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ethics
Social responsibilities of
UNIT 1
Business
Business is the mainspring of the modern human life. It is the major
economic activity in any society. Each one of us, making some dealing
in our day-to-day life with a number of business concerns.
It includes activities concerned with production, trade, banking,
insurance, finance, agency, advertising, packaging, and other related
activities.
What is important and what needs emphasis in the term business is
that the above activities area being organized and carried on to satisfy
the consumers needs.
Business Policy
The origin of business policy can be traced back to 1911, when the
Harvard Business School introduced an integrative course in
management aimed at providing general management capability.
Policy making is one of the most important components of business
planning. It provides guidelines as to how objectives of business are to
be achieved.
The necessity of guiding the future direction of business arises at
some stage in the course of existence of every company.
Definition
According to Terry, A business policy is an implied overall guide setting
up boundaries that supply the general limits and direction in which
managerial action will take place.
According to Knoontz, Policies define how the company will deal with
stock holders, employees, customers, suppliers, distributors and other
important groups. Policies narrow the range of individual discretion, so
that employees act consistently on important issues.
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Features of Policy
From the above definitions, following features of a policy can be
identified
A policy provides guidelines to the members of the organization
for deciding a course of action. Policy provides and explains what
a member should do rather that what he is doing.
Policy limits an area within a decision is to be made and assures
that the decision will be consistent with and contributive to
objectives.
Policies are generally expressed in qualitative or general way.
The words most often used in stating policies are to maintain, to
continue, to follow, to provide, to assist, to assure, to employ, to
make, to produce or to be etc.
Policy formulation is a function of all managers in the
organization because some form of guidelines for future course of
action is required at every level.
Policies serve an extremely useful purpose. They avoid confusion
and provide clear-cut guidelines at all levels to subordinates; and
therefore, they enable the business to carried on smoothly and
often without break.
They also lead to better and maximum utilization of resources,
human, financial and physical, by adhering to actions for
conservation.
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Classifications
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For
For
For
For
Policy Implementation
Policy Control
Ascertaining the Problem
The main object of generating the policy is to have smooth working in
the business organization. Hence, the task of formulating policies
should be assigned only to those in the management who are well
versed and quite conversant with varied situations or problems of the
business concerned.
Policy Formulation
This is the next step to be taken by persons concerned with policy
implementation. Any policy that is to be framed should be quite
suitable both to the management and to its employees.
No policy can be successfully put into practice unless it is properly
approved by the company personnel.
Dissemination of the Policy
Dissemination indicates announcement or making the subject-matter
known to others. One of the basic elements of the policy is that
whatever policy is framed it should be made known to all within the
organization so as to avoid any conflict between the company
management and its personnel.
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Once the basic principles on which the policies are designed and the
rules and regulations included in the proposed draft policy are
thoroughly understood and accepted.
Explanation of the Policy
If the policy is to be accepted at all levels of management, every
attempt should be made by policy-makers that the exact meaning,
significance and purpose of policy are explained in clear terms to the
persons concerned.
The policy will have no opposition and an early approved if explained
thoroughly, will hold relevance to the business environment in which
the business enterprise is expected to operate.
Policy Implementation
This is last but one stage in the process of policy-making decisions.
Implementation of policy indicates putting it into practice as and when
any problem or critical situation arises.
Even otherwise, corporate operations are undertaken and are also the
outcome of the policy implementation.
Policy Control
This is a very important element of business policy which is likely to be
implemented at different levels on different occasion.
The
management in this regard should be careful to see that the policy
implementation takes place in conformity with the basic principles,
rules and regulations set by the policy makers.
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In Terms of Attitude
The attainment of the knowledge and skill objectives should lead
to the inculcation of an appropriate attitude among the learners.
The most important attitude developed through this course is
that of a generalist. The generalist attitude enables the learners
to approach and asses a situation from all possible angles.
