ARAB OPEN UNIVERSITY

DEPARTMENT OF BUSINESS ADMINISTRATION

Understanding Business Functions B 202 BLOCK ONE

The Definition of Business

Business is defined widely in this course to include both “for-profit”
organizations (such as companies created by investors or generate profits) and “not-for-
profit” organizations (e.g. education institutions).
These organizations provide opportunities to learn the impact of the wider environment
(social, technological, economic, political and physical). This impact may be negative or
positive.
The Definition of Business Function
“A specialised area of activity,
activity, supported by a body of knowledge derived from theory
and practice,
practice, that is undertaken within an organization and that contributes in specific
ways to an organization's outputs either directly or indirectly”.
indirectly”. Business Functions
consist of five functions
(1) Marketing: The contribution of this discipline to the development of markets for
goods and services and investigating and meeting customer needs.
(2) Operations:
Operations: The management of resources for the production and delivery of goods
and services; and the organization's interaction with customers for goods and services.
(3) Human Resource Management: How people in organization managed and
developed;
developed; the interfaces between groups in organization; the relationship between
people's work and non-work roles.
(4) Accounting and Finance: The sources, uses and management of finance; finance; the
nature and contributions of management accounting; the role of the finance and
accounting professions in different sorts of organizations.
(5) Information Management: The development, structuring, management and
exploitation of information for managerial applications; the impact of information
systems on organizations; the relationship between information and knowledge.
Case study
 What is case study?
 "It is a description of a situation which raises issues or problems for analysis and
solution".
 Why?
1. It helps you to develop your skills in analytical and critical thinking, problems
solving and decision making.
2. It provides starting points for information searching and evaluating.
3. It enables you to stimulate a decision-making process and make recommendations
for what actions should be taken by the protagonists, and explained why.
why.
 Other skills of Case Studies
1. Judging between different courses of action.
2. Handling assumptions and inferences.
3. Presenting a point of view and Listening to and understanding others.
others.
 Four Types of Case Studies: John Heath has identified four different types of case
serving different teaching and learning purposes.

1
 (1) The incident case: A short description of a single incident,
incident, used to illustrate a
concept or raise an issue to be reflected on and perhaps discussed in a group.
(2) The background case: A way of conveying information or data, given "human
interest", be being base on a real organization or industry.
industry. This can form a context in
which other cases illustrate issues, or for further development through students' own
research.
(3) The exercise case: Often used to provide a context and data for students in practice
quantitative skills and apply specific techniques.
techniques.
(4) The situation case: The classic's type of case study often containing a number of
types of data, which students analyze in order to explain relationship such as cause and
effects.
effects. It is important to understand where thing went wrong in the situation and to
describe ways of improving matters or avoiding problems in future.
Approaching case study analysis
1. Read the case study through fairly quickly,
quickly, and listen to or watch any audio or video
components, to get a feel for the sort of situation involved.
2. Understand what you are required to do: Go through the case study materials again
looking for potentially important points,
points, and check that you are clear about what is
required of you.
3. Then re-read the case study to assess their relevance and reliability. Make brief notes
about the key issues that seem to be relevant to the question (s). At this stage you are
diagnosing:
diagnosing: What seems to be going on here that may be relevant.
4. Start organizing your observations- what seem to be the underlying issues or events
that may have affected the situation of interest?
5. Remind yourself again of the questions you have been asked to address and organize
your ideas appropriately.
6. Ensure that your recommendations are logical in the light of the situation you have
described, and that they take into account the interests and values of stakeholders in
the situation.
Do's and don'ts
1) Do- prepare in advance- it is unfair on the group if some people have not read or
though about the case.
2) Do- stick to what is relevant to the task in hand, help establish a climate in which
everyone can contribute.
3) Do- think about principles of group dynamics-
4) Do- if you are working in a "virtual",
"virtual", online group, remember the principles of
effective computer-mediated communication.
Do's and don'ts
1) Don't – Expect to have all the information you may ideally need- use the information
you have been given, state any reservations you have about its validity, accuracy etc.
2) Don't – Answer an imaginary question! If you allow yourself to wander away from
the question (s) set in the activity.
3) Don't – Miss opportunities to apply relevant course concepts.
4) Don't – Expect a right (or wrong) answer- if the case study situation is based on a
real world situation. The key point is to support your own answers with logical
argument and evidence from the case.
1.2 Business functions, organizations and environments
 Functions are embodied in the people who make up communities of practice.
practice.
 It is important to recognize that there are many influences that shape functional
activities from outside their "functional communities" through pressures exerted on
organizations.
 These pressures come from various sources, only of which are within the
organization's control.
 The "environments as shapers" model groups these pressures into three categories or
environments- internal, near, and far- as shown graphical in figure 1.1
Far environment
(response)
Near environment
(influence)

Internal
Environment
(control)

