Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

16 April 2014

The Meaning of Business

Organization that provides goods and services to earn
a profit (the difference between revenues and
expenses).
Factors to consider in running a business:
Consumer Choice & Consumer Demand
Opportunity & Enterprise
Quality of Life

Evolution of Business *
The Factory System

(Industrial Revolution)
Mass-Production
Specialization of labor

Laissez-faire

(Entrepreneurial Era)
Minimum governmental

intervention
Monopoly

The Production Era

(Scientific Management)
Productivity improvement
Manufacturing efficiency

The Marketing Era

Identifying consumer wants
Satisfying consumer wants
The Global Era
Communicating with
consumer
Globalized resources &
productions
The Information Era
Massif and extensive use of
internet
Equal opportunity for
smaller business

Factors of Production
Resources used in the production of goods and services to
achieve business goals:
1.

2.
3.

4.
5.

Labor: physical and mental capabilities of human resources

contributing in the economic production,
Capital: funds needed to create and operate a business
enterprise,
Entrepreneurs: individuals who take the risks &
opportunities in creating and operating a new business
venture,
Physical Resources (land): tangible items that organizations
use in conducting their business,
Information Resources (knowledge): data and other
information used to extend business operations.

Types of Economic System

Economic system is the approach to manage factors
of production in an economy such as:
1. Planned Economy: an economy that relies on a

centralized government to control all or most factors

of production and to make all or most production &
allocation decisions,
2. Market Economy: an economy in which individuals
control production & allocation decisions through
supply and demand.

Demand & Supply

In a Market Economy
Market economy is a mechanism for exchange
between buyers and sellers of a particular good or
service that consists of:
1. Input Market: market in which firms buy resources

from supplier households,

2. Output Market: market in which firms supply
goods and services in response to demand on the
part of households.

Circular Flow in a Market

Economy*
OUTPUT MARKETS
Goods
Services

FIRMS
Supply Products
Demand Resources

HOUSEHOLDS
Demand Products
Supply Resources

INPUT MARKETS
Labor
Capital
Entrepreneurs
Physical Resources
Information Resources

Who Are Managers?

A manager is someone who coordinates and oversees
the work of other people so that organizational goals
can be accomplished. Managers are classified into
levels:
1. Top Managers
2. Middle Managers

3. First-Line Managers

Levels of Managers (UTS)

1.

2.

3.

Top Managers: responsible for

making strategic decisions and
establishing the plans & goals that
affect the entire organization.
Middle Managers: manage the
work of first-line managers and may
have titles (regional, project, store,
or division),

First-Line Managers: manage the

work of non-managerial employees
who are involved in producing
organizations products or serving
organizations customers,

Top
Middle
First Line
NonManagerial

What is Management? *
Management is what managers do that involve
coordinating and overseeing the work activities of
others so that their activities are completed effectively
& efficiently.
Effectiveness:

Efficiency:

Goal Attainment

Resource Usage

High Attainment

Low Waste

Management strives for:

High Goal Attainment & Low Resource Waste

What do Managers do?

1. Management Functions: Planning, Organizing,

Leading, and Controlling,

2. Management Roles: Interpersonal, Informational,
and Decisional,
3. Management Skills: Conceptual, Human-Relation,
Technical,
4. Changes Affecting Managers Job: Changing
Technology, Changing Security Threats, Increased
Emphasis of Organizational & Managerial Ethics,
Increased Competitiveness.

What is Organization?
Organization is a deliberate arrangement of people
to accomplish some specific purpose with 3 common
characteristics:
A distinct purpose,
2. Composed of people,
3. Develop some deliberate structure within which
members do their work.
1.

Why Study Management?

1. The Universality of Management: it is needed in

all organizational areas, all sizes of organizations, all

types of organizations, and at all organizational
levels,
2. The Reality of Work: once you graduated from
university you will either manage or be managed,
3. Rewards & Challenges of Being a Manager:
management can be a tough and often thankless job,
yet it can be rewarding.

Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

23 April 2014

Organizational Boundaries
Organizational boundary is that which separates
the organization from its environment.
External environment is everything outside an
organizations boundaries that might affect it. It is not
a single entity but rather multiple environments.

