Module 4

Every entrepreneur’s ability is determined by his or her managerial abilities. As a result, it is

most appropriate to consider business management abilities to be the foundation of entrepreneurship.
Managing a firm entail overseeing a large number of different entities.
Management is described as a set of well-defined and methodical skills that are taught to
persons who aspires to be managers. This acknowledge has evolved over time and is always changing
and expanding. In addition, these concepts and principles are applied to a variety of business
scenarios. This knowledge is taught in a variety of institutes and colleges, as well as through books
and periodicals. A profession has admission requirements. However, management fails to meet this
need in a satisfactory manner. Medicine, for example, necessitates the presence of a practicing
physician. Surprisingly, no comparable prerequisites exist in the management sphere. Regardless of
their educational qualifications, anyone can be labeled a manager in an organization. Furthermore,
there is no specific degree that a person must possess in order to be considered a manager. Having
educational knowledge from reputable management institutes, on the other hand, is a significant
feature and sought attribute.
We will study about the concept of management and its relationship to entrepreneurship in
this class. The concept will give an understanding of management’s emphasis and how it might help
an entrepreneur achieve his or her aim of entering the current business world.

At the end of this chapter, the student will be able to:

• Identify the concept of management;

• Describe the nature and scope;
• Differentiate the management from administration;
• Enumerate the primary forms of management in entrepreneurship; and
• Label the various levels of management.

DEFINITION OF MANAGEMENT
The coordination and administration of tasks to attain a goal is referred to as management.
Setting the organization's strategy and organizing employee efforts to achieve these objectives
through the application of available resources are examples of administrative activities. The seniority
structure of employees inside a company is also referred to as management. There are also the various
definitions of management based from the writers/philosophers such as:
1. William Spriegal, gal, "Management is that function of an enterprise which concerns itself
with direction and control of the various activities to attain business objectives. Management is
essentially an executive function; it deals with the active direction of the human effort.

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 2. “According to Mc Farland, "Management is defined for conceptual, theoretical and
analytical purposes as that process by which managers create, direct, maintain and operate purposive
organization through systematic, coordinated, co-operative human effort.
3. “According to Terry, "Management is not people; it is an activity like walking reading,
swimming or running. People who perform management can be designated as members of
management or executive leaders."
To sum up, we can say that different conceptions of management are not mutually exclusive.
Management is the sum of all activities that determine objectives, plans, policies, and programs; (ii)
secure men, material, and machinery at a low cost; (iii) put all of these resources into operation
through sound organization (iv) direct and motivate men at work; and (v) supervises and controls all
of these activities.
CHARACTERISTICS OF MANAGEMENT
Management is a distinct activity with the following distinguishing characteristics:
1. Economic Resource: Management is one of the components of production, along with land, labor,
and capital. The demand for managers grows in tandem with the development of industrialization.
Efficiency in management is the most important input in the success of any organized group activity
since it assembles and integrates other production elements such as labor, capital, and materials.
Labor, capital, and resources alone are insufficient to ensure production; instead, the catalyst of
management is required to produce the commodities and services that society requires. As a result,
management is an important part of every firm.
2. Purposeful: Management is a goal-oriented activity, thus it must be purposeful. It coordinates
employee efforts in order to achieve the organization's goals. Managerial success is measured by the
extent to which organizational goals are realized. All levels of management must be aware of and
understand the company's objectives.
3. Separate Process: Planning, organizing, staffing, directing, and managing are all separate
processes processes in management. These functions are so intertwined that it's impossible to pinpoint
the order in which they occur or their relative importance.
4. Integrative Force: The essence of management is the integration of human and non-human
resources in order to accomplish the desired outcomes. All of these resources are available to those in
charge. To get the best results from their staff, managers combine non-human resources with their
skills, experience, and management concepts. Individual desires are also aligned with organizational
goals by managers.
5. Authority System: A command and control system hierarchy is represented by management as a
group of managers. Managers have diverse degrees of authority at various levels. The degree of
authority rapidly decreases as we proceed down the managerial structure. Managers can execute their
jobs more efficiently when they have authority.
6. Management has evolved as a field of study (i.e., discipline) with the support of a variety of other
disciplines, including engineering, anthropology, sociology, and psychology. The combination of
these disciplines has resulted in a large amount of management literature. Productivity orientation, for
example, is based on industrial engineering, while human relations orientation is based on
psychology. In the same way, sociology and operations research have aided the advancement of
management science.
7. Universal Applicability: Management is applicable to everyone. Management Principles and
approaches can be used in a variety of settings, including business, education, the military,

