Organisation structure & management

ORGANISATION STRUCTURE & MANAGEMENT

MODULE I: Management and Nature of Organization

Management in all business and organizational activities is the act of getting people together
to accomplish desired goals and objectives using available resources efficiently and effectively.

Management is the process of getting activities complete efficiently and effectively with and
through other people. Management functions include: Planning, organizing, staffing, directing,
coordinating, reporting, and budgeting.
Frederic Taylor's 4 principles of management:
- Develop a science for each element of an individual's work
- Scientifically select, train and develop the worker
- Heartily cooperate with the workers
- Divide work & responsibility equally between managers & workers
- Improve production efficiency through work studies, tools, economic incentives

Management comprises planning, organizing, staffing, leading or directing, and controlling an
organization (a group of one or more people or entities) or effort for the purpose of
accomplishing a goal. Resourcing encompasses the deployment and manipulation of human
resources, financial resources, technological resources, and natural resources.
Since organizations can be viewed as systems, management can also be defined as human
action, including design, to facilitate the production of useful outcomes from a system. This
view opens the opportunity to 'manage' oneself, a pre-requisite to attempting to manage others.
History
The verb manage comes from the Italian maneggiare (to handle — especially tools), which in
turn derives from the Latin manus (hand). The French word mesnagement (later ménagement)
influenced the development in meaning of the English word management in the 17th and 18th
centuries.
Some definitions of management are:
• Organization and coordination of the activities of an enterprise in accordance with
certain policies and in achievement of clearly defined objectives. Management is often
included as a factor of production along with machines, materials, and money.
According to the management guru Peter Drucker (1909–2005), the basic task of a
management is twofold: marketing and innovation.
• Directors and managers have the power and responsibility to make decisions to manage
an enterprise when given the authority by the shareholders. As a discipline,

management comprises the interlocking functions of formulating corporate policy and
organizing, planning, controlling, and directing the firm's resources to achieve the
policy's objectives. The size of management can range from one person in a small firm
to hundreds or thousands of managers in multinational companies. In large firms the
board of directors formulates the policy which is implemented by the chief executive
officer.
Theoretical scope
At the beginning, one thinks of management functionally, as the action of measuring a quantity
on a regular basis and of adjusting some initial plan; or as the actions taken to reach one's
intended goal. This applies even in situations where planning does not take place. From this
perspective, Henri Fayol (1841–1925) considers management to consist of six functions:
forecasting, planning, organizing, commanding, coordinating, and controlling. He was one of
the most influential contributors to modern concepts of management.
Another way of thinking, Mary Parker Follett (1868–1933), who wrote on the topic in the
early twentieth century, defined management as "the art of getting things done through
people". She described management as philosophy.[3]
Some people, however, find this definition, while useful, far too narrow. The phrase
"management is what managers do" occurs widely, suggesting the difficulty of defining
management, the shifting nature of definitions, and the connection of managerial practices with
the existence of a managerial cadre or class.
One habit of thought regards management as equivalent to "business administration" and thus
excludes management in places outside commerce, as for example in charities and in the public
sector. More realistically, however, every organization must manage its work, people,
processes, technology, etc. in order to maximize its effectiveness. Nonetheless, many people
refer to university departments which teach management as "business schools." Some
institutions (such as the Harvard Business School) use that name while others (such as the Yale
School of Management) employ the more inclusive term "management."
Features of Management
Management is an activity concerned with guiding human and physical resources such that
organizational goals can be achieved. Nature of management can be highlighted as: -
1. Management is Goal-Oriented: The success of any management activity is accessed
by its achievement of the predetermined goals or objective. Management is a
purposeful activity. It is a tool which helps use of human & physical resources to fulfill
the pre-determined goals. For example, the goal of an enterprise is maximum consumer
satisfaction by producing quality goods and at reasonable prices. This can be achieved
by employing efficient persons and making better use of scarce resources.
2. Management integrates Human, Physical and Financial Resources: In an
organization, human beings work with non-human resources like machines. Materials,
financial assets, buildings etc. Management integrates human efforts to those resources.
It brings harmony among the human, physical and financial resources.

3. Management is Continuous: Management is an ongoing process. It involves
continuous handling of problems and issues. It is concerned with identifying the
problem and taking appropriate steps to solve it. E.g. the target of a company is
maximum production. For achieving this target various policies have to be framed but
this is not the end. Marketing and Advertising is also to be done. For this policies have
to be again framed. Hence this is an ongoing process.
4. Management is all Pervasive: Management is required in all types of organizations
whether it is political, social, cultural or business because it helps and directs various
efforts towards a definite purpose. Thus clubs, hospitals, political parties, colleges,
hospitals, business firms all require management. When ever more than one person is
engaged in working for a common goal, management is necessary. Whether it is a small
business firm which may be engaged in trading or a large firm like Tata Iron & Steel,
management is required everywhere irrespective of size or type of activity.
5. Management is a Group Activity: Management is very much less concerned with
individual’s efforts. It is more concerned with groups. It involves the use of group
effort to achieve predetermined goal of management of ABC & Co. is good refers to a
group of persons managing the enterprise.
Objectives of Management
The main objectives of management are:
1. Getting Maximum Results with Minimum Efforts - The main objective of
management is to secure maximum outputs with minimum efforts & resources.
Management is basically concerned with thinking & utilizing human, material &
financial resources in such a manner that would result in best combination. This
combination results in reduction of various costs.
2. Increasing the Efficiency of factors of Production - Through proper utilization of
various factors of production, their efficiency can be increased to a great extent which
can be obtained by reducing spoilage, wastages and breakage of all kinds, this in turn
leads to saving of time, effort and money which is essential for the growth & prosperity
of the enterprise.
3. Maximum Prosperity for Employer & Employees - Management ensures smooth
and coordinated functioning of the enterprise. This in turn helps in providing maximum
benefits to the employee in the shape of good working condition, suitable wage system,
incentive plans on the one hand and higher profits to the employer on the other hand.
4. Human betterment & Social Justice - Management serves as a tool for the upliftment
as well as betterment of the society. Through increased productivity & employment,
management ensures better standards of living for the society. It provides justice
through its uniform policies.
Nature of Management:
Continuous Process: Management is a never ending process. It will remain the part of
organization till the organization itself exists. Management is an unending process as past
decisions always carry their impact for the future course of action.