ENVIRONMENTAL SHAPERS
(1) INTERNAL ENVIRONMENT
• It is concerned with everything that happens within the organization (Staff, facilities,
related systems and processes)
• The manager has control and influence.
influence.
(2) NEAR ENVIRONMENT
• The near environment includes customers, suppliers and competitors.
• The manager has no control, but he has an influence.
• This is the environment in which an organization's marketing activities are generally
focused.
(3) FAR ENVIRONMENT
• The far environment refers to factors that can neither be controlled nor influenced
from within the organization.
• These include social, technical, economic, ethical, physical environmental, political
and legal factors (STEEPPL).
(STEEPPL).
• Some industries attempt to influence the far environment- particularly political
factors- through lobbying,
• The best for manager is to understand and anticipate the far environment, in the hope
of responding appropriately.
• The near environment, which affects the internal environment of organizations, is in
turn influenced by events in the far environment
What is STEP?
1) STEP stands for (Social-cultural, Technological, Economic and Political) factors.
2) STEP Analysis is a framework that provides a systematic way of identifying
potential important external influences on an organization, and (often indirectly) its
internal activities that need to be taken into account in decision making and
planning.
3) It can be particularly useful to have such a framework to hand when managers from
different functional backgrounds come together to develop a new product or
service, tackle an unexpected change in performance, or assess the risks associated
with a major change.
Examples of typical environmental factors:
1) Social – social class, demographic characteristics such as life expectancy and
population age structure,
structure, life style, wealth distribution, education levels.
levels.
2) Technological-
Technological- availability of equipment for manufacturing, communications, travel
etc., reliability of electrical supply.
3) Economic – inflation,
inflation, market trends, globalization, supply and demand relationships.
4) Political – local and national government policies, international agreements and
regulations, current or potential future conflicts.
Principles of Management by Philip Sadler
Management theory is a theory of practice. It prescribes what to do to achieve a
particular outcome or to prevent a condition from developing which might be considered
undesirable.
Different theories utilized different assumptions. They prescribe different structures and
processes. Yet each of them focuses on how an organization can be made more effective.
The Beginnings of Management Thought
1) There is no universal agreement about the principles of management. It is better not
to use the term "principles
"principles"" at all, but to refer instead to guidelines.
guidelines.
2) Early Egyptian writings show that the builders of pyramids recognized certain basic
principles such as authority,
authority, responsibility and specification.
specification.
3) The Babylonian Code of Hammurabi set out principles of control and
responsibility.
responsibility.
4) Machiavelli,
Machiavelli, in the sixteenth century, developed four principles: reliance on mass
consent; cohesiveness,
cohesiveness, leadership,
leadership, and the will to survive.
survive.
5) Frederick Taylor (1911), the founder of Scientific Management. Management
should take certain tasks, such as planning and scheduling of work.
Taylor’s various principles of scientific management are as follows:
1) Separation of planning from doing. doing.
2) Functional supervision
3) Job analysis;
analysis; based on time, and motion studies to determine fair amount of work.
4) Standardization of tools, period of work and cost of production.
5) Scientific selection and training of workmen
6) Financial incentives to motivate workmen.
The pre-war Management Writers
Henri Fayol in France:
France: He analyzed management activity into five elements –
planning,
planning, organizing,
organizing, commanding (or directing), co-ordaining and controlling.
controlling. To be
effective management should be founded upon fourteen principles as follow:
1) Division of work and specification
2) Authority must match responsibility
3) Discipline
4) Unity of command (one man, one boss)
5) Unity of direction
6) Subordination of individual interest to the general interest
7) Remuneration must be fair in relation to effort
8) Centralization
9) The scalar or hierarchical principle of line authority
10) The principles of order (a place for everyone and everyone in his place)
11) Equity
12) Stability of tenure of personnel
13) Importance of initiative
14) Importance of esprit de corps
Elton Mayo Harvard Professor in USA
• Mayo shifted the attention away from the more mechanistic issues of structure and
control on to the human factors affecting industrial performance.
• Mayo concluded that human motivations were more important than logical and
rational arrangements in determining output.
• Mayo also held that social relationships in working groups were the most important
factors influencing the job satisfaction.
satisfaction.
• Bernard (1938) constitutes an important part of our sociological literature.
• Follett (1949) reached similar conclusions, but on philosophical grounds rather than as
a result of applied research. She emphasized the importance of group processes in
decision making.
• Urwick laid classical principles of management. He applied a combination of
experience and philosophy rather than rigorous research.
 The principles which Lyndall Urwick gathered based on the work of Taylor, Fayol and
Follett have come to be known as the 'classical principles of management.
management. They are
based on experience and philosophy rather than research. There has been a lot of
criticism on this.
 Firstly, there cannot be a common set of principles for all management situations.
 Secondly,
Secondly, the environments in which they had formulated these theories have changed
drastically and today, we have a highly dynamic environment in which all
organisations have to match pace with or they lose out in the long run.
Management theory in the post-war era
1) First,
First, the tradition of the consultant or practitioner theorizing on the basis of his
experience has continued in order to meet the needs of many practicing managers.
2) Second,
Second, number of influential writers who have illuminated management though with
shafts of humor or satire (e.g Parkinson's Law).
 3) Third,
Third, there are the propounders of functional principles or of principles concerned
with part rather than the whole of the management task (e.g. principles of marketing)
4) Herzberg is best known for his distinction between motivations such as the work
itself, achievement, responsibility and recognition, and what he describes as
"hygiene"
"hygiene" factors, which do not provide motivation but merely act so as to prevent
workers from being dissatisfied.
5) McClelland's researchers emphasized the importance of the motivation to achieve in
relation to the performance of work.
6) Maslow's most important contribution was to draw attention to the way in which
human needs are ordered into a hierarchical system, (belonging, esteem,
achievement and self-actualization).
Theories by 3 American psychologists
1- Herzberg 2- Maslow 3- Mc Clelland
(A) Hygiene (maintenance) Factors
The factors that help prevent dissatisfaction. These factors are necessary to maintain a
reasonable level of satisfaction:
(B) Motivation (satisfiers) Factors
The five factors that lead to job satisfaction and higher levels of motivation. These factors
are neutral if they are not activated. These factors influence job satisfaction to a great deal
(A) Hygiene (maintenance) Factors (B) Motivation (satisfiers) Factors
1 Company's policies and administration 1 Achievement
2 Quality of supervision 2 Recognition
3 Working conditions 3 The work itself
4 Interpersonal relations 4 Responsibility
5 Salary, Status and Job security 5 Advancement
Preferably, the two approaches, hygiene and motivation, must be carried out
simultaneously. Treat people so they obtain a minimum of dissatisfaction. Use people so
they achieve, get recognition, grow and advance in their careers.
Maslow: Maslow’s Hierarchy of Needs
 Human needs in a hierarchy from the most basic survival to complex psychological
 Maslow’s theory applies to people in general & not specific to work & organizational
behavior
(1) Physiological Needs: Good working conditions, attractive wage or salary subsidized
housing, free or subsidized catering.
(2) Safety Needs: Private health insurance cover, attractive pension provision, safe
working conditions,
(3) Social Needs: Company sports and social clubs, office party's outings, encouraging
open communications.
(4) Esteem Needs: Regular positive feedback, prestige job titles, photographs in
company news sheets, promotions
(5) Self- estimation Needs: Challenging job assignments s, discretion over core work
activities, promotion opportunities encouraging creativity
(3) Mc Clelland : Mc Clelland’s needs theory -3 types of basic motivating needs
(1) Power Motive –exercising influence and control
 (2) Affiliation Motive – derive pleasure from being loved
(3) Achievement motive -takes risks, wants to go that extra mile
 In Britain,
Britain, the work of members of the Tavistock Institute of Human Relations has
demonstrate the importance of taking account both of the constraints imposed by
technology and the need of human being for satisfying social relationships when
designing organization structures.
 Joan Woodward: (there is no one best way to organize a business and that the form
of organization advocated in the classical principles, with its emphasis on unity of
command,
command, hierarchy and clarity of structure).
 In a similar vein Burn and Stalker demonstrate that the classical principles worked
well in forms with highly stable technologies and markets but failed to be associated
with successful performance in firms faced with the need for rapid adjustment to
changing conditions.
 In US, Mintzberg and Stewart have thrown much needed light on what managers
actually do, and how the job content of managers with different roles in the
organization varies.
 The fourth group of contribution to modern management theory include: first, first, the
application of scientific methods and mathematical problem- solving techniques and
second,
second, to the subsequences development of computers and related mathematical
approaches to solving complex problems.
The main changes affecting the managerial role
1) The impact of the computer and more recently the microprocessor on information
processing task in production and administration.
2) The increase of the pace of technological change
3) The growth of international trade
4) The impact of legislation on business activity (employment protection, consumer
protection, environmental care
5) Changes in social climate leading to demands for employee participation in decision
making
6) High rates of inflation
Modern Management Principles
(1) The organization as a complex: The achievement of the purposes of a human
organization will involve a wide range of activities which are interconnected so as to
form a system.
(2) The technical and social sub-systems: The organization as a system is made up of
two principal sub-system the technical and the social.
(3) The organization as an open system:
system: The existence of any organization depends on
some process of exchange of goods or services with other organizations, social units
or individuals in its environment
(4) The key resource of the modern business organization in advanced industrial societies
is knowledge.
(5) Management's key task is to secure the future survival of the organization by means
of appropriate and timely innovation
(6) Management is the process of getting things done by other people
(7) Management as an activity is universal but does not take the same form in all
situations
(8) There is no best way to organize a business:
business: The most successful systems of
organization differ markedly from one kind of business to another. Any one business
must continuously adapt its organization to meet the demands of changing
circumstances.
(9) Small is beautiful:
beautiful: Large organizations have bureaucratic systems of administration
and control. Effective management structures therefore involve autonomous profit
centers served rather than directed by small head-office teams.
(10) Management is a process involving a mix of rational,
rational, logical decision making and
problems solving activities and intuitive, judgmental activities.
Marketing Definition
(1) UK Chartered Institute of Marketing
 Marketing is the management process identifies,
identifies, anticipates and supplies customer
requirements efficiently and profitability.
profitability.
 (2) American Marketing Association
 Marketing is the process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchange and
satisfy individual and organizational objectives.
Marketing Mix
 McCarthy mentions 4 Ps of marketing mix
(1) Product: The product should fit the task the target consumers want it for and
should be what the consumer expected to get.
(2) Place: The product should be available from wherever the firm's target group of
customers find it easiest to shop (e.g. mail order through a catalogue or doorstep
delivery)
(3) Promotion: All the other communications tools (e.g. advertising, public
relations, sales promotion) should put across the organization's message in a way that
fits what the particular group of consumers and customers would like to hear.
(4) Price: The product should be seen as representing good value for money.money.
 It does not necessarily mean that it should be the cheapest available. One of the main
tenets of the marketing concept is that customers are usually prepared to pay a little
more for something that really works well for them.
 Booms and Bitner (1981) proposed three additional factors:
(5) People: All services are reliant on people to perform them (e.g. the behavior of
waiters in restaurants) forms a crucial part of the total experience for the consumers.
6) Process: Since services are usually carried out with the consumer present, the process
by which the service is delivered is, again, part of what the consumer is paying for
(e.g. a consumer seeking a fast process will prefer the fast-food place, whereas a
consumer seeking an evening out might prefer the slower process of the restaurant)
(7) Physical evidence: All services contain some physical elements (e.g. decor, the
atmosphere, the waiters)
Definition of some marketing terms
 Need & want: Need is perceived lack of something and the awareness of not having
it. A want is a specific satisfier for a need.
 Price & Value: Price is the amount of money a product is sold for.
 Value is what the product is worth to the customer or consumer.
 The value is always higher than the price, or no business would result.
  Goods & services: Goods are something tangible and you can use for example
washing machine. A service is something an intangible like laundry.
Marketing job titles
1- Brand Manager Responsible for all the decisions concerning a
particular brand.
2- Product Manager Responsible for all the decisions around a group of
similar product within a firm.  
3- Sales Manager:
Manager: Responsible for controlling, training and motivating
the sales force and sales back up team.
4- Salesperson Finds out what each customer needs and tries to
arrange for it to be delivered.
5- Advertising Controls media purchases, deals with advertising
Manager agencies, generally handles the flow of information to
the company's customers and consumers.
6- Public Relations Monitors the company's public image and applies
Manager:
Manager: corrective measures if the company is acquiring a bad
reputation.
7- Market Research Collect evidence about what it is that consumers really
Manager:
Manager: need, and what they would really like to buy.