Multiple Organizational Environment

Technological
Environment

Economic

Sociocultural

Environment

Environment

Business
Organization
Political-Legal

Business

Environment

Environment

Global

Emerging

Environment

Challenges

Economic Growth, Aggregate

Output & Standard of Living &
ECONOMIC ENVIRONMENT

A market-based economy have 2 key goals:

1.
2.

Economic Growth
Economic Stability
Economic Growth follows a pattern of Business Cycle shortterm ups (expansion) and downs (contraction) in an economy.
Economic Growth is measured by Aggregate Output which is
the total quantity of goods & services produced by an economic
system during a given year,
When output grows more quickly than the population then output percapita increases and the system provides relatively more goods and services
that people want; thus a higher Standard of Living.
Standard of Living is the total quantity and quality of goods & services that
a countrys citizens can purchase with the currency used in their economic
system.

Economic Stability
ECONOMIC ENVIRONMENT

A condition in an economic system in which the

amount of money available and the quantity of goods
& services produced are growing at about the same
rate.
Two common problems facing stability:
1. Inflation: occurrence of widespread price increases
throughout an economic system,
2. Unemployment: level of joblessness among people
actively seeking work in an economic system,

Product & Service Technologies*

TECHHNOLOGICAL ENVIRONMENT

Product & Service Technologies (PST) are the

technologies employed for creating products for
customers.
A big challenge for PST in decreasing cycle-time
which is the time from beginning to the end that it
takes a firm to accomplish some recurring activity or
function.

Business Process Technologies*

TECHNOLOGICAL ENVIRONMENT

Business Process Technologies (BPT) are the

technologies employed to improve a firms
performance of internal operations such as;
accounting, MIS flows, activity reports.
BPT is a large-scale information system for organizing
and managing a firms processes across product lines,
departments, and geographic locations.

Customer Preferences & Tastes

SOCIOCULTURAL ENVIRONMENT

Customer Preferences & Tastes

1.
2.
3.

Vary both across & within national boundaries

Change over time
Influenced by sociocultural factors

Sociocultural Environment are conditions including

customs, mores, values, and demographic
characteristics of the society in which an organization
functions.

Ethical Compliance &

Responsible Business Behavior
SOCIOCULTURAL ENVIRONMENT

Rapid changes in business relationships,

organizational structures, and financial flows pose
unsurpassed difficulties in keeping accurate track of
companys financial position.
Stakeholders are entitled to a fair accounting so they
can make personal and business decisions.

Redrawing Corporate Boundaries

BUSINESS ENVIRONMENT

To stay competitive, firms are redrawing traditional

organizational boundaries as they join together with
other companies, even with competitors, to develop
new goods & services.
Some of these relationships are permanent, but others
are temporary alliances.
Most successful companies are getting leaner by
focusing on their Core Competencies; which are
skills & resources with which an organization
competes best and creates the most values for owners.

Emerging Challenges & Opportunities

in the Environment of Business *
BUSINESS ENVIRONMENT

1. Outsourcing: strategy of paying suppliers and

distributors to perform certain business processes or

to provide needed materials or resources.
2. Viral Marketing: strategy of using the internet and

word-of-mouth marketing to spread product

information.
3. Business Process Management: approach by

which firms move away from department-oriented

toward process-oriented team structures.

Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

16 April 2014

The Importance of Small

Business*
Small Business are independently owned and
managed business that does not dominate its market.
Small business have impacts on an economic system:
1.

Job Creation: small firms hire at a faster rate, but are also likely to
cut jobs at a far higher rate,

2.

Innovation: small firms have the flexibility to generate innovation

and reach the consumer,

3.

Importance to Big Business: small firms carry big businesses

products to their customers.

Popular Areas of
Small Business Enterprise
Small businesses tend to cluster around these
industries:
1.
2.
3.
4.
5.

Services
Construction
Finance & Insurance
Wholesaling
Transportation & Manufacturing

Distinction Between
Entrepreneurship & Small Business
Small Businesses are firms with a set of goals but
with no plans to grow and expand.
Entrepreneurs are people who assume the risk of
business ownership with a primary goal of growth and
expansion.

Entrepreneurial Characteristics*
Some common characteristics of entrepreneurs:
1.

2.
3.
4.
5.