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government, and hospitals. Henri Fayol proposed that management concepts would apply in almost
every situation. The principles are flexible and adaptable working standards that can be used to any
organization where human efforts are to be coordinated.
MANAGEMENT FUNCTIONS OR MANAGEMENT PROCESS
Planning, organizing, staffing, directing, coordinating, and controlling will be designated as
management functions for our purposes.
PLANNING: Of all the management functions, planning is the well, thasic and ubiquitous
Nepot all thing anagroups are expected to perform well, they mu understand what has to be done,
what tasks they must conduct in order to comple the ask, add what has to be de completed.
Performance planning is concerned with the 'what, 'how,' and 'when." It entails making decisions in
the present regarding future goals and strategies for achieving them. It entails the following:
a. determining long and short-term objectives;
b. developing strategies and courses of action for achieving these objectives; and
c. formulating policies, procedures, and rules, among other things, for putting strategies
and plans into effect.
Top management determines the organization's goals and objectives in light of the
organization's fundamental purpose and mission, as well as environmental considerations, business
predictions, and available and potential resources. These goals are both long-term and short-term in
nature. There are 13 objectives or goals, separated into divisional, departmental, sectional, and
individual aims. Following that, strategies and plans of action are developed to be implemented at
various levels of management and in various parts of the organization. Policies, procedures, and rules
establish the framework for decision-making as well as the method and order in which decisions are
made and implemented.
ORGANIZING: Organizing entails identifying the activities required to meet corporate
objectives and carry out plans, grouping those activities into jobs, assigning these jobs and activities
to departments and individuals, delegating responsibility and authority for performance, and providing
support for activity synchronization on both a vertical and horizontal level. Each manager must
determine what actions must be carried out in his or her department or sector in order to achieve the
objectives. Every manager must determine what actions must be carried out in his or her department
or sector in order to achieve the objectives. In order to complete jobs, he must group identical or comp
comparable activities, assign these jobs or sets of activities to subordinates, and delegate authority to
them so that they can make decisions and initiate actions. The sub-functions of organizing are as
follows:
a. Identifying the activities needed to meet goals and put plans into action
b. Organizing the actions into self-contained jobs
c. Employee job assignments.
d. Delegation of authority allows them to do their duties and command the resources
they require.
e. Creating a network of coordinating relationships
The structure of the organization is the consequence of the organizing process It consists of a
network of roles and authority-responsibility linkages, as well as organizational positions, duties, and
responsibilities.
Organizing is the basic process of combining and integrating human, physical, and financial
resources in productive interrelationships in order to achieve company objectives. Its purpose is to

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manage personnel and related duties in such a way that organizational work is coordinated and all
efforts and activities contribute to organizational goals being met.
STAFFING: Permanent staffing is a vital management function. The next logical step in the
15 management process is to hire suitable personnel to carry out the tasks after determining
objectives, formulating strategies, policies, programs, procedures, and rules to achieve them, and
identifying and grouping activities for the implementation of strategies, policies, programs, and so on.
Because the efficiency and success of an organization are significantly dependent on the quality of its
workers, and because it is one of the key functions of management to identify competent and trained
people, staffing has been acknowledged as a distinct function of management.
a. The process of determining the quantity and type of workers required is
known as staffing planning.
b. Recruitment to attract a sufficient number of potential employees to apply for
jobs in the company
c. Identifying the best qualified candidates for the open positions
d. Placement, orientation, and induction
e. Transfers, promotions, terminations, and layoffs are all examples of b.
f. Employee development and training
Staffing is becoming accepted as a distinct management function as the relevance of the
human aspect in organizational efficiency is increasingly recognized. It hardly needs to be stated that
no organization can ever be better than its people, and managers must treat hiring as seriously as any
other function.
DIRECTING is the process of motivating people to do their best work and contribute their
full potential to the attainment of corporate objectives. The jobs of subordinates must be explained
and defined, they must be coached in work performance, and they must be inspired to put up their best
efforts with passion and zeal.
The guiding function entails the following sub-functions:
a. Communication
b. Motivation
c. Leadership
COORDINATING. The process of establishing relationships between various sectors of an
organization so that they all pull in the same direction is known as coordination. As a result, it is the
process of connecting all of an organization’s decisions, operations, activities, and efforts in order to
achieve organizational goals through unity of action. Mary Parker Follet has emphasized the
importance of the coordinating process. According to her, a manager should make sure that his
company is “coordinated, so moving together in their closely-knit and adjusting actions, so linking,
interlocking, and interacting that they constitute a working unit, which is not congeries of
individuals.”
a. Relationships of authority and duty are clearly defined.
b. Directional consistency
c. Command consistency
d. Effective communication
e. Effective leadership

