Various Issues of Business - Book Report/Review Example

? Business Report Submitted Academia Research May 25. Contents Contents Page Number Introduction 3 Business models, theories and techniques 3 Functional Elements of Business 4 Specific effects and changes from particular environments 5 Concept and Role Management 6 Some applications of models, concepts and techniques 7 Organizational Structures 8 Conclusion 10 Bibliography 13 Introduction This report aims to define and discuss several facets of business such as business models, theories, concepts, techniques, business environment, business structures and the application examples of the same in the modern business world. Each of these topics is discussed under separate headings. Business models, theories and techniques: Business models are empirical and pragmatic in nature as they usually originate from success stories of business world. The study of successful application of a set of business concepts, tools and methods that promise delivery of measurable results such as a market share, revenue or profits are called business models. They are holistic in approach and there are many successful business models that are being taught in business schools and are being emulated in practice as well. Successful business models have immense practical value as they deliver measurable results. They deliver S.M.A.R.T results i.e Specific, Measurable, Attainable, Realistic and Timely. Theories are more like suppositions, ideas or assumption-based narration of observed or contemplated phenomenon that may describe cause and effect. Social theories describe social paradigms that reflect on observed or contemplated thought about a social phenomenon. The scientific theories may describe some phenomenon with a cause and effect relationship to it. But they all remain theories and need scientific testing before being accepted as facts or any valid phenomenon. Therefore the key difference between business models and theories is that theories need to be tested for their validity, whereas business models are already successfully proven and promise practically measurable results. Theories once tested and proven can be used to lay the foundations of a successful business model. Many business models came into being as a result of practical application of theories. Theories are generalized un-tested paradigms based on assumptions or suppositions and need to be tested for their validity and can not be relied upon for results unless tested and proven as true. Theories are descriptive by nature whereas models are mostly prescriptive. Theories may offer insights and may speculate whereas models are more like tools and methods which when applied deliver promised results. Theories usually depend on the validity of assumptions to be proven true and their assumptions may not be valid in the real world. Business models usually have fewer assumptions which can be controlled and managed. Techniques, as defined by businessdictionary.com is “A systematic procedure, formula, or routine by which a task is accomplished.” Techniques are more tactical, operational and functional in application as they comprise methods to reach a goal or objective. An established business model may advise the adoption of one or more techniques in a specific manner or situation to achieve or help achieve the promised goals or results. Techniques are tactical weapons and are not holistic in approach like models. The business models are holistic and emerge from real life situations, they are practically valuable because of the certainty they promise in the uncertain environment of real business world. Most blue chip companies make frequent and rigorous use of successful business models in their business operations to achieve success. They seek conceptual guidance from these models and use them as a comprehensive and holistic framework to approach and solve their business problems. Business models have flexible design features that can usually be customized and adapted to specific business situations. The key benefit that they deliver to client companies is the years’ of accumulated knowledge and wisdom that comes with their hi- tech applicability. Functional Elements of Business: The basic functional elements of Modern day businesses have some key functional elements which are important for their successful operations. One of the first basic functional elements is “Manufacturing” or creating something-i.e. a product or service-which is of some value to someone somewhere. It should fill an existing need, solve a problem or overcome an inconvenience etc. This is mostly referred to as product or service. Another basic functional element of the modern business is “Selling” which aims to find an outreach for the product or service to its target customers who can appreciate and pay for the product or service. Selling is the single most important functional element of any business which produces revenues, while all other elements produce cost. Another basic functional element is the “Accounting and Financing” which refers to keeping track of monetary side of business. After all without money there is no business! This element keeps track of everything that may have monetary stakes in it whether it is internal or external to the business entity. Yet another basic functional element of modern business is “Human resources” arrangement which aims to find the right kind of people for the business and then train them for the matching functions so that each of the functional elements does well. Modern day businesses operate in a range of generic environments which define their scope and limitations. There are four types of macro environments that work in tandem to define the overall business environment within which businesses operate. These are “Economic”, “Political”, “Legal” and “Technological” environments. The economic environment defines the scope and limitations of the financial and monetary dimension of business. Political environment defines the scope and limitations imposed by the current political forces and ideology. The technological and legal environments define techno-legal scope and boundaries for the business. Within these macro environmental forces, there are demographical dispositions which also define generic environment for domestic and international businesses. Socio-economic forces play an important role in determining the character and scope for business environment. Cultural trends that tend to define the cultural stereotypes, dogmas also define micro environment for business. Specific effects and changes from particular environments. Business environments are defined and characterized by a complex interplay of political, economic, social and technological forces. These forces shape the external macro environment of all businesses. Specific changes in these forces affect and influence particular environments. States regulate the environment by making specific changes in the rules, regulations, duties and state level taxes to create specific influence in the environment. Although the fast emerging globalization is smashing away the established uniqueness of business environments worldwide, there are still certain unique