Resourcefulness,
Concern for good customer relations,
A strong desire for control of life and business,
Able to deal with uncertainty and risk,
Open-minded leader who relies on network,
business plans, and consensus,

Crafting a Business Plan

A business plan is a document in which the
entrepreneur summarizes his or her business strategy
for the proposed new venture & how that strategy will
be implemented; composed of:
Setting Goals & Objectives
2. Sales Forecasting
3. Financial Planning
1.

Starting the Small Business (UTS)

The first step to start a small business start with the
individuals commitment to becoming a business
owner; through such ways as:
Buying an existing business,
2. Starting from scratch while defining:
1.

a)
b)
c)
d)
e)
f)

Who are my customers?

Where are they?
At what price will they buy my product?
In what quantities will they buy?
Who are my competitors?
How will my product differ from those of my competitors?

Financing the Small Business

and Franchising
1. Venture Capital Companies: group of small

investors who invest money in companies with rapid

growth potential.
2. Small-Business Investment Company (SBIC):
government-regulated investment company that
borrows money from Small Business Administration
(SBA) to invest in or lend to small businesses.
3. Franchise: arrangement in which buyer (franchisee)
purchases the right to sell good or services of the
seller (franchisor/er) for a franchise-fee.

Trends of Small Business

Start-Ups
Five factors that propels small business:
Emergence of e-commerce
2. Crossovers from Big Business: small businesses that are
created by people who left big corporations,
3. Opportunities for Minorities & Women
4. Global Opportunities
5. Better Survival Rates
1.

Reasons for Failure & Success *

Four common reasons for failure:
Managerial incompetence or inexperience,
2. Neglect,
3. Weak control system,
4. Insufficient capital,
1.

Four common reasons for success:

Hard work, drive, and dedication,
2. Market demand are being provided,
3. Managerial competence,
4. Luck (?)
1.

Sole Proprietorships, Partnerships

& Corporations
1. Proprietorship: personal unlimited liability,

personal unrestricted management, personal sources

of investment,
2. Partnership: personal unlimited liability,
unrestricted management based on agreement,
personal by partners sources of investment,
3. Corporations: capital invested liability, under
control of board of directors selected by
stockholders, purchase of stock investment.

The Corporate Entity, Types,

and Managing a Corporation
Corporation is a business that is legally considered an
entity separate from its owners and is liable for its own
debts; owners liability extends to the limits of their
investments.
Types: examine Table 4.2 (page 109)
Managing a corporation must be done by people who
understands the principle of corporate governance
that is the roles of shareholders, directors, and other
managers in corporate decision making &
accountability.

Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

14 Mei 2014

Types of Strategy
1. Corporate Strategy: strategy for determining the

firms overall attitude toward growth & the way it will

manage its businesses or product lines,
2. Business (Competitive) Strategy: strategy at the

business or product-line level that focus on a firms

competitive position,
3. Functional Strategy: strategy in specific areas on

how best to achieve corporate goals through

productivity.

Setting Business Goals

An organization functions systematically because it
sets goals and plans accordingly. An organization
commits its resources on all levels to achieving its
goals for the purpose of:
1.
2.
3.
4.

Provides direction & guidance for managers at all levels,

Helps firms allocate resources,
Helps to define corporate culture,
Helps managers assess performance.

Formulating Strategy (UTS)

Creation of a broad program for defining and fulfilling an
organizations goals.
1. Set strategic goals: long-term goal derived directly from a firms mission
statement,
2. SWOT Analysis:
2.a. Analyze the organization (S & W): analyzing the firms strengths and
weaknesses,
2.b. Analyze the environment (O & T): scanning the business
environment for opportunities & threats.
3. Matching the organization and its environments: takes risks or be
conservative.
4. Formulate strategy:
4.a. Strategic Plans: resource allocation, firms priorities, steps to meet
strategic goals,
4.b. Tactical Plans: short-range plans concerned with implementing firms
strategic plans,
4.c. Operational Plans: setting short-term targets for daily, weekly, or
monthly performance.

Contingency Planning
and Crisis Management
Contingency planning is identifying aspects of
business or its environment that might entail changes
in strategy.
Contingency planning is planning for change as it
seeks to identify in advance important aspects of a
business or its market that might change.
Crisis management is the organizations methods for
dealing with emergencies that require immediate
response.

Planning, Organizing,
Directing and Controlling
1.