CONTROLLING: Controlling ensures that divisional, departmental, sectional, and

individual results are in line with predetermined goals and objectives. Goals and plans must be
monitored for deviations, which must be identified, investigated, and corrected. When plans and

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objectives aren't accomplished, managers are given feedback, and all other management procedures,
such as planning, organizing staffing, leading, and coordinating, are assessed and revised as needed.
Employees and their managers should be aware of the objectives, targets, and performance standards.
It also suggests a flexible and dynamic organization that can adapt to changes in goals, plans,
programs, strategies, policies, and organizational structure.
As a result, controlling entails the following steps:
a. Performance evaluation against predefined objectives.
b. Identifying departures from these objectives.
c. Corrective activity to correct errors.
Although the management responsibilities of planning, organizing, staffing directing,
coordinating, and controlling have been articulated in a specific order, they are not performed in that
order. Management is an essential process, and categorizing its functions into neat boxes is difficult.
Management functions tend to meld together, making it difficult to distinguish one from the other. It's
difficult to tell whether a production manager is directing, developing, or interacting with one of his
employees, or whether he's doing all of these things at once. Furthermore, managers frequently do
multiple functions at the same time.
LEVELS OF MANAGEMENT

Within a firm, there may be many levels of management. A management level is a dividing
line between different managerial positions within a company. The size, technological capability, and
product range of a corporation determine the management levels. Administrative management (i.e.,
the highest level of management) and operational management (i.e., the lowest level of management)
are the two types of management that we usually face (ie., the lower level of management). Policy
development, planning, and standardization are all "thinking" operations that fall within the
administration umbrella. The "doing" role, such as implementing policies, is the focus of operational
management.
In practice, however, distinguishing between a thinking and a can be challenging. As a
member of the board of directors, the pay and salary director of a company may help to setting the
company's wage and salary structure because doing function all managers, regardless of their levels or
ranks, perform the basic/fundamental managerial functions. On the other hand, it is his obligation as
the head of the salaries and salary department to guarantee that the decisions are carried out. The
actual significance of levels is that they describe how a company's authority is distributed. When the
hierarchy of authority and responsibility is considered, three levels of management can be established.
1. TOP MANAGEMENT of a company consists of owners/shareholders, Board of Directors, its
Chairman, Managing Director, or the Chief Executive, or the General Manager or Executive
Committee having key officers.
Top management is the ultimate source of authority, and it sets the company's goals, rules,
and plans. It spends more time planning and arranging activities. It is responsible to the company's
owners for overall management. It is also known as the policy-making body in charge of the
company's overall direction and success. The most important functions are:
a. To determine the enterprise's objectives or goals;
b. To develop policies and programs in order to achieve the set goals;
c. To provide an organizational framework for carrying out the operations as planned;
d. To gather the necessary funds, persons, materials, machinery, and procedures to carry
out the plans;
e. To maintain effective operational control; and
f. To serve as the company's overall leader.

