CHAPTER 1

BUSINESS ORGANISATIONS
At the end of this Module the student shall be able to:

 Understand the various types of business organisations that can be established.

 Appreciate the advantages and disadvantages of each type of business

Introduction

A business activity is any legal activity that may be owned by one person as a sole
proprietor or can be owned jointly by two or more people thereby creating a
partnership. The main aim of many business operations is to make a profit either in
the short or long term. A business activity is not only trading activities like the
popular Kantemba business that have spread along many high ways in cities and
towns. A business may be in the form of manufacturing something for sale, buying
and selling for profit, providing services etc. Some examples of businesses include
banking, insurance, retail trade, producing beer, providing educational services,
Shoprite Chain Stores, Game stores, Internet services, tourist lodge or hotel, transport
services etc.

Element 1.1 Types of Business Enterprises

A business may be owned by one person as a sole proprietor or can be owned jointly
with another person or partner as a partnership. Another way in which a business
could be owned is through the establishment of a limited liability company. A limited
liability company can be privately or publicly owned. Another form of business
organization could be through a cooperative society. The government may on behalf
of the entire citizenry own businesses.

i) Sole Trader

a) Definition

This is a business owned by only one person who provides all the capital needed
to set up and manage the organization and takes profit as his/her reward. The
owner uses his/her labour assisted sometimes by one or two workers and/ or
family members. This is normally a small business in size though it is not always
small.

This type of business may involve retail trade, builders, hairdressing, radio and TV
repairs, farming, fishing, consultancies, bar, restaurant, hotels, travel agencies, law
firm, home finders, estate agencies, etc. All such business activities are owned and
managed by the sole proprietor.
The sources of finance for the sole proprietor may be through selling of Personal
assets such as land, buildings, cattle or shares held in a company. Other sources could
be through borrowing from a friend, family member or the bank.
Features of the Sole Proprietor

The main features of Sole Proprietorship are as follows:

i. It is a business owned by only one person who provides all the capital
needed to set up and manage it and takes all the profit as his reward.
ii. It is the simplest and most common type of business enterprise.
iii. The owner uses his/her labour, assisted perhaps by one or two workers or
family members.
iv. The business tends to be small in size although it is not always so.
v. This type of business enterprise is not confined to the retail trade.

b) Advantages of a Sole Trade

When you own and manage the business as a sole proprietor there are
several advantages, and these include the following:

i) The business is easy to set up, control and manage.

ii) It requires a small amount of capital to set up; as a result many
people are able to run this type of business.
iii) The owner makes independent and quick decisions on how the
business is to be run.
iv) The owner has personal contact with his/her workers as well as
customers and is likely to be familiar with all the aspects of the
business.
v) The owner tries to provide his/her customers with personalised
service. This is one of the main reasons for the continued survival of
the sole proprietors.
vi) The owner takes all the profits made by the business and this gives
him/her encouragement to work hard.
vii) Business affairs are kept private except when completing tax returns.
The law provides that the sole proprietor shall pay tax.
viii) The owner will be familiar with all aspects of the business with
timely solutions to problems if any.
ix) The sole proprietor is elf-employed and gets a sense of satisfaction
for working for him/herself.

c) Disadvantages of a Sole Trader

There are a number of disadvantages of running a sole proprietorship and the

common ones include the following:

i) The personal assets are at risk because the business has unlimited
liability. In an event that the sole trader borrows money from any
institution or individual, he/she must pay back the whole of it
otherwise her/his personal assets would be attached and auctioned to
raise the money to repay the debt.
 ii) The business cannot do without the owner. The business may close
+down when the owner dies, as the owner is everything to the
business. There is no sharing of workload.
iii) It is more difficult for the sole trader to borrow money than in other
forms of business, making expansion difficult. The sole trader may
not borrow money, as the sole trader does not provide financial
collateral as security.
iv) The size of the business is rather too small. Thus, it is unable to
benefit from the economies of scale making it more expensive to run
than larger organizations. There may not be any division of labour.
v) The sole proprietor is self-employed. This means he/she does not
have such benefits as state social security or retirement benefits,
which are enjoyed by those employed by other companies or
government departments.
vi) Shortage of capital prevents the sole proprietor from providing
modern equipment, for example the use of computerized stock
control. He/she cannot afford to provide services such as credit,
delivery, and other amenities to his/her customers thereby making
such businesses unattractive to customers.
vii) The risks of failure are as high as there is severe competition from
especially large-scale businesses.
viii) Division of labour may be difficult to organize because of the small
size the business, thus there is little sharing of workload and
therefore always overloaded. This affects his/her efficiency and
productivity.

ii) Partnerships

a) Definition

Partnerships may be established for purposes of pooling of skills,

experiences, knowledge, contacts, finances, assets or a combination of
any two or more factors. At individual levels, people may realize that
they did not have adequate skills, knowledge or finance to run a
business on their own, but as a team, they could achieve more.

+++++++++++++++++++++++++++++++++++++++++++
Between two and twenty people can come together and form a partnership
by drawing up a legal document called partnership deed. This document
gives details of the way the firm will be organized and managed.

The details in the partnership deed include the following:

i. The objectives of a partnership,
ii. The financial contribution of each partner,
iii. The sharing of profits and losses,
iv. The rights and obligations of each partner,
v. The amount of money to be paid as salary to each partner,
vi. The name of the partnership and
vii. The treatment of capital invested.
b) Features of a Partnership

i. Can be formed by between two and twenty people but professional

partnerships like that of lawyers, doctors, engineers etc can be
formed by more than twenty people.
ii. The capital of the partnership is raised by contribution of each
partner and does not need to be equal. Partners can lend capital to a
partnership with interest payment depending on the provisions in the
partnership deed.
iii. In a partnership, ownership and control are not separated, thus
partners own and control the partnership.
iv. A partnership has no separate legal entity. Thus the liability of
partners is just like in a sole proprietorship.
v. Each and every partner is entitled to be involved in the running of a
business. A decision of any one partner binds the partnership.
vi. Partnerships are common among professions such as estate agents,
insurance brokers, lawyers, doctors, accountants.

c) Advantages of Partnerships

Forming partnerships has several advantages that include the following:

i. A Partnership is easy to set up, as it does not involve long costly

procedures.
ii. Division of labour is possible, as there are many people involved
with various skills and experiences.
iii. More people are involved in the business so more capital can be
raised.
iv. Expenses and management of the business are shared.
v. The individuality of each partner is not totally lost, as partners
maintain many of the personal advantages of the sole proprietorship.
vi. There is greater continuity in a partnership than in sole
proprietorship. In case of death or resignation, the remaining partners
can form a new partnership.
vii. Decision-making is consultative leading to improved quality of
decisions.
viii. A partnership is not required to publish its accounts annually so there
is secrecy.

d) Disadvantages of Partnerships

Partnerships have several disadvantages as given below.

i. Decisions may be delayed by disagreements among partners.

 ii. Partners have unlimited liability and are therefore personally
liable for the debts of the partnership. Personal assets are at
risk.
iii. Lack of capital may limit expansion as it depends on partners
for raising capital.
iv. When one partner dies or leaves, a new partnership is required,
which may be awkward to the remaining members.
v. Membership in a partnership is limited to twenty except for
professional partnerships. This restricts the ability of the
partnership to raise capital.
vi. One partner’s decision can be binding on all the other partners
even if it is a wrong decision. This makes the partnership a
risky affair.
vii. A partnership is a delicate business and can break at any time.
This is particularly the case in many auditing and legal
firms/partnerships.

iii) Private Limited Company

According to the Company’s Act of Zambia, the two documents namely

the Memorandum of Understanding and Articles of Association have been
combined to create the Articles of Association. The promoters of the
company should submit the articles of association to the Registrar of
Companies. The Registrar of Companies shall issue a certificate of
incorporation once the application complies with the Company’s Act.

a. The Articles of Association

The articles of association shall include the following information:

i. Name of the company with the last word being limited.

ii. Objectives of the Company.
iii. The statement of limited liability for its shareholders.
iv. The authorized capital thus the amount of capital to be raised by
the shareholders.
v. The number of shares issued to each Director.
vi. The rights, obligations and powers of the directors.
vii. The procedure for calling annual general meetings.
viii. The rights and power of each type of shareholder.
ix. The procedure for electing directors.
x. The issue, transfer and forfeiture of shares.
xi. Procedure for dealing with any alterations in the amount of capital.
xii. Procedure for distributing profits and carrying out auditing.