Universal in Nature: Management is universal in nature i.e. it exists everywhere in universe
wherever there is a human activity. The basic principles of management can be applied any
where whether they are business or non-business organization.
Management is an universal phenomenon in the sense that it is common and essential element
in all enterprises. Managers perform more or less the same functions irrespective of their
position or nature of the organization. The basic principles of management can be applied in all
managerial situations regardless of the size, nature and location of the organization.
Universality of managerial tasks and principles also implies that managerial skills are
transferable and managers can be trained and developed.
Multidisciplinary: Management is basically multidisciplinary. Though management has
developed as a separate discipline it draws knowledge and concepts of various other streams
like sociology, psychology, economics, statistics etc. Management links ideas and concepts of
all these disciplines and uses them for good-self of the organization.
Management is a group activity. Management is a vital part of group activity. As no
individual can satisfy all his needs himself, he unites with his co-workers and work together as
an organized group to achieve what he can not achieve individually.
Management is goal oriented: Management is a goal oriented activity. It works to achieve
some predetermined objectives or goals which may be economic or social.
Dynamic: Management is dynamic in nature i.e. techniques to mange business changes itself
over a period of time.
System of authority: Authority is power to get the work done by others and compel them to
work systematically. Management can not perform in absence of authority. Authority and
responsibility depends upon position of manager in organization.
Management is an art: Management is considered as art as both requires skills, knowledge,
experience and creativity for achievement of desired results.
Management is Science. Management is considered as science. Science tells about the causes
and effects of applications and is based on some specific principles and procedures.
Management also uses some principles and specific methods. These are formed by continuous
observations.
Purposeful: Management is always aimed at achieving organizational goals and purposes. The
success of management is measured by the extent to which the desired objectives are attained.
In both economic and non-economic enterprises, the tasks of management are directed towards
effectiveness (i.e., attainment of organizational goals) and efficiency (i.e., goal attainment with
economy of resource use).
Social process: Management essentially involves managing people organized in work groups.
It includes retaining, Developing and motivating people at work, as well as taking care of their
satisfaction as social beings. All these interpersonal relations and interactions makes the
management as asocial process.
Coordinating force: Management coordinates the efforts of organization members through
orderly arrangement of inter-related activities so as to avoid duplication and overlapping.

Management reconciles the individual goals with the organizational goals and integrates
human and physical resources.
Intangible: Management is intangible. It is an unseen force. Its presence can be felt
everywhere by the results of its effort which comes in the form of orderliness, adequate work
output, satisfactory working climate, employees satisfaction etc.
Composite process: Functions of management cannot be undertaken sequentially, independent
of each other. Management is a composite process made up of individual ingredients. All the
functions are performed by involving several ingredients. Therefore, the whole process is
integrative and performed in a network fashion.
Creative organ: Management creates energetic effect by producing results which are more
than the sum of individual efforts of the group members. It provides sequence to operations,
matches jobs to goals, and connects work to physical and financial resources. It provides
creative ideas, new imaginations and visions to group efforts. It is not a passive force adapting
to external environment but a dynamic life giving element in every organization.

Purpose of Management:
Fix it → Cure it
It is not so much a question of fixing problems, which has undoubtedly been the priority for
many managers over the past decade, it is more a question of curing those problems – so that
they do not come back to haunt our children.
Spotlight → Floodlight
Fire-fighting and symptomatic problem management together with reacting quickly to fix
business problems to address so called “external market pressures” all lead to detracting from
management focus and achieving real results.
Must do → Want to
Our managers should really be aiming to make the shift from “Must do” to “Want to” in terms
of motivation and engagement. Nobody likes to be forced to do anything and quite frankly why
should they be forced?
Told to → Just do
Management should be trying to stimulate the shift from “Told to” to “Just do”, where we have
a highly empowered and motivated process team that takes pride in their team achievements
and performance without being told to.
Lead & Manage → Inspire & Captivate
Management should wake-up to the needs of “Inspiring” and “Captivating” their employees as
opposed to “Leading” and “Managing” them.
Managing → Enabling
We must make the overarching shift from “Managing” to “Enabling”, this can be seen in
various ways, for instance: the manager as coach.

IMPORTANCE OF MANAGEMENT:
1. It helps in Achieving Group Goals - It arranges the factors of production, assembles
and organizes the resources, integrates the resources in effective manner to achieve
goals. It directs group efforts towards achievement of pre-determined goals. By
defining objective of organization clearly there would be no wastage of time, money
and effort. Management converts disorganized resources of men, machines, money etc.
into useful enterprise. These resources are coordinated, directed and controlled in such
a manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources - Management utilizes all the physical & human
resources productively. This leads to efficacy in management. Management provides
maximum utilization of scarce resources by selecting its best possible alternate use in
industry from out of various uses. It makes use of experts, professional and these
services leads to use of their skills, knowledge, and proper utilization and avoids
wastage. If employees and machines are producing its maximum there is no under
employment of any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning
and by using minimum input & getting maximum output. Management uses physical,
human and financial resources in such a manner which results in best combination. This
helps in cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and coordinated
functions). To establish sound organizational structure is one of the objective of
management which is in tune with objective of organization and for fulfillment of this,
it establishes effective authority & responsibility relationship i.e. who is accountable to
whom, who can give instructions to whom, who are superiors & who are subordinates.
Management fills up various positions with right persons, having right skills, training
and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing
environment. It keeps in touch with the changing environment. With the change is
external environment, the initial co-ordination of organization must be changed. So it
adapts organization to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to better
economical production which helps in turn to increase the welfare of people. Good
management makes a difficult task easier by avoiding wastage of scarce resource. It
improves standard of living. It increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment
opportunities which generate income in hands. Organization comes with new products
and researches beneficial for society.

