ORGANIZATION AND MANAGEMENT

INSTRUCTOR: JOAN MAE A. VILLEGAS

MODULE 2 - The Firm and Its Environment

Forces in the Firm’s Environment

- Various forces in the macro environment that affect a firm may be classified mainly into political, economic,
sociocultural, and technological (called as PEST) analysis. Also added to the PESTA analysis is the presence of
natural risks in the environment due to the vulnerability of the Philippines to natural disasters such as typhoons,
floods, earthquakes, and volcanic eruptions.

Different Forces in the Environment of a Firm

1. Political
2. Economic
3. Sociocultural
4. Technological
5. Natural Risks
Political Forces
-in the environment pertain to legal regulations, political orientations, government policies, and compliance procedures of
government bodies that affect or control the operations of a firm. These forces, to which firms must comply with are implemented by
government or regulatory agencies. They are also influenced by political figures. The political forces regulate the conduct and
operations of business firms to protect the interests of the general public.

Economic Forces
- That affects firms pertain to economic conditions relevant to the business. These economic factors include
employment rates, income levels, inflation rates, savings and investments rates, insurance rates, and monetary
Are people’s characteristics and lifestyles that impinge on the operations of a firm. They pertain to social
norms, customs, and values. To help you understand cultural forces, it is important to note Hofstede’s on
differences in national cultures based on th following dimensions: Power Distance (he degree to which power
differences among people are accepted) , Uncertainty Avoidance (the degree to which members of society
become uncomfortable when faced with uncertainty or ambiquity), Individualism-collectivism (focus on self
interests vs. focus on group’s or society’s interests), and Masculinity-Femininity (emphasis on career and
economic achievement as measures of success vs. emphasis on quality of life as measures of success).
Managers must recognize and understand these cultural differences to effectively cater to market that might be
composed of people coming from different countries and cultures.
- policies. These are essential to businesses as they influence the cost of capital, consumer spending, degree of
tolerance or a version to financial risks, job creation, and the market entry or exit of certain types of business
firms.
Technological Forces
- Recent advancements in technology have led to great strides in product innovations, process improvements, and
integrated systems in the manufacturing and service sectors. Companies continue to invest in research and
development (R&D) to churn new products and services. Innovations in digital technology, breakthroughs in
medical science, and waves of inventions in transportation and communications have contributed significantly
to the rapid technological changes in the environment of many firms. These inventions create and open up new
markets.
Natural Risks
- In addition to the PEST environmental analysis, there are also natural risks that can affect the firm’s
environment. In the light of adverse impacts of climate change and global warming, business establishments
need to assess their exposure to natural risks. Natural risks include strong typhoons that may cause massive
flooding and landslides, earthquakes, volcanic eruptions, tsunamis and storm surges. The Philippines is known
as being prone to natural disasters due to its geographic location and agro-climatic conditions. Managers must
be vigilant to the presence of natural risks.
- To prepare for natural risks, business establishments in Metro Manila, for instance have begun to adopt disaster
preparedness measures.
Application of PEST Analysis

P E S T
(Political Factors) (Economic Factors) (Sociocultural (Technological Natural Risks
Factors) Factors)
• Mr. Reyes must Mr. Reyes must • Young people are • There is an The area
comply to laws on monitor any change more adept in use of increasing use of surrounding the
business permit in the prescribed computers. Thus, it computers for computer store of
within the city or minimum wage in is strategic for Mr. academic learning Mr. Reyes is not
municipality. the region that will Reyes to target more prone to floods
affect the the youth as his •New softwares are during the rainy
•Mr. Reyes must compensation of market developed for season. Thus, Mr.
comply to copyright workers if he is educational purposes Reyes will not be
law regarding the thinking of hiring •More people visit bothered by floods if
use of licensed additional staff to he decides to expand
computer softwares. expand his computer his computer
shop. business.

Environmental Scanning and SWOT Analysis

 To formulate strategies for the firm, a manager needs to conduct environmental scanning. Environmental Scanning is the
process of assessing the internal and external operating environment of a firm to analyze its strengths, weaknesses, opportunities, and
threats (SWOT Analysis). The elements of environmental scanning pertain to the External Analysis and Internal Analysis of the
firm.
External Analysis is examines the opportunities and threats in the firm based on the different forces in the environment
(PEST) that were discussed earlier. It also includes analysis of the competitive forces in specific industry where the firm belongs, such
as competitors, buyers (customers), suppliers, and substitutes for the firm’s product or service.

