Management
Theory and Practice
Table of Contents
Introduction
Overview of the Topic
Discussion
Theories, Concepts and Models Relating to Practice of
Management
Organizational Level
Strategic Level
Implications and Relevance to Modern Business movement and
Globalization
Conclusion
References
Introduction
Management is the act through which any given organization may employ in order to achieve its goal. The organization may be an educational facility, a corporation, a nom-profit organization or even a peer group. The organization sets out to conquer these goals by employing the following functions: (1) planning, (2) organizing, (3) directing, and (4) controlling (, 2007).
Planning is an act to which an organization’s leader, or even the whole organization itself, creates a scheme to which the organization’s goals and purposes are integrated.
Organizing is an act to which the organization sets about to do its goals. It may include the ability of the company to look for resources and other necessary materials to accomplish a company’s given task. This also includes the concept of structuring.
Directing is the process through which a selected leader may lead the organization to achieve its goals. This may include the concepts of supervision and leading.
Controlling this function is an act onto which the whole undertaking is evaluated. If the there would be anything found which, in any way, does not satisfy the organization’s goals, it could be corrected right away (, 2007).
There are three contemporary theories in management, these are:
Contingency Theory – “asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand.” (, 2007).
Systems Theory – “concerned with problems of relationships, of structures, and of interdependence, rather than with the constant attributes of object” ( and , 1966).
Chaos Theory – “scientific principle describing the unpredictability of systems “ (, 2007).
The theories and their practical application will be further explained in this paper.
Overview of the Topic
With the globalization of most industries in the latter half of the twentieth century, the topics of international businesses and competitive advantage have received much attention from business executives, public policy makers and scholars in recent years. This; in conjunction with the rise of global competitors from all parts of the world, has led to the acknowledgement of and search for firms that are both nationally and globally competitive. Practitioners and academics alike have tried to qualify and quantify those characteristics that are present in highly competitive international businesses, with the hope of replicating them in organizations with lower profiles. The research has resulted in numerous rankings, where industries and firms are compared on a global scale to see which are the most competitive. Thus the topics of national competitiveness and global competitiveness have become new additions to the business lexicon. The world was undergoing tremendous change even before the horrors of 11 September. Both democracy and the market economy have proliferated globally since the collapse of communism, and revolutionary developments in communication and information technology have helped trigger an increasing interdependence between countries at an unprecedented pace. Further, the end of the Cold War signaled the displacement of ideological obstinacy in favor of a heated pursuit towards economic advancement and competition for resources and technology. Economic statecraft, whereby nations use trade, loans, grants and investment to influence the action of other states, is now becoming more important.
Globalisation is a term frequently used by many but is vaguely defined. One finds trouble in even finding two authors who defines globalisation in the same, exact way. But even that being the case, there is no denying that global markets, in particular emerging ones, offer attractive potential. For many organisations it is the only approach for growth as existing markets mature with few chances for profitable opportunities. As global markets open through the increasing use of the Internet and with improved supply chains, it is likely that there are many untapped segments around the world that would open to a multinational company, regardless of the industry. More and more, the world is becoming an available global market place. To stop marketing activities at one’s home-base borders is not only arbitrary, but also short-sighted. International marketing is often defined largely in terms of the level of involvement of the company in the global marketplace, and export, multinational and global marketing are most widely considered. Multinational enterprises (MNEs) develop international marketing strategies in order to improve corporate performance though growth and strengthening their competitive advantage. However, MNEs differ in their approach to international marketing strategy development and the speed and the progress they make in achieving an international presence.
A competitive and complex make-up would thoroughly describe the structure of the pharmaceutical industry of today. Many companies are coming out of nowhere and are competing with some of the world’s oldest and most trusted pharmaceutical companies. The demand for high quality medicine never lessens. And so, competition is always an item. Industries strive hard to make medicine which is much more effective and cost-efficient than the rest. But how can one address and meet the demands of people? With the use of marketing strategies. A marketing strategy, as we can clearly understand, is a way of using all the resources you have in order to gain a better marketing opportunity. Though, a person may have limited financial, or whatever resources that he has limited supply of, he can still be able to pull off a great advantage in the marketing world through good marketing strategy. A great marketing strategy is the foundation of a great marketing plan. And just what is a marketing plan? It is an overall plan on how the producer is going to tackle the different components of selling his product. A marketing plan often entails the help of a great marketing strategy. For example, “Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer’s interaction with the low-cost product or service.” (Source: , 2007)
The unintended consequences of progress, heightened global competition, and greater efficiency are at the crux of the controversy. At the same symposium in Wyoming where Mr. presented his paper, , Chairman of the Federal Reserve Board of Governors, addressed the issue in his remarks: “Globalisation as most economists understand it involves the increasing interaction of national economic systems. Of necessity, these systems are reasonably compatible and, in at least some important respects, market oriented. Certainly, market-directed capitalism has become the paradigm for most of the world, as central-planning regimes have fallen into disfavor since their undisputed failures around the world in the four decades following World War II. But there remains an active intellectual debate over the elements of capitalism that are perceived as most essential for a productive and civil society. . . . . The conceptual battleground has moved far from the stark terms of the earlier capitalist-socialist confrontations. . . . . The debate has now shifted to the nature and extent of actions appropriate for governments to take in order to ameliorate some of the less desirable characteristics that are perceived to accompany unfettered competition.”