Planning: determining what an organization needs to do

and how best to get it done,

2.

Organizing: determining of how best to arrange

organizations resources and activities into a coherent
structure,

3.

Directing: guiding and motivating employees to meet an

organizations objectives,

4. Controlling: monitoring an organizations performance

to ensure that it is meeting its goals.

Levels & Areas of Management

Levels of Management
1.
2.
3.

Top Managers: manager responsible to the board of directors &

stockholders for a firms overall performance and effectiveness,
Middle Managers: manager responsible for implementing the
strategies, policies, and decisions made by top managers,
First-Line Managers: manager responsible for supervising the work
of employees.

Areas of Management
1.
2.
3.
4.
5.
6.

Human Resource
Operations
Marketing
Information
Financial
Other

Technical, Human Relations,

Conceptual, Decision Making, and
Time Management Skills (UTS)
Skills needed to become an effective and successful
manager:
1.
2.
3.

4.
5.

Technical: skills needed to perform specialized tasks,

Human Relation: skills in understanding and getting along with
people,
Conceptual: abilities to think in the abstract, diagnose and analyze
different situations, and see beyond the present situation,
Decision Making: skills in defining problems and selecting the best
courses of action,
Time Management: skills associated with the productive use of
time.

Management Skills
for the Twenty-First Century
1. Global Management Skills: the need to

understand

Foreign Markets
Cultural Differences
Foreign Rivals

2. Management & Technology Skills

Communicating the Culture

and Managing Change
Corporate culture influences management
philosophy, style, and behavior:
1.
2.
3.

Managers must have a clear understanding of the culture,

Managers must transmit the culture to others in the organization,
Managers can maintain the culture by rewarding and promoting
those who understand it and work toward maintaining it.

Managing change is a must when a corporate needs to

change its culture through three stages:
1.
2.
3.

Decide at the highest level that change is the most effective response
to its problems: conflict & resistance,
Top management begins to formulate a vision of a new company,
The firm sets up new system for appraising & compensating
employees who enforce the firms new value.

Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

21 Mei 2014

What is Planning?
Planning involves:
Defining organizations goals,
2. Establishing strategies for achieving those goals,
3. Developing plans to integrate & coordinate work
activities
1.

Its concerned with both ends (what) and means

(how).

Why Do Managers Plan?

Purposes of Planning
Since planning take a lot of effort, then planning is
necessary because:
Provides direction,
2. Reduces uncertainty,
3. Minimize waste & redundancy,
4. Establishes the goals of standards used in
controlling,
1.

Planning & Performance (UTS)

Is planning worthwhile?

Although the relationship between planning and

performance is generally positive relationships, we cant
say that organizations that formally plan always
outperform those that dont plan.
What can we conclude?
1.
2.
3.
4.

Formal planning is associated with positive financial results,

Doing a good job in planning & implementing those plans generate
high performance
when performance was not high, the external environment often was
the culprit,
Planning-performance relationship seems to be influenced by the
planning time-frame (4 years of planning is required before it begins
to affect performance).

The Role of Goals & Plans in Planning

Goals (objectives) are desired outcomes or targets.
They guide management decisions and form the
criteria against which work results are measured:
1.
2.

Stated Goals: official statements of what an organization says its

goals are,
Real Goals: goals that an organization actually pursues, as
defined by the actions of its members.

Plans are documents that outline how goals are going

to be met that includes resource allocations,
schedules, and other necessary actions to
accomplish the goals.

Types of Plans
Types of plans in an organization are described in terms of:
1.

Breadth:
a.
b.

2.

Time-frame:
a.
b.

3.

Long-term plans with a time frame beyond three years

Short-term plans covering one year or less

Specificity:
a.
b.

4.

Strategic plans that apply to an entire organization & establish

its overall goals
Operational plans that encompass a particular operational
area of an organization

Directional plans that can have several interpretations

Specific plans that leave no room for interpretation

Frequency of Use:
a.
b.

Single-use plans that are used only once

Standing plans that are used multiple times

Approaches to Establishing Goals

Traditional goal setting includes goals set by top
managers flow down through the organization and
become sub-goals for each organizational area.
Instead of the above, many organizations use
Management-by-Objective (MBO) as a process of
setting mutually agreed upon goals and using those
goals to evaluate employee performance.
For steps of MBO see Exhibit 7-3, page 166.