Reasons not to adopt a marketing philosophy

1 Production People (Argument)
This is what we make efficiently.
It is a good, well-made product.
It is up to you to find people to sell it to.
2 Accountants and Financial Directors
The only sensible way to price is allocate
all the costs, then add on our profit
margin.
That way we know for sure we can not
lose money.
3 Legal department
We have no legal obligation to do more
than return people's money if things go
wrong.
Why go to the expense of sending
somebody round to apologize?
4 Board of Directors
Business is not so good, so everybody's
Marketing People (Response)
(Response)
You might like the product.
What we need to do is not just "keep the
punters happy“
Marketing People (Response)
(Response)
If you use cost-plus pricing, you will
certainly either price the product lower
than the consumers are prepared to pay, in
which case you are giving away some of
your profit, or you will price it too high
and nobody will buy the product.
Marketing People (Response)
(Response)
With no customers, we have no business.
We have all our eggs in one basket; we can't
afford to upset any of them.
Marketing People (Response)
(Response)
If you cut the marketing budget, you cut
 budgets are being cut, including the the amount of business coming in.
marketing department. Sorry, you will Our competition will seize the advantage,
just have to manage with less. and we will lose our customer base and
market share.
 The Marketing Environment
 SWOT ANALYSIS
 INTERNAL FACTORS
 STRENGTHS WEAKNESSES
 EXTERNAL FACTORS
 OPPORTUNITIES THREATS
 SWOT ANALYSIS
(A) Strengths (B) Weaknesses
1 What are we best at? 1 What are we worst at doing?
2 What intellectual property do we 2 Is our intellectual property outdated?
own?
3 What specific skills does the 3 What training does our workforce lack?
workforce have?
4 What financial resources do we have? 4 What is our financial position?
5 What connections and alliances do we 5 What connections and alliances should
have? we have, but don’t?
6 What is our bargaining power with 6
both suppliers and intermediaries?
© Opportunities (D) Threats
1 What changes in the external 1 What might our competitors be able to
environment can we exploit? do to hurt us?
2 What weaknesses in our competitors 2 What new legislation might damage
can we attack? our interests?
3 What new technology might become 3 What social changes might threaten us?
available to us?
4 What new markets might be opened 4 How will the economic (boom-and-
up to us? bust) cycle affect us?
SWOT ANALYSIS
 Creative Use of SWOTs: Generating Strategies
 If the objective seems attainable, the SWOTs are used as inputs to the creative
generation of possible strategies, by asking and answering each of the following
four questions, many times:
1) How can we Use each Strength?
2) How can we Improve each Weakness?
3) How can we Exploit each Opportunity?
4) How can we Mitigate each Threat?
Michael Porter’s five forces model
1. The bargaining power of suppliers
 2. The bargaining power of customers
3. The threat of new entrants.
entrants.
4. The threat of substitute products and services
5. The rivalry among current competitors.
competitors.
The main strength of Porter's model is that it broadens the concepts of competition and
enables marketers to look at the wider picture
Accounting and Finance in B202
Definition of Accounting: Accounting and Finance
 Accounting is concerned with collecting,
collecting, analyzing and communicating
financial information.
information.
 Finance is concerned with the ways in which funds for a business are raised and
invested.
invested. This lies at the very heart of what a business is about.
Users of accounting information
Who requires accounting information? and why?
Main users of financial information related to a business operation.
1) Customers: Whether to continue in business and to supply customers‘ needs.
2) Competitors: Whether to compete or to leave the market on the grounds that it is not
possible to compete profitability.
3) Employees: to assess the ability of the business to continue to provide employment
and to reward employees for their efforts.
4) Government: Whether to pay tax and if so, how much
5) Community Representatives: Whether to expand its premise or whether to provide
economic support.
6) Investment Analysts: Whether or not to advice clients to buy shares or not.
7) Suppliers: Whether to continue to supply and, if so, whether to supply on credit.
8) Lenders: Whether to lend money or whether to require repayment of any existing
loans.
9) Managers: Whether the performance of the business requires improvement.
10) Owners (Shareholders): Whether to buy additional shares or to sell some or all
of those presently held.
Accounting Classifications
1) Management Accounting Information: It is that which is produced for internal
consumption.
consumption.
2) Financial Accounting Information: It provides information to people outside the
organization, such as shareholders, loan capital investors, suppliers, competitors,
government, etc.
Financial accounting information provides information to people outside the
organization such as shareholders, loan capital investors, suppliers, competitors,
government, etc. with the following purposes:
1) External reporting.
reporting.
2) Providing information to allow resource providers to make choices about investing
in the reporting organization
3) Disclosure the facilitate public accountability
4) Encouraging competition by making information available to competitors.
Management Accounting Information is produced for internal consumption for the
managers for such purposes as:
1) Planning and budgeting
2) Management control and operational control
3) Performance evaluation
4) Making decision about particular activities, tasks and functions.
1- Characteristics of Useful Accounting Reports.
Reports.
1- Relevance:
Relevance: Accounting information must have the ability to influence
decisions.
decisions. Unless this characteristic is present, there is really no point in
producing the information.
2- Reliability:
Reliability: Accounting should be free from significant errors or bias, bias, it
should be capable of being relied upon by users to present what it is supposed to
represent.
3- Comparability:
Comparability: will enable users to identify changes in the business over
time. It will also help users to evaluate the performance of the business in
relation to other similar businesses.
4- Understandability : Accounting reports should be expressed as clearly as
possible and should be understood by users.
The difference between management accounting & financial accounting
1) Nature of the reports produced. Financial accounting reports tend to be general
purpose while management accounting reports specific.
specific.
2) Level of detail. Financial accounting reports provide users with a broad overview
while management accounting reports focuses on particular operational decision.decision.
3) Regulations. Financial accounting reports are subject to accounting regulations but
there are no regulations from external sources concerning the form and content of
management accounting reports.
4) Reporting interval. Financial accounting reports are produced on an annual basis,
though large businesses may produce half-yearly reports and a few produce quarterly
ones. Management accounting reports maybe produced as required by managers.
5) Time horizon. Financial accounting reports reflect the performance and position of the
business for the past period.
period. Management accounting reports often provide
information concerning future performance as well as past performance.
6) Range and quality of information.
information. Financial accounting reports concentrate on
information that can be quantified in monetary terms. Management accounting also
produces such reports, but is also more likely to produce reports that contain
information of a non-financial nature.
1- Forms of Business Unit
1- Sole Proprietorship:
Proprietorship: AsAs the name suggests, is where an individual is the sole
owner of a business. This type of business is often quite small in terms of size
(as measured, for example, by sales generated or number of staff employed),
however, the number of such businesses is very large indeed.
2- Partnership:
Partnership: it exists where at least two individuals carry on a business together
with the intention of making a profit. Partnerships have much in common with
sole-proprietor business. They are often quite small in size.
size.
3- Limited companies can range in size from quite small to very large.
large.
 The number of individuals who subscribe capital and became the owners may be
unlimited, which provides the opportunity to create a very large-scale business.
The proprietorship has three important advantages:
1. It is easily and inexpensively formed.
2. It is subject to few government regulations and
3. The business avoids corporate income taxes. taxes.
The proprietorship also has three important limitations.
1. It is difficult for a proprietorship to obtain large sums of capital.
2. The proprietor has unlimited personal liability for the business’s debts, which can
result in losses that exceed the money he or she invested in the company;
3. The life to a business organized as a proprietorship is limited to the life of the
individual who created it.
Information Management IM is defined as
“The conscious process by which information is gathered and used to assist in decision
making at all levels of an organisation”
Stages of IT Growth
Initiation : New technology is initially introduced into the organization, and
1-
some users become familiar with the technology and its applications
2- Contagion:
Contagion: As more individuals become acquainted with new technology,
demand increases and use proliferates.
3- Control:
Control: The issue of costs versus benefits intensifies and managers become
concerned about the economics of technology
4- Integration: Managers become interested in integrated systems and databases
5- Data Administration: Managers are concerned with the value of data resources.
resources.
They manage and control the database to ensure their effective utilization.
6- Maturity:
Maturity: The technology and the management process are integrated into an
efficiently functioning entry
Operations Management
Definition: Operations management is concerned with managing the resources that
directly produce the organization’s service or products
The Tasks of Operations Managers
1. Managers have to understand what their operation has to be good at in their
particular environment.
2. Planning and control are major activities.
activities.
(A) Planning involves arranging for the orderly flow of resources so that the
objectives can be met.
(B) Control means checking the performance of the operation against the
standards expected if it.
3. Simply accepting the output and the process as factors designed by someone else
and trying to manage them as well as can be expected is not acceptable
4. Operations managers have to seek continuous improvement in everything that their
operation does.
5. Operations managers have to be able to communicate across the functional
boundaries.
boundaries.
Operations Management as a Transformation Process
• All types of operations take inputs such as people, materials and capital and convert
them into the designed outputs such as products and services. Hence, operations
management can be viewed as a transformation process. process. The key components of this
process are:
1) Inputs: they include transformed resources such as such as material whose status
will change as the results of the conversation process and transforming resources
that help the transformation process but their status does not change as the result of
the conversation process.
2) Conversation process:
process: this is concerned with the design of the operation system
and improvement activities that are needed for the manufacture and supply of goods
and services to customers.