A limited liability company is controlled and governed by a board of

directors, which is elected by the shareholders at annual general
meetings.
b. Characteristics of a Private Limited Liability Company

The main features of a private limited liability company include the

following:
i. A private limited company is a separate legal entity meaning the
company has its own legal existence separate from that of its
shareholders.
ii. A private limited company is not allowed to sell its shares to the
general public unless by approaching people individually.
iii. Shares of a private limited company are not transferable without
the agreement of the other shareholders.
iv. Shareholders in a private limited company have control over the
company.
v. A private limited company is not required by law to publicise its
accounts annually.
vi. The liability of shareholders is limited to capital invested.
vii. At least two people and not more than fifty can form a private
limited company.
viii. A private limited company is usually a small family business,
though it is not always so.
ix. The capital and ownership of a private limited company is divided
into shares.
x. Profits earned are usually shared in proportion to the number and
value of shares held.

c) Advantages of a private limited company

Forming a private limited company is probably the most secure way of
owning a business. The benefits of this kind of business include the
following:

i It is a legally separate entity or personality from the owners.

ii. The liability of shareholders is limited, so their
personal assets are not at risk.
iii. It can easily raise more capital by selling shares though not
publicly.
iv. The company has sure continuity, as it does not depend on one
person.
v. Shareholders have direct control over the company's affairs.
They present their views at the annual general meeting.
vi. The founders can retain control over the company by holding
the majority of its shares.

d) Disadvantages of private limited company

Some of the disadvantages of a private limited company are as given
below.

i. There are too many legal formalities to comply with.

ii. Lack of capital can restrict the growth of a private limited
company.
 iii. The shares are not freely transferable, as the existing
shareholders should approve such
iv. Accounts should be audited annually, hence the need to engage
services of an Auditors.
v. The company is less flexible when compared to a sole
proprietorship.
vi. It is a costly exercise to form a limited liability than that of a
sole Proprietorship
vii. Not easy for such a company to borrow money from the banks,
etc.

v) Public Limited Companies

Definition
A public limited company is a corporate association of at least two persons, which
is registered with the Registrar of companies and owned by the shareholders who
have limited liabilities. Public Limited companies are generally quoted at the
Lusaka Stock Exchange where members of the public can freely trade in shares for
such companies.

Public limited companies use the prospectus as an invitation to members of the public
to buy shares in the company. The prospectus gives information on the number of
shares being sold and at what price.

a) Characteristics of a Public Limited Companies

A public limited company may be characterised by the following attributes:

i. It is a company formed by at least two persons without a maximum

number.
ii. It is a separate legal entity and is registered with the Registrar of
Companies.
iii. The Board of Directors are elected by the shareholders controlling it.
iv. Shares of the public company are freely bought and sold on the stock
exchange. There are no restrictions on the transfer of shares to third
parties.
v. The liability of shareholders is limited to the capital they have invested
or agreed to invest in the company.
vi. The day to day running of the business is in the hands of the Managing
Director. The Board of Directors deal with the Managing Director on
policy issues.

b) Advantages of Public Limited Companies

The advantages of the Public Limited Company include the following:

i. The company is a separate legal entity and as such the liability of

shareholders is limited to the amount of shares they hold in the
company.
ii. Its shares are freely transferable on the Lusaka Stock Exchange.
iii. It has assured continuity.
iv. It can raise more capital by the sale of shares and debentures to the
 public through the Lusaka Stock Exchange.
v. It can easily borrow money from banks and other financial institutions.
vi. It can employ specialists in such fields as marketing, accounting and
human resource management, which is more efficient.
vii. Its sheer size makes it possible for the company to buy modern
equipment and technology
viii. It buys in bulk and therefore enjoys economies of scale and possible
discounts.

c) Disadvantages of Public Limited Company

When you form a public limited company, there are some disadvantages you
may find as follows:
i. It is difficult and expensive to form.
ii. It has to comply with many regulations set to protect employer,
employee and other stakeholders.
iii. Raising capital tends to be very expensive
iv. It may grow and become too large and difficult to manage.
v. Original owners usually lose control over it as it has become too big.
vi. There is little secrecy, as its accounts must be published annually. This
is a legal requirement.
vii. Decisions tend to be delayed because of the amount of administration
or bureaucracy involved such as those that require board approval.
viii. The risk of takeover bids by other companies because shares of a
public limited company can easily be bought on the stock exchange.

V) Cooperative Societies
Definition

Cooperative societies are businesses established and managed by a group

of customers on a cooperative principle of ownership, operation and
distribution. The cooperative societies are owned and financed by their
members who buy from the stores.

Membership is open to anyone who buys a share in the society. Cooperative

societies are democratically controlled with each member having one vote.
Generally, cooperative societies pursue social objectives in addition to profit.
In Zambia, the most common cooperative societies have tended to be
agricultural cooperative societies at both district and provincial levels. Because
of difficulties faced by provincial agricultural cooperative societies, the focus
has shifted to primary cooperative societies at the village level.

a) Characteristics of cooperative societies

The following are features of cooperative societies particularly those for
trading activities:

i. The members or owners are people who have bought shares in the
society and are also the main customers.
 ii. A maximum amount of shares is set as an individual's shareholding.
Thus, the number of shares that one can buy in a society is restricted to
prevent rich people from taking over the control of the society.
iii. Members have one vote irrespective of the number of shares one holds
at any particular time.
iv. Profits or surpluses are divided as dividends to members in relation to
the amount of goods traded from the business.
v. In the case of retail business, a committee elected by members manage
the business.
vi. The societies may offer special benefits such as scholarships, funeral
benefits and other social amenities to the society members.

b) Advantages of cooperative societies include the following:

i. The customers especially members enjoy lower prices since they are
given dividend stamps each time they purchase goods from the store.
ii. Such cooperative society businesses are convenient as they are near to
the customers.
iii. Anybody can do business with the cooperative society and is not
restricted to members only.
iv. They are democratically controlled in the interest of customers and each
member has a right to be heard.
v. Another major problem is that capital raised through the sale of shares is
limited given the restriction of the number of shares an individual can
buy, making it difficult to expand.

c) Disadvantages of the cooperative societies include the

following:
i. The stores are inefficient as the issuing of divided stamps is a slow
process.
ii. It involves a lot of paperwork.
iii. Over time, cooperative societies tend to amalgamate in order to withstand
stiff competition.
iv. Many members do not attend meetings as a result; a few members
dominate societies.
v. Lack of qualified management team retards the progress of the societies.
Poor management, poor planning and poor financial control plagued many
cooperative societies. This has forced many cooperative societies to close
down.
vi. Another major problem is that of capital, as capital raised through the sale
of shares is limited given the restriction given on the number of shares an
individual can buy· making it difficult to expand.

ELEMENT 1.2 THE ORGANISATION AND ITS STAKEHOLDERS

Organisations operate in an environment that impinges on the interest of various

business associates called organisational stakeholders. Stakeholders are those
individuals, institutions etc who have a stake in the future development of the
organisation. The success or failure of an organisation affects stakeholders in its
environment.
 Definition

Organisational stakeholders may be defined as individuals or groups of people

who have an interest in and/or are affected by the goals, operations or
activities of the organisation or the behaviour of its members.