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 2. MIDDLE MANAGEMENT consists of functional department heads, such as the purchasing
manager, production manager, marketing manager, financial controller, and divisional and sectional
officers.
The job of middle management is to put top management's policies and plans into
action. It acts as a vital link between upper-level management and lower-level or operational
management. They are accountable to upper management for the smooth operation of their
departments. They dedicate more time to the management duties of organization and
motivation. They provide the direction and framework for a successful business. The
ambitions and ambitious expectations of senior management will not be accomplished
without them. The key functions of middle management are as follows:
a. To interpret upper management's policy directives.
b. To develop their departments' organizational structures in the goals outlined
in various corporate policies. order to achieve
c. To find and hire qualified operative and managerial personnel.
d. Assign tasks, jobs, and obligations to ensure that the plans are implemented
on time.
e. To assemble all of the instructions and hand them along to the supervisor. e
f.
f. To encourage employees to achieve higher levels of productivity and to
suitably reward them.
g. To work cooperatively with other departments to ensure that the entire
organization runs well.
h. To compile reports and data on their departments' performance.
i. To submit reports to upper management.
j. Make appropriate recommendations to upper management for enhanced
plan and policy execution.
3. LOWER LEVEL OR OPERATIVE MANAGEMENT is made up of superintendents, foremen,
and supervisors. Lower or operative management: This level of managerial is at the bottom of the
management structure, and it is responsible for real operations. Forepersons, supervisors, sales
officers, accounts officers, and others make up this group. They have direct contact with the workers
or rank and file. Their power and authority are restricted. Workers receive instructions from middle
management, which they pass on to them. They interpret and split management's plans into short-term
operating plans. They are also involved in the decision-making process. They'll have to rely on the
workers to get the job done. They assign workers to various tasks, evaluate their performance, and
report to middle management. They are more concerned with management's direction and control
functions. They invest more time to overseeing the staff.
TYPES OF BUSINESS ENTITIES
The type of business entity you choose will depend on three primary factors: liability, taxation, and
record-keeping. Here is a quick look at the differences between the most common forms of business
entities:
1. Sole Proprietorship
2. Partnership
3. Corporation
Sole Proprietorship
By definition, a single/sole proprietorship is a business owned and operated by one person. The
owner and the business are synonymous in the eyes of the law.

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 1. The proprietor subject owns all assets in the firm only to the liabilities he has incurred
in its establishment and operation.
2. Solely responsible for its debts incurs any losses, assumes all its risks, provides all its
capital, and provides its total management.
3. It is the most common form of business organization. It is easy to form and offers
complete managerial control to the owner. However, the owner is also personally
liable for all financial obligations of the business.

Advantages Disadvantages

1. Simplicity of organization 1. Owner’s possible lack of ability and

experience

2. Owner's freedom to make all decisions 2. Limited opportunity for employees

and owner's enjoyment of all profits

3. Minimum legal restrictions 3. Difficulty in raising capital

4. Ease of discontinuance 4. Limited life of the firm

5. Tax advantages 5. Unlimited liability of the proprietor

Partnership
A partnership involves two or more people who agree to share in the profits of losses of a
business. A primary advantage is that the partnership does not bear the tax burden of profits or the
benefit of losses-profits or losses are “passed through” to partners to report on their individual income
tax returns. A primary disadvantage is a liability – each partner is personally liable for the financial
obligations of the business.
1. Association of two or more persons to carry on as co-owners of a business for profit.
2. Partnerships are based upon a partnership agreement, also known as articles of co-
partnership. It should cover all areas of possible disagreement among the partners. It should
define the authority and the rights and duties of each partner and limits to such authority.
3. According to W. Thurston Debman Jr., a partner with Smith, Debnam, Narron, Wyche, Story
^ Myers LLP, a law firm in Raleigh, North Carolina, a partnership agreement should answer
the following questions:
a. What is each partner’s investment? Is one investing cash and the other
energy? Do any of the partners own equipment that you will use in the
business, and does that fact deserve consideration as part of the start-up
investment?
b. What are the responsibilities and duties of each partner? Be specific about
each partner’s role in the day-to-day operations of the company.
c. If a partner becomes disabled, how long will he or she get a share of the
profits? If a partner dies, what happens to that share? An excellent way to
deal with this issue: life insurance for all partners.
d. Can the partners have other outside partnership interests? In particular, can
interest be in similar or competitive businesses?
e. What will you do if one partner wants to withdraw? Typically, you will set up
a buy-out agreement, but it is an excellent idea to decide on the terms before
the situation arises. You will also want to include a non-compete covenant.
f. How will you restrict partnerships-interest transfers? Can a partner transfer
his or her ownership to anyone, or can you limit that transfer? This means the

