1. Welcome to MT140 Introduction to Management Unit 2 Seminar – Foundations of Management

2. Agenda General Questions and Announcements Introduction Business Organizations as Open Systems Management Environmental Considerations Major Management Theories Conclusion of Seminar

3. Unit 2 Objectives During this unit we will: 1.Describe the business organization as an open system. 2. Identify the role of internal and external environmental factors in business. 3. Identify significant past and current management theories.

4. Key Concepts Organizations are open systems that are influenced by their environment and in turn, influence their environment. All organizations must operate in a macroenvironment. All organizations must operate within a competitive environment.

5. Businesses are Open Systems Organizations that are affected by, and that affect, their environment. See Figure 2.1 page 28. They take in Inputs: In the form of goods and services to create products or services. They produce Outputs: In the form of goods or services. These are in constant interaction with the firm’s environment. These impact and are impacted by both the External Environment and the Macroenvironment.

6. Inputs Into The Open System Raw Materials Services Equipment Capital (Human Labor, Money, Intellectual, Managerial, etc.) Information (Knowledge)

7. Outputs Into The Open System Products (Example: Cars, Computers, Furniture, Groceries, etc.) Services (Example: Accountants, Medical Services providers, Banking, etc.).

8. External Environment (page 29, Figure 2.2) All relevant forces outside the firm’s boundaries. These include competitors, customers, the government, and the economy. Examples: --Copyrights, patents, trademarks, government licenses --Industry-specific requirements for entry --Specific taxes --Interest rates for both customers and business --Technological changes that impact the firm (Example: iPods versus tape players; regular cameras versus digital cameras, etc.)

9. Macroenvironment A part of the External Environment that forms the general environment for the firm. Includes: --Governments (Government actions, rules, laws, regulations, etc.). --Economic Conditions (Amount of money, interest rates, etc.). --Technology --Demographics (age, gender, family size, income, education, occupation, etc.). --Social Issues (labor force, corporate social actions, strategic decisions about products and markets).

10. Competitive Environment A part of the External Environment that forms the immediate environment surrounding the firm. (Figure 2.3, page 34) Includes: --Customers - Current customers as well as potential customers. --Rival Firms - Size, efficiency, and market position of current competitors. --Potential rival firms - Size, efficiency, and market position of potential competitors. What could customers substitute for your product? --Suppliers and others that the firm needs to conduct business (Distribution channels).

11. Barriers to Market Entry New firms enter markets when barriers to entry are low and less enter when these increase. Barriers can originate from: --Government Policy and Controls --Capital Requirements - $$$ --Brand Identification – Loyalty to familiar brands. --Cost Disadvantages - Savings due to size, large vs. small. --Distribution Channels – Promotions, quantity price breaks, etc.

12. Substitutes and Complements Substitute – a potential threat. Customers use it as an alternative, buying less of one kind of product but more of another. Complement -- a potential opportunity, because customers buy more of a given product if they also demand more of the complementary product.

13. Ultimately the Customer Decides! Ultimately, it is the customer who determines the success or the failure of a business. Regardless of the type of customer involved, business organizations that create value for their customers will retain their customers and attract new ones. Those that fail to provide perceived value for the customer will eventually lose customers and fail. Profit is the measure of how well a business provides value to its customers! Management plays a key role in determining how well a business provides this value.

14. Clues to Company Culture Corporate Mission Statement Business practices Symbols, rites, and ceremonies ‘People’ stories

15. Something to Think About….. What type of company culture is important to you in your career? Is it one that emphasizes teamwork or efficiency? Is it one that emphasizes creativity or competitiveness?

16. Management Theories “The Evolution of Management” focused on the business management theories that extend over many years and cover many different aspects of the management function. --Classical Approach – 1.) Scientific – ‘One best way’, Frederick Taylor. 2.) Administrative -- function to be applied to any size organization. --Behavioral Approach – Hawthorne Experiments. --Systems Approach – W. Edwards Deming, ‘14 points’, Total Quality. --Contingency Approach – “‘It depends…” Cause and effect of managerial decisions.

17. Any questions ?

18. See you next week! After this seminar has concluded, there will be a recording in the archives located in the seminar room. It may be selected by date. Thanks for joining us in the seminar!