Stakeholders for any organisation shall comprise its employees, customers, suppliers,
government, financiers, community publics and other organisations or groups. Each
stakeholder shall now be discussed below.

i. Employees

Employees are probably the most important assets of the organisation and the
employees and organisations need each other. The responsibilities of the
organisation go beyond the terms and conditions of service in the employment
contract but recognise the workers' well being. Organisations have social
contracts with employees where employees expect the employer to treat them
fairly, put in a transparent and good corporate governance system for the
organisation that promotes gender equity and equal employment opportunities.

ii. Customers

Customers are the reasons for the existence of an organisation. They bring
money to the business, provide new product ideas and they are marketing
agents for the organisation. The success of the organisation depends on
customer patronage. The customers or consumers or clients have certain
expectations of the organisation, such as good value for money, safety and
durability of goods and services, after sale service, respect and recognition,
long-term satisfaction such as convenience, serviceability consistence of
supply and full and unambiguous information.
iii. Suppliers
Suppliers of production inputs to the organisation are major sources of
competitive advantage. The suppliers want money from the organisation for
various supplies they make. The quality of the goods and services are affected
by the quality of inputs from the suppliers. The organisation should develop
suitable social responsibility programmes to maintain a productive working
relationship. Suppliers may provide quantity or cash discounts to the
organization.
iv. Government

Government is a major buyer of various goods and services. In addition, the

government enacts laws and makes regulations that should be respected and
obeyed even if it is not in the interest of the company. The export regulations
and measures to control inflation such as ceilings on wage claims, control on
the sale of tobacco and display of health warnings are among the regulations
government may set. Compliance with tax laws and other legislations that
affect the organisation is important for a good corporate citizen.

The government expects the organisation to continue in operation so that it can

continue to collect tax revenues for the implementation of its various
programmes.
v. Financiers

In any business, there are shareholders, providers of investment capital such as

insurance companies, Pension funds, Building Societies, Commercial and
Investment banks who may invest their funds into an organisation and expect a
reasonable return on their invested funds. In some cases people buy shares at a
stock exchange like the Lusaka Stock Exchange and expect a dividend at the
end of a period. These financiers have an interest in the company and expect it
to be responsibly managed in the most transparent and most accountable
manner to ensure that their investment is safeguarded and earns some return
for the risk and use of their capital.

These financiers expect management to provide them with full and complete
information and shareholders question top management on policy decisions.

vi. Community Publics

The customers of the organisation are part of the community and contribute to
the growth of the organisation. A good corporate citizen is more pronounced
in the company's support for local community projects and its concern for the
environment. In Zambia, the support of the Premier Soccer League by
Konkola Copper Mines; sponsorship of Coca cola Cup for secondary schools,
BP Top Eight, donation of building materials for a classroom block, adoption
of a ward at the University Teaching Hospital etc are some of the examples of
how organisations show appreciation of community support to the business.
An organisation may have negative corporate image if it did not undertake
such activities.
The communities have expectations of good corporate citizens to be good to the
community publics in areas they operate in. The environmentally friendly
policies of organizations are other expectations of the community such as
promoting the Keep Lusaka Clean Campaign, avoidance of using excessive
packaging and more use of biodegradable materials. The continued existence of
the organization is of public interest in nature as it provides employment to
society.
Questions
1. Briefly discuss the various types of businesses clearly pointing out the
characteristics, pros and cons of each.
2. Identify the various stakeholders of an organisation and briefly discuss
the expectations of each one of them.
3. A friend of yours wishes to set up a Kantemba business to sell
fitumbuwa to industrial workers. Advise your friend the advantages of
and disadvantages of being a sole trader.
4. You have been asked to give a talk on the features of, advantages and
disadvantages of partnership type of business. What would include in
your paper.
5. A group of men in your neighbourhood have come together to form a
private limited company and they have come to you for advice. Explain
to them the features of the private limited company by outlining
advantages and disadvantages of this type of business.
6. Distinguish between a partnership and a public limited company. What
are the advantages and disadvantages of each type of business type?
7. Many communities in Zambia formed cooperative societies as a way of
creating investment. Discuss the characteristics of cooperatives and state
why many communities opted for them. What are the advantages of
such types of business?
CHAPTER 2.0

THE FUNCTIONS OF MANAGERS

The learning Objectives

 To explain the meaning of management and main activities or functions of

management;
 To analyse the essential nature of managerial work;
 To evaluate the importance of management to effective performance of work
organisations; and
 To explain the managerial skills and the manager's role in an organisation.

MANAGEMENT FUNCTIONS AND THE MANAGER'S JOB

Management can only achieve their goals and objectives by the coordinated effort of
their members and it is the task of management to get work done through other
people. Management is fundamental and central to the effective operation of work
organisations. Management cannot be a separate department like Finance or
Marketing as it is common to all other functions.

Definition
Management is about changing behaviour of people and making things happen.
It is about developing people, working with them, reaching objectives and
achieving results. The success or failure of management is attributable to the
manager. Management may be defined as a process of achieving organisational
objectives, within a changing environment, by balancing efficiency, effectiveness
and equity, obtaining the most from limited resources and working with and
through people.

Common activities of management may be classified into six categories:

i. Technical (production, manufacturing and adaptation)

ii. Commercial (buying, selling, exchange and market information)
iii. Financial (obtaining capital and making optimum use of available funds)
iv. Security (safeguarding property and persons)
v. Accounting (information on the economic position, stocktaking, balance
sheet, costs, statistics, etc) and
vi. Managerial.

The managerial activity is divided into five elements of management i.e. planning,
organising, coordinating, leading and controlling. These managerial activities are
discussed below.

i. Planning
In their managerial functions, planning tends to be the starting point at all times.
Planning may be defined as to foresee, examining the future, deciding what needs to
be achieved and developing a plan of action.
Planning involves the setting of objectives (what to do), formulation of a strategy
(how to do) and implementation of strategy (when, whom) to achieve the set
objectives.

The planning process is best done through the participation of all key players in the
organisation to ensure ownership of the plan.
ii. Organising
Organising involves the analysis of activities, identifying decisions and
relationships required in the organisation, classifying and dividing work,
creating the organisation structure and selecting staff to implement management
strategies. Organising may also be seen as a provision of material and human
resources and building of the structure to carry out the activities of the
organisation.

Organising is an essential ingredient of management as it is very important that

whatever you want to do, it is properly organised or arranged. Once things are
properly organised or arranged, it becomes easier to implement and ensure that
organisational objectives are achieved.

iii. Coordinating
Coordination involves the unifying and harmonisation of all activities and effort
of the organisation to facilitate its work and success. It involves balancing and
maintaining the team by ensuring a suitable division of work and seeing that the
tasks are performed in harmony and not in conflict. Through this function, the
manager creates reporting relationships vertically and facilitates
communication relationships horizontally.

iv. Leading
Leading is the creation of an organisational climate, in which, people work
willingly and effectively thus inspiring morale among employees. An essential
part of management is coordinating the activities of people and guiding their
efforts towards the goals and objectives of the organisation. This involves the
process of leadership and choice of an appropriate form of action and
behaviour.

Leadership is a central feature of organisational performance. A manager will

not be able to single-handedly carry out all programmes of the organisation and
requires the support of other people in the organisation. The ability to lead
people, or inspire and influence others to the desired direction for the
achievement of objectives is one of the greatest challenges of leadership.
Through effective motivation and communication, a manager creates a team out
of people responsible for various jobs.
v. Controlling
After planning, organising and coordinating the various work processes, it is
important that an evaluation is undertaken to compare actual performance
against the set standards. This comparison will ensure satisfactory performance
and progress and this record can be used as guide for future operations. Once
deviations from set standards have been detected, they are reported to those
people in the organisation with the mandate to institute corrective action. Where
 people feel that the assumptions no longer make sense, a review of these
assumptions may be necessary. The same goes for people’s behaviour. If it is
found to be contrary to the set behavioural standards, corrective action must be
taken to rectify the situation.

The continuous monitoring and evaluation of the plan enables management to

detect any deviations from standard and institute timely corrective measures to
ensure that the organisation maintains its focus on the mission.