FUNCTIONS OF MANAGEMENT:
Management has been described as a social process involving responsibility for economical

and effective planning & regulation of operation of an enterprise in the fulfillment of given
purposes. It is a dynamic process consisting of various elements and activities. These activities
are different from operative functions like marketing, finance, purchase etc. Rather these
activities are common to each and every manger irrespective of his level or status.
Different experts have classified functions of management. According to George & Jerry,
“There are four fundamental functions of management i.e. planning, organizing, actuating and
controlling”. According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where
P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination,
R for reporting & B for Budgeting. But the most widely accepted are functions of management
given by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and
Controlling.
For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.
1. Planning
Deciding what needs to happen in the future (today, next week, next month, next year,
over the next 5 years, etc.) and generating plans for action.
It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement of
pre-determined goals. According to KOONTZ, “Planning is deciding in advance - what
to do, when to do & how to do. It bridges the gap from where we are & where we want
to be”. A plan is a future course of actions. It is an exercise in problem solving &
decision making. Planning is determination of courses of action to achieve desired
goals. Thus, planning is a systematic thinking about ways & means for accomplishment
of pre-determined goals. Planning is necessary to ensure proper utilization of human &
non-human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.
2. Organizing
(Implementation) making optimum use of the resources required to enable the
successful carrying out of plans.
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and personnel’s”. To
organize a business involves determining & providing human and non-human resources
to the organizational structure. Organizing as a process involves:
• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.

• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.
3. Staffing
Job Analyzing, recruitment, and hiring individuals for appropriate jobs.
It is the function of manning the organization structure and keeping it manned. Staffing
has assumed greater importance in the recent years due to advancement of technology,
increase in size of business, complexity of human behavior etc. The main purpose o
staffing is to put right man on right job i.e. square pegs in square holes and round pegs
in round holes. According to Kootz & O’Donell, “Managerial function of staffing
involves manning the organization structure through proper and effective selection,
appraisal & development of personnel to fill the roles designed un the structure”.
Staffing involves:
• Manpower Planning (estimating man power in terms of searching, choose
the person and giving the right place).
• Recruitment, selection & placement.
• Training & development.
• Remuneration.
• Performance appraisal.
• Promotions & transfer.
4. Directing
Determining what needs to be done in a situation and getting people to do it.
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel
aspect of management which deals directly with influencing, guiding, supervising,
motivating sub-ordinate for the achievement of organizational goals. Direction has
following elements:
• Supervision
• Motivation
• Leadership
• Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to
work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.

Leadership- may be defined as a process by which manager guides and influences the
work of subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from
one person to another. It is a bridge of understanding.
5. Controlling
Checking progress against plans.
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if necessary,
to correct any deviation”. According to Koontz & O’Donell “Controlling is the
measurement & correction of performance activities of subordinates in order to make
sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:
α. Establishment of standard performance.

β. Measurement of actual performance.
χ. Comparison of actual performance with the standards and finding out deviation if
any.
δ. Corrective action.

LEVELS OF MANAGEMENT:
In organizations, there are generally three different levels of managers: first-level managers,
middle-level managers, and top-level managers. These levels of managers are classified in a
hierarchy of importance and authority, and are also arranged by the different types of
management tasks that each role does. In many organizations, the number of managers in every
level resembles a pyramid, in which the first-level has many more managers than middle-level
and top-level managers, respectively. Each management level is explained below in
specifications of their different responsibilities and likely job titles.
Top-Level Managers
Typically consist of Board of Directors, President, Vice President, Chief Executive Officers,
etc. These individuals are mainly responsible for controlling and overseeing all the departments
in the organization. They develop goals, strategic plans, and policies for the company, as well
as make many decisions on the direction of the business. In addition, top-level managers play a
significant role in the mobilization of outside resources and are for the most part responsible
for the shareholders and general public.
According to Lawrence S. Kleiman, the following skills are needed at the top managerial level.

• Broadening their understanding of how factors such as competition, world economies,
politics, and social trends influence the effectiveness of the organization.
Middle-Level Managers
Typically consist of General Managers, Branch Managers, Department Managers, etc. These
individuals are mainly responsible to the top management for the functioning of their
department. They devote more time to organizational and directional functions. Their roles can
be emphasized as executing plans of the organization in conformance with the company's
policies and the objectives of the top management, they define and discuss information and
policies from top management to lower management, and most importantly they inspire and
provide guidance to lower level managers towards better performance.
• Designing and implementing effective group and intergroup work and information
systems.
• Defining and monitoring group-level performance indicators.
• Diagnosing and resolving problems within and among work groups.
• Designing and implementing reward systems that support cooperative behavior.
First-Level Managers
Typically consist of Supervisors, Section Officers, Foreman, etc. These individuals focus more
on the controlling and direction of management functions. For instance, they assign tasks and
jobs to employees, guide and supervise employees on day-to-day activities, look after the
quantity and quality of the production of the company, make recommendations, suggestions,
and communicate employee problems to the higher level above, etc. In this level, managers are
the "image builders" of the company considering they are the only ones who have direct
contact with employees.
• Basic supervision.
• Motivation.
• Career planning.
• Performance feedback.
•

TYPES OF MANAFERS:
THE SEVEN TYPES OF MANAGERS
With all the efforts those who are managed, the mass, put forth in a regal and often last attempt
to salvage a once positive work environment, at the core of every toxic working environment is
the toxic boss, manager or supervisor that breeds it. All roads go back to the manager. And if
the manager isn't willing to change, then it's a safe bet that nothing will.
That's why to impact long lasting change, managers need to upgrade their style and approach to
managing their people.