environments on the global scene today. States lighten or loosen the environmental control by regulating these forces. For example, the political environment in China characterizes its business environment of limited freedom of private ownership to business and a lot more regulated business. The Chinese companies are subjected to a lot more scrutiny and regulations of the state. This is the effect of political force. The same was true for India a few decades ago when Indian business environment was characterized by a more controlled-economy policies of the state. The policies of controlled economy and protectionism affect the business environment in a peculiar fashion. Within controlled economies, state laws regulate and govern the practices of business which determine the scope and limitations of each business domain. Under protectionism, a state may decide to give protection to some of its industries against international competition. For example India, Pakistan and China have been providing protection to its car manufacturers by levying heavy duties on the on the import of cars from the international markets and subsidizing the cost of car manufacturing for the domestic car manufacturing companies. States employ several means such as declaring some territory as tax free zone which creates a specific lucrative change in the business environment of such zone and induces investors to invest there. By offering tax holidays for a specific zone or for a time frame, this encourages investors to invest in such areas and take advantage of the tax holiday. Concept and Role Management:  The concept of management is based on four key concepts: Planning, organizing, leading and controlling as Daft & Marcic (2010) define management: “Management is attainment of organizational goals in an effective and efficient manner through planning,, organizing, leading and controlling organizational resources”. In business area, management refers to, strategic and tactical level, thinking, planning, directing, leading, organizing and controlling an organization’s scarce man, material and financial resources to achieve organizational goals and objectives. The role and purpose of management can be understood from the fact that without management in an organization, there will be no vision and direction for the organization. It will be like a ship without a captain or aero plane without a pilot. The management’s role is fundamental to the survival and existence of an organization. In smaller companies, management is mostly in the hands of the owners themselves who possess both ownership and management control of the organization. Whereas in large organizations, ownerships is to leave control down to the middle or the top management who are usually not the owners of the organization. The role and significance of management can be understood from the fact that organizations of all sizes whether small or large, need and do have management and no organization can think of surviving without management. The middle and top management usually think and plan for the long term and short term directions for the organization. They may have formal or informal planning process, but they do have one. They make strategic, functional and operational plans for each of the key function in the organization such as Finance, HR, Manufacturing, Marketing etc. They organize resources needed to make those plans and then monitor and control the results of their intended plans throughout the execution phases of their business plans. Therefore, the purpose and role of management can not be understated in any organization be it private, public, small or large organization, the role of the management is the most significant. All sorts of organizations depend on management. There are several different styles of management as well. Some applications of models, concepts and techniques: One popular technique that is widely used in the practical business world is SWOT analysis. It helps in analysis and strategy development by helping an organization to identify its strengths, weaknesses in the internal environment and opportunities and threat in the external environment. Then the planners can devise ways and means to overcome the weaknesses and match strengths with the opportunities in the environment. This technique has been widely used by strategic planners, business managers, marketing managers alike in order to steer their organization or department from collision course in the market or to define and identify important new emerging opportunities that are important for the future growth of the organizations. Porter’s(1985) Value chain analysis is based on a process view of organizations. It has been widely used by the organizations equally well by the manufacturing (or service) organizations. In applying this analysis, one must see it as a system, made up of subsystems each with provides inputs, transformation processes and outputs which involve the acquisition and use of scarce resources. As tutor2u.net refers to Ansoff growth model “The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.” The Ansoff’s model is used to cross-match existing and new products with markets to define growth opportunities for both products and markets. This growth model has been successfully used in many organizations to find growth and expansion strategies. Organizational Structures: In today’s business world there are many different categories and types of organizational structures which can be categorized as follows: Flat or horizontal structures which essentially have a very limited hierarchy. They work naturally well for small scale businesses where the entrepreneur himself has the core skills or knowledge of the core area of the business. He controls and manages the entire organization himself in his personal capacity. The employees report directly to the owner himself and there is no middle management involved at all and the employees do not have a functional demarcation of tasks and responsibilities. Usually an organization naturally assumes this type of structure in the initial phase of its inception. There is no hard and fast demarcation of jobs duties and responsibilities amongst the employees. They all work on the principle of one for all and all for one and there is no concept of middle management. The owner himself is the manager of the entire organization. Types of Organizational Structure in the Business World [online] As an organization evolves through successive growth phases, it experiences work load and role clashes. This is the time when flat structures are not effective and they can limit the functioning and efficiency of an organization. The organizations need to change their traditional flat structure and introduce more formal structures usually on bureaucratic lines. Bureaucratic structure organizations suit production, procedural, craft and coping organizations. These four categories are used explain state bureaucracies where we see the employee compliance and not productivity is the key requirement of the structure. These structures are wide spread in the third world bureaucratic institutions. In the modern business world, however, most organizational structures are functionally