These notes cover the textbook Introduction to business management from chapters 1-6. Detailed notes include the textbook, lecture notes as well as study guide notes. It focuses on the business world and the place of management.
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The business world and business management
& The business dictionary (n.d) defines an organisation as “a social unit of
1.1 Introduction people, systematically structured and managed to meet a need or to
® “Business organisation as machine” – shadows over the way we think pursue collective goals on a continuing basis. All organisations have a
about business management as creates mindset that change is unusual. management structure that determines relationships between functions
and positions, and subdivides and delegates roles, responsibilities, and
® Change is the new constant; thus, to sustain business operations, authority to carry out defined tasks. They affect and are affected by the
managers must constantly consider and monitor the interrelationship environment beyond their boundaries.
and interactions between areas of management, as well as between the
organisation and its business environment. ∆ It is apparent that there is no agreed definition of a business
organisation, however various views embrace the idea that
® 21st century altered business environments significantly across the globe organisations are: groups of people, acting together in pursuit of the
(Felin and Powell, 2016). This complex and ever-changing business triple bottom line (profit, planet, people).
environment poses new challenges to orthodox views of business
management that occur in real time (Meredith and Francis, 2000). ® Sustainable value cannot be created for one group of stakeholders
unless it is created for all stakeholders. Ex. Value creation for
® Therefore, it is imperative for managers to understand how customers cannot be achieved unless the right employees are
contemporary organisations, through deployment of unorthodox recruited, developed, rewarded and unless investors receive
management principles, successfully align and realign their resource base, consistently attractive returns.
to ascend to new spheres (business models), structures, processes and
value chains. Discovery Limited is a South African-founded financial services organisation that
has mastered the art and science of creating sustainable value for all its
stakeholders. It operates in the healthcare, life assurance, short-term insurance,
1.2 What is a business organisation? savings and investments, banking, and wellness markets. Established in 1992,
& An organisation is a collection of people working together to achieve a Discovery is guided by a clear purpose – to make people healthier and to enhance
common purpose. In so doing, the members can accomplish tasks that are and protect their lives. Its core purpose has manifested in a globally relevant
far beyond the reach of anyone acting alone (Schermerhorn, 2001). Shared-Value business model (see image below), with Vitality at the centre, which
creates value for its businesses, clients and society.
& Osifo (2013) defines it as a social entity, where people are systematically
structured and managed to meet a set target on an endless basis and can be
driven by profit or humanitarian interest.
, Figure 1: Shared-Value business model (Discovery Limited, 2020)
Figure 2: Trends underpinning the shared-value model (Discovery, 2018)
1.2.1 A business organisation in action
1.3 Business management defined
® Discovery’s core purpose is to make people healthier and enhance and
protect their lives. Discovery does this by creating awareness of health
risk factors, helping to manage and improve their health. Give people & According to Erasmus, Rudansky-Kloppers and Strydom
tools to become healthier and reward them for adopting a healthier (2019), business management is an applied science that is concerned
lifestyle. with the study of need-satisfying organisations in a particular economic
- Discovery health aims to protect people’s health by providing system.
comprehensive medical cover when they are sick. Protecting lives
is about giving security that should a life changing event occurred o The purpose: to produce the greatest number of units of
and also providing financial security. products/services effectively at the lowest possible cost. = From this
- Discovery life offers flexible and relevant pure-risk protection emerges the task of business management, which is to determine
products. how an organisation can
- Discovery invest offers value-adding solutions that help people achieve the highest possible output with the least possible factors of
build wealth and provide protection against poor investment production.
choices.
- Discovery insure and make peoples better drivers through their o BM is also concerned with the study of micro-foundations of agility.
incentive-based driver programme, vitalitydrive.
o The environment in which business organisations operate have
become capricious, volatile and highly competitive = socio-
economic, political and technological changes in the last few
decades.
, o The notion of agility and ambidexterity is linked to the coevolution
concept and dynamic capabilities theory, which underscores the ® Entrepreneurs are at the heart of all business activities and through
importance of endogenous variables: their creativity and innovation, start and sustain business venture
- Planning thereby creating jobs. Job creation grows the economy and
- Organising subsequently improves society’s welfare. Businesses have the power to
- Leading transform communities they operate in for the better by acting
- Controlling responsible in their pursuit for profit.
, to achieve evolutionary fitness as well as averting business
organisations from decomposing into pandemonium ® In the same vein (Erasmus et al, 2019), argue that businesses must
(disorder/confusion). trade off the demands of divergent stakeholders to strive for
sustainability and the best interests of the society they serve.
o Dynamic capabilities are strategic processes and routines used
by managers to reconfigure their organisations to keep up with « Externalities: can be loosely regarded into positive and negative
changes occurring in their respective industrial setting (Atkinson, externalities. Unethical business activities exacerbate (make worse)
2013; Mushore, Rossouw and Bounds, 2019). negative externalities such as pollution.
o Business management focuses on the practices of an organisation ® Negative externalities can be defined as a cost suffered by a third party
within a free-market context were individuals have the freedom to as a result of an economic activity / business transactions.
decide what to produce and how to produce it (Erasmus et al,
2019)
® From a corporate social responsibility (CSR) standpoint, business
o BM is concerned with managing the coordination, the organisation organisations have a responsibility for their impact on society and the
of business activities, its employees and management tasks necessary natural environment. The term corporate citizenship is the recognition
for the smooth operation of the organisation. that businesses are an integral part of communities, affording the
organisation standing as a juristic person in the society with the rights
o All functions in a business operate within a system and are but also the responsibilities and obligations.
interrelated
1.4 The role of business in society
® In a mixed economy, business organisations in pursuit of the triple
bottom line (profit, people, planet) transform resources into products
and services to meet the needs and wants of society. Business is how
society endeavours to satisfy its needs and improve its standard of
living creating wealth.
, 1.5 Understanding human needs and wants
o Needs can be basic and few or intricate and numerous (Erasmus et al,
2019). No matter which form or level, they require some degree of
satisfaction.
o Abraham Maslow (1908-1970), in an attempt to unpack the subtle
nuances of human needs, put forward a theory: Maslows hierarchy of
needs.
1.5.1 Maslow’s hierarchy of needs
® Is a five-stage model arranged in a pyramid style starting from lowest
at bottom to most at top
- From a business point of view: the ability to satisfy needs and
wants is the key to making a profit and maximizing shareholders
wealth.
- Products can be tangible and intangible
- To sustain a competitive advantage over competitors, it is of
paramount importance for contemporary organisations to
understand the needs and wants of their customers which leads on
to the notion of artificial intelligence (AI) and business intelligence
(BI).
® Modern business organisations can gain prescience and foreknowledge
• Physiological needs: include basic amenities of life. (food, shelter) in less time with augmented analytics software. SAP Analytics Cloud
• Safety and security needs: include job security, pension plans and and augmented analytic software make it possible for organisations to
physical protection. fuse intelligence and enterprise planning workflows with powerful AI,
• Affiliation / social needs: include the need for love, friendship, BI and deep learning technology. Such capabilities and possibilities make
it possible for organisations to quickly unravel deep insights and make
belonging.
confident data-driven decisions that will give a business a sustainable
• Esteem needs: refer to a positive self-image, self-esteem,
competitive edge over competitors. Such technology makes businesses
recognition and career development prospects.
understand customers’ needs and wants at a click of a button.
• Self-actualization needs: involves one reaching the apex of self-
growth, achievement and opportunities for skills development and
innovation.
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