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 remaining partners will not find themselves in partnership with someone they
object to. This is frequently used to protect the business if one of the partners
gets a divorce and his interest becomes a part of the divorce settlement.
g. Can a partner pledge his or her interest as collateral for a loan?
h. Are additional contributions mandatory? If the business needs capital in
future, are partners required to make capital contributions?
i. How will conflicts be resolved? Most often, an arbitrator is used.
4. There are various partnerships such as General Partnership, Limited Partnership,
Limited Liability Partnership, and LLC Partnership.
a. GENERAL PARTNERSHIP is a company owned by two or more
individuals who agree to run the business as partners or co-partners. It
characterizes as follows:
1. Each partner has an EQUAL SHARE of profits and losses. It does
not split duties and shares.
2. Partners manage a business and assume responsibility for the
partnership’s debt.
3. Because the business is not a separate entity from its partners,
profits in general partnerships are only taxed at the personal income level.
Profits are not taxed at the company level.
4. General partnerships are easy to establish, low-cost, and flexible.
On the downside, your assets are at risk in a general partnership. Not to
mention, partners are liable for each other’s actions.
b. LIMITED PARTNERSHIP is more structured than general partnerships
and has both general and limited partners. To start a limited partnership,
you need at least one general and one limited partner. It characterizes as
follows:
1. All limited partnership does not have equal shares in profits and
losses. It will only depend on how many shares you have in the
company.
2. Limited partners only serve as investors for the partnership.
3. Limited partners can lose their status if they become too involved
in managing the company (e.g., signing legal documents or cotracts).
If you are a limited partner, be careful about your activities and the
decisions you make in the partnership.
4. Limited partnerships are generally desirable to investors due to the
different responsibilities of the general and limited partners.
c. LIMITED LIABILITY PARTNERSHIP – A limited liability
partnership, or LLP, is a type of partnership where owners are not held
personally responsible for the business’s debts and other partners’ actions.
It characterizes as follows:
1. With an LLP, you typically cannot lose your assets if someone
takes legal action against your business. However partners, can be
held liable if they do something wrong.

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 2. The protection an LLP partner receives varies from state to state.
Only certain professions can form an LLP in some states, such as
lawyers, doctors, or accountants. Check your state’s rules before you
form a limited liability partnership.
3. LLPs make it easy to add or remove partners, Furthermore, unlike
some other types of partnership, you can have liability protection
from other members’ action (depending on your state).
d. LLC PARTNERSHIP – An LLC partnership can have two or more
owners, called members. Limited liability companies with multiple
members are referred to as multi-member LLCs or LLC partnership. It
characterizes as follows:
a. Under an LLC partnership, members’ asset is protected. In most
cases, members cannot be sued for the business’ actions or debts.
Members can be held liable for other members’ actions, in any case.
b. Most business can form an LLC partnership. LLC partnership
offer personal liability protection and tax flexibility for members.

