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Meaning of Business
The term business is derived from the word ‘busy’. In practice, business includes certain
economic activities in which people are busy or engaged. Such activities relate to
production, distribution, trading or exchange of goods and services to satisfy the needs of
people so as to earn income or profit. It includes activities concerned with manufacturing,
trading, transportation, insurance, warehousing, banking and finance, etc.

Business – Definitions
“Business may be defined as human activity directed towards or acquiring wealth through
buying and selling of goods.” – Lewis H. Haney

“Business is an enterprise engaged in the production and distribution of goods for sale in
the market or rendering service for a price.” – R. N. Owens

Objectives of Business
Market Standing
Market standing means position of an the enterprise in relation to its competitors. Every
business enterprise must aim at standing on strong position in market in order to provide best
offers to its customers and serving them to their satisfaction. In this global economy, market
standing is becoming important, that’s why companies spending huge amount on marketing
and advertisement to acquire new customers.

Innovation
Innovation is the introduction of new ideas or methods in the way something is
done or made. There are two types of innovation in every business innovation in
product or services and innovation in various skills that needed to improve quality and quantity
of products and services. Every business enterprise wants to be in race. So, innovation becomes
an important objective.

Productivity
Productivity is an important activity of the business. In order to continuous survival and
progress, every business must aim to increase productivity through the best use of available
resources. When the company increases productivity, it decreases the price of its products.
Which helps the company to increase, its market share.

Physical And Financial Resources

If the business wants to stay for long run, it needs two physical resources and financial
resources. physical resources includes plants, machines, offices, etc., and
financial resources includes funds to be able to produce and supply goods and services to its
customers.
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Earning Profits
One of the main objectives of business is to earn profits and growth of the company. Every
business must earn a reasonable profit for its survival and growth. Profit is ultimately aim of
every business, without profit business can not survive for long time. Business should have
proper revenue plan in order to grow.

Social Responsibility
Social responsibility refers to contribute resources for solving social problems and work in a
socially desirable manner. Business uses the natural resources of the society, So the business
should contribute its resources to solve the social issues.

Foreign Capital
A big business can help the developing economies to secure capital from the developed
countries. they facilitate transfer of capital from countries where it s abundant to countries
where it is scare. Thus, Business can help to increase the investment level and thereby the pace
of development of host country.

Professional Management
Business brings managerial revolution in the host countries through professional management
and the employment of sophisticated management techniques and practices.

Create Employment
When the business starts, it creates employment from top executives to lower worker. it
satisfied social needs and help them to upgrade life style of the people.

Nature of Business
An Economic Activity
Business is an economic activity with the aim to make a profit and provides products and
services to consumers. It is a process that involves exchanges of goods and services in monetary
terms. That makes business economic activity.

Profit Earning
The main purpose of business is earn profit. Profit is the main objective of every business,
without earning profit company can not survive in long run. if profit doesn’t take place in
transaction, then it cannot be considered as business transaction. For example, goods given in
charity is not a business activity.
Uncertainty Of Risk
Business has always uncertainty, There is always a possibility of losses of business. It is not
possible for a businessman to earn adequate profit always, as market conditions may change,
customer’s taste may change. All these can lead to loss.

Collective Transfer Of Resources

A business facilitates a multilateral transfer of resources. Usually this transfer takes place in
the form of a “package” which includes technical know-how, machinery, and equipment, raw
materials, management expertise, etc.
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Buyer And Seller Involvement

Business is a process of exchanging of products and services which involves buyers and sellers.
Without buyers and seller, business can not take place.

Regular Process
Business is a regular process, it provides daily uses products and services. That makes
a business regular Process. People buy products and services daily, which makes the business
process alive.
International Operations
A big business operates in many countries through a parents corporation in the home country.
it runs its operations through a network of branches and subsidiaries in host counties.
Production, marketing and other operations are scattered in different counties to reap the
economies of local operations.