Throughout my years of coaching managers, business owners and executives, I've been able to
identify seven types of managers. Using these seven types of managers as examples, identify
the critical competencies necessary to become an effective sales coach. It all starts with the
way we communicate. Which one best describes you or your boss?
1. The Problem-Solving Manager
This boss is task-driven and focused on achieving goals. These problem solvers are constantly
putting out fires and leading by chaos. The paradox here is this: It is often the manager who
creates the very problems and situations that they work so hard to avoid. Continually providing
solutions often results in the lackluster performance that they are working so diligently to
eliminate.
2. The Pitchfork Manager
People who manage by a pitchfork are doing so with a heavy and often controlling hand:
demanding progress, forcing accountability, prodding and pushing for results through the use
of consequence, threats, scarcity, and fear tactics. This style of tough, ruthless management is
painful for people who are put in a position where they are pushed to avoid consequences
rather than pulled toward a desired goal.
3. The Pontificating Manager
These managers will readily admit they don't follow any particular type of management
strategy. Instead, they shoot from the hip, making it up as they go along often generating
sporadic, inconsistent results. As a result, they often find themselves in situations that they are
unprepared for. Interestingly, The Pontificating Manager thrives on situations like this. Often
adrenaline junkies themselves, these managers are in desperate need of developing the second
most essential proficiency of a coach: masterful listening. The Pontificating Manager is the
type of manager who can talk to anyone and immediately make people feel comfortable. This
character strength becomes a crutch to their leadership style, often blinding them to the need to
further systemize their approach. As a matter of fact, the only thing consistent about these
managers is their inconsistency.
4. The Presumptuous Manager
Presumptuous Managers focus more on themselves than anything else. To them, their personal
production, recognition, sales quotas and bonuses take precedence over their people and the
value they are responsible for building within each person on their team. Presumptuous
Managers often put their personal needs and objectives above the needs of their team. As you
can imagine, Presumptuous Managers experience more attrition, turnover, and problems
relating to managing a team than any other type of manager. Presumptuous Managers are
typically assertive and confident individuals. However, they are typically driven by their ego to
look good and outperform the rest of the team. Presumptuous Managers breed unhealthy
competition rather than an environment of collaboration.
5. The Perfect Manager
Perfect Managers possess some wonderful qualities. These managers are open to change,
innovation, training, and personal growth with the underlying commitment to continually
improve and evolve as sales managers, almost to a fault. This wonderful trait often becomes

their weakness. In their search for the latest and greatest approach, like Pontificating Managers,
Perfect Managers never get to experience the benefit of consistency. This manager is a talking
spec sheet. Their emphasis on acquiring more facts, figures, features, and benefits has
overshadowed the ability of Perfect Managers to recognize the critical need for soft skills
training around the areas of presenting, listening, questioning, prospecting, and the importance
of following an organized, strategic selling system. Perfect Managers rely on their vast amount
of product knowledge and experience when managing and developing their salespeople.
Because of this great imbalance, these manager often fall short on developing their
interpersonal skills that would make them more human than machine.

6. The Passive Manager

Also referred to as Parenting Managers or Pleasing Managers, Passive Managers take the
concept of developing close relationships with their team and coworkers to a new level. These
managers have one ultimate goal: to make people happy. While this is certainly an admirable
trait, it can quickly become a barrier to leadership efforts if not managed effectively. Although
wholesome and charming, this type of boss is viewed as incompetent, inconsistent and clueless
often lacking the respect they need from their employees in order to effectively build a
championship team. You can spot a Passive Manager by looking at their team and the number
of people who should have been fired long ago. Because all Passive Managers want to do is
please, they are more timid and passive in their approach. These managers will do anything to
avoid confrontation and collapse holding people accountable with confrontation and conflict.
2. The Proactive Manager
The Proactive Manager encompasses all of the good qualities that the other types of
managers possess, yet without all of their pitfalls. Here are the characteristics that this ideal
manager embodies, as well as the ones for you to be mindful of and develop yourself. The
Proactive Manager possesses the:
• Persistence, edge, and genuine authenticity of the Pitchfork Manager
• Confidence of the Presumptuous Manager
• Enthusiasm, passion, charm, and presence of the Pontificating Manager
• Drive to support others and spearhead solutions like the Problem-Solving Manager
• Desire to serve, respectfulness, sensitivity, nurturing ability, and humanity of the Passive
Manager
• Product and industry knowledge, sales acumen, efficiency, focus, organization, and
passion for continued growth just like the Perfect Manager.
The Proactive Manager is the ultimate manager and coach, and a testimonial to the additional
skills and coaching competencies that every manager needs to develop in order to build a world
class team.

Types of Managers:
Almost all working professionals are familiar with most types of managers. Let us skim
through the most prominent types of managers based upon various parameters.

Most of us have encountered the various types of managers in an organization or otherwise, in
many walks of our lives. Managers are mostly typecast according to the different types of
management styles, personality, function and involvement. The role of a manager, on a general
note, is to get things done by others by making optimum use of available resources, exercising
authority over and taking responsibility for all such resources that are allocated to be under
his / her supervision. In short, to perform all the functions of management! All said and done,
let’s take a look at the various types of managers and their unique characteristics based upon
their roles, functions, personalities and typecast quirks!

Types of Managers in a Company

Typically, based upon organizational functions, you will find the following manager types in a
standard commercial organization.
• Purchase Manager who is responsible for procuring raw materials in a manufacturing
company.
• Production Manager who is responsible for managing the manufacturing process.
• IT Manager who is responsible for supervising all computing and IT communication
related issues.