3) Outputs.
Outputs. These are products and services produced by the operation to satisfy the
customer's requirements and the operations and business strategic objectives in order
for it to remain competitive in the marketplace.
Performance Characteristics of Operations
• The contribution made by an operation function is crucial to the long-term success of
manufacturing. The operation function makes this vital contribution to a firm's
compositeness through the following five performance objectives.
1) Quality: Doing things right.right. Striving to satisfy customers by providing goods and
services that are fit for their purpose.
2) Speed: Doing thing quickly.quickly. This involves delivering goods and services to
customers as fast as they want them.
3) Dependability: Doing things on time. time. This means keeping the delivery schedule
that has been promised to the customer.
4) Flexibility. This is being able to change what you do to respond to changes in
customer requirements in terms of products and services design, volume, and mix
and delivery times.
5) Cost: Doing thing cheaply involves aiming to get the right mix of resources and
facilities to provide good value products and services at low cost.
Efficient & effectiveness
The success of any organization is related to its ability to manage its operations
efficiently and effectively.
 Operations efficiently is to make the best use of resource,
resource,
 Operations effectively,
effectively, to meet the requirements of its customers
The input-output transformation model for operations
 Transformed resources- those that are transformed as part of the output.
 Transforming resources, those that are necessary to carry out the transformation but
do not themselves form part of the output
The different types of transformed input resource can be used to distinguish
between three different types of operations
1) Material processing operations- Typically these are manufacturing operations in
which raw materials and components are transformed into finished products for sale
 to customers, but they also include mining and other extractive operations, and the
transport and storage of goods in warehousing and retailing operations.
2) Information processing operations- There are many examples of information
processing including accountancy, banking and financial services,
services,
telecommunications, and research of all kinds.
3) Customer- processing operations- Examples of this type operation include hospital,
hairdressers, schools, hotels, travel agents and theaters.
Services Goods
1- Intangible Tangible
2- Simultaneous production and Production before consumption
consumption
3- High degree of customer contact Low degree of customer contact
4- Quality as perception Quality as functionality
Human Resources Management
HRM is concerned with all aspects of managing people within organizations. HRM is an
organizational function that performs the many activities needed to keep the
employment contract going.
There are various interpretations where HRM has come from.
1) It is nothing more than a renaming of the traditional personal function.
2) It is fusion between the personal and industrial relations functions.
functions.
3) It presents wider conception of the employment relationship
4) It represents a more strategic managerial function.
function.
HRM Approaches
(1) Instrumental approaches
 It views HRM as something which is driven by and derived directly from corporate
strategy and aimed almost exclusively at increasing competitive advantage.
(2) Humanistic approaches
 It emphasizes the reciprocal nature of the relationship between strategic
management and HRM, HRM, and the latter's role in ensuring that competitive advantage is
achieved through people but not necessarily at their expense.
expense.
Types of HRM
 Hard HRM focuses on managing and controlling employees so as to achieve the
organization's strategic goals.
 Soft HRM gives more recognition to the needs of employees and the importance of
their commitment to the organization.
organization.
 Both hard and soft HRM share a concern for matching the organization's strategic
needs.
needs.
Looking at businesses from inside and out
Organizational Aspects of Business David Needle
 Goals & Structures
Superordinate goal
1. A popular notion is that business firms should posses some super ordinate goal,
namely the maximization of profit.
profit.
2. Some writers see profit as a product of other goals like survival, market expansion
and enhancing reputation, others see profit as less important than growth.
growth.
3. Profit notion is entirely unsuitable for those public-sector organizations where
goals of service take priority over all others.
Goal, Objective and Strategy
(1) Goals: Goals are seen as being unbounded,
unbounded, are generalized statement of intent
(2) Objectives: Objectives represent those intentions that can be measured within a
certain time frame
(3) Strategies: Strategies are seen as the processes by which goals are determined
through the adoption of certain of action and the allocation of resources.
Open ended and closed ended:
ended: Richard (1978) distinguishes between closed and open-
ended goals.
(1) Closed-ended goals: Closed-ended goals are those which have clearly defined and
measured targets to be achieved within a stated time period.
(2) Open-ended goals: Open-ended goals are the types which include some broad
statement of intent such as the pursuit of excellence (merit).
Perrow (1961) distinguishes between official and operative goals.
(1) Official Goals: Official goals are the statements of intent which occur in official
documents and are type illustrated
(2) Operative Goals: Operative goals reflect the behavior that is actually occurring,
occurring,
and which may in fact conflict with the official intention.
intention.
The main purposes of the goal are:
To give members a sense of direction
direction and to reduce ambiguity and conflict.
conflict.
Goals comprise:
1) The statement of intent,
intent, sometimes referred to as a mission statement
2) and a set of more detailed objectives to guide strategic planning.
Management-by-Objectives (MBO)
 MBO is a process of agreeing upon objectives within an organization so that
management and employees agree to the objectives and understand what they are in
the organization.
Multiple goals
 Marris (1964) speaks of the goal conflict emerging from the separation of ownership
and control.
 Shareholders were concerned primary about profitability,
profitability, the professional managers
acting as the directors of companies were more concerned with growth.
 The goals of the sales department are normally measured by volume turnover while
these of the production department are measured by cost efficiency.
efficiency.
 Most groups in an organization will agree to those goals formulated by senior
management as a means of achieving their own goals. goals.
 Most organizations members would appear to accept the goals of top management
with little question.
 The dominant coalition normally sets up a series of contracts to ensure compliance
to their goals
 In many firms senior management acknowledge that different group may have their
own goals which need to be satisfied
Organizational Aspects of Business
 Structures: "Organization structure is a grouping of activities and people to achieve
the goals of the organization".
 A structure is concerned with the grouping of activities in the most suitable manner
to achieve the goals of the dominant coalition.
 It is concerned with the allocation of differential amounts of power and authority to
the various roles.
 It is associated with job descriptions,
descriptions, mechanisms for coordination and control, and
management information systems.
Factors which influence structures
(1) Technology
 Technology is the most important determinant of a firm's structure. This is part of the
concept known as "technological
"technological determinism".
determinism".
 Technology factor affects the extend of management hierarchy and the number of
subordinate controlled by one manager (the span of control).
(2) Size
 As firms increase in size, additional problems are created in terms of coordination
and control often necessitating structural changes.
 The complexity of organization operations may have a more significant impact on its
structure than sheer size.
size.
 As the business expand, the owner of a small business often faces increasing
pressures on his or her time (no more control and need delegation).
delegation).
(3) Changes in the environment
 Technology and market changes were best served by less bureaucratic,
bureaucratic, more flexible
kind of organization. Such organic structure was an essential element in the firm’s
ability to cope with a highly changing environment.
 Different tasks in the organization are confronted by different environmental
problems and demands, differences which should be reflected in the structure of the
departments carrying out those tasks.
(4) Strategy
 The influence of strategy on structure is related to the way management perceives
their environment.
environment.
 A firm wishing to be a product leader in a technology sophisticated product market
will have a corresponding large Research Development Department both in term of
market and employees.
(5) Culture
 The influence of culture on structure should not be underestimated. American firms
developed initially through the adoption of divisional structures,
structures, while in Britain we
favoured the holding company.
company.
(6) Interest groups
 The preferences of the dominant coalition can exert considerable influence on the
structure as can the demands of major stakeholders.
 Those firms where the owners play a major role in management tend to be highly
centralized.
Types of Organizational Structure
(1) Functional Structure
 The main criterion guiding this type of organization is functional specification.
specification.
 Employees performing related specialist tasks are grouped together under single
management structure.
 Most firms as they develop adopt this form of structure and it is especially suited to
single product firms.
firms.
Functional Structure
Advantages Disadvantages
1- Specialization Conflicting departmental objectives
2- The logic of custom and practice Conflicting management values
3- A clear chain of command A lack of coordination and consumer orientation
(2) Divisional Structure
 It sometimes called multi-divisional company is associated with market expansion
and product diversification
 Under such as organization structure each division is self contained and operates as a
profit centre
 Division can be grouped around products or markets or a combination of the two, as
the case of Ford.
 The activities of the various divisions are directed by a central headquarters unit
who take a global view of corporate strategy.
Divisional & Holding Co Structure
Advantages Disadvantages
1- The operation of business as profit centers Lack of cooperation and
interdependence
2- The encouragement of entrepreneurship Accounting procedures, especially
transfer and pricing
3- Reducing upward dependency on top Increasing diversity of operations
management
4- Economies of scale by centralization of Overall management control
common functions like R&D
(3) Holding company
 A group of independent companies controlled by a coordinating group usually
made up of the chief executives of the constituent companies.
 Holding companies can be highly diversified,
diversified, as in the case of Trafalgar House, or
built around loosely related product as with the TI Group.
 The holding company is the prevalent structural form for large Japanese
companies.
Project Teams Structure
Advantages Disadvantages
1- The ability to cope with unstable A costly duplication of resources
environment
2- The ability to cope with diverse Scheduling
problems
3- The use of individual expertise The participants have no functional home
4- Deal directly with the customer What happens when the project is
finished?