ELEMENT A 2.2 MANAGEMENT SKILLS AND THE ROLE OF A

MANAGER

In understanding the importance of management skills and the role of a

manager, it would be important to understand why organisations need
managers. Henry Mintzberg suggested six reasons why organisations need
managers as follows

i. To ensure the organisation serves its basic purpose - the

efficient production of goods and services;
ii. To design and maintain the stability of the operations of the
organisation;
iii. To take charge of strategy-making and adapt the
organisation in a controlled way to changes in its environment;
iv. To serve as the key informational link between the
organisation and the environment; and
v. As formal authority to operate the organisation's status system.

a) Managerial skills or qualities

The managerial skills or qualities of a manager shall revolve around
people (human and social) skills, technical skills or competence and
conceptual skills irrespective of whether the organisation is private or
public. No single skill mentioned here can make a manager effective.
Instead, it is the combination of these skills, in various proportions that
make a manager effective. As a manager climbs the organisational
ladder, a greater proportion of emphasis is likely to be placed on
conceptual skills and proportionately less of technical competence. The
human and social skills remain very important at every level of the
organisation.
i)Technical Competence/Skills relate to the application of specific
knowledge, methods and skills to implement various tasks. This type
of skill is very important for those at supervisory levels and
responsible for day-to-day operations like an Assistant Accountant,
human resources officer, sales manager, workshop foreman etc.

ii) Social and human (people) Skills refer to interpersonal

relationships in working with and through other people and
exercise of judgement. A manager requires excellent people
management skills to secure the effective use of human resources
of the organisation. The leadership style of a manager has an
effect on team work and the attainment of coordination among
 staff. The suitability of the management styles will have a
bearing on the willingness of staff to do what the manager wants.
iii) Conceptual Skill or ability is required in order to view the
complexities of the operations of the organisation as a whole
including external factors. This involves decision-making skills.

b) The role of a Manager

The work of the manager is varied and fragmented and is greatly influenced by
the following factors.

i. The nature of the organisation, its philosophy, objectives and size;

ii. The type of structure;
iii. Activities and tasks involved;
iv. Technology and methods of performing work;
v. The nature of people employed; and
vi. The level in the organisation at which the manager is working.

Empirical evidence from the study of Chief Executive Officers of medium to

large organisations, Henry Mintzberg has equated the functions of a manager to
the managerial roles since the managers in organisations have formal authority.
These managerial roles may be categorised into three groups, namely
interpersonal roles, informational roles and decisional roles.

Interpersonal Roles are relations with other people arising from the manager's
status and authority.

i. Figurehead role - most basic and simple managerial role is being the public
face of an organisation. The manager is a symbol and represents the
organisation in matters of formality, ceremonial nature, signing documents,
etc.

ii) Leadership role is one of the significant roles and it permeates all activities of
a manager. Due to the formal authority vested in the manager, there is
responsibility for staffing, motivation and guidance of employees.

iii. Liaison role involves relationships that the manager develops within and
outside the organisation thus linking the organisation to its environment.

Informational Roles relates to the sources and communication of

information arising from the manager's interpersonal roles.

iv. Monitor Role identifies the manager in seeking and receiving information.
The information enables the manager to develop an understanding of the
working of the organisation and its environment.
v. Disseminator Role involves the manager in transmitting external information
through the liaison role into the organisation, and internal information through
the leader role between the subordinates, which information may be factual or
 value judgement.
vi. Spokesman Role involves the manager as formal authority in transmitting
information to the people outside the unit such as Board of Directors, or other
superiors and general public.

Decisional roles involve the making of strategic organisational decisions on the

basis of the manager's status and authority, and access to information.

vii. Entrepreneurial Role is the manager's function to initiate and plan controlled
change through exploiting opportunities or solving problems and taking
actions to improve the existing situation.
viii. Disturbance Handler Role involves the manager in reacting to involuntary
situations and unpredictable events. The manager takes action to deal with
unpredictable events.
ix Resource Allocator Role involves the manager in using formal authority to
decide where effort will be expended and making choices on the allocation of
resources such as money, time, material and staff. The Manager decides the
programming of work and maintains control by authorising important
decisions before implementation.
x. Negotiator Role is participation in negotiation activity with other individuals
or organisations e.g. trade unions, suppliers or customers.

Questions
1 A manager requires to be armed with appropriate managerial skills in
order for him/her to play the various roles expected of him/her. As a
management student, explain these various skills a manager is required to
play and relate them to the managerial roles.
2 Assuming you have been appointed as a supervisor of your work group,
what management functions will you be expected to perform? Explain
with examples.
3 Identify and discuss the several roles that any individual plays by virtue of
him/her being in a managerial position.
CHAPTER 3.0

THEORIES OF MANAGEMENT
Learning Objectives
After this unit, the student shall be able to:

 Explain the relationship between management theory and practice;

 Identify major trends in the development of organisation behaviour and
management thinking;
 Evaluate the relevance of these different approaches to the present day
management of organisations;
 Assess the value of the management theory and different approaches to
organisation and management.

ELEMENT 3.1 PRINCIPLES AND ELEMENTS OF MANAGEMENT

Henri Fayol made a contribution to the management theory by advocating for

principles of management. The management principles must be flexible and
adaptable to changing circumstances. These principles may be influenced by
the organisation structure in which the process of management takes place.
Fayol identified the following 14 principles of management.

i. Division of work. The objective is to produce more and better work

from the same effort and the advantages of specialisation.

ii. Authority and responsibility. Responsibility is the corollary of

authority. Whenever authority is exercised, responsibility follows. The
application of sanctions is essential to good management and it is
needed to encourage useful actions and to discourage their opposite.
iii. Discipline is essential for the efficient operation of the organisation.
Discipline is in essence the outward mark of respect for agreements
between the organisation and its members.
iv. Unity of Command. In any action, the employee should receive
orders from one superior only, if not the authority is undermined and
discipline, order and stability is threatened. Dual command is a
perpetual source of conflict.

v. Unity of direction. In order to provide for unity of action,

coordination and focusing of effort, there should be one head and one
plan for any group of activities with the same objective.
vi. Subordination of individual interest to the general interest. The
interest of the organisation should dominate individual or group
interests.

vii. Remuneration of Personnel. Remuneration should as far as possible

satisfy both the employee and the employer. Methods of work can
influence the organizational performance and it should be fair and
should encourage keenness by rewarding well-deserved effort.
viii. Centralisation is always present to some extent in any organisation.
 The extent of centralisation is a question of proportion and will vary
with a particular organization
ix. Scalar Chain. The chain of superiors from the ultimate authority to
the lowest ranks should be clearly outlined. Respect for line of
authority must be reconciled with activities, which require urgent
action and some measure of initiative at all levels of authority.

x. Order. This includes material and social order. Material order is

required for the avoidance of loss with each item placed at the
appointed place. In social order, there should be an appointed place for
each employee and each employee in his/her appointed place.
xi. Equity. There should be equity and equality of treatment in dealing
with employees throughout all1evels of the scalar chain.
xii. Stability of tenure of personnel. Generally, prosperous organisations
have stable managerial personnel, but changes of personnel are
inevitable and stability of tenure is a question of proportion.
xiii. Initiative. This represents a source of strength for the organisation and
should be encouraged and developed. Tact and integrity are important
to promote initiative and to retain respect for authority and discipline.
xiv. Esprit de corps should be fostered, as harmony and unity among
members of the organisation is a great strength in the organisation. The
principle of unity of command should be observed to avoid the dangers
of divide and rule of one's own team and abuse of written
communication.

ELEMENT 3.2 MANAGEMENT THEORIES

The study of management theory is important for the following reasons:

i) What leading writers say is an important part of the study of management;
ii)It is necessary to view the interrelationships between the development of
theory, behaviour in organisation and management practice;
iii) An understanding of the development of management thinking helps
in understanding principles underlying the process of management;
iv) Knowledge of history helps in understanding the nature of management
and organisational behaviour and the reasons for the attention given to the
main topical areas; and
v) Many of the earlier ideas are of continuing importance to the manager and
later ideas on management tend to incorporate earlier ideas and conclusions.

The study of management has been categorised into either of the following
approaches, namely classical approach, human relations school, systems approach
and the contingency or contemporary theories of management. The various
approaches to management theory have tended to focus on approaches to
organisational structure and management aimed at making the student understand
how the organisation works.
A CLASSICAL APPROACH OR THEORY

Introduction
The classical theory of management was promoted by early management
thinkers like Frederick Taylor with his scientific management and Henri Fayol
with his principles of management. The classical theorists thought of an
organisation in terms of its purpose and formal structure. The focus is largely
on the need to plan the work, stating the technical requirements, principles of
management and the assumption of rational and logical behaviour.
Under this approach, a clear understanding of the purpose of an organisation is
seen as essential to understanding how the organisation works and how its
methods of working can be improved. Setting objectives lead to the
clarification of purposes and responsibilities at all levels of the organisation
and to the most effective structure.