• Marketing Manager who is responsible for supervising the promotion and advertising
of the company’s products / services.
• Sales Manager who looks after the sales department and sets targets for sales personnel
and appraises their performance on the basis of the extent of target achievement.
• Finance Manager who is responsible for the financial management of the organization.
• Human Resources Manager who is responsible for the HR department and oversees
all human resource management functions like recruitment, payroll, attendance,
employee exit, etc. besides displaying all basic management skills.
• Product Development Manager who is authorized with the management of the
technical division of new product design and product innovation.
Other than these, a standard company may have a general manager and an operational
manager, depending upon the type and scale of its operations. Software development and
testing companies also have two types of project managers - functional project managers who
are deeply involved with every technical aspect of the project and activity or resource
managers who manage the operational and people part of the project, leaving the technical
aspects to his subordinate IT professionals. In most companies these days, we can see another
school of managers called case managers. These case managers are chiefly vested with the
responsibility of attending to employees’ medical well-being There are, broadly, two types of
case managers - medical case managers who are responsible for getting medical aid for
emergency medical contingencies of he employees and liaison case managers who act as the
mediator between the medical professionals and the employer organization.

Types of Managers Based Upon Management Styles

There can be the following types of managers based upon the four most prominent types of
management styles. Each subheading underlines different aspect of management styles and
techniques.
• The Authoritarian Manager is one who is the sole decision maker for his management
nit and prefers his subordinates to perform their tasks exactly as outlined by him. In a
way, this type of manager makes work easier for the employee as the latter knows
exactly what is expected of him / her and the way in which the task is to be performed.
The thinking part is left to the boss while the doing part lies with the subordinate. This
type of manager displays management skills of strong leadership and direction but may
lack the knack for delegation.
• The Democratic Manager is that person who believes in majority consensus and takes
any decision only after consulting his / her subordinates. This type of manager displays
participative management style by allowing his subordinates’ participation in the
decision making process, giving them a sense of belonging and deeper involvement in
the organizational fabric.

• The Paternalistic manager is the one who acts like a parent figure to his subordinates
and makes sure to regularly bond with his subordinates to listen to their professional
issues and lend a helping hand to ease their operational difficulties. A paternalistic
manager encourages his subordinates to work as a family and be supportive of the
collective effort for the bigger organizational well-being.
• The Laissez Faire Manager communicates the tasks to be performed by his
subordinates and sets targets and deadlines for the completion of such tasks. Thereafter
he leaves the method to the subordinates. As long as the employees complete the task in
line with the organizational standards and within the specific deadline, it doesn’t matter
what methods are employed by them to do so.

BASIC ROLE OF MANAGERS:
To meet the many demands of performing their functions, managers assume multiple roles. A
role is an organized set of behaviors. Henry Mintzberg has identified ten roles common to the
work of all managers. The ten roles are divided into three groups: interpersonal,
informational, and decisional.

• Interpersonal: roles that involve coordination and interaction with employees.
Interpersonal roles ensure that information is provided.
• Informational: roles that involve handling, sharing, and analyzing information.
Informational roles link all managerial work together.
• Decisional: roles that require decision-making. Decisional roles make significant use
of the information.

The performance of managerial roles and the requirements of these roles can be played at
different times by the same manager and to different degrees depending on the level and
function of management. The ten roles are described individually, but they form an
integrated whole.
a) The three interpersonal roles are primarily concerned with interpersonal relationships.
Figure Head: In the figurehead role, the manager represents the organization in all matters
of formality. The top level manager represents the company legally and socially to those
outside of the organization. The supervisor represents the work group to higher management
and higher management to the work group.
Liaison: In the liaison role, the manger interacts with peers and people outside the
organization. The top level manager uses the liaison role to gain favors and information,
while the supervisor uses it to maintain the routine flow of work.
Leader: The leader role defines the relationships between the manger and employees.

The direct relationships with people in the interpersonal roles place the manager in a unique
position to get information.
b) The three informational roles are primarily concerned with the information aspects of
managerial work.
Monitor: In the monitor role, the manager receives and collects information.
Disseminator: In the role of disseminator, the manager transmits special information into the
organization. The top level manager receives and transmits more information from people
outside the organization than the supervisor.
Spokesperson: In the role of spokesperson, the manager disseminates the organization's
information into its environment. Thus, the top level manager is seen as an industry expert,
while the supervisor is seen as a unit or departmental expert.

The unique access to information places the manager at the center of organizational decision
making.
c) There are four decisional roles.
Entrepreneur: In the entrepreneur role, the manager initiates change.
Disturbance Handler: In the disturbance handler role, the manger deals with threats to the
organization.
Resource Allocator: In the resource allocator role, the manager chooses where the
organization will expend its efforts.
Negotiator: In the negotiator role, the manager negotiates on behalf of the organization.
The top level manager makes the decisions about the organization as a whole, while the
supervisor makes decisions about his or her particular work unit.
The supervisor performs these managerial roles but with different emphasis than higher
managers. Supervisory management is more focused and short-term in outlook.
Thus, the figurehead role becomes less significant and the disturbance handler and negotiator
roles increase in importance for the supervisor.
Since leadership permeates all activities, the leader role is among the most important of all
roles at all levels of management.

ESSENTIAL MANAGERIAL SKILLS:
Management skills
• Technical: used for specialized knowledge required for work.
• Political: used to build a power base and establish connections.
• Conceptual: used to analyze complex situations.

• Interpersonal: used to communicate, motivate, mentor and delegate.
• Diagnostic: ability to visualize most appropriate response to a situation.

