
that workers should be selected and trained in accordance with the requirements of
the jobs, to be entrusted to them. Instead of allowing workers to learn themselves,
systematic training and development programmers should designed to improve
their skills and efficiency. Efforts should be made to develop each employee to his
greatest efficiency.
c) Close cooperation between workers and management : close cooperation between
management and workers to ensure that work is done in accordance with the
developed scientific principles. The interests of employer and employees should be
fully harmonised so as to create a mutually beneficial relationship.

d) Equal divison of work and responsibility : management should assume the


responsibility for which it is better suited. Management should decide the methods
of work, working conditions, time for completion of work instead of leaving them
to the discreation of the works. In other words, management should take more
responsibility for planning and supervision of the work, while the workers should
be concerned with the execution of plans.
e) Maximum prosperity for both employers and employee : the aim of management
should be to secure maximum prosperity for each employee along with maximum
prosperity for the employer.This can be possible when efficiency and output are
maximised. Maximum output and optimum utilisation of resources will bring
higher profits to the employers coupled with higher wages and salaries for
employees.
f) Mental revolution : it means a complete change in the outlook of both management
and workers with respect to their mutual relations and in relation to work effort.
Instead of fighting on the division of surplus of industry, they should work together
to increase the surplus so that each one can get more.
Objective of Scientific Management
a) Scientific utilization of various resources like human power, material.
b) To provide trained and efficient work force.
c) To provide standardize methods of work.
d) To provide a scientific base for selecting material, and equipment.
e) To provide extra wages to the worker for higher production.
f) Replace old rule of thumbs to new scientific methods.
g) To develop a good rapport between management and workers.
h) To achieve higher production, with reduce costs and maximum efficiency.

i) Less wastage.
3. Administrative management
Henri Fayol was real father of modern Management. Henri Fayol is the French
industrialist in 1841-1925. He was a mining engineer in. Henri Fayol spent his entire
working career in French industry, French cool and iron combine of commentary
fourchambault. Henri Fayol developed a general theory of Business Administration.
Henri Fayol was concerned the principles of organization and the function of
management. Fayol laid the foundation of management as a separate body of
knowledge. He always insisted that if scientific forecasting and proper methods are
used in management than company can get satisfactory results. According to Fayol,
management was not personal talent, it is a knowledge base skill.
Henri Fayols Administrative Management is based on six admin activities, that
are :
a) Technical : Production and manufacture
b) Managerial : Planning, controlling, co-ordination
c) Commercial : Purchasing and selling
d) Financial : Use of capital
e) Accounting : Asset, Liabilities, cost, profits
f) Security : Protection of goods and Person
Fayols fourteen Principles of management. Fayol derived the following
fourteen principles.
a) Division of work: Division of work means specialization. Each job and work
should be divided into small task and should be assigned to specialist of it.
b) Authority and responsibility: Authority means right to give order and command
while responsibility means to accomplish objective.

c) Discipline: Discipline is required at every level in every organization. Fayol


stated discipline in terms of obedience, application, and respect to superiors.
d) Unity of command: A subordinate should receive order from only one boss.
e) Unity of direction: It means that all the works of an organization must work
together to accomplish a common objective in under one plan and head.
f) Subordination of individual interest to common interest: Worker follows the
common interest of organization rather than individual.
g) Remuneration: Remuneration should be fair and adequate. It includes both types
of incentives financial as well as non financial.
h) Centralization: There should be one central point in organization which
exercises overall direction and control of all the parts.
i) Scalar Chain: Scalar chain is the chain or line of command from superior to
subordinates.
j) Order: Only proper order can give an efficient management.
k) Equity: Equity creates loyalty and devotion among the employees.
l) Stability of tenure personnel: Security of job for an employee in an organization
is very important and pre-requisite condition. Retaining productive employee
should always a higher priority of management.
m) Esprit de corps: Management should encourage harmony and proper
understandings between workers. Fayol said that in union there is strength.
Whole organization should work as a team.
n) Initiative: Manager should be encouraged the employees Initiative for creative
working.
B. The neo classical theory of management