The classical approaches place its attention on the division of work, the clear
definition of duties and responsibilities, and maintaining specialisation and
coordination. Emphasis is on a hierarchy of management and formal
organisational relationships.
Two most publicised classical management approaches are the scientific
management and the bureaucratic organisations.

i) Scientific Management
Many classical writers were concerned with the improvement of management
as a means of increasing productivity through the technical structuring of the
work organisation and provision of monetary incentives as a motivator for
higher levels of outputs.
Frederick W Taylor (1856 - 1917) promoted the idea of scientific management
approach focusing largely on working methods by which people should
undertake their jobs. He believed that work processes could be analysed into
discrete tasks and that by scientific method, it was possible to find the one best
way to perform each task. He was concerned with finding more efficient
methods and procedures for coordination and control of work. He developed a
number of principles to guide management, namely:

a) The development of a true science for each person's work;

b) The scientific selection, training and development of the workers;
c) Cooperation with the workers to ensure that work carried out in the
prescribed way;
d) The division of work and responsibility between management and
the workers.

The central theme of Taylor's work was not inefficiency but the need to
substitute industrial welfare by industrial harmony.
Taylor sought to do this through:
a) Higher wages from increased output;
b) The removal of physical strain from doing work the wrong way;
c) Development of the workers and the opportunity for them to
undertake tasks they were capable of doing; and
d) Elimination of the boss by the duty of management to help the
 workers.

The scientific management was criticised for its simplification of work making
the jobs boring, repetitive and requiring little skill to do. Further studies
revealed that the scientific method gave high levels of uncontrolled power to
the production managers/supervisors.
Despite the criticism, scientific management has justified managerial control
over the production process and removed decision making from employees and
from owners as well. This approach diminished the direct involvement of
owners or shareholders in day-today decision making. The scientific
management theory has contributed to the modern management by such
practices as works study, organisation and methods, payment by results,
management by exception and production control

ii) Bureaucracy
A bureaucracy is a form of structure you find in many large-scale
organisations. Max Weber, a German sociologist believed that the definition of
tasks and responsibilities within the structure of management gave rise to a
permanent administration and standardisation of work procedures
notwithstanding changes in the actual holders of office. This is particularly true
for very large organisations and public service institutions like government
ministries, cabinet office, etc. Bureaucratic organisations apply to certain
structural features of formal organisations. Bureaucracy has tended to be
criticised to connote red tape and rigidity. However, government departments
can only efficiently operate if they followed the bureaucratic principles, as a
form of introducing/ maintaining order and rationality into social life.

Main Characteristics of Bureaucracies

Weber did not define bureaucracy but attempted to identify the main
characteristics of this type of organisation. He emphasised on the importance
of administration based on expertise (rules of experts) and administration based
on discipline (rules of officials).

The characteristics of a bureaucratic organisation included the following:

a) The tasks of the organisation are allocated as official duties
among positions.
b) There is an implied clear-cut division of labour and a high level
of specialisation.
c) A hierarchical authority applies to the organisation of offices
and positions.
d) Uniformity of decisions and actions is achieved through
formally established systems of rules and regulations. Together
with authority, this enables the coordination of various
activities within the organisation.
e) An impersonal orientation is expected from officials in their
dealings with clients and other officials. This meant to promote
rational judgements by officials in their performance of their
duties.
f) Employment by the organisation is based on technical
qualifications and constitutes a lifelong career for the officials.
 R Stewart in his reality of management summarised the main features of
bureaucracy as specialisation, hierarchy of authority, systems of rules and
impersonality.

Criticism/Disadvantages of Bureaucracy
i. The over-emphasis on rules and procedures, record keeping
and paperwork may become more important in its own right
than as a means to an end.
ii. Officials may develop a dependence upon bureaucratic status,
symbols and rules.
iii. Initiative may be stifled and when a situation is not covered by
complete set of rules or procedures, there may be a lack of
flexibility or adaptation to changing circumstances.
iv. Position and responsibilities in the organisation can lead to
officious bureaucratic behaviour. There may also be a tendency
to conceal administrative procedures from outsiders.
v. Impersonal relations can lead to stereotyped behaviour and a
lack of responsiveness to individual incidents or problems.
vi. Bureaucracies provide safe haven where managers can hide
from responsibility and avoid being held accountable for errors
of judgement or problems they created or failed to solve.

Evaluation of Bureaucracy

i. Bureaucracies come through increasing size and complexity of

organisations and associated demand for effective
administration.
ii. It has given emphasis to the careful design and planning of
organisation structure and definition of individual duties and
responsibilities.
iii. An effective organisation is based on structure and delegation
through different layers of the hierarchy.
iv. Greater specialisation and expertise and technical knowledge
highlighted the need for laid-down procedures.
v. However, increased changes in the external environment, de-
layering of organisations, empowerment, and greater attention
to meeting the needs of customers have increased the need for
flexibility.

B HUMAN RELATIONS SCHOOL

While the classical approaches focused on the structure and the formal
organisation, the human relations school approach focused on the social
factors of work and the behaviour of employees within the organisation.

2.1. The Hawthorne Experiments

The most famous works under this approach was the Hawthorne
experiments of Elton Mayo at the Western Electric Company in USA
 (1924 -32). The four main phases of the Hawthorne experiments were
as follows:
 The illumination experiment
 The relay assembly test room
 The interviewing programme
 The bank wiring observation room

i. The illumination Experiments

The experiment was initially testing the validity of the classical

approach using the scientific management style with the effects of
the intensity of heat on workers’ productivity. The workers were
divided into two groups thus the experimental group and the control
group. There was no conclusion on this experiment on the possible
relationship between the level of lighting and productivity. In some
cases, productivity improved when the conditions were made much
worse. This simply means that the level of production was
influenced by factors outside the physical conditions of work.

ii. The relay assembly test room

In the relay assembly test room, the work was boring and repetitive.
A team was created that had a mixer of friends and in some cases
merely co-workers. The researchers divided the experiment into 13
periods during which the workers were subjected to a series of
planned and controlled changes to their conditions of work, such as
hours of work, rest pauses and provision of refreshments.

During the experiments, the observer adopted a friendly approach,

consulting with the workers, listening to their complaints and
keeping them informed of the experiment. There was a general
increase in production. The researchers concluded that extra
attention given to the workers and the apparent interest in them
shown by management was the main reason for higher productivity.
iii. The interviewing programme
The preceding phases of the experiment drew attention to the effect of
supervision on worker's productivity. Under this phase, the research
sought to establish the feelings of workers towards their supervisors
and the general conditions of work through a large interviewing
programme. Initially the interviewers formulated a structured
questionnaire focused on the views of workers on their jobs. The
questionnaires produced limited information and the workers talked
about other issues other than supervision and immediate working
conditions.

The style of interviewing was changed with and introduced more non-
directive and open-ended questions. The interviewers set out to be
friendly and sympathetic and adopted an impartial, non-judgmental
approach and concentrated on listening. This approach produced some
very valuable information of the workers' views on supervision,
working conditions, company itself, management, work group
relations and matters outside the work such as family life and views on
society. Many workers welcomed the opportunity of having someone
to talk to about their feelings and problems. This experiment led to an
 impetus to the development of the human resource management and
use of counselling interviews and the need for management to listen to
the workers feelings and problems. Being a good listener is still very
important in today's management thinking.

iv. The bank wiring observation room

This experiment involved the observation of 14 men working in the
bank wiring room. The results revealed that men tended to form
informal working groups, with subgroups or cliques with natural
leaders emerging with the consent of other members. The group
formed its own social relationships with group norms of what
constituted a proper behaviour. The group controlled output levels
despite the availability of financial incentives for more output. The
group pressure on individual workers was stronger than the
management financial incentives.