By acing in a comprehensive manner, a generalist is able o
function under conditions of partial ignorance by using his or her
judgment and intuition. Typically, case studies provide only a
glimpse of the overall situation and a case analyst frequently
faces the frustrating situation of working with less than the
required information.
UNIT 2
Business Strategy
The term Strategy is derived from military, where it is taken to mean
the process of planning the movements of troops so as to outplay the
enemy in the battlefield. Originally, the term has been derived from
Greek word strategos.
The word strategy, therefore means the art of general. In corporate
planning, strategy is the grand design, which an organization chooses
in order to move to react towards the set objectives by using its
resources.
Meaning / Definitions
According to knootz O Donnel Strategies are general programme
of action towards the attainment of comprehensive objectives.
According to Andrews, Strategy is the pattern of objectives,
purpose of goals and major policies and plans for achieving these goals
stated in such a way, so as to define what business the company is in
or is to be and the kind of company it is or is to be.
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and
and the strategy that reflects the best match between them. It is
based on the logic that an effective strategy maximizes a businesss
strengths and opportunities but at the same time minimizes its
weaknesses and threats.
The following summary shows the major factors of ETOP. The summary
provides an example of an ETOP prepared for an established company
in the bicycle industry.
The main business of the company is in sports cycle manufacturing for
the domestic and export market.
This example relates to a hypothetical company but the illustration is
realistically based on the current Indian business environment.
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Environmental
Sectors
Social
Nature
of
Impact
No significance factor
Economic
Growing
affluence
among
urban
consumers; experts potential high
Regulatory
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The horizontal axis represents the relative market share, which is the
ratio of a companys sales to the sales of industrys largest competitor
or market leader.
The low and high market shares are separated by a vertical lines set at
1.0. The means that a company would have a relative market share of
less than 1.0 if it does not have the largest share.
A relative market share of more than 1.0 would occur for companies
that are the largest sellers in their various industries. Still, in order to
get the maximum benefit out of the experience curve, the BCG matrix
indicates that it is necessary to be the market leader.
The result of combining the industry growth rate and relative market
share, each along a high and low dimension, is a four-cell matrix. Each
cell of this matrix has been given an interesting and appropriate name
by the Boston Consulting Group.
The four cells of the BCG matrix have been termed as stars, cash cows,
question marks and dogs. Each of these cells represents a particular
type of business.
These different types of businesses with some contemporary examples
from the Indian corporate world, are described below
A Typical BCG Matrix
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TOWS analysis helps you get a better understanding of the strategic choices that you face.
(Remember that "strategy" is the art of determining how you'll "win" in business and life.) It
helps you ask, and answer, the following questions: How do you:
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A next step of analysis, usually associated with the externally-focused TOWS Matrix, helps you
think about the options that you could pursue. To do this you match external opportunities and
threats with your internal strengths and weaknesses, as illustrated in the matrix below:
TOWS Strategic Alternatives Matrix
External
Opportunities
(O)
1.
2.
3.
4.
External Threats
(T)
1.
2.
3.
4.
Internal Strengths
SO
ST
(S)
"Maxi-Maxi" Strategy "Maxi-Mini" Strategy
1.
2.
Strategies that use
Strategies that use
3.
strengths to maximize
strengths to
4.
opportunities.
minimize threats.
Internal
Weaknesses (W)
1.
2.
3.
4.
WO
WT
"Mini-Maxi" Strategy "Mini-Mini" Strategy
Strategies that
minimize weaknesses
Strategies that
by taking advantage minimize weaknesses
of opportunities.
and avoid threats.
This helps you identify strategic alternatives that address the following additional questions:
Strengths and Opportunities (SO) - How can you use your strengths to take advantage of
the opportunities?
Strengths and Threats (ST) - How can you take advantage of your strengths to avoid real
and potential threats?
Weaknesses and Opportunities (WO) - How can you use your opportunities to overcome
the weaknesses you are experiencing?
Weaknesses and Threats (WT) - How can you minimize your weaknesses and avoid
threats?