Scope of Business

Industry

The word “Industry” refers to the business activities which are linked with the extraction and
production or manufacturing of products. The product formed by an industry is either used by
the vital consumers or again by the industry. If the product is used by the consumer it is called
consumers’ goods such as clothes.

If the product is used again by the industry it is called the producer’s goods or capital goods.
In a case when a product produced by the industry is further processed into finished products
for other purposes they are called intermediate goods. e.g. plastic.

The industry is further divided into types on the basis of business activity:

• Extractive Industries

The industries which extract, raise and manufacture raw materials from above or under the
Earth’s surface are known as Extractive Industries and they include mining, fisheries, forestry
and agriculture, etc.

• Genetic Industries

The industries which are involved in reproducing and multiplying certain species of animals
and plants and sell them in the market to earn a profit are named as Genetic Industries. These
industries include cattle breeding farms, poultry farms and plant market, etc.

• Constructive Industries

The industries which are involved in the construction of building, canals, bridges, dams and
roads, etc. are called Constructive Industries.
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• Service Industries

The industries which are involved in manufacturing the intangible goods which cannot be seen
but felt such as services of professionals like doctors, lawyers are examples of Service
Industries.

Commerce

The second component of the scope of business is Commerce. It involves the buying and selling
of goods and all the activities which are associated with the transfer of goods from the
production source to the ultimate consumers or destination. The ranges of activities related to
Commerce take place through:

• Trade

The process of buying and selling goods is called Trade. It is the process of exchanging goods
and services amongst the buyers and sellers and both of them earn profits. Trade can be
classified into two types; internal and external.

1. Internal Trade: The process of buying and selling goods within a country is called
internal trade. The internal trade can be either wholesale trade or retail trade.
2. Wholesale Trade: In wholesale trade, the goods are purchased in bulk from the
producers and sell them to the retailers. These retailers then sell these goods to the final
consumers.
3. Retail Trade: In the retail trade, the retailer sells goods and services to the final
consumers.
4. External Trade: The process of buying and selling goods between the two countries is
called external trade. The external trade has two types; import trade and export trade.

The elements which help in the purchasing of goods and services are called aid to trade. There
are certain constituents that are essential for the progress of the trade and are as follows:

• Transport

By using different ways of transport, the goods are transported from industry to the consumers.
It includes railways, ships, airlines, etc.

• Insurance

Insurance is very important to aid to trade. Insurance reduces the risk of damage to goods due
to fire, flood or earthquake, etc. by paying a good amount in this regard.

• Warehousing

Warehouses are used to keep the goods and are released and are delivered to the market when
demanded. Thus, warehousing plays an important part to overcome the barrier of time and
helps the goods reach the consumers in a short span of time.
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• Banking

Commercial banks play an important role in financing trade activities. They provide funds to
the traders for stock holding and transporting the goods. They also support the producers in
purchasing and receiving at both national and international levels. The banks also offer credit
facility in the form of cash credit, overdrafts and loans to the traders.

• Advertisements

Advertisements play an important part in selling the good to the consumers. The advertisement
is either shown on television or printed in newspaper or magazines etc. and help the consumers
to choose their desired product. Thus, advertisements are very important for the seller as well.

Essential of a successful business

o 1. Objectives

o 2. Planning

o 3. Research

o 4. Location and Size

o 5. Sound Organization

o 6. Adequate Finance

o 7. Effective Management

o 8. Effective Distribution System

o 9. Maintenance of Better Employee relationship

1. Objectives
For the success of any business organization, determination of its objective
is very essential. It should be clearly described and also be realistic. It may
be primary or/and secondary. Each activity of the organization should be
directed towards the achievement of its objectives.

2. Planning
Planning refers to the rational and orderly thinking about the ways and
means for the achievement of the firm’s objectives. It analyses the problem
and find out the solutions with reference to the objectives of the firm. It
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enables the firm to run smoothly and thereby reduces the risk of loss. Thus,
it is considered as the essence of business.

3. Research
Research is necessary for the organization in order to improve the methods
and techniques of production, quality of the products and also to introduce
new products. It enables the businessman to meet the changing needs of
customers, demand and also competition among the producers.