Managerial Skills
A manager's job is varied and complex. Managers need certain skills to perform the duties and
activities associated with being a manager. What type of skills does a manager need? Research
by Robert L. Katz found that managers needed three essential skills.
These are technical skills, human skills and conceptual skills.
Technical skills include knowledge of and proficiency in a certain specialized field, such as
engineering, computers, financial and managerial accounting, or manufacturing. These skills
are more important at lower levels of management since these managers are dealing directly
with employees doing the organization's work.
As the name of these skills tells us, these are skills about technical of fulfillment of tasks.
These are not only for working on machines, but also can be skills to performing sales, about
marketing and so on. For example, some individual work in a sales department and have skills
about sales that were developed through education and experience. This person is perfect to
become some day sales manager because have great technical skills from sales.
Technical skills are most needed for first-level managers, but for the top managers, there does
not need for this type of skills. As we go through a hierarchy the bottom to upper levels the
technical skills lose their signification.
Human skills involve the ability to work well with other people both individually and in a
group. Because managers deal directly with people, this skill is crucial! Managers with good
human skills are able to get the best out of their people. They know how to communicate,
motivate, lead, and inspire enthusiasm and trust. These skills are equally important at all levels
of management.
Human skills are knowledge of managers to work with people. The most important task for
managers is to work with people. Without people, there is not needed for management and
managers. These skills will enable managers to become leaders, to motivate employees for
better accomplishment of their tasks, to make more effective use of human potential in the
business. These are most important skills for managers. Human skills are needed equally on all
hierarchical levels of management.

Conceptual skills are the skills managers must have to think and conceptualize about abstract
and complex situations. Using these skills managers must be able to see the organization as a
whole, understand the relationship among various subunits, and visualize how the organization
fits into its broader environment. These skills are most important at top level management.
Conceptual skills are ability or knowledge of managers for abstract thinking that mean to see
the whole through analysis and diagnose of different states and to predict the future state of the
business as a whole. Why is needed this skill? Firstly, one business is composed from several
business elements as selling, marketing, finance, production… All of these business elements
have different objects even completely opposed as marketing and production. This skill helps
top managers to look outside from single objects of business elements and to take decisions
that will bring fulfillment of overall business objects.
Conceptual skills are most needed for top managers, little for mid-level managers, and it is not
needed for first-level managers. As we go from a bottom of the managerial hierarchy to the
top, significance of these skills is increasing.
A professional association of practicing managers, the American Management Association, has
identified important skills for managers that encompass conceptual, communication,
effectiveness, and interpersonal aspects. These are briefly described below:
Conceptual Skills: Ability to use information to solve business problems, identification of
opportunities for innovation, recognizing problem areas and implementing solutions, selecting
critical information from masses of data, understanding the business uses of technology,
understanding the organization's business model.
Communication Skills: Ability to transform ideas into words and actions, credibility among
colleagues, peers, and subordinates, listening and asking questions, presentation skills and
spoken format, presentation skills; written and graphic formats
Effectiveness Skills: Contributing to corporate mission/departmental objectives, customer
focus, multitasking; working at multiple tasks at parallel, negotiating skills, project
management, reviewing operations and implementing improvements, setting and maintaining
performance standards internally and externally, setting priorities for attention and activity,
time management.
Interpersonal Skills: Coaching and mentoring skills, diversity skills; working with diverse
people and culture, networking within the organization, networking outside the organization,
working in teams; cooperation and commitment.
In today's demanding and dynamic workplace, employees who are invaluable to an
organization must be willing to constantly upgrade their skills and take on extra work outside
their own specific job areas. There is no doubt that skills will continue to be an important way
of describing what a manager does.
Key personal characteristics for Managerial success:

The following are nine personal characteristics: adaptability, creativity, commitment,
communication, decisiveness, future orientation, independence, judgment and teamwork are
essential attributes for managerial success.

”Adaptability” - Organizational changes surround us. No industry is immune. So the
individual with the ability to adjust quickly, move deftly, and deal with all the changes is
prized. Conversely, those that don’t or can’t adapt, will fail. Whining is out! Complaining
about what is lost or the good old days is useless at best. That attitude doesn’t even qualify to
make you feel better any more. No one wants to listen. Having and demonstrating the personal
confidence that you can handle anything is a sign of intelligence and reality-based thinking.
This is not about bluster, empty words or an overbearing demeanor. Rather it is exhibiting the
ability to deal with whatever crosses your path in a purposeful and positive manner.

“Creativity” - Certainly the artist has abilities that most of us don’t have. I’ve always envied
the person who can take a blank piece of paper and create a masterpiece either with paints,
words or notes. Clearly, these individuals are the minority of the population. However, many
more of us have the ability to see a situation with a new set of eyes. That’s the kind of
creativity that is valuable in business today. This characteristic differentiates the plodder from
the leader. The latter demonstrates original thought, unique impressions and unusual solutions
to issues, problems and crises. Leaders take the mundane and visualize the possibilities. They
take the overwhelming and make it understandable.
The business environment today demands ever-higher standards and more creative problem
solving in an increasingly complex world. The people highest in demand are those who are up
to this challenge; who long ago relinquished formula based thinking, traditional ways of
operating and reactive or risk adverse behavior.

“Commitment” - The dictionary defines commitment as the state of being bound emotionally
or intellectually to a course of action or to another person or persons. In business, this
attribute manifests itself in professionals who seize an issue, make it their own and follow it
through to completion. These are the folks who don’t need to be coddled. Instead, they grasp
the situation, look at it as a challenge, own it and solve it. They tackle what comes their way,
not lie down and play dead or stand in the way as an obstacle. These are the project or process
champions.

“Communication” - It is not possible to overstate the essential nature of this characteristic.
Those who can translate and transfer information to others in an understandable, believable and
convincing manner are in a special class. While written communication skills are
indispensable, oral communications have taken on vital importance. The ability to meet one-
on-one for discussion, negotiation, brainstorming and problem solving requires above average
use of language, excellent listening abilities and sensitivity to what is being said. Increasingly,

professionals also must have high quality presentation skills to win projects, gain new clients
or customers, train colleagues, convince or inspire others.

“Decisiveness” - In a business environment anchored in speed, the ability to make quick,
forceful decisions based on good analysis is a required characteristic. Tom Peters refers to this
as a bias for action. Too many folks never have enough information so they engage in analysis
paralysis. They study and discuss and process an issue until the positive effects of any decision
are dissipated. At the other end of the continuum are those that practice the knee jerk response
to decision making. They impulsively act without adequate consideration of the outcomes.