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UNIT 3
Major Business policies
Personnel Policy
Personnel policies are the tools for the personnel department to
achieve the objectives of the organization. Personnel policy provides
guidelines for a wide variety of employment relationship in the
organization. The personal policy of the organization should have two
types namely
General Objective : The statement of general objective
should express the top managements basic philosophy of
human resources and reflect its deep underlying convictions as
to the importance of people in the organization.
Specific objectives: The statement of specific objectives
should refer to the various activities of personnel
administration connected with staffing, training, developing,
wage and salary benefits, employee records and personnel
research.
Key issues in personnel policy : The close interrelation between the
quality of personnel and strategic management requires the top
executives to be concerned with the following major policy issues
bearing on personnel.
Recruitment, promotion and transfer.
Compensation and supplementary benefits.
Relation with employee unions
Collective bargaining.
Finally, policy decisions have to be taken in connection with personnel
administration, and these relate to personnel selection, training and
promotion, remuneration and benefits and industrial relations.
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The Size of the Run Policy : This will depend on the backing and
orders as well as the nature of automation introduced. It will also
depend on the type of the market.
The temptation is to increase the size of the run to take advantage of
avoiding the set up costs. However, these have to be weighted against
the cost of heavier inventories.
Automation Policy : Policy decision at the top level may have to be
taken on the question of automation. The modern trend is towards
greater automation but this has to be tempered by social objectives of
avoiding increasing unemployment in India.
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Source of Capital Policy: Policy dimensions are taken at the top level
regarding the sources of capital. For example, in the case of the sole
trader, the individual proprietor generally provides the capital, which is
supplemented by loans, which he may be able to obtain from banks
and other financial institutions.
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Policy decisions will have to be taken with regard to how for such
current assets should be held in cash or in other readily marketable
securities or placed in fixed deposit to earn interest.
These policies are also concerned with the extent of bank borrowings
permissible and allowances credit facilities that should be extended to
the customers.
Profit Distribution Policy : Policy decisions have to be taken with
regard to how much profits should be distributed by way of dividends
to the share holders and how much should be ploughed back for future
capital requirements.
If adequate dividends are not distributed, when capital is required in
the future it will be difficult to attract investors as new shareholders or
to induce existing shareholders to take up more shares in the company.
Some companies follow a policy of dividend equalization by setting
aside profits in good years to be used for payment of dividend in lean
years.
Depreciation Allowance Policy: Policy decisions have to be taken
on the question of extent of depreciation to be written off while
keeping in mind the tax providing as well as its possible use as source
of funds for the enterprise.
UNIT 4
Major Business Strategies
Strategy refers to the manner of using resources to provide superior
results. In operational terms, strategy is a comprehensive, integrated
plan designed to assure that the basic objectives of the enterprise are
accomplished.
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Internal Growth Strategy: In this strategy, the company will take all
necessary effort to grow its business with help of its own resources and
effort.
There are two types of internal growth strategies namely, internal
growth by increasing sales of the single product or service line and
internal growth by diversification.
In internal growth by increasing sales of the single product or service
line, the firm increases its level of objective achievement by increasing
the sales and profit of its present product or service line. This may be
achieved in the following ways;
By expanding sales through increasing primary demand and
encouraging new uses
Expanding sales of product by adopting a different income groups
Expanding sales by adopting a different pricing strategy
Expanding sales to different market segments by producing
goods/services,
which,
cater
to
different
purposes
and
personalities
External growth by Merger and Joint Ventures: An external
growth strategy is one by which a firm increases its level of objective
achievement through mergers, joint ventures and vertical integration.
Merger: A merger is that process by which two of more firms acquire
the assets and liabilities of the other in exchange of stock, or cash, or
both. It can be two types namely, concentric and conglomerate.
A concentric merger is one in which two or more firms, which are
related by the production process, technology and markets combine.
A conglomerate merger involves the combination of two or more firms
not closely related by technology, production process or markets.