4. Location and Size

Favourable location and suitable size have a great bearing on the success of
any business concern. The businessman in selecting a suitable location and
also in determining its size must exercise proper care.

5. Sound Organization
Sound organization is very essential for the success of any business. It is a
medium for exercising effective control and management of any business.
A good organizational chart is necessary for staffing the organization with
sufficient number of personnel with different talents and skills, dividing
work among people etc.

6. Adequate Finance
Finance is the lifeblood of the organization. Inadequate finance may lead to
losses in the firm. Hence, arrangements should be made to meet the short-
term and long-term requirements of the organization. Flow of funds and
employment of funds should be planned well in advance.

7. Effective Management
In order to achieve its objectives, effective and efficient management is
essential. No firm can achieve success unless it has an efficient
management. It is possible only when the managers are competent in
performing their duty.
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8. Effective Distribution System

The goods produced have value only when they are made available to the
consumers. The object of producing goods itself is to distribute it for value.
Therefore, in every business organization it is essential to have effective
distribution system.

9. Maintenance of Better Employee relationship

Cordial employee-employer relationship is very essential for the successful
operation of the business concern. Employees are to be rewarded, well
treated and also provided with all amenities to ensure job satisfaction. This
will definitely boost up the employee morale and ensure their cooperation.

Business Environmental
According to the business dictionary, “The combination of internal and external
factors that influence a company’s operating situation. The business environment
can include factors such as: clients and suppliers; its competition and owners;
improvements in technology; laws and government activities; and market, social and
economic trends”

Business environment refers to the totality of all such factors which influence the
working and decision-making of a business organization. Every business organization
has to operate under a given environment, which is called the business environment.

There are two factors that affect the operation of the business. These can also be
classified into two categories. Internal factors and external factors.

Internal Factors
The internal factors are known as controllable factors because the business has control
over these factors. these factors can easily alter or modify its personnel, physical
facilities, organisation and functional means, such as marketing mix, to suit the business
environment.
The most important internal factors which have a bearing on the strategy and other
decisions are:
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• Value System
• Mission and Objectives
• Management Structure and Nature
• Internal Power Relationship
• Human Resources
• Company Image and Brand Equity
Value System
The value system of the founders has an important bearing on the choice of business.
The mission and objectives of the organisation or business policies and practices.
Mission and Objectives
The business domain of the company, priorities, direction of development, business
philosophy and business policy etc are guided by the mission and objectives of the
company. The mission and objectives of a business can easily alter or modify to suit the
business environment.
Management Structure and Nature
The organisational structure the composition of the board of directors, the extent of
professionals in management etc are the most important factors influencing the business
decisions. Some management structures and styles delay decision making while some
others help in quick decision making.
Internal Power Relationship
Factors such as the amount of support the top management enjoys from different levels
of shareholders, board of directors and employees have an important influence on the
decision and their implementation.

Human Resources
The features of the human resources like skill quality, morale, attitude, commitment
etc., could contribute to the strength and weakness of the organisation, Some
organisations find it difficult to carry out restructuring and modernisation because of
resistance from employees whereas they are smoothly done in some others.
Company Image and Brand Equity
The image of the company maters while raising finance, forming joint ventures or other
alliances, soliciting marketing, entering purchases, sales contracts, intermediaries,
launching new products etc, Brand equity is also relevant in several of these cases.
External Factors
The external factors, on the other hand beyond the control of a company. The external
or environmental factors such as the economic factors, socio or cultural factors, political
factors, geophysical factors and demographic factors etc.., are therefore generally
regarded as uncontrollable factors.
Some of the external factors have a direct and intimate impact on the firm (like the
suppliers and distributors of the firm). These factors are classified as
microenvironments also known as task environments and operating environments.
There are other external factors that affect an industry very generally such as industrial
policy, demographic factors etc.
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• Economic Factors
• Socio or Cultural Factors
• Socio or Cultural Factors
• Technological Factors
• Micro Environment Factors
Economic Factors

