Management Principles: The Definition and Structure of Business - Assignment Example

Task An organization or business can be defined as an individual or group of people that collaborate to achieve certain commercial goals (Kokemuller, 2015). A goal all businesses have is to achieve profitability and to maximize owner’s wealth. Businesses are composed of employees that work for the company. These employees work for a firm in exchange for financial compensation. Most employees are paid a base salary plus benefits. Some of the benefits that the employees of an organization receive include medical plan, sick and vacation days, bonuses, stock option plans, tuition reimbursement, and child day care among others. Businesses are the driving force behind an economy. In the United States there are nearly 29 million businesses operating. These businesses create nearly 120 million jobs. Business organizations are imperative towards the well being of a society. Not only do businesses provide jobs for people, but they also produce products and services that consumers desire. For instance Apple Computers is the top producer of smartphones in the world with its famous iPhone series. The business world has evolved in the 21st century with the arrival of e-commerce. There are millions of websites that offer products and services. The two largest online retail establishments are Amazon and EBay. The success of a business enterprise depends on the abilities of its managerial staff. The manager of an organization is responsible for the performance of the company as well as the performance of its employees. A good manager is able to motivate his staff to achieve higher levels of performance. There are different levels of management. Management is divided into three levels which are: upper level, middle management, and lower level. The lower level management positions are typically referred to as supervisors. An example of a middle level manager is the manager of a division of the company. In a publicly traded company the upper level management is the executive management team. The executive management team is led by the chief executive officer (CEO). The CEO of a firm is the most powerful and influential person within the company. The Sarbanes-Oxley Act made the CEO responsible for the content of the financial statements of a company. If fraud is detected in these statements the CEO could face jail time. CEOs have to establish both yearly operational plans as well as strategic plans for the long term. Some important skills and abilities that managers must possess are analytical abilities, leadership, superb verbal and written communication skills, active listening skills, and vision. A few years ago I worked for a company that had a very dynamic managerial staff. The owner of the organization was the general manager of the firm. He was a dynamic person that had great creativity and leadership. He believed a lot in the value of teamwork. Each week the entire staff would meet for an hour on Fridays to discuss what occurred during the week. During those meetings the manager would perform 10 minutes brainstorming session with the staff in order to think of new product ideas, better production processes, or any idea that could add value to the company. I would categorize the manager of this firm as a charismatic leader. A charismatic leader is a person who by force of their personal abilities is capable of having a profound and extraordinary effect on his followers (Schermerhorn & Hunt & Osborn, 2003). During my short tenure with this company I learned that good management is imperative towards the success of a business. The manager at this firm was flexible and open to suggestions from his employees. He always made sure that his workers understood their role within the firm and that anyone within the firm could be promoted if they applied themselves to become better professionals. Task #2 Businesses can be structured into three types. The three types of businesses are proprietorship, partnership, and corporation. A business owned by one person is considered a proprietorship. In such a business the owner typically serves the role of manager. Proprietorships are often small businesses. A small business is defined as a company that has 500 or less employees. A problem that owners of proprietorship face is that there is no legal distinction between the business as an economic entity and the owner. If the business were to fail the owner is responsible for the debt that the business leaves behind. Due to this rule the proprietorship structure is only appropriate to use when a company is small. Large companies cannot afford to be sole proprietorship for a variety of strategic reasons. For instance it is often difficult for sole proprietorship to raise large amounts of capital. The second business structure is a partnership. A partnership can be defined as a business owned by two or more partners. Partnerships are often used in many professional circles such as accountants, lawyers, doctors, architects and consultants. The structure is tailor made for a small operation. From a business perspective a partnership is similar to proprietorship with the exception that more than one person owns the business. From strategic standpoint professionals such as lawyers prefer this business structure because it allows them to combine their capital, connections, and knowledge to build a successful practice. The third type of business structure is corporations. The corporation is the preferred business structure for large businesses. There are several strategic advantages of incorporating a business. First