(4) Project team

 They comprise units specially created to cope with a highly unstable environment.
environment.
 They are temporary structures formed around a particular task or problem and
reflect technical expertise rather than any notion of management hierarchy.
 The approach is an extension of the kind of client-based structure found in
professional firms such as solicitors,
solicitors, accountants and the like.
(5) Matrix structure
 The matrix is an attempt to combine the best of all worlds, the customer-orientation
of the project team, the economies of scale and the specialist orientation of the
functional organization, and the product or market focus of the divisional company.
 The matrix is an attempt to devise a structure that can effectively manage at least two
different elements, be they size, products, markets or customers.
Matrix Structure
Advantages Disadvantages
1- Emphasizes strengths of the functional Lack of Coordination and control
& project types
2- Flexibility of labour An increase of committees and meetings
3- The ability to transfer expertise where Too many bosses
it is most needed
4- Dual control via function and project Confliction loyalties for staff
5- Closeness to the consumer Can be slow to adapt
The Flexible firm: The main assumption is that new forms of organization are required
as a strategic response to job losses, technological change, increased uncertainty, and
reduction in the working week. Atkinson identifies three types of flexibility.
(1) Functional flexibility: It is achieved when employees are able to perform a range of
jobs and can move between them as the need arises.
(2) Numerical flexibility: Numerical flexibility is achieved through management's
ability to make rapid alternations to meet changes in demand. (e.g. a growth in part-
time and contract work was envisaged.
(3) Financial flexibility: It is required to reflect changes in the supply and demand of
labor and to enhance the operation of functional and numerical flexibility. This can be
achieved through the creation of differential rates of pay for full-and part-time workers
and the use of incentives for workers to acquire more skills.
What sorts of characteristics can be used to distinguish business/organization?
(1) Quantitative- Objective Characteristics
People describe businesses individually and compare them with others such number
of employees.
Finance and accounting focus mainly on objective characteristics
(2) Qualitative- Subjective Characteristics
 People use positive or negative terms to reflect particular interests and viewpoints
such as “friendly bank”
Human Resource Management is concerned with subjective characteristics.

Three 3 approaches can be used to distinguish business/organization?