Joint Venture: It can take place between two or more firms of the
same country or between the firms operating in different countries. As
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they are formed with a different purpose and have a different rate of
success.
Vertical Integration: Vertical integration is a growth strategy
characterized by entering or leaving one or more stages in the process
of the manufacture and distribution of goods and services.
It may be backward integration or forward integration. Backward
integration also known as upstream development, it involves addition
to activities to ensure the supply of a firms present inputs.
It is aimed at moving lower on the production process scale so that the
firm is able to supply its own raw materials or basic components.
Retrenchment Strategy
Retrenchment strategy is followed when an organization substantially
reduces the scope of its customer groups, customer functions, or
alternative technologies in order to improve its performance.
Retrenchment involves total or partial withdrawal from a customer
group, customer function, or use of an alternative technology.
Retrenchment strategies may be used on the following circumstances;
Poor performance
Threat to survival
Redeployment resources
Insufficiency of resources
To secure better management and improved efficiency
There are different ways in which a company may defend its existence
and survive, or best serve the interest of owners in the face of internal
or external crises.
The variants or sub strategies of retrenchment strategy are turnaround
strategy, divestment strategy, and liquidation strategy.
Turnaround Strategy: When an enterprise has been suffering from
business losses for a long period because of continued decline in sales,
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for
the
whole
company,
creating
the
need
for
divestment.
Technological up-gradation is required if the business is to survive
but where it is not possible for the firm to invest in it.
Divestment may be done because by selling off a part of business
the company may be in a position to survive
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Normally at this stage, personal values and expectations of decisionmaker play an important role in strategy because he will decide the
course of action depending on his own likings and disliking.
This happens because in one way, the organizational objectives reflect
the personal philosophy of individuals particularly at the top
management level.
Implementation: After the Strategy has been chosen, it is put to
implementation, which is it is put into action. Choice of Strategy is
mostly analytical and conceptual while implementation is operational
or putting into action.
Various factors which are necessary for implementation are design of
suitable organization structure, developing and motivating people to
take up work, designing effective control and information system,
allocation of resources etc.,
When these may produce results, which can be compared in the light
of objectives set, and control process comes into operation. If the
results and objectives differ, a further analysis is required to find out
the reasons for the gap and taking suitable actions to overcome the
problems because of which the gap exists.
This may also require a change in strategy if there is a problem
because of the formulation inadequacy.
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The 7-S-Model
By Dagmar Recklies
The 7-S-Model is better known as McKinsey 7-S. This is because the two persons who
developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey
& Co at that time. Thy published their 7-S-Model in their article Structure Is Not
Organization (1980) and in their books The Art of Japanese Management (1981) and In
Search of Excellence (1982).
The model starts on the premise that an organization is not just Structure, but consists of
seven elements:
Structure
Strategy
Systems
Shared
Values
Skills
Style
Staff
www.themanager.org
Those seven elements are distinguished in so called hard Ss and soft Ss. The hard
elements (green circles) are feasible and easy to identify. They can be found in strategy
statements, corporate plans, organizational charts and other documentations.
The four soft Ss however, are hardly feasible. They are difficult to describe since
capabilities, values and elements of corporate culture are continuously developing and
changing. They are highly determined by the people at work in the organization. Therefore
it is much more difficult to plan or to influence the characteristics of the soft elements.
Although the soft factors are below the surface, they can have a great impact of the hard
Structures, Strategies and Systems of the organization.
Description
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The Hard Ss
Strategy
Structure
Systems
The Soft Ss
Style / Culture
Skills
employees
The distinctive competences what the company does best,
Shared Values /
Superordinate Goals built must be simple, usually stated at abstract level, have
great meaning inside the organization even though outsiders
may not see or understand them.
Effective organizations achieve a fit between these seven elements. This criterion is the
origin of the other name of the model: Diagnostic Model for Organizational Effectiveness.