of all the corporation is organized as a separate legal entity under state corporation law. Ownership of a corporation is divided into transferable shares. The shares of the company can be classified as common or preferred stock. A strategic advantage for the owners of a corporation is that owners enjoy limited liability, thus they are not personally liable for the debt of the corporation. The shares that the owners of the corporation own can be sold or transfer at any time. Another major strategic advantage of a corporation is the ability to raise capital. When companies become large enough and they want to continue to expand a strategic option of any corporation is to become a publicly traded company. A publicly traded company is a firm whose stocks are sold in the open market in places such as the New York Stock Exchange (NYSE) or NASDAQ. When a company sells its shares in the open market for the first time the transaction is referred to as an initial public offering (IPO). After the IPO any subsequent sale of stock is a secondary offering. A con of corporations for the owners is double taxation. Double taxation occurs when the owner get taxed for the dividends that the company distributes. The reason that they called this phenomenon double taxation is because the corporation has to pay taxes over the earnings and the shareholders subsequently pay taxes over the same earnings once they receive dividends. Due to the size of corporations these firms require the existence of all three levels of management within the firm. Corporations have to spend a lot of money to compensate its executive management team. The median salary of a CEO in the United States is $681,798 (Salary, 2015). For a corporation to succeed it is important for managers to value its employees. Human capital is often the most valuable asset of a company. Task #3 A) Tesco is one of the world’s largest retailers. The retail industry is one of the most competitive industries in the world. Profit margins are thin, thus being efficient is imperative towards the success of the business. Tesco employs over 500,000 people across 12 countries. The company serves 75 million customers on a weekly basis. The organization’s core purpose is: We make what matters better together. Tesco’s new value is: We use our scale for good. The firm’s business strategy is to strengthen its core retail activities by expanding domestically and globally. Tesco has also kept up with new market trends as the firm has an online store that sells products. B) To formulate a strategy for the year 2015 the managers of the company have to create a plan based on the market trends in the retail industry and the business capabilities of the company. Creating a strategic plan requires the collaboration of all members of the managerial staff. The firm should also involve the floor employees in the process to provide input. Since the company is so large, one of the best ways to gain input from the workforce is through online surveys. The executive management team has to dissect vast amount of information in order to have sufficient data to create a strategic plan. The executive management has to create the actual plan. Gaining input from a consulting firm can also facilitate the process of analyzing the market. Once the plan is ready the firm should inform its shareholders of the future strategic plans of the organization. C) The term organizational culture can be defined as the system of shared actions, values, and beliefs that develops within an organization and guides the behavior of its members (Schermerhorn, et al. 2003). Corporate cultures have a great impact on how a company operates. For instance the organizational cultures of companies in the technology sector often thrive on values such as creativity, teamwork, and innovation. The impact of organizational culture can work both ways. When companies have bad organizational culture disaster can happen. An example of a company whose organizational culture was based on corruption, unethical conduct, and fraudulent activities is Enron. Tesco can definitely improve its overall performance if it alters the organizational culture of the firm. Currently my assessment of the company is that the firm has a good organizational culture. Having a good organizational culture does not mean that you should stop looking for ways to improve it. Some areas that there is always room for improvement are communication, teamwork, and leadership. The use of technology could be implemented by the company in order to strengthen the organization. The firm could decide to purchase new smartphones for all its employees. Buying the phones wholesale the initiative would cost the company at least $75 million. Employees that see a company take such an initiative to improve communication will feel appreciated. Better communications can help improve the workplace environment. Opening the lines of communication between the managerial staff and the floor employees can also help improve the organizational culture. Managers have a lot of influence over a company’s corporate culture. A way to improve Tesco’s corporate culture is by increasing the amount of training the employees receive and by establishing a scholarship fund for the employees of the company. Training and education are two factors that are going to improve the organizational culture at Tesco. References Kokemuller, N. (2015). What is the Meaning of Business Organization? Salary.com (2015). Chief Executive Officer Salaries. Schermerhorn, J., Hunt, J., Osborn, R. (2003). Organizational Behavior (8th ed.). New York: John Wiley & Sons. Read More