STRATEGY, GOVERNANCE AND ETHICS REVISION

REVISION QUESTIONS AND ANSWERS
QUESTION ONE
Organizations are becoming increasingly influenced by their external environment. In what ways does the understanding of the external environment factors enable managers to make better decisions?

QUESTION TWO

Explain how the ideas of scientific management thinkers contribute to the development of concepts and principles of modern work management in organizations

ANSWERS

QUESTION ONE

Managerial decisions are affected by the external environment. Organizational performance depends on the successful management of the opportunities, challenges and risks presented by the external environment.

A host of external factors influence a firm’s choice of direction and action and ultimately organizational structure and internal processes.

Every firm is surrounded by 3 subcategories of environments:

a) The operating environment comprising labour, creditors, suppliers, customers and competitors.

b) The industry environment which comprise forces driving industry competition.

c) The remote external environment which comprise economic, social, political, technological and ecological factors.

One popular technique of analyzing the external environment is the SLEPT analysis which divides the environment into five related but separate systems – social, legal, economic, political and technical.

The social and cultural environment

The firm is influenced by changes in beliefs, values, habits and attitudes of society e.g.

  • With the shift away from 9 – 5 working days to more flexible forms in some companies, supermarkets open until late and also IT now allows people to bank throughout the night.
  • The number of women employees have also steadily increased and new policies have to be designed to cater for their ‘speed needs’
  • Demographic changes affect demand e.g. emigration or falling birth rates. Changes in tastes and fashions also affect manufacturers especially in the fashion industry.
  • Legal environment The legal environment is concerned with how a firm does its business and covers law of contract, treatment of workers, laws about the environment and legislation on competitive labour.
  • The law can affect the firm in several ways: strict health and safety regulations increase costs. Premises failing to meet higher standards could be closed down or have their products banned. Tobacco companies are at present faced with the prospect of a ban on advertising.
  • Management must also bear in mind other legal and regulatory parameters e.g. tax regulations and minimum wage allowed.
  • The government sometimes can become an unbeatable competitor by allowing itself sole rights over certain businesses e.g. communications or by fully owning certain natural resources. Organizations must make strategic forecasts in such cases.

The Economic Environment

The current state of the economy can affect how a company performs. The economic influences include taxation levels, inflation, interest rates, GNP, the balance of trade and government subsidies.

A downturn in the economy will lead to corporate failures especially for suppliers of goods with a high-income elasticity of demand e.g. house owners or property management firms such as Lloyd Masika, Regent

Deflationary government fiscal policy and central bank monetary policy can have a highly damaging impact on business.

The Political Environment The organization must react to the attitude of the political party in power at that time. The government is the nation’s largest supplier, employer, customer and investor and any change in government spending priorities will greatly affect business.

Political influence will include legislation on trading, dividends, employment, privatization and unemployment.  governments take actions on monopolies and restrictive practices, provide financial assistance to some ailing industries and take action to protect the environment.

The Technological Environment This environment changes very rapidly and organizations must be constantly aware of what is going on.

A lot of new technology is found in communications particularly the Internet and also in Information Technology.

Technological changes influence production techniques, the type of products made and the services provided. Failing to exploit IT and new production technology will lead to an organization falling behind its rivals and losing its competitive edge. Most companies now deliver services through IT especially banks. Technology has led to the emergence of substitutes e.g. videos at home as opposed to going for cinemas. Managers should seek to understand that their firms are environment dependent and their decisions must take into account the external environmental factors.

Competition Competitors are organizations that offer similar or alternative products or services to the customer. Therefore the organization must compete for resources and also for market share. Knowledge of competitors is very important for corporate success. The competitors’ strengths and weaknesses must be evaluated so as to develop competitive strategies. Competitors affect a firm’s pricing decisions, location of industry, employment, product quality and attributes.

QUESTION TWO

Prior to 1900, there was no systematic way of managing work. Management was highly individualistic, adhoc, autocratic and not at all standardized. The classical era, to which the scientific management belongs, marked the first attempt at developing and documenting guidelines to help managers move away from this approach. FW Taylor is regarded as the father of scientific management. To discover better ways of management, he conducted a wide variety of experiments most of which involved time and motion studies. Taylor wanted to:

(i) Know how long it should take a worker or a machine to perform a given task.

(ii)Develop uniform standards of work

(iii) Find a method of matching workers to jobs

(iv) Learn better ways to supervise and motivate personnel.Taylor’s main contributions:

Determining one best way of performing tasks: managers should study work scientifically and determine one best way of performing the ob using Time and Motion Studies. This measures all tasks movements made by a worker and eliminates those that do not lead to activity.

  • Scientific method of selecting personnel: workers must be scientifically selected and trained so that they can be more productive on their jobs. Taylor knew some workers were more suited to a job than others.
  • Financial incentives: workers should be given financial motivation to increase production efficiency. At that time, the most common type of wages were hourly rates. Taylor felt that motivation would be enhanced by piece-rate, a financial rate whereby workers would be paid according to what they produce other than the number of hours worked.
  • Functional foremanship: Taylor advocated that responsibility be divided between managers and worker. Managers should plan, direct and control the work process while workers should be responsible for performing actual tasks.
  • Each task must bescientifically designed so that it can replace the old ‘Rule of thumb’ method.
  • Encourage friendly interaction between management and employees but a clear separation of duties remain. Taylor however faces the following criticisms
  • He assumed workers are primarily motivated by money.
  • He regarded an organization as a machine and workers as part of it.
  • He failed to consider informal relationships in organizations characterized by social activities, rise of informal group leaders e.t.c.
  • He relied too much on his own experience and it is dangerous to generalize from just one experience. Current organizations are faced with rapid change and competition

Other thinkers:

Henry L Gantt: Gantt is one of the leading contributors to the scientific management theory. He believed that the piece rate system developed by Taylor was not having the desired level of impact and focused his attention on techniques that would further motivate workers. His main contributions are:

(i) Bonus: He developed the idea of bonus wage system. Production goals were set for workers and if the worker achieved the goals, a bonus in addition to the day’s wage was provided. The bonus was extended to the manager in charge of the subordinate.

(ii) Gantt Chart: This is a technique which shows on a graph, the scheduling of work to be done during any given period e.g. a chart might show which machine will be used or has been used for various tasks over time. The chart is especially used today in many organizations especially manufacturing firms for production control and scheduling. Gilbreths A team of husband and wife, Frank and Lilian Gilbreths.

 

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