Management of today must be very equipped in order to meet the demands of rapidly growing industry. Organizational theories and its relation in real life practices shall be further discussed in this paper.
Discussion
Theories, Concepts and Models Relating to Management Practice
The three theories presented above, Contingency, System and Chaos theories are only three of the hundreds of theories that govern management and its practice.
As mentioned above, Contingency theory deals with how the manager makes a decision regarding the firm’s moves. This theory suggests that the manager must take into consideration many factors which would be, directly or indirectly, be affected by the situation. This theory somehow relates to the concepts of CSR, or Corporate Social Responsibility which takes into consideration the interests of its shareholders which primarily comprises of the employees, the customers, the stockholders and the environment. The basis for making decisions in the context of this theory is the situation in which the company is in. One method may work for the company in this situation but in others may not. The following are factors that may affect the decision making ability of the leader.
Ø Size of the Organization – The decision making body of the firm may find this factor a very common hindrance in any decision that is to be made.
Ø Adaptation ability of the company
Ø Constraints in the resources and operational functions
Ø How managers may perceive the employees
Ø Strategic aspects
Ø Technological advancements (, 2007)
In the organizational aspect, the contingency theory consists of the following thoughts. First, that no best organizational or managerial technique can effectively manage any organization. As was afore mentioned, firms vary. Either in the size of the company, the location, the resources available, the type of employees they have, even the era where the company exists in. A tactic that maybe used in managing the company varies from time to time. Whether or not it is effective, it is all in the mercy of the situation. Second, the organizational structure must be suitable to its environment. In order to effectively manage the company, a firm must likewise fit its chosen environment. Again, the results may vary from time to time and cannot be fully determined by any case study, unless controlled. Third, effective organizations suit their environment and likewise suitability between its subsystems is also evident. The suitability of the organization must also be seen in its minor sublevels. Lastly, the proper management style should be adopted in the company in undertaking tasks to attain the primary goal and of course, the nature of the firm. Also, as was mentioned, this theory touches the concept of Corporate Social Responsibility.
In the theory of Corporate Social Responsibility, it is stated the organization has the responsibility of taking into consideration the interests of its stakeholders. It must incorporate in its goals the needs of its stakeholders. Firms are said to follow the theory of Corporate Social Responsibility, taking into consideration not only the profit to be made, but also the best things for its stakeholders. Corporate Governance as was mentioned is the method of regulating and monitoring the behaviour and practices of the company. This idea may relate in many ways in the aspect of corporate social responsibility. Corporate Social Responsibility or CSR is one of the leading theories relating to corporate governance. The theory talks about the responsibility of the corporation, or any organization for that matter, to all its stakeholders, which comprises mainly of its customers, employees, etc. The theory mainly states that the organization should keep in mind the interests of their shareholders and not only the possibility of making higher profit.
System Theory deals on the organizational aspect of a company. This deals greatly on the different parts of the organization and how an alteration of these parts may affect the whole. Principles of the system, in the context of management, are as follows:
Ø View the company as a system
Ø Establish system objectives (performance criteria)
Ø Identify wider systems (the environment)
Ø Create formal subsystems (including a humanistic, psychosocial subsystem)
Ø Integrate the subsystems with the whole system (if not the subsystems themselves, whatever interrelates them with other subsystems) (, 2007).
The systems theory deals on how the company may change or be affected, either negatively or positively, through any alteration in any of the organization’s parts. One must take not that in this theory, the company is treated as a system, with parts which contribute to the wholistic function of the company. In an organizational aspect, the designated manager must be able to perceive and put into action the fore mentioned principles in order to fulfill the goals of the company using the theory of systems.