(1) Metaphors
 We use metaphor whenever we attempt to understand one element of experience in
terms of another. It can be powerful to compare them to non-human objects.
 People are often compared to animals that supposedly have particular traits-
sometimes positive lion (courage), but often negative- such a chicken (cowardly).
 Gareth Morgan invites his readers to share his images of organizations as (machines,
brains)
If the organization is a…….. Then a function might be a …….
1- Machine: Processing component
2- Organism Sub-system contributing to survival, source of
adaptations
3- Political system, “instrument Arena of power or influence, competing set of
of domination“: beliefs
4- Brain: Source of ideas, information and skills
5- Culture, "Psychic prison”: Subculture, system for defining loyalty, set of
values
6- "Flux and transformation“: Perhaps "a function" would just be an obstacle
here
(2) Models and modeling
 Models enable people to investigate complex aspects of ‘reality’ by concentrating
on the elements that are most relevant to their particular interests, while noting what
other factors may also need to be considered before action is taken in a real-world
context.
 Models participate in is to produce and interpret diagrams,
diagrams, charts and graphs to
describe and explain specific aspects of organizational activity or structures.
(1) Mental models,
models, constructed in people’s minds or on paper- arguments,
arguments, what if..?
discussions, alternative ways of representing aspects of reality in order to test how
human activity systems might develop.
(2) Mathematical models where certain types of organizational processes can be
designed, analyzed,
analyzed, tested or controlled by representing them in quantitative form.
form.
3) Stakeholder Awareness
 Develop a general level of awareness of the interests of different stakeholders in
an organizational situation.
 Business functions often act as an interface between several stakeholders,
stakeholders, internal
and external.
 It is one of the concept used to counterbalance the apparent tidiness that can arise
from looking at the running of a business in terms of a set of separate functions,
guided by management, being performed to achieve a shared objective.
Culture
 The culture of an organization refers to those factors which enable us to distinguish
one organization from another.
another.
 Culture is about how the company organises itself, it's rules, procedure and beliefs
make up the culture of the organisation.
 Deal and Kennedy (1982) Corporate culture is “the way we do things around her” her”
Corporate culture sets the scene for the determination of strategy and hence the
operational aspects of organizational life.
Types of Organizational Culture
(1) Power Culture (Family)
 Power cultures are usually found within a small or medium size organisation.
organisation.
 Decisions in an organisation that display a power culture are centralised around
 However this culture has its problems,
problems, lack of consultation can lead to staff feeling
undervalued and de-motivated,
de-motivated, which can also lead to high staff turnover.
(2) Role Culture (Eiffel Tower)
 Common in most organizations today is a role culture.
culture. In a role culture, organizations
are split into various functions and each individual within the function is assigned a
particular role.
 The role culture has the benefit of specialization.
specialization. Employees focus on their particular
role as assigned to them by their job description and this should increase productivity
for the company.
 This culture is quite logical to organize in a large organization.
 The drawback of its slowness in responding to change.
change.
(3)Task Culture (Guided Missile)
 A task culture refers to a team based approach to complete a particular task. task.
 They are popular in today's modern business society where the organization will
establish particular 'project teams' to complete a task to date.
 A task culture clearly offers some benefits. Staff feel motivated because they are
empowered to make decisions within their team, they will also feel valued because
they may have been selected within that team.
 The task cultures are found in advertising agencies and research groups.
groups.
(4) Person Culture (Incubators)
 The main purpose of the organization is to satisfy the needs of individuals and the
organization itself is secondary to individual self-fulfillment.
 A good illustration of this would be that of an academic focusing on goals of personal
research within a university.
 Such a culture is attractive to many people who would like to operate as freeholders
within the security of an organization.
So where do the functions come in?’
 Functions represent a convenient way of understanding certain aspects of business
structure and behavior, and the contributions that individuals make.
 Structures and functions: Different people visualize organizations in a variety of
ways. This is particularly important if groups are trying to understand why things have
gone wrong or how they could be improved
Function & Functional organization
 Function:
Function: an individual's job role defined broadly within headings such as
(marketing, finance etc.). Therefore business structured by function is organized into
departments
 Functional organization is based on a hierarchy in which each department operates
separately under the leadership of those at the top of the pyramid