driven. A functional structure is one where employees are grouped as teams according to their functions and tasks in the organization. Such structures are wide-spread and most global and multinational companies have adopted this kind of structure. There is a marketing department a finance and admin department, a production department, a R&D department etc. The employees in a specific functional department report to the functional head through supervisors or immediate line manager. Their line manager might be reporting to another manager or to the CEO if it is a corporate structure. The functional structure is adopted because of the high efficiency inherent to their design. Then there are divisional or product or service specialist structures where employees relating to a specialist status are grouped together. The matrix structure is one where there are two lines of authority and command. There is product specialist cross-matched with functional specialists. Such structures have high costs and conflict prone therefore is now becoming obsolete. But still many departments and state functionaries that require a general and specialist knowledge are seen to have this kind of structure. A matrix structure has many benefits in terms of monitoring and control, but they are usually more prone to lateral and horizontal conflict within the organizations as functional teams and specialist teams come into some kind of a role clash and they tend to create and waste their time on the ownership issues with respect to important projects. This costs the organization time, money and waste of efforts. Matrix structure is usually adopted by organizations when they are transiting from being a product led organization to market or customer led organization. In the product led phase they are dominated by engineers and specialists and when they start moving from product to market or customer focus, they start to be dominated by marketing and other functional specialists which creates important but points of intersection between the two control types. This creates role clashes leading to organizational stress and conflict. This costs the organization in terms of money and waste of important managerial time and resources that go waste in unnecessary power struggle. The eventual structure that is now fast emerging on the organizational scene is one that relies heavily on the internet to facilitate global functioning and operations of corporate entities with a very limited need for employees. Conclusion From the foregoing discussion, it can be inferred that the business models are more established tried and tested concepts in real life situations as compared to theories. Therefore most companies and organization tend to adopt tried and tested business models. Theories are more philosophical in nature and are taught in academics only. They are not used as such in the practical business world directly. They need to get tested and proven and can be taken up by the practicing business world. This is true however that many theories have laid the foundations for many business models in the sense that concepts promoted buy the theories have been tried and tested and proven true in practical business world. Theories are integral part of the growth and progress of the science in every walk of life. It is a theory that provokes a thought in a specific direction first that becomes instrumental in invoking a scientific inquiry. In the business world, economic and business management theories provoke business and managerial thoughts and after validations and testing if the theory is proven as valid, the results can be used in practice and if it delivers revenues and profits. There are four key basic functional elements of a business today these are the manufacturing, selling, finance and accounting and Human resources. They all have to work in tandem to make a business successful. They all have their roles in making the business model successful. There are four key forces that define the environment within which businesses operate. These are technological, legal, economic and political environment that set the limits and define scope for the businesses of today. The complex interplay of these forces set the stage for business world in every part of the world. There is however a new force that is fast emerging and taking over the traditional effect of these force i.e. Globalization. It is smashing off the political, legal, technological and economic aspects of the environment and it s eroding all forms of protectionism to industry and business worldwide. The concept is management is central to the study of organizations and business. It is basic to the survival and existence of an organization that without one we can not conceive of creating and running a business organization. The role of management can be understood from the fact that organizations of all sizes whether small or large, need and do have management and no organization can think of surviving without management. They organize resources needed to make those plans and then monitor and control the results of their intended plans throughout the execution phases of their business plans. Therefore, the purpose and role of management can not be understated in any organization be it private, public, small or large organization, the role of the management is the most significant. All sorts of organizations depend on management. There are several different styles of management as well. The organizations pass through several different growth and evolutionary phases in their life cycle. In each of these phases, they experience a different kind of structural needs so that its growth is continued. There are broadly 4 types of structures that are followed by different organizations. These are flat structure, hierarchical structure functional or divisional structure and matrix structure. Each type has its own peculiar strengths and weaknesses and different organization types adopt different structure according to its needs and requirements. Bibliography 1. Business Dictionary.com [Online](http://www.businessdictionary.com/definition/technique.html) [Accessed: 23/5/2011] 2. Porter, Michael. (1985). Competitive Advantage. [Online] Sterling. VA Kogan Page. Available from http://books.google.com.pk/books?id=H9ReAijCK8cC&pg=PR15&dq=Porter,+Michael.+(1985).+Competitive+Advantage&hl=en&ei=UHXcTcODLMTtsgb9l8DXDg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCkQ6AEwAA#v=onepage&q=Porter%2C%20Michael.%20(1985).%20Competitive%20Advantage&f=false. [Accessed: 23/5/2011] 3. Richard L. Daft, Dorothy Marcic. (2010). Understanding Management. [Online]. Available from: http://books.google.com.pk/books?id=xWxmFNMKXhEC&pg=PA7&dq=Daft+%26+Marcic+management+definition&hl=en&ei=bXfcTeTnBIuSswba6-TrDg&sa=X&oi=book_result&ct=book-thumbnail&resnum=1&ved=0CDMQ6wEwAA#v=onepage&q&f=false. [Accessed: 26/5/2011] 4. Types of Organizational Structure in the Business World [Online], available from: http://www.the-business-plan.com/types-of-organizational-structure.html [Accessed: 23/5/2011] 5. Ansoff's product / market matrix[Online], available from: http://www.tutor2u.net/business/strategy/ansoff_matrix.htm [Accessed: 23/5/2011] Read More