Neo- classical theory is also referred to as behavioral science approach to


modifying and improving the classical theory. While classical theories focused more on
structure and physical aspects of the worker and Neo-classical theory gives importance to
human and social aspects of the worker and his relations in the organization.
The neo-classical theory is based on the Hawthrone experiments. Elton Mayo
conducted the Hawthrone experiments at Hawthron plant of General Electronic
Company (GEC) between 1927 and 1993 at Chicago with 30,000 workers. The
Hawthron plant was manufacturing telephone system bell. The objective of the
experiment was to find out the behavior and attitude of workers at workplace under
better working conditions. In the company, when management provide the benefits of
medical allowance and pension with recreational facilities. Even thought workers get all
facilities but the productivity was not up to expectation. So, in 1924, the professor Elton
Mayo and his research team investigate the reasons for dissatisfaction of employees and
decrease in productivity.
Four Phase of Hawthrone experiments:
Prof. Elton Mayo and his team conducted researches in four phases.
1) Illumination experiments (1924 1927)
2) Relay assembly room experiments (1927 1928)
3) Mass interviewing programme (1928 -1930)
4) Bank wiring room study (1931 1932)
Result of Hawthrone Experiments:
1) Motivation: Employees are not motivated by only money (bonus scheme and
incentive).

2) Communication: communication helps the management and employees to have better


mutual

understanding.

Through

proper

communication,

management

can

easily identified the problem faced by its employees and can easily solve out.
3) Social factors: Social factors are responsible for deciding the level of output.
4) Behavior of workers: workers are not as individual identity but as members of a group
in an organization and they have their own norms and beliefs. Workers behavior
depends upon his mental level and emotions. Workers began to influence their group
behavior towards management.
5) Relationship: Employees do not like order and command. They preferred to maintain
amicable relationship with their co-workers. They want co-operative attitude from
their superiors.
6) Production level: Teamwork and Group psychology increases productivity.
Criticism of Hawthrone Experiments:
1) Hawthrone experiment was not conducted scientifically.
2) In the experiment, various format and structure are not feasible.
3) Eltone Mayo gives more importance to human aspect and ignoring other important
aspects.
4) Group conflict is prevalent in an organization.
5) Hawthrone experiment did not give any recognition to the forces which are
responsible for productivity in the organization.
6) During experiment, Eltone Mayo has assumed that a satisfied employee would be
productive. But the finding was different. There is no link between working condition
and productivity.
Major contributors of Neo-classical theory are:

1) Chris Argyris- He recommended that worker should be given freedom to make their
own judgments.
2) Mary Praker Follett: He referred group influence.
3) Dougals Me Gorgor: he referred two views.
X-theory- it is based on classical theory and
Y-theory- it is based on neo-classical theory.
4) Abraham Maslow: He referred individual needs.
C. Modern Management Theory
Management is one or the other form has existed in every nook and corner of the
world since the dawn of civilization. Modern Management has grown with the growth of
social-economics and scientific institution. Modern view consists that a worker does not
work for only money. They work for their satisfaction and happiness with good living
style. Here Non- financial award is most important factor.
Modern management theories started after 1950s. Modern management theory
focuses the development of each factor of workers and organization. Modern
management theory refers to emphasizing the use of systematic mathematical techniques
in the system with analyzing and understanding the inter-relationship of management and
workers in all aspect. It has following three streams, that are :
1) Quantitative Approach
Quantitative approach also called Operation Research. Quantitative approach is
a scientific method. It emphasizes the use of statistical model and systematic
mathematical techniques to solving complex management problems. Its helps the
management to making decisions in operations. It can only suggest the alternatives
based on statistical data. It cannot take final decision.