Internal Analysis on the other hand, examines the strengths and weaknesses of the conditions inside the firm, such as skills
and competencies of employees, capacities of resources, organizational culture and team spirit.

Application of SWOT Analysis

Refer again to the opening case scenario found in Beyond Walls 4.1. This time, use the SWOT Analysis to assess further if
Mr. Reyes should expand his computer shop business. The SWOT Analysis of the case of Mr. Reyes may yield to hypothetical results
that are shown in table 4.2 on the next page.

Table 4.2 Sample SWOT Analysis of the case of Mr. Reyes, Sole Proprietorship of a Small Computer Shop
The Internal Environment of a Firm (Mr. Reyes Computer Shop)
STRENGTHS WEAKNESSES
•Well-trained technical and administrative personnel •Only Mr. Reyes as owner-manager is doing the
who have stayed in the company from the start of the recruitment process, which reduces his time for
business managing the office operations

•Availability of capital to expand the business •Lack of teamwork is expected between the new and
current personnel at the start of work of the new hires.
•Good relationships between Mr. Reyes and his
employees

•Strategic location of the computer shop since it is near

existing schools

•Favorable feedback received from customers due to the

good quality of services

•Mr. Reye’s personal tolerance for taking calculated

risks.
The External Environment of a Firm (Mr. Reyes’s Computer Shop)
OPPORTUNITIES THREATS
•Potential demand for more computer facilities from •A close competitors may also plan to expand their
students due to recent opening of a nearby school computer facilities due to opening of a nearby school
•Good reputation of the firm from current customers
•Reliable sources of computer supply •Potential disruptions in electricity may occur during
•Latest technology advancements in effective computer certain time periods in summer as announces by the
maintenance and repair government recently.

In doing the SWOT Analysis, identify carefully all the relevant factors pertaining to the internal strengths and weaknesses, as
well as the external opportunities and threats confronting the business. After identifying these factors, examine their interrelationships.
For instance, how will you use the strengths to counteract the weaknesses and threats, and to maximize the opportunities? In addition,
how will you use the opportunities to counteract or mitigate the weaknesses and threats, and to maximize your strengths? At the end of
your thorough analysis, it is up to you to make your decisions and plans for your business.
BEYONG WALL 4.2 APPLY IT IN REAL LIFE: ACTIVITY 1

You are the sole owner and manager of a small retail bookstore which has been operating for the past there
years. Your bookstore is located near a university. Currently, you have four employees who have been working with
you since you started the business. You now plan to expand your business, and you have invited a potential partner
as co-owner and manager. For the proposed partnership, your task is to make a brief, oral presentation to the
potential partner about the current situation and prospects of your business by using the SWOT Analysis. you will be
evaluated by your potential partner in terms of how you have identified the strengths, weaknesses, opportunities and
threats of your bookstore business.

The Local and International Business Environment of the Firm

Managers continually face the challenge of gaining competitive advantage in today’s business environment to boost company
performance. Competitive Advantage pertains to distinguishing features or characteristics of a business organization that enable it to
perform better than rival organizations. Managers, therefore, must know to analyze the scope and strength of competition prevailing in
business environment of the company. They will be able to make good decisions if they have a better understanding of the business
environment.

However, decision-making among managers to gain competitive advantage is challenging. Managers are always confronted
with environmental uncertainty and environmental complexity. Environmental Uncertainty pertains to the lack of complete
information about the current and future environment of the firm. while environmental Complexity is the presence of numerous
factors prevailing in the environment that change over time. These factors in the environment pertain to the political, economic, social
and technological conditions that were discussed earlier.
 To understand better the competition occurring in business environment, managers have to look at both the local and
international business environment of their companies. The local business environment pertains to the specific industry to which the
company belongs and directly deals with. It comprises the customers, suppliers, competitors, regulators, and employees. On the other
hand, the International Business Environment pertains to the business activities performed by companies operating in foreign
locations.

Understanding the Local Environment through an Industry Analysis.

The first step for managers to gauge status of business environment is to analyze the competition in the local business
environment. This begins with an industry analysis. a manager looks at his or her company as belonging to a specific industry wherein
competition with rival companies exists. An industry is a group of companies offering the same or similar products or services. A
manager must know the different people that constitute the industry where his or her company competes in. for instance, a retail store
selling shoes belongs to the shoe manufacturing industry where the people involved are composed of the employees who produce the
shoes, the customers who buy the shoes, and the rival companies who also manufacture shoes.