2.2 Evaluation of the Human Relations School

This approach has been subjected to severe criticism as follows:

a. The Hawthorne experiments have been criticised on their

methodology, and on the failure of the investigators to take sufficient
account of environmental factors.

b. The human relations advocates were criticised for the adoption of a

management perspective, their unitary frame of reference and their
oversimplified theories.

c. It was insufficiently scientific, took a narrow view and ignored the role
of the organisation itself in how society operated.
2.3 Importance of the Hawthorne Experiment
a. They did develop new ideas concerning the importance of work
groups and leadership, communications, output restrictions,
motivation and job design.
b. They placed emphasis on the importance of personnel management
and gave impetus to the work of the human relations writers.

c. They undoubtedly marked a significant step forward in providing a

further insight into human behaviour at work and the development
of management thinking.
C SYSTEMS THEORY

One of the founders of the systems theory was biologist Ludwig von
Bertalanffy (1951) who used the systems theory. The classical approach
emphasised technical requirements of organisations thus organisations without
people while the human relations school emphasised the psychological and
social aspects and the consideration of human needs thus people without
organisations. The systems approach attempted to reconcile these two
approaches and focused on the analysis of organisations as systems with a
number of interrelated subsystems.
 The systems approach focused on the total work organisation and the
interrelationships of structure and behaviour and the range of variables with the
organisation. Organisations are complex social systems and are more open to
change than lower-level simple dynamic or cybernetic system.
The business as an open system

A business organisation is an open system with continuous interaction with the

external environment of which it is part. An organisation is viewed within the
total environment and emphasises the importance of the multiple channels of
interaction. The systems approach views the organisation as a whole and
involves the study of the organisation in terms of the relationship between
technical and social variables within the system. Any changes in one will affect
the other parts and thus the whole system.

D.CONTEMPORARY CONTINGENCY THEORY OF MANAGEMENT

The classical approach suggested one best form of structure and placed
emphasis on general sets of principles while the human relationships approach
gave little attention at all to the structure.

The contingency approach renewed the importance of structure as a significant

influence on organisational performance. Contingency approach assumes that
there is no one optimum state. The approach for instance states that the
structure of organisation and its success are dependent thus contingent on the
nature of tasks, with which it is designed to deal with and the nature of
environmental influences.

The most appropriate structure and system of management will always depend
upon contingencies of the situation for a particular organisation. The approach
argues that managers should not seek to suggest one best way to structure or
manage the organisations but should provide insights into the situational and
contextual factors, which influence management.

Questions

1. Why is the study of the management theory important? Explain.

2. Even though the human relations school of thought (Hawthorne

experiments) was criticised, there were still some very significant
learning experiences from these studies. Outline the important
experiences learned from the Hawthorne studies/experiments.

3. All organisations today cannot do without some bureaucratic practices

in their day-to-day management. Is this statement correct? Give
reasons for your answer.

4. Explain at least four approaches to the practice of management.

Discuss your understanding of the theory/approach to management.

5. The principles of management propounded by Henri Fayol had a

significant impact on management even today. Outline the principles
of management and explain their impact on modern management.
CHAPTER 4.0
MOTIVATION
Learning objectives
After completing this unit, the student shall be able to:
 Understand the meaning and underlying concept of motivation;
 Appreciate the various types of need and expectations of people at work;
 Be able to understand the theory of motivation
 Review the complex nature of work motivation and rewards.

ELEMENT 4.1 THEORIES OF MOTIVATION

Introduction

The relationship between the organisation and its members is influenced by

what motivates them to work, the reward system and the fulfilment they derive
from it. The manager or supervisor needs to know how best to elicit the
cooperation of staff and direct their performance to achieving the goals and
objectives of the organisation. The manager must understand the nature of
human behaviour and how best to motivate staff so that they work willingly
and effectively. In summary, the study of motivation is concerned basically
with why people behave in a certain way.

Motivation may be defined as the direction and persistence of action. It is

concerned with why people choose a particular course of action in preference
to others and why they continue with a chosen action, often over a long period,
and in the face of difficulties and problems.

Process of Motivation

Four common characteristics of motivation theories are as follows:

a. Motivation is typified as an individual phenomenon, as each person is unique.

b. Motivation is described, usually as intentional as it is under the worker's
control.
c. Motivation is multifaceted as it revolves around what makes a person
activated or aroused and the force of an individual to engage in desired
behaviour.
d. The purpose of motivational theories is to predict behaviour thus the internal
and external factors that influence a person's choice of action.

The underlying concept of motivation is some driving force within individuals by

which they attempt to achieve some goal in order to fulfil some need or expectation.
The basic motivation model is as given below.
Performance = function (ability x motivation)
Maslow's Hierarchy of Needs Model

Maslow's basic assumption was that people are wanting beings, they always want
more and what they want depends on what they already have. He suggested that
human needs are arranged in some form of levels, a hierarchy of importance. He
identified the hierarchy to range through to five levels from the lowest level namely
physiological needs, through safety needs, love needs, esteem needs to the need for
self actualisation at the highest level.
The hierarchy of needs are usually shown in a pyramid,, which reduce as one goes to
higher level needs as follows.

a. Physiological Needs. These include needs for satisfaction of hunger and

thirst, need for sleep, sensory pleasures, activities, material behaviour and sex
desire.

b. Safety Needs. These include safety and security, freedom from pain or threat
of physical attack, protection from danger or deprivation and the need for
predictability and orderliness.

c. Love or Social Needs. These include needs for affection, sense of belonging,
social activities, friendship, and giving and receiving of love.

d. Esteem or Ego Needs. These include self-respect and esteem of others. Self-
respect involves the desire for confidence, strength, independence and
freedom and achievement. Esteem of others means reputation or prestige,
status, recognition, attention and appreciation.
e. Self-Actualisation Needs. This is the development and realisation of one's full
potential. Maslow regards this as what humans can be, they must be, becoming
everything that one is capable of becoming.
Once a lower level need is satisfied, it no longer acts as a strong motivator but the
higher level need becomes the motivator and so on. Thus a satisfied need is no
longer a motivator.

Evaluation of Maslow’s theory

Maslow based his theory on the assumption that once lower level needs are satisfied,
giving more of the same does not provide motivation. However there were some
problems in applying the theory to work situations.

i. People do not necessarily satisfy their needs especially higher-level needs,

just through the work situations but other areas.
ii. There is doubt about the time which lapses between the satisfaction of a
lower level need and the emergence of a higher level need.
iii. Individual differences mean that people place different values on the same
need.
iv. Some rewards or outcomes at work satisfy more than one need, e.g. salary
or promotion.
v. Even for people within the same level of hierarchy, motivating factors will
not be the same.
vi. Maslow viewed satisfaction, as the main motivational behaviour but job
satisfaction does not necessarily lead to improved work performance

Hertzberg's two-factor theory

Hertzberg carried out interviews with 203 accountants and engineers from different
industries. Using critical incident methods, he asked respondents to indicate when
they felt exceptionally good or exceptionally bad about their jobs or previous jobs.
They were requested to give reasons for either condition. The findings revealed two
different sets of factors affecting motivation. The two-factor model of Hertzberg was
born from these interviews namely motivators and hygiene factors.

a. Hygiene or Maintenance factors. These factors are related to the job

context, thus job environment. They serve to prevent dissatisfaction but do
not lead to motivation. These factors are necessary to avoid unpleasantness.

b. Motivators or Growth factors. These are factors that create a feeling of

satisfaction but not dissatisfaction. The motivators relate to what people are
allowed to do and the quality of human experience at work.

Hertzberg's work or the motivation-hygiene theory extended Maslow's hierarchy of

needs theory and is more directly applicable to the work situations.
Personality Attitudes

Through experience and learning, people acquire beliefs and attitudes, which
influence their behaviours towards work. A belief is a descriptive thought that a
person holds about something such as the value of work and work processes.
Attitudes describe a person's enduring favourable or unfavourable cognitive
evaluations, emotional feelings and action tendencies towards some object or idea.
The beliefs and attitudes are personality factors that have a bearing towards one's
attitude to work. Each person has distinct personality that will influence his or her
work ethic and motivations towards work. Essentially, what intrinsically motivates an
individual to carry out work assignments willingly?