If one element changes then this will affect all the others. For example, a change in HRsystems like internal career plans and management training will have an impact on
organizational culture (management style) and thus will affect structures, processes, and
finally characteristic competences of the organization.
In change processes, many organizations focus their efforts on the hard Ss, Strategy,
Structure and Systems. They care less for the soft Ss, Skills, Staff, Style and Shared
Values. Peters and Waterman in In Search of Excellence commented however, that most
successful companies work hard at these soft Ss. The soft factors can make or break a
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successful change process, since new structures and strategies are difficult to build upon
inappropriate cultures and values. These problems often come up in the dissatisfying results
of spectacular mega-mergers. The lack of success and synergies in such mergers is often
based in a clash of completely different cultures, values, and styles, which make it difficult
to establish effective common systems and structures.
The 7-S Model is a valuable tool to initiate change processes and to give them direction. A
helpful application is to determine the current state of each element and to compare this
with the ideal state. Based in this it is possible to develop action plans to achieve the
intended state.
UNIT 5
Society and Business
Business is an integral part of the social system; and it influences other
elements of society, which in turn affect business. The type of
products to be manufactured and marketed, the marketing strategies
to be employed, the way the business should be organized, are
influenced by society.
The social system also on the other hand, is influenced by the way the
business functions, innovations, transmission on diffusion of
information and new ideas may affect society.
Thus business activities have greatly influenced by social attitudes,
values, outlooks, customs, traits, etc. Responsibility of business
towards society includes concern for ecology; consumerism; rural
development and new projects.
Business may or may not have direct or day-to-day interaction with
these interest groups. The well being of society is the well being of
business.
Business Ethics
Business ethics is concerned with the relationship of business goals
and techniques to specific human needs. It studies the impact of acts
on the good of the individual, the firm, the business community and
the society as a whole.
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oriented
management
ecology
and
environmental
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ORGANIZATIO
NAL
LEVEL
Chief Executive
Staff Specialists
Division
Management
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Obtain
organizational
commitment.
Change
performance
expectations.
Provide
response
from
operating units.
Apply
data
system
to
performance
measurement.
Issue:
Management
problem.
Action: Commit
resources
and
modify
Outcome:
Increased
responsiveness.
CARROLLS FOUR-PART MODEL
Archie B. Carrol has promulgated the four-part model. The model
suggests that business firms are basically an economic activity; its
primary responsibility is economic. It mist produce the goods that
society wants and must sell them at a profit. Legal responsibilities are
also basic.
Firms should operate within the law.
In this model, ethical
responsibilities refer to behavior by the firm that is expected by
society. The category of discretionary responsibilities encompasses
voluntary activities undertaken for the public good.
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Social Audit
Business unit has obligations to its employees, owners, buyers,
government and environment. The question now is how to assess the
performance of a particular business unit.
The answer is social audit. The social audit is an approach for
monitoring, appraising and measuring the social performance of
business. Kreps may regarded as the founding father of the idea.
He included among these measurements; employment, production,
consumer effort commanded, consumer funds absorbed, pay rolls and
dividend and interest. The basic purpose of a business is to maximize
the financial return earned on its financial investment plus the amount
of social return on its social investment.
To make rational investment decisions in the social area it is necessary
to know what the social returns are, and if we are to assess them by
the same measures as for financial investment, these must be
expressed in monetary terms.
A social audit is a systematic study and evaluation of an organizations
social performance, as distinguished from its economic performance.
It is concerned with the possible influence on the social quality of life
instead of the economic quality of life.
Social audit leads to a report on the social performance of a business
unit. It is the evaluation or assessment of a companys performance
against planned goals in the area of social responsibility.
The internal and external bodies may carry out the assessment,
different people have interpreted the term social audit differently.
To some it means the public disclosure of a companys social
responsibility and to some others social audit is a comprehensive
evaluation of the way a company discharge all its responsibilities to
shareholders, customers, and employees and to the wider community.
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audit
encourages
greater
concern
for
social
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