Figure 4.8 Porter’s Five Forces Model

Source: Porter M. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York:The Free Press
1980

Industry Competitors (Rivalry among Existing Firms)

•Potential Entrants (Threat of new entrants)
•Suppliers (Bargaining Power of Suppliers)
•Substitute (Threat of substitute products or services)
•Buyers (Bargaining power of buyers)

You can understand the people belonging in an industry better through Porter’s Five Forces Model. A simplified version of
this model is shown in figure 4.8. this framework identifies the five forces or main groups of people that shape competition within an
industry:
1. Industry Competitors
2. Suppliers
3. Buyers
4. Potential Entrants Substitutes

Industry Competitors – this focuses on the rivalry among existing firms. The greater the number or rival companies existing in the
area, the more intense the competition will become.

Supplier or Producers – this focuses on the bargaining power of suppliers or producers. If there are more producers of a particular
product as compared to the number of buyers or customers for that product, then the producers would have more control in influencing
the selling price for the product, such that this creates a competition between the suppliers and the buyers.

Buyers or Customers – this focuses on the bargaining power of buyers or consumers. If there are more buyers of the product as
compared to the number of sellers for that product, then the buyers or customers would have a better control in influencing the price
that they are willing to pay for that product, such that this creates a competitors between the buyers and the suppliers.

Potential Entrants – this focuses on the threat of new entrants. The presence of new rival companies will increase the total number of
competitors in the area, which further intensifies the level of competition among them.

Substitutes – this focuses on the threat of substitute products or services. The presence of substitute products will serve as competitors
to existing products, and this further intensifies the level of competition among the companies who produce similar products.

Usually, the analysis of an industry begins at the national level. Managers have to analyze the specific industry in the Philippines
where their company competes in, such as in terms of the total number of market players, number and location of the large
competitors, industry growth trends, and industry profitability performance.

Understanding the International Environment through Global Management

After understanding the competitive forces in the local industry where companies compete, the manager will have to look at
the international or global contexts of the business environment. According to Schermerhorn (2011), global management refers to the
management of businesses which pertains to a business environment that poses challenges in adaptations to the cultures and business
conduct in foreign countries. Today we live in globalized market environment as a result of factors such as free trade agreements,
regional economic alliances among nations, and even technological developments and innovations. For instance, among the most
relevant to us as Filipinos are the Asia Pacific Economic Cooperation (APEC) and the ASEAN Free Trade Agreement (AFTA). Other
factors that contribute to global management are the advancements in technology (contributing greatly to “e-commerce”) and the
migration of labor across conutries.

Just think again about today’s cell phones, and particularly your own cell phone gadget how many countries do you think
were involved in manufacturing its parts, assembling it into its final form, and finally transporting it to reach you? The international
business environment, therefore, is becoming more important as it increases profitability in the following ways:
1. Greater access to inputs
2. Lower production costs
3. Larger market for outputs

As such, the trend today is globalization which pertains to the growing interdependence among people around the world
(see). Today’s managers, therefore need to analyze their business environment in a more broader context that includes current
development in global trade. With the advent of modern communications, information technology, and new business
 relationships formed in the international and global arena, managers need to think of better strategies to compete
successfully.
Ways to Compete in Local and International Business
In general, businesses today compete through four main ways namely:
1. Lower Cost
2. Quality
3. Speed or Flexibility
4. Innovation.

Competing by Lower Cost – involves efforts of a company to lower its production costs to enable it to offer a lower price
relative to a competitor.

Competing by Quality – means offering unique or more desirable features of a product or service.

Competing by Speed or Flexibility – involves faster delivery of the product or service or quickly responding to the needs of
customers.