According to , Chaos Theory is “the quantitative study of unstable aperiodic behavior in deterministic nonlinear dynamical systems” (, 1993, ). This theory deals on how one may create a non-chaotic matter amidst a very seemingly chaotic action or set of actions (, 2007). In the context of management, Chaos theory may present a very valuable asset to a company who wishes to employ this theory on their managerial approaches. Since the business scenario is often very turbulent and often unpredictable, it is very wise indeed to apply this theory in the company’s decision making processes. Areas of application for the chaos theory may include:
Ø Business Strategy/Corporate Strategy
Ø Complex decision making
Ø Social Sciences
Ø Organizational Behavior and Organizational Change
Ø Stock market behavior/ investing (, 2007).
The theories presented above also, in part, touch the concept of culture. So what is culture? Culture, according to the scholar and anthropologist of the 18th century, Mr. , “culture is that complex whole that includes knowledge, belief art, law, morals, customs, and other capabilities and habits acquired by man as a member of society. “So, based on this definition, we could say that culture depends heavily on society. It is, in a way, a collection of ways and course of doing things, which is an end result of human interaction with one another. It is, as you could say, a polished product of human experience. As time moves on, culture changes and grows more complex than it was before. If we would be lucky enough to be alive when the year 2050, we would be stunned to by the definite change of culture by then. Another important aspect of culture is the use of material objects; this is more commonly referred to as material culture. Evolution of some of these objects also makes the evolution of culture much more possible. For example, the computer was unheard of in the time of Newton, but through human experience, skills and needs, it is very much a common place object today and plays a very vital part of the existence of our society and culture. Though the evolution of the material culture is relatively important, much more important aspects are the skills and knowledge we acquire through the usage and application of these objects in our daily lives. All the skills we acquire, all the knowledge we gain, and all the purposes of these thing are more commonly referred to as the non-material objects of culture.
Real life Applications
In order to thoroughly understand the concepts presented above, a case study is presented below about a large telecommunications company, Telefonica SA. Before we begin to address the problems and complaints of the minority shareholders, let us first examine what their problems are.
Telefonica SA started to conquer the South American markets when the EU started to abolished the monopolization of companies in Europe. Seeing that they had greener pastures in the South American countries, they started to build a large branch in there. But soon after the company started, many complaints started to rise, many of them came from the minority shareholders.
Minority shareholders in Telefonica South America have been complaining about the exorbitant management fees the parent company is charging which is causing their interest to dwindle and also, they complain about the practice of the parent company to transfer product lines which have high growth potential from the subsidiaries to the parent.
It is only normal for the minority shareholder to feel unhappy with the way Telefonica South America runs the South American telecommunications market. It was pointed out that due to their charging of excessive management fees, the subsidiary companies have lesser interest and also the practice of taking away a high growth potential product line from the subsidiaries to itself. It is really normal for the minority shareholders to be angry since that could have doubled or even tripled their income but since the parent corporation took it away, as well as charging them with insanely high fees.
If I were a senior manager of the Telefonica South America, I would of course listen to their complaints first. I’d study their complaints very well and I’d look if there is any validity to their complaints. If I do find that what they are complaining to me about is really valid, then I’d assess what I could be able to do to help them. First, I’d look at their major complaint: the exorbitantly high management fees. What is the basis for the parent corporation to charge really high fees on the minority shareholders? If I could see that they are rendering good management services from the parent corporation, then I can see no reason for their complaints on the fees charged to them. Giving out good service is well worth a high price any day. But if I can see that the parent corporation is charging insanely high fees for no good reason at all, then I would recommend to the CEO that they should lessen the fees charged to the subsidiaries, since charging them with really high fees could lessen their revenues. It would be bad for the subsidiaries and for the parent company in the long run. They might lose their grip on the South American markets. Since there will be other investors coming into the South American markets, they might find themselves losing their minority shareholders to other foreign investors that offer a better deal for the shareholders. It would also not be good for the image of the company if they would wish to venture to other countries besides South American countries because their reputation might precede them.
Next, I would try to view the other complaint posed by the minority shareholders: the high growth potential product lines and the practice of the parent company of transferring them from the subsidiaries to itself. I can really say that this is really an unfair practice because one can clearly see that the parent company is taking what should be for the subsidiary. I would recommend to the CEO that this practice should be stopped and that a chance should be given to the subsidiaries in order for them to increase their inputs through these product lines. As was said in the case study, the Telefonica South America subsidiaries’ value of shares stagnated for two years, even though the shares of the parent company continued to do well. The product lines should be returned to them in order for the value of their shares to go up.