“Future Orientation” - No one is issued a crystal ball, but those with the ability to make
connections between current events and future trends have a crucial skill. The capacity to
extrapolate is very important when tomorrow’s successful venture is envisioned today, based
on yesterday’s information. The talent for prediction and always looking ahead is one essential
piece of strategic thinking.

“Independence” - The quality of being self-motivated is essential. The days of hovering
supervisors are gone. They don’t have the time or the answers. The most successful
professionals use their own engines to propel them, not someone else’s. They are resourceful in
seeking out new information and applying it. They don’t wait to be chosen or to be told the
next steps.

“Judgment” - Formation of an opinion after consideration or deliberation is one definition of
judgment. Translated into business terms it means having the ability to evaluate people,
situations, issues and problems using clear standards. The operative words are clear standards.
To me, this requires values. To be skilled in judgment, one must have a solid understanding of
where they begin and end, so that personal needs, interests and biases don’t overshadow the
wider corporate or employee needs.

Balance and discretion are important components of judgment. When confronted with
confusing or incomplete data, the ability to make good decisions, proven over time to be of
consistently high quality, distinguishes corporate winners.

“Teamwork” - The Lone Ranger is dead! Today, while the mantra is teams, there are too few
individuals who know how to organize, support, grow and participate on teams. Flexibility is a
key quality here. The roles keep changing. Successful professionals understand that sometimes
they lead, sometimes they follow, sometimes they speak and sometimes they listen. All are
necessary when working in a team environment.

Evolution and various schools to management thoughts:

The evolution of management thought:
Current management theory and practice did not just eventuate. It evolved over many years.
The evolution of the discipline of management has helped to develop a body of knowledge
about the practice of management.
• Early management theory consisted of numerous attempts at getting to know these
newcomers to industrial life at the end of the nineteenth century and beginning of the
twentieth century in Europe and United States.

• These includes
– Scientific management
– Classical organization theory
– Behavioural school and management science.

• As you study these approaches keep one important fact in mind.
• The managers and theorists who developed this assumption about human relationships were
doing so with little precedent.
• Large scale industrial enterprise was very new.
• Some of the assumption that they made might therefore seem simple or unimportant to you,
but they were crucial and to ford and his contemporize.

• Fedrick W Taylor (1986-1915) rested his philosophy on four basic principles.
1. The development of a true science of management so that the best method for performing
each task could be determined.
2. The Scientific selection of workers so that the each worker would be given responsibility for
the task for which he or she was best suited.
3. The scientific education and development of workers.
4. Intimate friendly cooperation between management and labor.

• The scientific management schools
1. Scientific management theory arose in part from the need to increase productivity.
2. In the United States especially, skilled labor was in short supply at the beginning of the
twentieth century.
3. The only way to expand the productivity was to raise the efficiency of workers.

4. Therefore, Fredick W. Taylor, Henry Gantt, and Frank and Lillian Gilberth devised the body
of principles known as scientific management theory.

• Taylor contended that the success of these principles required”a complete mental revolution”
on the part of management and labor.
• Rather than quarrel over profits both side should increase production ,by so doing ,he
believed profits would rise to such an extend that labor have to fight over them.
• In short Taylor believed that management and labor had common interest in increasing
productivity.

1. Taylor based his management system on production line time studies. Instead of relying on
traditional work methods, he analyzed and timed steel workers movements on a series of jobs.
2. Using time study he broke each job down into its components and designed the quickest and
best method of performing each component. In this way he established.
• How much workers to do with the equipment and materials in hand. he also encourage
• Employers to pay more productive workers higher rate than others. using a “scientifically
correct “rate that would benefit both the company and workers.
• Thus the workers were urged to surpass their previous performance standards to earn more
pay .Taylor called his plane the differential rate system.

• Contributions of scientific management theory
– The modern assembly line pours out finished products faster than Taylor could ever
imagined.
– This production “Miracle” is just one legacy of scientific management .
– In addition its efficiency techniques have been applied to many task in non industrial
organizations ranging from fat food service to the training of surgeons.

• Limitations of scientific management theory
– Although Taylor's method led to dramatic increase in productivity and higher pay in number
of instance.
– Workers and unions began to oppose his approach because they feared that working harder or
faster would exhaust whatever work was available Causing layoffs.
• Moreover, Taylor’s system clearly meant that time was of the essence.
– His critics objected to the speed up condition that placed undue pressure on employees to
perform at faster and faster levels.

– The emphasis on productivity and by extension profitability led some managers to exploit
both the workers and customers.
– As a result more workers joined unions and thus reinforced a pattern of suspicious and
mistrust that shaded labor relations for decades.

Henry L. Gannt Henry L. Gannt (1861-1919) worked with Taylor on several projects but
when he went out on his own as a consulting industrial engineer, Gannt began to reconsider
tailors insensitive systems.
• Abandoning the differential rate system as having too little motivational impact Gannet came
up with new idea.
• Every worker who finished days assigned work load win 50 percent bonus.
• Then he added a second motivation, the supervisor would earn a bonus for each worker who
reached the daily standard plus a extra bonus if all the workers reached it.
• This Gantt reasoned would spur super wiser to train their workers to do a better job.
• Every workers progress was rated publicly and recorded an individual bar charts
• I black on days the worker made the standard in red when he or she fell below it.
• Going beyond this Gantt originated a charting system for production was translated into eight
languages and used through out the world.
• Starting in 1920’s it was use in Japan Spain and soviet union it also formed that the basis of
two charting device which were developed to assist

1. In planning, managing and controlling complex organization the critical path method
(CPM) originated by Dupont, and program evaluation and review Technique (PERT),
developed by navy.
2. Lotus 1-2-3 is also a creative application of the giant chart.”