The notion of the excellent company

Peters and Waterman (1982) attempt to identify the features of the excellent company.
The eight attributes of excellence:
1) "Bias for action",
action", being typified by clear objectives and a marked absence of
committee procedures.
2) "Closeness of the customer",
customer", typified by processes and procedures aimed at
identifying and servicing the customer's needs.
3) "Autonomy and entrepreneurship",
entrepreneurship", which are best achieved through the creation
of small cohesive teams.
4) Productivity through people,
people, with workforce involvement at all times.
5) "Hands on; value driven",
driven", involving the fostering of a strong corporate culture by
top management who are seen to be in touch with all employees.
6) "Stick to the knitting",
knitting", which involves limiting activities to what the firm does
best.
7) "Simple form, lean staff",
staff", avoiding complex hierarchies and large administration
sections,
8) "Simultaneous loose-tight properties", which means that organization structure
should display a combination of strong central direction with work group autonomy.
Block 1 Section 4 Behind the Organization Chart Supply Chain Management
Chapter Nine
The Nature of Project Management
 A project is a set of activities that has a definable start and a definable end (e.g. new
information system, new hospital)
The Tasks of Operations Managers
1. Managers have to understand what their operation has to be good at in their
particular environment.
2. Planning and control are major activities.
(A) Planning involves arranging for the orderly flow of resources so that the
objectives can be met.
(B) Control means checking the performance of the operation against the standards
expected if it.
3. Simply accepting the output and the process as factors designed by someone else and
trying to manage them.
4. Operations managers have to seek continuous improvement in everything that their
operation does.
5. Operations managers have to be able to communicate across the functional
boundaries.
Factors driving the continued development of operations management
1. Globalization of the economy: Increasing competition from foreign companies has
stimulated organizations to strive for better ways of producing efficiently and
effectively.
2. Total quality management:
management: In the 1980s and 1990s total quality management ideas
swept across all types of operations.
3. Empowerment: In the 1990s empowerment was viewed as the key to cost-effective
operations. The key to cost-effective operations challenged the way that was designed
and managed, attempting to place responsibility for decision-making with the people
who actually performed the work.
4. Technology: The information technology revolution has created new opportunities for
the way in which operations function.
5. Improving public services and service sector productivity:
productivity: The desire to improve
public services and service sector productivity such as health, social and education
Project Management Techniques
 Several techniques are used for project planning and control. These include:
1. Gantt Chart
2. Critical Path Methods (CPM)CPM) widely used in UK and European industry.
3. Performance Evaluation and Review Techniques (PERT) (PERT) widely used in USA
(1) Gantt Chart:
Chart :
 The Gantt chart is a useful tool for both devising and communicating schedules.
schedules.
 The basic format of the chart is to list all the required activities down the left axis of
the chart and display the relevant planning time horizon across the top axis running
from the left to right.
 It is easy to show the start and end dates of each activity against the time horizon by
blotting out the relevant time periods with a bar.
(2) Critical Path Methods (CPM)
 CPM is a management technique developed for planning, scheduling and
controlling any kind of project.
 It takes a project of any size and breaks it down into a set of activities and places them
in a logical network or diagram by working out their interdependencies.
 The primary aim is to complete the project in the shortest possible time, time, whilst
making the most economic use of available resources.
(3) Performance Evaluation and Review Techniques (PERT)
 Unlike CPM,
CPM, which adopts single time estimates, the PERT approach uses three time
estimates.
 The optimistic time-
time- the time it will take to complete the activity when everything
runs smoothly (the best time).
 The most likely time-time- the time it will take to complete the activity when there are
minor problems.
 The pessimistic time – the time it will take to complete the activity when almost
everything goes wrong (the worst time).
Purchasing and Supply Chain Management
Supply chain management is defined as the process of managing the entire chain of raw
material supply, manufacture, assembly, and distribution to the end customer.
The Importance of Purchasing and Supply
 To any business, purchasing and supply of material, products and services is important
in financial, operational and strategic terms.
 Dealing with suppliers who fail to meet the purchase specifications will result in
delays and can have serious implications on the efficiency with which goods and
services are produced.
 Hence, strategically it is important to a firm to get its suppliers involved in planning
and understanding the organization's long-term goals and the company's quality
objectives.
The interface between purchasing and operations
(1) Design Department:
 The Purchasing Department needs to understand the required performance
specifications for purchased materials.
 Involving the purchasing department allows design function more time to plan for
future requirements.
(2) Production Department
 Integration between purchasing and production departments can improve the area of
delivery, quality, dependability, flexibility and cost advantages.
(3) Finance Department
 The PD is involved in negotiating payment arrangements with suppliers. Purchasing
staff may ease cash flow problems by negotiating longer-term payment.
(4) Marketing Department
 Purchasing staff can suggest to the marketing dept. to exploit the capabilities of new
or changing suppliers. They can develop new sources of supplies in good time and
avoid over commitment in areas having little future.
(5) Sales Department
 PD can help the sales to know about the cost make up of a product which will help
the sales staff to protect margins when dealing with customers.
Purchasing Responsibilities
 There are two types of materials and services that are bought by the purchasing
function.
 Items that are used directly in producing the goods and services for customers
 Items in which help to run the business and regard as essential purchases for
operations such as stationary, oil, catering materials.
Purchasing Objectives & Responsibilities:
1) Selecting,
Selecting, evaluating and developing sources of materials, supplies and services
required by the firm.
2) Maintaining and developing close relationship with suppliers in terms of quality,
delivery, payments and returns.
3) Seeking new materials and products,
products, and new sources of better materials and
products, for possible future use of the company.
4) Negotiating and acquiring raw materials at prices that represent the best value for
money and consistent with the quality requirements.
requirements. .
5) Co-operating in cost reduction activities such as value analysis, make or buy studies.
6) Maintaining an effective communication with the organization's internal functions
and its external suppliers.
Advantages of
 Single Source Multisourcing
1- Bargaining power and the likelihood of Risk of interruption in supply is reduced.
quantity discount are increased.
2- Paperwork and coordination effort are Competition for future business is stimulated
reduced. –a single supplier may develop a monopoly.
3- The number of sets of special tooling New supplier can be evaluated and may
required for production is reduced become a superior source
Value Analysis
This concept is usually applied by team that comes together from different departments
to review an existing or anew product, with the aim of reducing the costs involved in
producing the product without reducing its value. To achieve this value analysis, the team
needs to answer these questions:
Questions needs to be answered by the team
1 What is the function of the product? 5 What does the item cost?
2 Is the function necessary? 6 What else will perform the equivalent function?
3 Are all its features necessary? 7 What does this substitute cost?
4 Can a standard part that will serve the function be found?
Make or Buy decision
 The decision whether to make an item or buy it from outside will effect the in-house
capacity planning system. Decisions will also depend on inputs from other
departments such as marketing and finance. The key questions are:
(1) Cost:
Cost: Could we buy it from outside at less cost and in similar quality and reliability?
(2) Flexibility: Could we buy it from outside and maintain or improve the flexibility and
responsiveness that we get from our in – house capacity?
(3) Future: What about the future? What are the technology trends and investment
implications? If we go for an outside supplier now, will we be able to buy it easily in
five years time?
Purchasing Mix
 The key elements of the purchasing mix are:
1. Price-
Price- Purchasing at the right price has a big impact on operation’s costs. For most
companies a 1% cut in purchasing spending has about the same effect on profit as a
10% increase in sales.
sales.
2. Quantity –There are a couple of factors that affect this decision. Quantity and timing
of purchase orders will be influenced by the balance between delays in production
due to shortage of supply, stockholding and warehousing costs, deterioration,
insurance and so on. From all these factors we can determine the Economic Batch
Quantity( EBQ)
3. Quality –Purchasing materials and services at the right quality will improve the
operations delivery services and reliability.
reliability.
4. Delivery – The lead time between placing an order and receiving the materials in
store can be critical to efficient stock management and to the overall performance of
the operation.
Supply Chain Management
  Since the late 1960s there has been a transition from the old concept of purchasing to
a newer concept of material management to include inventory control, distribution
and purchasing)
 Since 1980s companies have enhanced the role of materials management and called it
supply chain management. These companies have been developed a supply chain
management
management process and an integrated procurement system that uniquely fits their
own culture and business needs.
 This also involves supplier quality assurance and the supplier and the buyer working
together from the start in order to achieve mutually set goals.
 The overall objective of supply chain management is to develop and apply strategies
that can satisfy and retain the end customers.
To manage the supply chain management efficiently and effectively the following
concepts should be understood;
1. Supplier selection
2. Supplier appraisal
3. Supplier rating
(A) Supplier selection
 It is important to spend more time early on in order to choose the right suppliers.
 A firm should look for the best purchasing solution which, amongst other things,
should include the best products or services for its needs,
 The price should be consistent with the company's demands for quality, quantity,
delivery and flexibility.
(B) Supplier Appraisal
(1) Financial stability: Can they finance working capital needed to carry out the order?
Might they go out of business before delivering the goods? Usually a copy of the
supplier's last annual report can help to answer these questions.
(2) Ability to do the job. Are they capable of providing the agreed supplier to manage
its product process? Talk with their satisfied customers can help to get an insight to these
questions.
(3) Capacity constraint: Do they have the capacity to do the work? To find an answer
to this question is to visit to their sites and a walk around their plant and office can be
helpful here.
(4) Clarity of purchase specification: Do they fully understand the product
specification? Misunderstanding in the area can be the biggest cause of delay and extra
costs.
(5) Ease of access: Are they easy to deal with? Are they near and approachable if things
go wrong? Do they return phone calls promptly? Do they speak the same language? It is
easier to get on the suppliers who share the same business approach and philosophies
© Supplier rating
 A firm should review the performance of the venders to find out how good its
existing suppliers are. The measurement system used is called vender rating.
1. List the qualities expected from a supplier.
2. Record supplier's performance against maximum weighting.
3. Take the necessary actions.
actions.
 The overall objective of supply chain management is to develop and apply strategies
that can satisfy and retain the end customers.
customers.
Advantages of partnership
Working closely with suppliers in a climate of trust and co-operation can lead to
mutually beneficial improvements both in the buyer and supplier businesses. Some of
these include the following improvements.
(1) Improved information flow
Improve the information between buyers and supplier and help to reduce inventory
level and improve delivery performance
(2) Improve quality
Quality assurance involves everyone inside a business and those among its suppliers in
the elimination or errors. They aim to provide customers with quality every time. time.
(3) Improve design:
Buyers should include suppliers' representative in their design and value analysis teams
and incorporate their suggestions if the ideas are useful. It is useful for a buyer to get
involved in the supplier design process.
process. This will help to focus on problems that matter,
as well as learning about venders' methods and technologies.
(4) Improve material flow
The two inventory management can work together and focus on stocks that are really
needed. The result will be lower stocks and therefore lower costs.
costs.
(5) Improve financial co-operation
As buyers and suppliers get to know and trust each other better, better, they will find out
more about their financial position and will be able to save one another financially.
Suitable payment terms can be negotiated to help both businesses by using different
terms at different times of the year to meet particular seasonal cash flow variations.
Diagrams
 Diagrams act as a way of presenting the internal models of how things that everybody
has “in their head” work in the real world.
 Diagrams can assist other people to explain their understanding of systems and
relationships.
relationships.
 Diagrams enable people to simplify complex processes or structures for particular
purposes.
 Diagrams can be used to try things out before making a decision-
decision- to experiment and
see "what might happen if …,
Features of a diagram
1) Analogue representation: These diagrams look similar to the object or objects it
describes. At their simplest they are photographs of real objects.
2) Schematic representations:
representations: These are plans or diagram which represent the essence
of real world" objects or phenomena, but do not look similar to them (e.g. maps).
3) Conceptual representations:
representations: These diagrams largely try to describe inter-
relationships between ideas or processes that can not be readily observed, but are put
forward as a model for acceptance by others.
Glossary of diagram types
(1) Spray Diagram and mind maps
 Spray Diagram and mind maps were developed by Tong Buzan (1974). They are a
simple fast technique for getting ideas down without being concerned by details of
structure.
 They can show connections in trains of thought and can indicate grouping between
ideas or thoughts.
 Spray diagrams are usually used for representing the structure of an argument,
argument, to
encapsulate the relationship between the ideas of others or for note taking.
 Mind maps are a little bit like brainstorming on your own, where you are trying to
get your own ideas out on paper in a relatively unstructured way.
(2) Relationship diagrams and concept maps
 Relationship diagrams or concept maps are use to display the connections between
related components or concepts respectively and help in the preliminary sorting out of
those components or concepts within a particular situation
 They are static diagrams where the lines indicate unspecified relationships in contrast
to influences, flow or causal diagram.
(3) Systems Maps
 A system map is essentially a snapshot.
snapshot. It show components of the system and
environment at a point in time
 The main uses of systems maps are to help you to decide how you are going to
structure a situation and to communicate to others
 Systems maps are used to clarify thoughts at an early stage of analysis and decide on
structural elements for a more detailed diagram.
(4) Influence Diagrams
 An influence diagram represents the main structural features of a situation and the
important relationships that exist among them.
 It presents an overview of areas of activity and their main interrelationships.
 It is used either to explore those interrelationships or to express a broad view of how
things are in the territory you are considering.
 Influence diagrams can be developed from systems map by adding arrows and can be
used as the starting point for a multiple cause diagram by clearer definition of the type
of influence.
(5) Multiple Cause Diagrams
 This type of diagram is used to explore why a given event happened or why a certain
class of event tend to occur.
 They are useful for finding out why something went wrong or keeps recurring.
 They can be derived from an influence diagram or developed a new
(6) Sign graph diagrams
 This type of diagram was first used in the biological sciences in the early part of the
twentieth century.
 They are used to represent and investigate the relationships between variables in a
given situation and in particular to identify positive and negative feedback loops
driving the system's behaviour
 A sign graph is often drawn to establish the structure planned quantitative models
and can be developed directly from a multiple cause diagram.
(8) Decision trees and networks
 Decision trees are used to clarify possible options for decisions making, and to help
identify key choices when many options exist
 Decision networks are used where the situation is more uncertain or complex and is
based upon the concept of decision areas, which are defined as identified opportunities
for choice in which a number of mutually exclusive options are available.
 The aim is to identify and choose between a set of interrelated and interdependence
options rather than determine the most appropriate sequence of decisions.
(9) Flow chart diagrams
 Flow diagrams are similar to activity sequence diagrams except that the emphasis is on
the pattern of the flow of a material,
material, energy or another specified resource through a
set of stages, entities or activities rather than the time take for each flow to happen.
 A diagram could represent schematically the flow of water through a central heating
system, the flow of paper in a recycling scheme or the two-way transmission of food
poisoning bacteria from domesticated animals to humans.
(10) Input-out diagrams
 They are used to define and determine the outputs from a physical or abstract
transformation process given the inputs and the resources needed for the
transformation process or vice versa.
Safari
 Safari is divided into seven sections, each covering a particular aspect of information
skills.
Safari (www.open.ac.uk/safari
(www.open.ac.uk/safari))
1 Understanding information 5 Evaluation information
2 Unpacking information 6 Organization Information
3 Planning research 7 Where do I go from here?
4 Searching for information
1- Understanding information
1) This section explores what information is and how we use it to make decisions in
different areas of our lives including in formal learning situations.
2) Several definitions of information (knowledge,
(knowledge, power and facts and figures).
figures).
3) The information age.
age. It suggests that the revolution in communications which has
brought computers and satellite TV has had great influence on all our lives.
4) Everyday uses of information:
information: Let us look now at the types of information we all use
in our personal lives, our work and our studies.
5) Types of information:
information: Sometimes we need information for very specific purposes.
6) Information universe:
universe: In this topic we look at how they all fit into the bigger picture
of the information universe. Think of yourself at the centre of a huge map of places
where information might be found.
7) Mapping sources: A single project can require a range of different kinds of
information.
8) Identifying needs:
needs: In this section we begin to focus on the specific skills needed to
search effectively for information. One of the skills that we hope you will develop
through the course is the ability to ‘identify your information needs’.
2- Unpacking information
1) Introduction: This section helps you to understand where information comes from, from,
how it is generated and how it reaches you as a consumer.
2) Information journeys:
journeys: The process by which information is generated (grown) and
consumed (bought) is just as complicated.
3) Supply chain:
chain: The ‘information
‘information supply chain’
chain’ is a model that can be used to
describe the ‘journey’
‘journey’ that information takes from where it is generated to where it is
consumed. The link of Supply chain
Information Supply Chain (Safari)
Information supply chain is a model that can be used to describe the journey that
information takes from generation to consumption.