Competing by Innovation – involves creating new products or new services, new ways, or new features of the products in
order to be ahead of the competition. In addition to these four ways to compete, the following alternative ways can be
considered in looking how companies expand into international and global business:
•Exporting and Importing – while exporting involves selling locally made products in foreign countries, importing
involves buying foreign-made products and selling them in local markets. A firm may set up its foreign subsidiary, a
company that it completely owns, to operate in another country.
•Licensing and Franchising – licensing involves a company granting another firm the rights to make or sell the
former’s products for a fee. Thus, a licensing agreement may be granted to a local or foreign firm to market or manufacturer
the products of a specific company.
Franchising is a form of licensing whereby a company grants another firm the rights to use the
former’s brand name and operating methods. Examples are Jollibee and Mang Inasal franchises. In franchising, a company
may want to expand globally, such as Jollibee, which now has outlets in different parts of Southeast Asia, Middle East and
even USA. This fast-food chain caters to Filipinos working overseas as well as foreign customers. Jollibee’s case in an
example of “Think Global, Act Global” approach that takes advantages of business opportunities in the global market.

•Joint Ventures and Strategic Alliances – joint ventures involve pooling or resources among foreign and local
coinvestors to operate the business. Strategic Alliances, on the other hand, involve local and foreign firms working together
in specific ways that benefit both parties, such as through exchange of knowledge or supply arrangements.

Company that you have chosen, assess its brand reputation in the Filipino market, and identify the main local competitors.
For analysis of the international business environment of the company of your choice, identify the foreign countries where
the company also operates, and determine the possible reasons why it is successful in maintaining those foreign markets. The
write-up should contain the company’s product or service, the target customers (whether local or foreign or both), the
competitors or rival firms, and the substitute products or services which compete with the company’s product or service. This
individual output will be typewriter on bond paper and submitted in class

Extend Your Knowledge

Visit the Web site www.google .com.ph/intl/en_uk/about/company/facts/culture/ (last accessed on 18
May 2016). View the video about the company activities inside Google. After viewing the video, make your
own assumptions about what you think are the possible strengths, weaknesses, opportunities, and threats
confronting Google.

ESSENTIAL LEARNING
Firms exist within a complex environment composed of different forces that are classified into political,
economic, social and technological. Apart from these PEST forces, business establishments in the Philippines are
also exposed to natural risks from the environment. These risks are in the form of typhoons, earthquakes, storm
surges and volcanic eruptions. All these forces in the environment pose challenges in the operations, continued
survival, and long-term growth of firms.
Environmental scanning enables a manager to analyze the internal and external environments of a firm. This is
important in making business decisions relevant to the current operations and future plans for the company. In
environmental scanning, the SWOT analysis serves as a useful framework to analyze the strengths, weaknesses,
opportunities and threats confronting the firm.
 MODULE 3 – Planning and Decision-Making

Managers normally face significant challenges in planning. They first identify the key issues and urgent concerns in
managing people, situations and events. They spend time and resources to get reliable and timely data from various sources to
examine those issues and concerns. They analyze and synthesize results based on the data gathered. They draw out the main findings
and recommendations to solve the key issues and problems. Then they apply that gained knowledge to plan in detail the appropriate
strategies and concrete actions. Given such challenges, managers use techniques and tools to aid them in planning so as to come up
with appropriate strategies and solutions.

Planning Techniques and Tools

Planning techniques and tools pertain to the different methods for determining, analysing, and predicting situations that will
likely occur. This is done in order to adequately prepare for these situations and to respond to them in a timely and appropriate
manner. Confronted with today’s challenges of heightened competition among industry players and the dynamic changes occurring in
the environment, managers make use of planning techniques and tools. The long-term success of an organization depends on how well
managers are able to use and apply their knowledge, skills and talent for planning. Therefore, you must be familiar with the different
planning techniques and tools that managers use to achieve target objectives.

Forecasting – it is essential for managers to be prepared for the future. Managers must be proactive. They should be forward-
looking and vigilant for any sudden change in the environment. This is in contrast to being merely reactive to events. Being reactive is
a passive attitude that does not attempt to identify potential problems in the future. By being complacent, a reactive person waits for
things to happen and makes no attempt to prepare for possible negative outcomes. For managers to become more prepared, the
following describes useful techniques to be able to anticipate future events:

Forecasting pertains to the use of scientific techniques to predict the likelihood of certain events or factors to happen in the
future. Managers make use of findings from data analysts who gather sets of data and examine these acquired information for patterns
and trends. Data analysts make certain assumptions for those patterns and trends that may occur at a certain time in the future.
Search: https://www.searchlaboratory.com/2013/09/time-series-decomposition-using-excel/(last accessed on 1 August
2016)

Forecasting techniques may be quantitative or qualitative in method. These techniques are described below:

Quantitative Forecasting Techniques use statistical tools and analyses to predict the future. They are used when the
information about the variable you are trying to forecast are available and can be quantified, for instance, a marketing manager of a
shoe manufacturing company is tasked by top management to provide quarterly forecasts of the sales volume of the shoes for the
coming year. Quarterly sales volume forecasts are important because they affect many areas related to operations, such as production
schedules, raw material purchasing plans, inventory policies, and sales quotas. To prepare the quarterly sales forecast, you can review
the actual sales data for shoes in previous periods, examine a pattern on the sales data, and then extrapolate that sales pattern into the
future. This procedure is called the time series method.
On the other hand, Qualitative Forecasting Techniques make use of opinions or perceptions from experts for prediction
purposes. For instance, a panel of experts may develop a consensus forecast of employment rate a year from now. An advantage of the
qualitative forecasting method is that it can be applied for nonquantifiable data and when historical data are not applicable or
available.

Contingency Planning
Due to uncertainties and risks in the environment that the future brings to any company, managers prepare contingency plans.
Contingency Planning is the process of identifying alternative courses of action in the event that unforeseen or uncontrollable events
take place. Business contingency plans are prepared by managers in relation to financial risks, market risks, production risks, labor
risks, information and communication risks and natural disaster risks. Managers sometimes refer to these contingency plans as Plan A,
Plan B, or even Plan C as alternative courses of action. Large companies that protect people’s safety such as hospitals, or those that
provide vital utilities such as power firms, water service providers and metro rail companies, are bound by government regulators to
prepare contingency plans in case of emergencies. These companies have higher standards for accuracy and speed of recovery in case
of breakdowns or service interruptions.

For instance, Metro Manila residents are aware of the possibility of an intensity 7 earthquake, dubbed as the “Big One”,
which may occur unexpectedly at any time based on scientific studies quoted by the Metropolitan Manila Development Authority
(MMDA). To prepare for the “Big One” all institutions in Manila are required to conduct earthquake drills and to prepare for
contingency measures in the event the actual earthquake strikes. Plans A, B, C and D were announced by the MMDA corresponding to
the four main location areas where people should converge during the big earthquake.
Search: http://code-ngo.org/home/archive/43-front/405-metro-manila-lgus-and-csos-getting-ready-for-the-big-
one.html (last accessed 3 August 2016)

Scenario Planning
-involves predicting potential alternative events that might happen. It entails preparing resources and actions to prevent or
mitigate the “shocks” from negative events. At the same time, it helps to visualize the positive effects of seizing opportunities.

Scenario planning, therefore is similar to contingency planning in preparing for unforeseen events. However, scenario
planning is more detailed and extensive in visualizing the alternative events that may take place. For instance, the “worst case”
scenario and the “best case” scenario are both described in detail.

Scenario planning is often used in strategic planning wherein managers visualize alternative scenarios in crafting their long-
term strategies. Managers apply the technique of scenario planning when, for instance, they want to venture into new markets or
launch new products. They explore multiple futures and multiple perspectives when they map out in detail scenarios for their
company. In picturing different scenarios, managers may take any of the following four approaches: the inductive approach, the
deductive approach, the incremental approach, and the normative approach

Inductive Approach – to scenario planning starts with a potential possibility based on a familiar context but not yet a well-
tested path, and then develops this route to grow out into several alternative pictures of potential possibilities.

Deductive Approach – to scenario planning starts with a general and well-tested concept or principle, then fleshes out this
principle into several possible detailed applications or features.

Incremental Approach – involves a gradual development of possibilities that usually starts with a general approach, then
leads to another potential approach, and so forth. The scenarios take many twists and turns.

Normative Approach involves developing possibilities emanating from a major path and ultimately aimed toward a grand
vision or an ideal end-goal.

In general, developing detailed scenarios as a planning technique ultimately depends on the end-objectives of an institution and the
cognitive styles (e.g., feeling vs. thinking or sensation vs. intuition) of the individuals who develop the finer details of the different
scenarios. For instance, some scenario planners would prefer five detailed narratives to come up with good scenarios, while other
would opt for just three to four scenarios.

Benchmarking
- Technique is finding out what other organizations are doing well and then incorporating those “best practices”
into the operations of one’s organization to improve its cost and effectiveness. It compared the methods and
approaches used by high performing companies with those of one’s company. The technique is referred to as
external benchmarking.