The parent company should take good notice of these complaints posed by the Telefonica South America subsidiaries and also of the people who subscribe to them. Since in the long run, it would wholly damage, not only the reputation of the company but also the chances that they may be able to expand into other parts of the world. They should rid themselves of this negative image and should start giving high value services not only to the subsidiaries but also to the subscribers. And since other international companies are taking interest in taking the South American markets for themselves and being a threat to the Telefonica South America, the Telefonica SA should start with the reforms right away. Even as early as 1999 it was force to million in refunds to Sao Paolo customers because of poor service. They should start minding the fact that we are entering the 21st century and that the people now immune to the marketing strategies of the olden times. The strategies of the past no longer work on the people of today so they should start thinking of a new strategy or just reform itself for the betterment of its service to the people and the subsidiaries.
The managers of the Telefonica should have had the foresight to have seen the impending trouble the steps they were about to take would bring. If they had used any of the theories above, the contingency theory for example, the results would have been different and their relations in the South American countries would have been better.
Implications and Relevance to Modern Business movement and
Globalization
The process of globalisation is commonly recognised to be characteristic of contemporary international developments. Contemporary processes of globalisation have several dimensions or faces: technological, cultural, religious, economic and political. None of these is in itself good or bad. All should be understood as ambiguous, with potential for good and evil, but in the current phase of globalisation it is important to distinguish the different faces of globalisation and identify with a potential to pursue the good. Globalisation implies two distinct phenomena. First, it suggests that political, economic and social activity is becoming worldwide in scope. Secondly, it suggests that there has been an intensification of levels of interaction and interconnectedness among the states and societies (, 1991). Among these relations are those created by the progressive emergence of a global economy, the expansion of transnationals links which generate new forms of collective decision-making, the development of intergovernmental and quasi-supranational institutions, etc. (, 1990 ). Consequences of globalisation are controversial and not necessarily positive. Severe questions rise about the accountability of such diverse international organisations and agencies as the International Monetary Fund (IMF) and North Atlantic Treaty Organization (NATO), which challenge the very idea of sovereign state.
Furthermore, the contents of controversy in contemporary globalisation can be roughly summarised as follows. Globalisation is not a spontaneous process. Rather, it is a strategy deliberately pursued by a tiny group of people striving for world domination. This group, comprising the world’s financial and entrepreneurial elites, lacks any national or cultural identity and is indeed anonymous. It is nevertheless powerful, as it has at its disposal both the vast financial resources and the contemporary technological means of domination (primarily, mass communication technologies). It not only runs the transnational corporations that are instrumental in creating the ‘new economic order’, but also manipulates a number of organisations that are instrumental in implementing the ‘new political order’ (primarily, the International Monetary Fund (IMF) and North Atlantic Treaty Organization (NATO). To achieve their strategic goal, the proponents of globalisation have to degrade nation states, which is impossible without eliminating national cultures.
Critics of present global developments call for the development of popular accountability on the part of national and global institutions, for more public control over these institutions, for a true internationalism, and for just alternatives to the criminal activities of international financial institutions (, 2000; , 2000:, ; and , 2000; , 2000: ). Ideally, external pressures on international financial institutions such as the World Bank will lead to substantive internal reforms, or to the demise of such institutions.
What is the role or the warranty of law in responding to the controversies of globalisation? Although law and legal forms play a central role in facilitating and warranting the global exchange of persons, capital, and culture, the place of justice in this world order is not clear (, 1997). Advancing human rights demands its own law, one that is independent of national law and sometimes deliberately at odds with states (, 1997; , 1990: ). A movement on behalf of indigenous peoples seeks to establish a universal declaration of such rights, quite independent of the law established by conquering colonial powers. The United States (along with other leading Western powers) has claimed a commitment to human rights and has challenged other countries on human rights issues, but this posture is hypocritical given its own dismal historical record on the implementation of such rights (, 2000: ). In a parallel vein, global business and finance engage in hypocrisy by campaigning against many forms of regulatory law in Western developed nations, while calling for adherence to “the rule of law” in developing nations (, 1997: ). The World Bank’s perspective on law has been market-focused and has failed to recognize the protection of human rights and of settled indigenous communities as legitimate purposes of law ( and , 1999: ).
Conclusion
Therefore, the theories that relate to practice of management are very vital in every organizational structure. These theories help define the effectivity of the managerial approaches taken. Therefore, one must be able to effectively evaluate the steps taken in order to effectively run the company.
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