General Limited Limited Liability LCC

Partnership Partnership Partnership

Number of 2 or more 2 or more 2 or more 2 or more

owners

Type of Partner At least one limited Partner Member

owner and on general
partner

Personal No Yes (only limited Yes Yes

liability partners)
protection

Protection No Yes (only general Yes No

from other partners)
members’
action

Who can Anyone Anyone Only certain Anyone

form one? professions,
depending on the
state

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 Advantages Disadvantages

1. Ease of organization 1. Unlimited liability

2. Combined talents, judgment, and 2. Limited life

skills

1. Larger capital available to the firm 3. Divided authority

2. Maximization of personal interest 4. Danger of disagreement

3. Definite legal status of the firm

4. Tax advantages

Corporation
A corporation is a legal entity that is created to conduct business. The corporation becomes
an entity separate from those who founded it that handles the responsibilities of the organization. Like
a person, the corporation can be taxed and can be held legally liable for its actions. The corporation
can also make a profit.
1. It is defined as “an artificial being, invisible, intangible and existing only in
contemplation of law. Its ownership is divided into shares of stock.
2. The main advantage of company status is that it protects you from personal liability.
The most significant disadvantage is the high cost forming a corporation, as well as
the substantial record-keeping that is required. While double taxation is sometimes
noted as a disadvantage of incorporation, the S corporation (or Subchapter
corporation, a common version of the standard C corporation) overcomes this by
allowing income and losses to be passed through on individual tax returns.
3. The liability protection provided to a small-business owner who decides to
incorporate is the most significant benefit. Because the debt of a corporation is not
considered the debt of its shareholders, forming a corporation does not put your assets
at danger.
4. A corporation can also keep some of its profits without having to pay taxes on them.
Another advantage is a corporation’s capacity to raise funds. To raise capital, a firm
can sell either standard or preferred shares. Corporations can also survive
permanently, even if a shareholder dies, sell his or her shares, or becomes
handicapped.
5. On the other hand, the corporate structure has a number of flaws. The cost increase is
one of the most significant. Corporations are formed under the laws of each state,
each of which has its own set of requirements. Furthermore, because it must comply
to more complex rules and regulations, a corporation requires more accounting and
tax preparation services than a partnership or sole proprietorship. Almost definitely,
you’ll require assistance.
CORPORATION VS. INCORPORATION
Incorporation is the process of creating a new legal entity that is separate from its
owners/shareholders and protects them from personal liabilities, whereas a corporation is the end-
product of that process; thus, a corporation can be said to have come into existence once you receive
the certificate of incorporation.

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 1. A corporation is a legal entity founded for the purpose of conducting business and
governing. There are various types of corporations, such as business corporations that
do business, charity corporations that oversee the operations of a charitable
organization, sports corporations that oversee the governance of a sports club, and so
on.
2. When we talk about businesses, significant organizations, and governing bodies in
general, we refer to corporations. For example, Google’s parent company, Alphabet,
General Motors, Future lifestyle, and Toyota are all large worldwide corporations.
3. Incorporation, on the other hand, is the process of forming a company, hence the
name. It refers to a set of legal procedures that must be followed in order to register a
business as a corporation.
4. It creates a barrier between the business entity and its owners, protecting them from
the liabilities that come with running a business. Using its assets and cash reserves,
the newly-formed business unit can hire workers, raise capital, and acquire another
organization.
5. However, if the company has a setback that necessitates the payment of creditors, the
legal entity’s and its subsidiaries’ (if any) assets will be liquidated. In such case, no
claim may be on the assets of the owners and shareholders. This is why, once a
company reaches a particular size, many industries try to turn it into corporation.

CATEGORY CORPORATION INCORPORATION

1. Significance It is the final legal product that Legal process of the transition
an entity transforms into after by which an entity becomes a
going through the process of corporation.
incorporation.

2. Status A body formed carries out a A serious of steps that help an

specific operation like business, entity become a corporation.
charity, sports club etc.

3. Life Cycle It continues to exist as long as it Being a process, incorporation

can pay back its liabilities and starts when the certificate of
build on its assets, failing to incorporation is issued till
liquidate and cease to exist. incorporation is finally
continued.

4. Operations It is mainly responsible for Incorporation takes care of legal

carrying out the day-to-day steps that aim to safeguard the
activities related to the business interest and the personal assets
or functioning of the legal entity. of owners and shareholders.

5. Rights and Responsibilities It is personified as legal persons Incorporation is structured

having rights like owning a process with limited
property that can help owners responsibilities and limited
save taxes or raise funds and rights.
responsibilities like in case of
payment failures to creditors, and

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 they can be sued and dragged to
court.

6. Sovereign Task Corporations in different The process of incorporation

countries will have almost differs from country to country
identical functioning, features based on the local laws.
and goals.

Advantages and Disadvantages of Corporation

Advantages Disadvantages

1. Limited liability of stockholders 1. Expenses of the organization

2. Perpetual life 2. Capital stock tax

3. Ease of transferring ownership

4. Ease of expansion of the company

LEGAL PITFALLS IN STARTING A BUSINESS AND HOW TO AVOID THEM

Care and caution are critical in starting one’s business, especially when we talk legal. For this
reason, it may be a good idea to take note of the following tips that would protect entrepreneurs from
committing severe legal pitfalls.
1. Protect your intellectual property
2. Execute a shareholder’s agreement
3. Read contracts.
4. Be cautious in leaving a former employee.
5. Remember to provide for stocks or option investing.
6. Watch out for undercapitalization.
7. Keep good records.
8. Keep it simple.
OTHER LEGAL ASPECTS
1. Patent protection
2. Trademark or trade secrets
3. Copyright protection

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