Search: http://ragscores.com/benchmarking.html (last accessed 3 August 2016)

The benchmarked activities may include the following:

1. How inventories are managed
2. How customer complaints are handled
3. How raw materials are purchased
4. How wastes are reduced and recycled
5. How preventive maintenance is performed
6. How factory defects are eliminated
7. Other practices that can be examined in terms of competitiveness

Take for instance a small hotel that can benchmark or learn from examining the good housekeeping practices of the number
one leader in the hotel industry. Studying the practices of other companied may be done by collecting information from
published reports, visiting the Web sites of the admired companies, holding interviews with industry experts, conducting
customer feedback surveys, and arranging for field trips to the facilities of other companies.

Managers can also learn from the best practices of other units within their own organization. This technique is called internal
benchmarking. Gathering benchmarking data from within one’s company is relatively easier compared to collecting data
from other competing or noncompeting companies. For instance, the Marketing Department can assess and learn from the
effective cost-cutting measures being adopted by the Finance Department.

Decision-making Techniques
- Planning necessarily involves decision-making by choosing the best path to tread on. Sometimes the more
intuitive managers decide using their “gut feel” or “hunches based on experience or big ideas they suddenly
stumble upon. There is nothing wrong with the intuitive approach, especially when a manager is faced with an
emergency situation that requires a quick and immediate decision, with no time for a well-planned assessment.
But more often, the manager has adequate time to decide in a more rational manner. The following discusses the
rational approach to decision-making by explaining the steps or stages to carry it out. This rational approach is
often taken to solve a particular problem in the workplace.

Step 1. Identify and define the problem

This first step of identifying the problem at hand is crucial. Individuals in the workplace have their own views and
perceptions about what the problem is. The challenge is to agree on what the problem really is. A problem is a situation that prevents
or constrains one from attaining the desired goal. It is a deviation from the expected or ideal situation.

A manager, by consulting his or her group, should clearly identify the specific problem occurring in the workplace. He or she
should be careful to distinguish the symptoms of the problem (the visible or felt indicators that the problem is occurring) from the root
cause of the problem (the underlying reasons why the problem exists). In order to do this, the manager, together with his or her group,
should gather factual data from several sources to avoid bias. He or she collects data from reliable sources, such as official statistics or
experts’ advice. He or she should also observe what is happening, and jot down his or her observations for proper documentation. The
manager also verifies with other groups if the information gathered are correct. After gathering information, he or she analyses and
integrates the various information to arrive at a clear definition of the problem.

Step 2: Generate and Evaluate alternative courses of action

After clearly defining the problem, the manager together with his or her group gathers facts and information to solve
it. By consulting his or her own group and other concerned groups, the manager analyses the facts for possible courses of action. As
such, he or she is able to come up with the alternative courses of action to solve the problem. He or she usually names those options as
alternative 1, alternative 2, alternative 3 and so on. Typically the manager will find himself surrounded by various alternatives that
he or she must choose.

To evaluate the alternatives, the manager formulates a set of criteria (also called factors) as basis for selecting the most
appropriate course of action. Each alternative is evaluated based on each criterion or factor. In today’s business environment, the
criteria usually include the following factors:
1. Costs – how much will be spent for the given alternative?
2. Benefits or desired features – what are the specific benefits or desired features for the given alternative? (may
pertain to specific quality or desired features)
3. Speed or timeliness – how fast can the given alternative be achieved?
4. Creativity or innovativeness – to what extent does the given alternative foster creativity or innovation in the
workplace?
5. Acceptability or participation from relevant groups – to what extent is the given alternative accepted by those
who will implement or what is the degree of participation shown during problem solving by those who will
implement the given alternative?
6. Ethical implications – to what extent does the given alternative comply with ethical standards of the company
and the outside society?
7. Environmental sustainability – to what extent does the given alternative avoid or reduce damage to the
environment?

In using the criteria above, the manager may assign percentage weights or degree of importance to each factor, according to his or her
viewpoint or to that of his or her group’s otherwise, the manager may consider all the factors as having equal degree of importance
and not assign weights to them.

Step 3: Choose the most appropriate course of action

To choose the most appropriate course of action, the manager must evaluate each alternative based on the criteria by assigning point
scores for each alternative. At this stage, the manager (perhaps together with his or her group) uses his or her own judgement in
assigning the point scores for each alternative. One scores are assigned to each alternative, the total point score for each alternative
will be computed. The alternative with the highest total score is considered and adopted as the most appropriate course of action to
solve the identified problem.