Personality is the person's distinguishing characteristics that lead to consistent

and enduring responses to his or her environment. Personality is usually
described in terms of traits such as self-confidence, dominance, autonomy,
deference, sociability, defensiveness, and adaptability or rigidity.
MARKETING AND SALES MANAGEMENT

Marketing has been defined in many different ways. This is the set of activities that
directs the flow of goods and services from the producer to satisfy consumers and
accomplish the objectives of the organization.

Marketing provides the match between the organization’s human, financial and
physical resources and wants of customers. This includes gathering data about direct
and indirect competition, economic uncertainties, legal and political and other
constraints. All this must be done against an environmental background of change
and uncertainty.

Relationships with the market are an important ingredient of corporate planning and
policy-making. Organisations have developed several different ways of regarding
their existing and potential customers. Most notable options are;

(i) PRODUCTION ORIENTATION

Here, the organization concentrates its attention on production efficiency, distribution

and cost in order to attract customers to its products. This works well when demand
is well ahead of supply, and where lower costs will encourage people to buy.

(ii) PRODUCT ORIENTATION

The organization stands or falls by the quality of its products. The thinking behind
this orientation is that customers buy products or services rather than solutions to
problems. E.g. in Education, the arts and journalism, where the inference often is
that, the supplier knows best what the customer needs.

(iii) SALES ORIENTATION

Here, the dominant concept is that people will not buy until they are persuaded to buy
by positive selling. Thus the focus of attention is more on the skills of selling, than on
the needs of the buyer. E.g. life insurance companies have adopted this approach over
the years.

(iv) MARKET ORIENTATION

A market-orientated organization is one which falls on the needs of its customers. Its
primary concern is to find out what its customers needs and wants are so as to meet
them with the highest level of customer satisfaction. In this situation production
responds to the demands of marketing rather than the other way round. This approach
to marketing is called the ‘marketing concept’ and its prospective is radically different
from the approaches of production, product and sales-orientated organizations.

MARKET SEGMENTATION
Market Segmentation can be defined as the subdivision of a market into identifiable
buyer-groups or sub markets, with the aim of reaching such groups with a particular
marketing mix. These are divided according to one or more characteristics that affect
the ability and willingness to buy a product. The most frequent methods of
segmenting a market are base on geographical, demographic, buyer-behaviour
variables.

(i) GEOGRAPHICAL CHARACTERISITCS

These include climate, city size, country size, population density, and region. Climate
influences sporting goods and clothing. Rainwear products, for example, will sell
more in the wetter parts of a country. Retail chains locate stores in areas of high
population density.

(ii) DEMOGRAPHICAL CHARACTERISTICS

These include age, sex, income, size of family, level of education, occupation, and
social class. These correspond with human wants and needs for products and they are
quite easily measured. Magazines and journals are examples of products which are
directed towards carefully segmented markets.

(iii) BUYER BEHAVIOUR/PERSONALITY CHARACTERISTICS

These include personality characteristics of independence, introverts, extroverts, and

status seekers. An important variable in buyer behaviour is usage rate. Some buyers
are very light users of a product, where as others use the same product.

THE MARKETING MIX

This concept was first expounded by Prof Neil Borden of Harvard University in the
1940s. He identified twelve key variables in the typical marketing programme.
These twelve variations have subsequently been reduced to four main headings by
later writers.

The mix is now defined as, the particular group of variables offered to the market at a
particular point in time. These variables are;

(i) Product (ii) Price (iii) Promotion (iv) Distribution

Each of these can be further subdivided as follows:

(i) Product

- variety
- Quality
- Brand name
- Packaging etc

(ii) Price
 - Basic price
- Discount
- Credit terms etc

(iii) Promotion

- Advertising
- Personal selling
- Sales promotion
- Publicity etc

(iv) Distribution/ Place

- Channels
- Sales force
- Coverage
- Transport etc.

The marketing mix is the central part of our organisation’s marketing tactics. Once
the market situation (customers, competitors, suppliers, middlemen etc0 has been
identified and evaluated, and once the decision has been made to penetrate, or
develop, a particular market then the role of the marketing mix is crucial.

The element of time is a vital factor in assessing the particular mix to be offered to a
market. Any market situation can change rapidly over even a short period of time, as
can be the case when a major competitor is suddenly declared bankrupt. By using the
marketing mix as a tactical tool of an organisation’s marketing plans, it is possible to
adapt speedily and promptly to changes in the marketing environment.

PRODUCT

Any discussion about the marketing mix must begin with the product.

The ‘Product’ means anything that is offered to a market for its use or consumption.
The product can be physical object or a service of some kind. The product offered by
a manufacturer consists of physical items, such as machine tools, television sets,
loaves of bread etc. Products offered by service industries include hospital care,
dental treatment, accountancy services etc.

In considering products, it is important to not that people generally want to acquire

the benefits of the product, rather than its features. Equally, organizations are selling
the benefits of that product, such as quality, brand, packaging and after-sales service,
where applicable.

Where quality is designed into a product, the benefits can be long product life,
absence of faults and subsequent breakdowns, reliability, increase in value and many
others.
Product quality may be high or low, depending on the wants or preferences of the
market, and part of an organisation’s product strategy is to decide the level of quality
to be aimed at.

One important method used to sell benefits is by branding products. This means
applying the organisation’s ‘signature’ to its product by the use of special names,
signs or symbols.

Packaging is also an important factor in the presentation of a product to the market.

Not only does packaging provide protection for the product but it can also reinforce
the brand image and the point-of-sale attraction to he buyer. Other aspects of
packaging may emphasise the convenience of the pack

PRODUCT LIFECYCLE

Most products pass through a series of stages-their life-cycle-from the time they are
introduced until the time they are withdrawn. A product will typically pass through
five major stages in its life.

These stages and their consequences are as follows;

(i) Introduction

Costs are high (because they include the development costs), sales and profits are
low. Few competitors. Price relatively high.

(ii) Growth

Sales rise rapidly. Profits at peak level. Price softens. Increasing competition.
Unit costs decline. Mass market appears.

(iii) Maturity

Sales continue to rise, but more slowly. Profits level off. Competition at its peak.
Prices soften further. Mass market.

(iv) Saturation

Sales stagnate. Profits shrink. Measures taken against remaining competition.

Prices fiercely competitive. Mass market begins to evaporate.

(v) Decline

Sales decline permanently. Profits low or even zero. Products is withdrawn from the
market.
The total length of time over which a product may decline on a variety of factors,
such as its relevance to basic needs, its adaptability in the light of economic trends. A
basic foodstuff, such as mealie-meal will have a long life cycle. Conversely an
expensive car with high fuel consumption will tend to have a short life cycle
compared to one which does not consume more fuel.

Taking into account the various stages of the product lifecycle and the period of time
concerned, it is possible to plan the product mix, plan the development and
introduction of new products, plan the withdrawal of obsolete or unprofitable
products, and set the revenue targets for each produce within the total range. If the
current position of any one product is plotted correctly on its life-cycle, then it is
possible to assess the potential growth of sales, or the degree which prices should be
allowed to soften in order to maintain the market share, or whether the product should
be superseded by another. Thus the concept of the product lifecycle makes an
important contribution to forecasting of sales and planning of products.

PRICE

Price is important because it is the only element of the mix which produces revenue,
the other all represent costs. Sellers gear prices to a number of key factors such as:-

i. The cost of production (and development)

ii. The ability to generate sufficient revenue and /profits
iii. The desired market share for the product
iv. The prices being offered by the competition

Price is also and especially important at certain times like:

a. When introducing new products

b. When placing existing products into new markets
c. During periods of rising costs of production
d. When competitors change other elements in their marketing mi (e.g.
improving quality or adding features without increasing prices)
e. When balancing prices between individual products in a product line.

Pricing is a very flexible element in the marketing mix and enables firms to react
swiftly to competitive behaviour.

PROMOTION

The promotion function of marketing has other sub functions such as;

(i) Personal selling

(ii) Advertising
(iii) Sales promotion
(iv) Public relation
(v) Sponsorship

(A) PERSONAL SELLING

Personal selling is an essential component of the promotion mix because it is the only
component which can actually negotiate and agree the contract of sale.