Economic factors have a bearing on the functioning of a business unit. Business

depends on the economic environment for all the needed inputs. It also depends on the
economic environment to sell the finished goods. Naturally, the dependence of business
on the economic environment is total and it is not surprising because, as it is rightly
said, business is one unit of the total economy.
It is difficult to be precise about the factors which constitute the economic environment
of a country. But still, there are some factors that have considerable influence. These
factors are:

• Growth strategy
• Economic system
• Economic planning
• Industry
• Agriculture
• Infrastructure
• Financial and fiscal sector
• Removal of regional imbalances
• Price and distribution control
• Economic Reforms
Socio or Cultural Factors

Social factors which are “beyond the company’s gate”. All such factors come under one
head that is culture. These factors exercise a great influence on the businesses which by
far are beyond the company’s control. All these factors are classified as social-cultural
factors of the business. The buying and consumption patterns of the people are very
much determined by these factors and the cost of ignoring the customs, tastes and
preferences etc. of the people could be very high for a business.
Consumers depend on cultural prescriptions to guide their behaviour, and they assume
that others will behave in ways that are consistent with their culture.

Political Factors

Political factors, in the context of the external environment in which business functions,
are a type of external constraint acting upon a business. They’re related to actions of
governments and political conditions in the location where the business conducts
business or seeks to conduct business.
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The first thing to recognize is that political factors constitute an external constraint on
a business, which just means that the political factors that affect a business that
completely out of the company’s control.

Technological Factors

There are certain technological factors that will affect the businesses across the globe
as per demand which would result in changing behaviour as per the need of traditional
marketing. The fast formulation of technology needs calculating explanation by
businesses in order to persevere in a materializing economic environment and
additionally preserve up with contemporary directions along with constructive
motivations which detached combatants might be approaching.
Micro Environment Factors

The microenvironment factors in the company’s immediate environment affect the

performance of the company. These include the supplier marketing intermediate
competitor customer and the public:
Suppliers: An important factor in the microenvironment of a company is the suppliers
(i.e) suppliers supply the inputs like raw materials and components to the company (the
importance of a reliable source or source of supply to the smooth functioning of
business is obvious)

Customers: The major task of the business creates and sustain customers (a company
may have different categories of the customers like individuals, households, industries
and other institutions.

Competitors: A firm competitor includes not only the other firms that market the same
or similar products but also those who compete for the discretionary income of the
consumers.

Marketing intermediaries: Marketing intermediaries are vital links connecting the

company and final consumers. A dislocation or disturbance of the link or wrong choice
of the link may cost the company very heavily. Retail chemists and druggists and India
once decide to boycott the products of a leading company and the company has been in
trouble.

Difference between Internal and External Business

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Scientific Management

The term 'Scientific management' was developed by Frederick Taylor (1856-1915) in 1911. It
refers to the classical outlook of management which focussed on devising the best ways of
doing the work and thereby increasing the effectiveness and efficiency of work. Scientific
management implies working according to standardised techniques and tools and with the help
of specialised personnel so as to improve the quantity as well as the quality of the product and
the same time reducing the costs. Scientific management is also known as Taylorism.

The Following are three principles of scientific management.

i. Harmony, Not Discord: According to this principle, the managers and the workers should
maintain a harmonious work environment. They should realise that they are dependent on each
other. Only if they work in amity, will they be able to perform better. Taylor emphasised on
complete mental revolution. That is, the workers should change their attitude and each one
should realise others importance. Management should take care of the needs of the workers
and workers on the other hand should work to their best efficiency. Both should work in
harmony towards the common goals of the organisation.
ii. Science, Not Rule of Thumb: According to Taylor, instead of rule of thumb scientific
management practices should be followed. Under the rule of thumb, each manger handles a
situation as and when they arise. They used the trial and error method to find solutions to a
problem. Taylor proposed that instead of this management practices should be scientific. He
suggested that a study of various traditional methods should be done and the best
method/solution among them should be adopted and followed by all the managers in the
organisation. Such a scientific management greatly reduces the costs and improves efficiency.
iii. Personnel Development: Overall efficiency of the organisation depends on the individual
competencies of the employees. Scientific management aimed at improving the
working capabilities of the employees to their maximum level. It focussed on the training and
development of the labourers to raise their productivity.
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Essential Skills of Manager

1. Technical Skills

Technical skills involve skills that give the managers the ability and the knowledge
to use a variety of techniques to achieve their objectives. These skills not only
involve operating machines and software, production tools, and pieces of equipment
but also the skills needed to boost sales, design different types of products and
services, and market the services and the products.