Step 4. Implement the chosen course of action

The manager prepared a work plan to implement the chosen course of action in order to solve the identified
problem. The action is implemented by the manager together with the concerned groups.

Step 5. Evaluate the results

The manager monitors the progress and evaluate the implementation of the solution taken to solve the problem. This
is to find out if the desired results are achieved. If not, corrective actions are taken. The manager also examines any unintended side
effects during implementation. Side effects may be in the form of physical (such as damage to some machines), or behavioural (such
improved team spirit among the concerned groups).

Speed in decision-making appears to be a competitive advantage in today’s business environment.

Increasingly more rivals enter the market. Rapid development in technology is also a constant threat to
business. Managers must learn good time management to swiftly address these challenges, and along with
this, find balance in their daily tasks.

Application of the Decision-making Criteria

For illustrative purposes, the decision-making process will be applied by using the opening case scenario in Beyond Walls
7.1 – The Best Buko Pie. The entrepreneur, Mang Carding, needs to decide on the best supplier of buko pie for his snacks restaurant
business. There are three brands of buko pie (he labelled as Brand A, Brand B, and Brand C) that he must choose from as his
supplier. Table 7.1 shown the criteria he used for decision-making.

At the outset, he considered four factors as criteria for his decision. He set a maximum point for each criterion or factor,
namely: buko taste – 4points; crust – 2points; overall taste – 2 points; and overall presentation (such as packaging) – 2 points; thus
making a maximum score of 10 points. After tasting a product sample of buko pie from each alternative supplier, as shown in table
7.1. Based on the results, Brand B got the highest score. Finally, Mang Carding was glad to have arrived on a rational decision to
choose Brand B as the supplier for his business.
Table 7.1 Criteria for Choosing the “Best Buko Pie”
Buko Taste Crust Overall Taste Overall Total Score
Presentation
Brand A 3 1 2 2 8
Brand B 4 1 2 2 9
Brand C 2 2 1 1 6

Total Management in Decision-making

A manager is often confronted with various commitments, meetings, and other scheduled activities that take a toll of his or
her time and energy. It is common to find a manager juggling with so many things to do. Time management is a vital skill that a
manager must learn along with decision-making skills.

Search: A manager faced with various tasks

Source: http://www/insightofgscaltex.com/?p=42068 (last accessed on 4 August 2016)

For managers, below are some tips in time management:

1. Identify the “time wasters” and avoid them. Better still, get rid of them.
 2. Follow priorities by working first on what is most important and urgent.
3. Do not get too preoccupied with details to the point that you miss the big picture of things
4. Avoid individuals who tend to monopolize your time unnecessarily.
5. Be the master of your calendar by not letting others control your time.
6. Break complex tasks into smaller chunks that can be done gradually.
7. Stay calm even under time pressure. A relaxed mind avoids mistakes.

Beyond Walls 7.2 Apply It in Real Life

You are a co-owner of several coffee shops. You are now thinking of opening a new branch in the
university belt area. However, you have found out that there are already two existing coffee shops operating in
that area. As such, by using scenario planning, you are going to prepare a brief write-up on a “best case” and a
“worst case” scenario if you pursue your plan. Your business partner, who will be acted upon by your teacher,
will evaluate your write-up based on the clarity of ideas you have presented in your planning

Extend Your Knowledge

Go online and learn about business continuity planning, which enables companies to be prepared in the
event of an incident that will disrupt business operations. Visit the following Web site:
http://www.cpni.gov.uk/Security-Planning/Business-continuity-plan/ (Last accessed on 4 August 2016)

Essential Learning
Planning, as the first function in management, requires critical thinking and diligence from a manager. As
an aid in planning, a manager uses several techniques and tools. These include forecasting, contingency
planning, scenario planning, and benchmarking. All these techniques and tools will help the manager in having
an open and creative mind to explore opportunities in the future. These can also guide the manager in
anticipating the various risks that may take place that will adversely affect the achievement of the business goals.
Decision-making is an important part of planning. The step-by-step guide to decision-making will guide a
manager in identifying a problem, generating alternative courses of action, and choosing the most appropriate
course of action to solve the problem.