Kaplan University AB140 Introduction to Management Welcome to our Unit 2 Seminar Foundations of Management

Agenda General Questions and Announcements Introduction Business Organizations as Open Systems Management Environmental Considerations / Q & A Major Management Theories / Q & A Conclusion of Seminar

Unit 2 Objectives During this unit we will: 1.Identify significant past and current management theories 2. Describe the business organization as an open system 3. Identify the role of internal and external environmental factors in business

Key Concepts Organizations are open systems that are influenced by their environment and in turn, influence their environment. All organizations must operate in a macroenvironment. All organizations must operate within a competitive environment.

Businesses are Open Systems Organizations that are affected by, and that affect, their environment. They take in Inputs: In the form of goods and services to create products or services. They produce Outputs: In the form of goods or services. These are in constant interaction with the firm’s environment. These impact and are impacted by both the External Environment and the Macroenvironment.

Inputs Into The Open System Raw Materials Services Equipment Capital (Human Labor, Money, Intellectual, Managerial, etc.) Information (Knowledge)

Raw Materials What are some of the raw materials used in your workplace to produce the end product?

Services What are some of the services used in your workplace to produce the end product?

Equipment How about equipment in your workplace?

Capital For example: Human Labor, Money, Intellectual, Managerial, etc.

Knowledge This refers to the information used to produce products and services. What are some examples from your organization?

Outputs Into The Open System Products (Example: Cars, Computers, Furniture, Groceries, etc.) Services (Example: accountants, medical services providers, etc.).

External Environment All relevant forces outside the firm’s boundaries. These include competitors, customers, the government, and the economy. Examples: Copyrights, patents, trademarks, government licenses Industry-specific requirements for entry Specific taxes Interest rates for both customers and business Technological changes that impact the firm (Example: iPods versus tape players; regular cameras versus digital cameras, etc.)

Copyrights, patents, trademarks, government licenses Does your organization deal with any of these external environment forces?

Specific taxes Most organization pay taxes, but some pay taxes specific to their industry.

Interest rates for both customers and business Paying interest is a fact of life for almost every organization. What do organizations pay interest on?

Technological changes that impact the firm New technology can force changes in our products and services. (Example: iPods versus tape players; regular cameras versus digital cameras, etc.)

Any questions ?

Macroenvironment A part of the External Environment that forms the general environment for the firm. Includes: Governments (Government actions, rules, laws, regulations, etc.) Economic Conditions (Amount of money, interest rates, etc.) Other fundamental conditions that could affect the firm.

Competitive Environment A part of the External Environment that forms the immediate environment surrounding the firm.

Customers Current customers as well as potential customers. Who are your customers?

Rival and Potential Rival Firms Size, efficiency, and market position of current and potential competitors. What could customers substitute for your product?

Suppliers and others: that the firm needs to conduct business What types of businesses supply your organization?

Barriers to Market Entry New firms enter markets when barriers to entry are low and less enter when these increase. Barriers can originate from:

Government Policy Environmental policies are a good example. What are some others?

Capital Requirements Ever hear, “It takes money to make money?”

Brand Identification Recognize any of these?

Cost Disadvantages Established companies can often keep their costs lower. Why do you think this might be the case?

Distribution Channels It might be difficult or costly for new entrants to get their products or services to the customer.

Ultimately the Customer Decides! Ultimately, it is the customer who determines the success or the failure of a business. Regardless of the type of customer involved, business organizations that create value for their customers will retain their customers and attract new ones. Those that fail to provide perceived value for the customer will eventually lose the customer and fail.

Profit Profit is only the measure of how well a business provides value to its customers! Management plays a key role in determining how well a business provides this value.

Any questions ?

Management Theories As you no doubt discovered as you watched the video “The Evolution of Management,” business management theories extend over many years and cover many different aspects of the management function. One way to describe these is to divide them into three broad categories: Scientific Management Theories Bureaucratic Management Theories Human Relations Management Theories

Scientific Management Theories Scientific Management Theories: Concerned with specific work tasks. These theories were called “scientific” because they introduced task definition and specific measurement to the process of work (Taylor, Fayol, etc.) Around 1900 until about 1940.

Our current POLC is derived from Henri Fayol’s Theory circa 1917! P ~ Planning O ~ Organizing L ~ Leading C ~ Controlling

What kinds of measurement do we do at work?

Bureaucratic Management Theories Bureaucratic Management Theories: These added to the measurement and specifications of earlier theories to recognize the need for structure, lines of authority, and control within the management of businesses. It responded to the growth of large business organizations by adding hierarchy to the business structure (Weber, etc. 1930s to 1950s).

Human Relations Management Theories Human Relations Management Theories: This broad range of management theories responded to the impersonal approach of earlier theories by recognizing the uniqueness of humans and the need for managers to resolve the needs of workers. Many of these come from the Behavioral Sciences (McClelland, Maslow, Lewin, McGregor, etc. 1930s to today).

Any questions ?

Instructor Contact Information Dave Starnes After this seminar has concluded, there will be a recording in the archives located in the seminar room. It may be selected by date.

Thank You for Joining Me This Evening! See you next week. Good Night All!