2. Conceptual Skills

These involve the skills managers present in terms of the knowledge and ability for
abstract thinking and formulating ideas. The manager is able to see an entire concept,
analyze and diagnose a problem, and find creative solutions. This helps the manager
to effectively predict hurdles their department or the business as a whole may face.

3. Human or Interpersonal Skills

The human or the interpersonal skills are the skills that present the managers’ ability
to interact, work or relate effectively with people. These skills enable the managers
to make use of human potential in the company and motivate the employees for
better results.
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Henri Fayol's 14 Principles of Management

Henry Fayol, also known as the Father of Modern Management Theory, gave a new perception on the
concept of management. He introduced a general theory that can be applied to all levels of management
and every department. He envisioned maximising managerial efficiency. Today, Fayol’s theory is
practised by the management to organise and regulate the internal activities of an organisation.
The fourteen principles of management created by Henri Fayol are explained below.

1. Division of Work

Henri believed that segregating work in the workforce amongst the workers will enhance the
quality of the product. Similarly, he also concluded that the division of work improves the
productivity, efficiency, accuracy and speed of the workers. This principle is appropriate for
both the managerial as well as a technical work level.

2. Authority and Responsibility

These are the two key aspects of management. Authority facilitates the management to work
efficiently, and responsibility makes them responsible for the work done under their guidance
or leadership.

3. Discipline

Without discipline, nothing can be accomplished. It is the core value for any project or any
management. Good performance and sensible interrelation make the management job easy and
comprehensive. Employees’ good behaviour also helps them smoothly build and progress in
their professional careers.

4. Unity of Command

This means an employee should have only one boss and follow his command. If an employee
has to follow more than one boss, there begins a conflict of interest and can create confusion.

5. Unity of Direction

Whoever is engaged in the same activity should have a unified goal. This means all the people
working in a company should have one goal and motive which will make the work easier and
achieve the set goal easily.

6. Subordination of Individual Interest

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This indicates a company should work unitedly towards the interest of a company rather than
personal interest. Be subordinate to the purposes of an organisation. This refers to the whole
chain of command in a company.

7. Remuneration

This plays an important role in motivating the workers of a company. Remuneration can be
monetary or non-monetary. Ideally, it should be according to an individual’s efforts they have
put forth.

8. Centralization

In any company, the management or any authority responsible for the decision-making process
should be neutral. However, this depends on the size of an organisation. Henri Fayol stressed
on the point that there should be a balance between the hierarchy and division of power.

9. Scalar Chain

Fayol, on this principle, highlights that the hierarchy steps should be from the top to the lowest.
This is necessary so that every employee knows their immediate senior also they should be
able to contact any, if needed.

10. Order

A company should maintain a well-defined work order to have a favourable work culture. The
positive atmosphere in the workplace will boost more positive productivity.

11. Equity

All employees should be treated equally and respectfully. It’s the responsibility of a manager
that no employees face discrimination.

12. Stability

An employee delivers the best if they feel secure in their job. It is the duty of the management
to offer job security to their employees.

13. Initiative

The management should support and encourage the employees to take initiatives in an
organisation. It will help them to increase their motivation and morale.

14. Esprit de Corps

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It is the responsibility of the management to motivate their employees and be supportive of

each other regularly. Developing trust and mutual understanding will lead to a positive outcome
and work environment.

In conclusion, the 14 Principles of Management the pillars of any organisation. They are
integral for prediction, planning, decision-making, process management, control and
coordination.