Produce Disseminat
Facilitato Users
r or r
A. Producers – people who produce or create the information;
information;
B. Disseminators – people who publish, broadcast or disseminate the information;
C. Facilitators – people who sell or make it available,
available, or help people to use the
information;
D. Users – people who use the information.
4) Research supply chain:
chain: the processes behind this journey, as most of the information
that you use during your studies will have been produced in this way.
5) Categorizing information:
information: How do we ‘group’ or categories information?.
6) Shape of the literature:
literature: Describing how information resources in a subject relate to
one another, and the relative importance of these different resources
7) Finding information:
information: This section will help you to know where to find information,
information,
and who may be able to help you. Understanding what information you will find
where, will save you time.
time.
Safari
 Understanding information is designed to help you to know what you need to know
which when you think it is a key skill in any context.
 Activity 5.1
 If you were (i) deciding which would be the best airport to travel from for a holiday
with family or friends,
friends, and (ii) asked by your tutor to compare the environmental
impact of Manchester, Copenhagen and New York JFK airports?
 To establish which airport to fly from (in the category of everyday information), you
simply need to know your destination.
destination.
 Then visit a travel agent or look in a newspaper with travel section.
 You may look at the website for the airport at your destination and see who flies these
from airports that are on your shortlist.
shortlist.
 You may find there are no direct flights from your preferred airports,
airports, at which point
you might definitely need to contact a travel agent.
(ii) asked by your tutor to compare the environmental impact of Manchester, Copenhagen
and New York JFK airports?
 Comparing airports' environmental impact is a much more specialized task needing
clearly worded search question.
 Your sources will probably be national, international and "cyberspace“.
"cyberspace“.
 You might be interested in news,
news, facts and figures,
figures, research results,
results, technical
information and so on.
 A discussion with an information specialist or researcher might be necessary.
 You could start by looking at the websites for the airports concerned, database giving
references to news, research articles,
articles, government or regulatory body reports on
your subject.
Activity 5.2
 Section 2 of SAFARI, "Unpacking information" explains how information of
various sorts originates, reaches users and can be categorized.
 Identify at least two different services of information that would be relevant to each
information need, and make brief notes about "the"the information supply chain"
chain" that
might apply for each source.
 In the case of (i) the holiday departure airport, you will probably only need secondary
information,
information, whereas for (ii) the environmental impact comparative study, you may
also need to use primary and "grey"
"grey" information sources.
 In terms of the information supply chain,
chain, two formats I though of were newspapers
reports and the airports' own website.
 The websites' producers are the airport staff responsible for collating environmental
impact information;
 The disseminators could be the staff employed
 My research for these sites was facilitated by a search engine.
engine.