It helps the management for improving their decision making by increasing the
number of alternatives and giving faster decisions on any problem. Management can
easily calculate the risk and benefit of various actions. the characteristic of this
approach are as under :
a) Management is essentially decision making and organization is a decision
making unit.
b) Organisational efficiency depends upon the quality of managerial decisions.
c) A problem is expressed in the form o a quantitative or mathematical model
containing mathematical symbols and relationship.
d) The different variables in management can be quantified and expressed in the
form of an equation.
Major contributors in Quantitative Approach are :

Johan MacDonald

George R. Terry

Andrew Szilagyi

2) System Approach
System approach was developed inlate1960s. Herbert A. Simon is the father of
system theory. A System is defined as a set of regularly interacting or inter dependent components that create as a whole unit. The system concept enables us to
see the critical variables and constraints and their interactions with one another.
The main features of systems approach are as follows :
a) An organization is a system consisting of four main parts or sub-systems
namely task, structure, people and environment.
b) The sub-systems of the organization system are interconnected and
interdependent. Therefore, all parts of the organization must be in balance

with one another. Task refers to the nature of jobs and technology used to
perform theory structure is the network of authority relationships including
single and ownership patterns. People constitute the human and social
aspects. Environment sub-system is the aggregate of forces within which
the other sub-system operate.
c) An organization is an open adaptive system which continuously interacts
with its environment. It is also a dynamic system because the equilibrium in
it always keeps on changing. The organization system must, therefore, be in
harmony with its environment.
d) It is the responsibility of management to regulate and modify the system so
as to optimize performance. Management is expected to perform
maintenance and adaptation functions. Maintenance function is concerned
with ensuring the stability and efficiency of the system. Adaptation function
involves adjusting the system to the changing demands of the environment
so as to make it more in tune with the organizations goals.
e) An organization is more than the aggregate of various parts. This is called
synergy. The focus should be on the total system rather than on individual
sub-systems. Several pioneers have made significant contributions to the
development of the systems approach. Notable among them are Ludwig
Von Bertelanffy, Stafford Beer, D. Kutz, R.L. Kahn, R.A. Johnson, Rosenz
Weig, Robert Weener, E.L. Trist, Kenneth Boulding.
Some of the key concepts of the systems approach are :
Synergy : synergy means thaht the whole is greater than the sun of its parts.
This implies that departments within an organization which interact

cooperatively are more productive than they would be if they operated in


isolation.
Open and closed system : an open system interacts with its environment
whereas a closed system does not. Though all organization interact with the
environment, but the extent to which they do so varies. For example, an
advertising agency is far more open system than the jail.
System boundary : each system has its own boundaries which separate it
from other systems in the environment. In an open system, the boundaries
are permeable whereas in a closed system they are rigid.
Flow : every system has flows of information, materials and energy. These
enter the system as input (example raw material), undergo transformation
process within the system (example: the production process and exit the
system as outputs (example : goods).
Feedback : this is the mechanism of control. Information can be fed back
either during the transformation process or at the output stage in order to
detect any deviations from plans so that corrective action may be taken.

3) Contingency Approach
Contingency Approach also knows as situational approach. In 1980s, it is
recognized as a key to effective management. This approach accepts the dynamics and
complexities of the organization structure. An organization is affected by its
environment and environment is composed by physical resources, climate, persons,
culture, economic and market conditions and their laws.
The principles of this approach as under :
a.) Contingency approach is situation oriented urging upon the managers to
study, analyse and diagnose the situation. It is to be done in terms of

component variables of the situation and external factors affecting the


situation.
b.) After the analysis of the situation, the managers are expected to prepare
inventories of management theory, principles, techniques and concepts.
c.) In order to tackle the situation efficiently the validity and applicability of
management tools and techniques is to be examined and finally package of
these tools and techniques is prepared which is appropriate for that specific
situation. The different situation requires different managerial response.
d.) The environment of an organization is ever changing and the organization
continuously interacts with the dynamic environment.
e.) Management style and practice should match the requirements of the
situation.
f.) Succes in management depends upon the ability to cope with environmental
demands. Therefore, managers should sharpen their diagnostic skill to
anticipate and comprehend the environmental changes.
This approach argues that there is no one universally applicable set of rules by
which to manage organization.
Major contributors in the contingency theories are1. G.M. Stalker,
2. Joan Woodward,
3. Tom Burns,
4. Paul R. Lawrence,
5. L.W. Lorsch.

Modern management theory depends upon System approach and Contingency


approach. Management is influenced by Internal and external environment. Appropriate
techniques are determined by situation and Environmental factors of an organization.

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