Developing Plans
The process of developing plans is influenced by 3
contingency factors & by the planning approach
followed:
1.
2.

3.

Organizational level: top to first-line paralleled with strategic to

operational planning
Degree of environmental uncertainty: when uncertainty is high,
plans should be specific but flexible
Length of future commitments: plans should extend far enough to
meet the commitments made when the plans were developed

Criticism of Planning (UTS)

Some critics that have challenged some basic
assumption of organizational planning:
Planning may create rigidity,
Plans cant be developed for a dynamic environment,
Formal plans cant replace intuition & creativity,
Planning focuses managers attention on todays
competition, not on tomorrows survival,
5. Formal planning reinforces success, which may lead to
failure,
6. Just planning isnt enough.
1.
2.
3.
4.

Effective Planning in
Dynamic Environment
In an uncertain environment, managers should develop
plans that are specific but flexible.
Managers should recognize that planning is an ongoing
process and managers should be ready to change directions
if environmental conditions warrant.
Making the organizational hierarchy flatter helps make
planning more effective in dynamic environments.

Agung AWS Waspodo, SE, MPP

Magister Manajemen, FE-UNJ

28 Mei 2014

Step.1 Identifying a Problem

Every decisions start with a problem, that is a
discrepancy between an existing and a desired
condition.

Step.2 Identifying Decision Criteria

Once a problem has been identified, a manager must
identify the decision criteria that are important or
relevant to resolving the problem.

Step.3 Allocating Weights to the

Criteria
If the relevant criteria arent equally important, the
decision maker must weight the items in order to
give them correct priority in the decision.

Steps. 4-8
Developing, Analyzing, Selecting, Implementing
the Alternatives, and Evaluating Decision
Effectiveness (UTS)
4. Listing all viable alternatives that could resolve the
problem,
5. Evaluating each of the alternatives,
6. Choosing the best alternative,
7. Put the decision into action,
8. Evaluating the outcome or result of the decision to see
if the problem was resolved.

Types of Decisions &

Decision Making Conditions
1.

Structured Problems & Programmed Decisions

a)
b)

2.

Structured Problem: a straightforward, familiar, and easily defined

problem,
Programmed Decision: a repetitive decision that can be handled
using a routine approach.

Unstructured Problems & Non-programmed Decisions

a)

b)

Unstructured Problem: a problem that is new or unusual and for

which information is ambiguous or incomplete,
Non-programmed Decision: a unique and non-recurring decision
that requires a custom-made solution.

Decision Making Conditions:

1. Certainty: a situation in which a decision maker can make accurate
decisions because all outcomes are known,
2. Risk: a situation in which a decision maker is able to estimate the
likelihood of certain outcomes,
3. Uncertainty: a situation in which a decision maker has neither
certainty nor reasonable probability estimates available.

Linear-Nonlinear
Thinking Style Profile (UTS)
Your thinking style reflects the source of
information you tend to use and how you process
that information:
1. Linear Thinking Style: a preference for using

external data and facts and processing these through

rational and logical thinking,
2. Non-Linear Thinking Style: a preference for using
internal source of information (feelings & intuition)
and processing these through internal insights,
feelings, and hunches.

Decision Making Biases & Errors

See page. 149
Overconfidence
Immediate gratification: tendency for quick results,
Anchoring effect: set a starting point but fail to adjust to new
information,
4. Selective perception
5. Confirmation: seek information to justify past choices and
disregard contradictions
6. Framing: select and highlight certain aspects and disregard others,
7. Availability: tendency to remember events that are most recent,
8. Representation: tendency to see how closely it resembles other
events,
9. Randomness: trying to create meanings out of randomness,
10. Sunk costs: current choices can correct the past,
11. Self-serving: quick to take credit of success and blame others for
failure,
12. Hindsight: falsely believe that they could have accurately predicted
the outcome after it is actually known.
1.
2.
3.

Overview of Managerial
Decision Making
Refer to exhibit 6-12, page. 151

Effective Decision Making

in Todays World
Understand cultural differences,
2. Know when its time to call it quits,
3. Use an effective decision-making process,
4. Build an organization that can spot the unexpected
and quickly adapt to the changing environment.
1.