The personal salesman;

(i) Locates and controls new, potential customers;

(ii) Informs customers about product, and its price, special features, availabil-
ity etc.
(iii) Persuades customer to prefer product.
(iv) Answers questions about product;
(v) Demonstrates product
(vi) Negotiates contract of sale.

Salesforces are usually organized on one of the following bases:

(i) by geographical area

(ii) by type of product
(iii) by type of consumer
(iv) by type of industry
(v) some combination of the above

A good salesman needs to have;

(i) Good health

(ii) Energy
(iii) Determination
(iv) Faith in himself, his company and its products.
(v) Empathy to identify with the customer and his needs and think as the cus-
tomer does.
(vi) Acceptable personality
(vii) Good appearance etc.

(B) ADVERTISING

Advertising is a non-personal communication directed at target audiences through

various media to present and promote products, services and idea.

The main advertising objectives may be classified as follows: be classified as follows;

(i) To create awareness

(ii) To provide information
(iii) To persuade
(iv) To remind
(v) To reinforce the purchase decision.

Whilst advertising may deal directly with the media owners it is customary to work
through an advertising agency. The media break down into various types, printed,
audio-visual, outdoor. Each varies in its ability to perform a specific advertising task;
e.g. a specialist magazine is better at giving detailed information than TV but TV is
better at capturing the attention of a wide selection is choosing the medium which will
best achieve the advertising objective at the lowest cost.

( c) SALES PROMOTIONS

This is also known as ‘below the line’ advertising, with media advertising being
‘above the line’ .

Sales promotion aims to persuade non-users to try the product and regular users to
increase their purchases, by offering some inducement to buy, over and above the
benefits implicit in the product itself. Such inducements may be financial (a money
off offer), tangible (e.g. a ‘free gift) or intangible (e.g. an opportunity to enter a
competition).

Every promotion aims to achieve either

(a) long –term growth in brand share, or

(b) A short-term gain in brand share or both.

The difference in the two objectives is reflected in their relative cashflows: the long-
term growth promotion is expected to yield profits in the future, through the increase
in loyal customers, whereas the short-term gain promotion must yield profit
immediately.

PUBLIC RELATION (PR)

Definition:

Public relations practice is the deliberate planned sustained effort to establish and
maintain mutual understanding between an organization and its public.

It is therefore broader in scope and embracing such areas as;

(i) Corporate and Financial PR

Projects the image of an organization and helps to maintain its position in the stock
market. Produce sales may be affected by favourable or adverse publicity about the
company and its financial management.

(ii) Community Relations

Environmental issues as pollution, land development, establishment of new factories
etc will affect the public’s attitude to the company and, by association, its products.

(iii) Industrial Relations

Publicity about industrial relations may affect attitude toward product quality and
deliveries.

(iv) Relation with opinion Leaders

The attitude of the general public toward a company and its products may be
influenced by opinion leaders such as politicians, Journalists, broadcasters, leaders of
specialized institutions or other pressure groups who in turn may be influenced by
their relationships with the company.

(E) SPONSORSHIP

Sponsorship is when a company contributes to the cost of public entertainment such

as a concert or sporting event. Often the sponsor awards a substantial cash prize to
the winner of sporting event.

Sometimes the sponsor pays the cost of a team or individual player.

The objectives of sponsorship are:

(i) Favourable publicity for the product or service

(ii) Association of the image of the sport with the product

DISTRIBUTION

This is primarily concerned with the task of moving the product to the consumer.
This task is achieved via a number of channels of distribution. There are marketing
institutions set up to facilitate the movement of goods and services from their point of
production to their product of consumption. The most frequent elements to be found
in a marketing channel are - manufacturers, wholesalers, retailers and customers. The
middlemen may sometimes be excluded from a channel.

Manufacturer Customer
Manufacturer Wholesaler Retailer Customer
Manufacturer Wholesaler Customer
Manufacturer Retailer Customer

TYPES OF PRODUCTION

(i) Job Production (Unit Production)

This occurs when a customer requires a single product made to his specification,
e.g. a ship or a suit. Demand can be only broadly forecasted and generally
production schedules can be prepared only when the customer’s order arrives.
There is no production for stock and there are only limited stocks of materials
 kept. There must be a wider variety of machines and equipment available to do all
types of work and lobour must have varied skills, this may not be too easy to
achieve.

Key Features of Job Production

(i) A wide variety of different operations to be performed under varying cir-

cumstances i.e. No Standardisation
(ii) Varying sequences of operations, also subject to subject to varying circum-
stances.
(iii) General purpose machinery and equipment
(iv) Varied work layouts, depending on process and/ or operation
(v) Unpredictable demands on stores
(vi) Workforce skilled in wide range of skills
(vii) Adaptable and equally skilled supervision

Because of the unique or individual nature of each article or, item to be produced,
planning is not easy in job production, neither is control. Efficiency of operations has
to give way to inventiveness and creativity. It is difficult to avoid idle time for both
men and machines. Thus the entire manufacturing process tends to be relatively
expensive compared with other forms of production.

(ii) BATCH PRODUCTION

This occurs where a quantity of products or components are made at the same time.
There is repetition but not continuous production. Production often is for stock, but if
a batch is required to fulfill a special order the items are usually completed in one run.
These are usually standardized units mostly found in the light engineering industry.

On of the major problems associated with batch production is to determine the

optimum size of batches, particularly where a generalized, rather than specific,
demand for a product exists.

Key Features

(i) Standardised set of operations, carried out intermittently (happening in in-

tervals) as each batch moves from one operation to the next.
(ii) General-purpose machinery and plant, but group in batteries of the same
type.
(iii) Heavy shop floor stores requirement.
(iv) Narrower range of skills required.
(v) Emphasis on production planning and progressing.
(vi) Relatively short production runs

These characteristics lead to a generally well-controlled and efficient method of

production, whose main disadvantage is the time-delay caused by the queuing effect
of individual units waiting for the batch to be completed before moving on to next
operation.
 (iii) FLOW PRODUCTION

This occurs where there is a continuous production of products of a more or less

identical nature. There is very little waiting between the execution of one operation
and another and each machine is continually used for one product and these are often
specialized single purpose machines. This type of production requires careful and
lengthy planning of plant and processes. The capital cost is high an account of the
specialized nature of the machines required for the production line. The supply of
raw materials has to be planned to the highest standards in order to avoid complete
plant shutdown owing to unforeseen shortages.

Its greatest drawback is that it requires human beings to adapt themselves to the
production process, and in most Western countries, there has been a reaction against
this requirement.

Key Features

(i) Product specifications, previously tested

(ii) Specialised machines and equipment, set out in a line formation
(iii) Highly-standardised methods, tools and materials
(iv) Long production runs for individual products
(v) Narrow range of skills and specified range of operations required by workforce
at any one point in the line.

SITE SELECTION AND FACTORY PLANNING

The selection of a site may be dependent upon;

(a) Availability of Land.

Land of the right nature and price must be available. There must be
provision for expansion. In this connection there are government
development aids which provide facilities for easy land purchase, and give
other benefits.

(b) Availability of labour.

The availability of labour of the right type is a strong locational factor.

(c) Availability of raw materials:

This is closely linked up with transport facilities, with regard to obtaining

the raw material and later in disposing of the product. Proximity to sea,
river, road or rail is usually important and essential.
 (d) Climate

For some industries climate may be a very important consideration in the

choice of a site.

(e) Local regulations or by-law

These may be an important consideration as they may place restrictions on

the industry.

(f) Social Facilities:

Availability of cultural and recreational activities, for example, and the

suitability of housing accommodation may be important.

SELECTION OF TYRE OF BUILDING

(i) Single-storey buildings can make better use of natural lighting.

Heavy machinery can be placed with fewer restrictions compared
with multi-storey buildings. Transport and movement of materials
is quicker and easier and there is a lower cost of building and main-
tenance.
(ii) Multi-storey buildings make better use of scarce land. Gravity can
be used for moving materials and there is economy of cabling and
heating.
(iii) There are of course many others factors to be considered by the ar-
chitect, e.g. position of workshops, canteen, offices etc. whatever
type of building is considered, factory Act regulations must be
noted, especially regarding heating, lighting, ventilation and safety.