LEVELS OF MANAGEMENT
The three levels of management are as follows
1. The Top Management - It consists of board of directors, chief executive or
managing director. The top management is the ultimate source of authority and it
manages goals and policies for an enterprise.

2. Middle Level Management - The branch managers and departmental managers

constitute middle level. They are responsible to the top management for the
functioning of their department.

3. Lower Level Management - Lower level is also known as supervisory /

operative level of management. It consists of supervisors, foreman, section
officers, superintendent etc

Various Approaches to Management

1. Scientific Management approach.

2. Management Process or Administrative Management approach.

3. Human Relations approach.

4. Behavioural Science approach.

5. Quantitative or Mathematical approach.

6. Systems approach.
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7. Contingency approach.

8. Operational approach.

9. Empirical approach.

1. Scientific Management Approach:

The industrial revolution in England gave an immense impetus for the
scientific management approach. It brought about such an extra ordinary
mechanisation of industry that it necessitated the development of new
management principles and practices. Bringing groups of people together
for the purpose of working in the factory posed problems for the factory
owners.

The establishment of formal organisation structure, formal lines of

authority, factory systems and procedures had to be undertaken for
coordinated effort. In order to deal with these problems, a management
movement known as ‘Scientific Management’ was born.

Frederick Winslow Taylor (1865-1915) was the first to recognise and

emphasise the need for adopting a scientific approach to the task of
management. The introduction of the concept of standard time, standard
output, standard cost, standardisation of production process, change in
the attitude of management and workers to bring about the mutuality of
interests are the important landmarks of scientific management. This
approach was supported and developed by Henry L. Gantt, Frank
Gilbreth, Lillian Gilbreth, Harrington Emerson, etc.

2. Management Process or Administrative Management Approach:

The advocates of this school perceive management as a process
consisting of planning, organising, commanding and controlling. In the
words of W.G. Scott, “It aims to analyse the process, to establish a
conceptual framework for it, to identify principles underlying it, and to
build a theory of management from them”.

It regards management as a universal process, regardless of the type of

the enterprise, or the level in a given enterprise. It looks upon
management theory as a way of organising experience so that practice
can be improved through research, empirical testing of principles and
teaching of fundamentals involved in the management process.
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The process school is also called the ‘traditional’ or ‘universalist’ school

as it believes that management principles are applicable to all the group
activities, Henry Fayol is regarded as the father of this school. Oliver
Shelden, J.D. Mooney and Chester I. Barnard are among the other
important contributors to this approach.

3. Human Relations Approach:

The human relations approach is concerned with the recognition of the
importance of human element in organisations. Elton Mayo and his
associates conducted the world famous Hawthorne Experiments and
investigated the myriad of informal relationships, social cliques, patterns
of communication and patterns of informal leadership. As a result of
these experiments, a trend began which can be phrased as ‘being nice to
people’. This trend was eventually termed as ‘the human relations
movement’.

The human relations approach revealed the importance of social and

psychological factors in determining workers’ productivity and
satisfaction. It was instrumental in creating a new image of man and the
workplace. It put stress on interpersonal relations and the informal
groups. “It’s starting point was in individual psychology rather than the
analysis of worker and work. As a result, there was a tendency for human
rationalists to degenerate into mere slogans which became an alibi for
having no management policy in respect of the human organisation.”
Nevertheless, this school has done a unique job in recognising the
importance of human element in organisations.

4. Behavioural Science Approach:

The ‘behavioural science’ approach utilises methods and techniques of
social sciences such as psychology, sociology, social psychology and
anthropology for the study of human behaviour. Data is objectively
collected and analysed by the social scientists to study various aspects of
human behaviour.

The pioneers of this school such as Gantt and Munsterberg reasoned that
in as much as managing involves getting things done with and through
people, the study of management must be centred around the people and
their interpersonal relations.
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The advocates of this school concentrated on motivation, individual

drives, group relations, leadership, group dynamics and so forth. The
noted contributors to this school include Abraham Maslow, Fredrick
Herzberg, Victor Vroom, McGregor, Lawler, Sayles, and Tannenbaum.

5. Quantitative or Mathematical Approach:

This approach stands for using all pertinent scientific tools for providing
a quantitative basis for managerial decisions. The abiding belief of this
approach is that management problems can be expressed in terms of
mathematical symbols and relationships. The basic approach is the
construction of a model because it is through this device that the problem
is expressed in its basic relationships and in terms of selected objectives.
The users of such models are known as operations researchers or
management scientists.

Linear programming, Critical Path Method, Programme Evaluation

Review Technique, Breakeven analysis, Games Theory and Queueing
Theory have gained popularity for solving managerial problems these
days. These techniques help the managers in improving their decisions
by analysing the various alternatives in a scientific manner.

The application of mathematical techniques is particularly useful in

solving the physical problems of management such as inventory and
production control. They can never be substitute for knowledge,
experience and training necessary for understanding the human
behaviour.

6. Systems Approach:
A system is composed of elements or subsystems that are related and
dependent on each other. The system approach is based on the
generalisation that an organisation is a system and its components are
inter-related and inter-dependent. This approach lays emphasis on the
strategic parts of the system, the nature of their interdependency, goals
set by the system and communication network in the system.

Another basic feature of the systems approach is that attention is paid

towards the overall effectiveness of the system rather than the
effectiveness of subsystems. Under system approach, the overall
objectives and performance of the organisation are taken into account
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and not only the objectives and performance of its different departments
or subsystems.

The spiritual father of this school of management was Chester I. Barnard.

The systems theory lays emphasis on the interdependency and
interrelationships between the various parts of a system.

It stresses communication and decision processes throughout the

organisation. It follows an open system approach. The organisation as an
open system has an interaction with the environment. It can adjust to the
changes in the environment.

7. Contingency Approach:
The latest approach to management is known as ‘contingency’ or
‘situational’ approach. Underlying idea of this approach is that the
internal functioning of organisations must be consistent with the
demands of technology and external environment and the needs of its
members if the organisation is to be effective.

This approach suggests that there is no one best way to handle any
management problem. The application of management principles and
practices should be contingent upon the existing circumstances.
Functional, behavioural, quantitative and systems tools of management
should be applied situationally.

There are three major parts of the overall conceptual framework for
contingency management – (a) environment; (b) management concepts,
principles and techniques; and (c) contingent relationship between the
two. The environment variables are independent and management
variables (process, quantitative, behavioural and systems tools) are
dependent. Every manager has to apply the various approaches of
management according to the demands of the situation.

8. Operational Approach:
Koontz and O’Donnell have advocated operational approach to
management. This approach recognises that there is a central core of
knowledge about managing which exists in management such as line and
staff, patterns of departmentation, span of management, managerial
appraisal and various managerial control techniques. It draws from other
fields of knowledge and adapts within it those parts of these fields which
are specially useful for managers.
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“The operational approach regards management as a universally

applicable body of knowledge that can be brought to bear at all levels of
managing and in all types of enterprises. At the same time, this approach
recognises that the actual problems managers face and the environments
in which they operate may vary between enterprises and levels”. The
application of science by a perceptive practitioner must take this into
account in finding solutions to management problems.

9. Empirical Approach:
According to this approach, management is the study of the experiences
of managers. The knowledge based on experiences of successful
managers can be applied by other managers in solving problems in future
and in making decisions. Thus, the empirical school is based on analysis
of past experience and uses the case method of study and research.

Managers can get an idea of what to do and how by studying management

situations of the past. They can develop analytical and problem-solving
skills. They can understand and learn to apply effective techniques in
comparable situations.

No one can deny the value of analysing past experience to obtain a lesson
for the future. But management, unlike law, is not a science based on
precedent, and future situations exactly resembling those of the past are
unlikely to occur. Indeed, there is a positive danger in relying too much
on past experience…….. for the simple reason that a technique found
“right” in the past may be far from an exact fit for a somewhat similar
situation of the future.