THE GILBRETHS • Frank B. and Lillian M. Gilbreth (1968-1924) and (1878-1972) made
their contribution
• To the scientific management movement as a husband and wife team. Lillian and Franck
collaborated on fatigue and motion studies and focus on ways on promoting the individual
workers welfare. to them the ultimate aim of scientific management was to help workers reach
their full potential as human beings
• In their conception motion and fatigue were intertwined every motion that was eliminated
reduced fatigue.
• using motion picture cameras they tried to find out the most economical motions for each task
in order to upgrade performance and reduce fatigue.

• CLASSICAL ORGANIZATION THEORY SCHOOL – Scientific management was
concerned with increasing the productivity of the shop and the individual worker. – Classical
organization theory grew out of the need to find guidelines for managing such complex
organization as factories.

HENRI FAYOL’ 14 Principles of Mnagement:
– Henri Fayol (1841-1925) is generally hailed as the founder of the classical management
school –not because he was the first to investigate managerial behavior but because he was the
first to systematize it.
1. DIVISION OF LABOR
– The most people specialize the more efficiency they can perform their work. This principle is
epitomized by the modern assembly line.
2. AUTHORITY
– Managers must give orders so that they can get things done while this format give them a
right to command managers willl not always compel obedience unless they have
– Personal authority (such as relevant ) expert as well
3. DISIPLINE MEMBERS IN AN ORGANIZATION need to respect the rules and
agreement that govern the organization.
– To Fayol, discipline leadership at all levels of the organization fair agreements and
judiciously enforced penalties for infractions.
4. UNITY OF COMMANDS
– Each employee must receive instruction from one person, Fayol believe that if employee
reported.
– More than one manager conflict in instruction and confusion in of authority would result.
5. UNITY OF DIRECTION
– Those operation with in the same organization that has the same objective should be directed
by only one manager using one plan.
6. SUBORDINATE OF INDIVIDUAL INTEREST TO COMMON GOOD
– In any undertaking the interest of employees should not take the precedence over the interest
of organization as a whole
7. REMUNERATION:
– Compensation of work done should be common to both employees and employers.
8. CENTRALIZATION:
– Decreasing the role of subordinates in decision making is centralization, increasing their role
is decentralization.
– Fayol believed that the managers should retain the final responsibility.

– But should at the same time give their subordinate enough authority to do the jobs properly.
– The problem is finding the proper degree of centralization in each case.
9. THE HIERARCHY
– The line of authority in an organization should represent in the neat box and the line of chart
runs in order of rank from top management and lowest levels of enterprise.
10. ORDER:
– Materials and the order should be in the right place at the right time. people
– In particular should be in job or position they are most suited to.
11. EQUITY:
– Managers should be fair and friendly to their subordinate.
12. STABILTY OF STAFF:
– A high employee turnover rate undermines the efficient functioning of an organization.
13. .INITIATIVE:
– Subordinate should be given the freedom to conceive and carry out their plans even though
some mistake may result.
14. ESPRIT DE CROPS:
– Promoting team spirit will give the organization a sense of unity.
– To Fayol even the small factor help to develop the spirit.
– He suggested for example the use of verbal communication instead of formal, written
communication whenever possible.

THE BEHAVIORAL SCHOOL:

– The behavioral school emerged partly because the classical approach did not archive
sufficient production efficiency and workplace harmony.
– To ‘managers’ frustration,
– People did not always follow predicted or expected patterns of behavior.
– Thus there was increased interest in helping managers deal more effectively with a people
side of their organizations.
– Several Theorists tried to strengthen with a people side
– Of their organization theory with an insights of sociology and psychology.
– The human Relations movement
– Human relations are frequently used as a general term to describe the ways in which
managers interact with their employees.

– When “employee management” simulates more and better work, the organization has a more
and better work, the organization has effective human relations
– When morale and efficiency deteriorate, its human relations are said to be ineffective.
– The human relations movement arose from early attempts to systematically discover the
social and psychological factors that would create effective Human reaction.

THE CONTINGENCY APPROACH
– The well known international economist Charles kindly Berger found of telling his students
at mitt that the answers to any really engrossing question in economics is “it depends“
– The task of economist kindly Berger would continue is to specify upon what is depend on
what in what ways.
– “It depends is an important question in management as well”

MANAGEMENT THEORY
– Management theory attempts to determine the predictable relationship between actions,
outcomes, situations.
– So it is not surprising that a peasant approach seeks to integrate the various schools of
management thought by focusing the interdependence of many facts involve in the managerial
situations.

THE CONTINGENCY APPROACH The contingency approach some times called
(situation approach) was developed by the managers, consultants and researchers who tried to
apply the concepts of the major schools to the real life.
• When methods highly effective in one situation failed to work in other situation.
• They sought an explanation, why for example did an organization development work
brilliantly in one situation and fail miserably in another.
• Advocates Of the contingency approach had a logical answer to such question. Result differs
because situation differs. A technique that works in one case will not work in other.
• According to the contagious technique the manager’s job is to find which technique will in a
particular situation, under particular circumstances and at a particular time.
• Best contributes to attainments of management goals, where workers need to encourage
increasing productivity.
• For example a classical theorist may prescribe a new work simplification scheme.
• The behavioral scientist may instead seek to create a psychologically motivating climate and
recommend. Some approach like job enrichment the combination of tasks that are different in
scope and responsibility and allow the worker greater autonomy in making decisions. But the
manager trained in the contiguous approach will ask which ties the recourse is limited; work

simplification would be the best solution. However skilled workers driven by pride in their
abilities, a job enrichment program might be more effective.
• The contingency approach represents an important turn in management theory, but it portals
each set of organization relationship in its unique circumstances.

SYSTEM APPROACH
• The system approach to management views the organizations as a unified, purposeful system
composed of integral parts.
• This approach gives managers a way of looking at the organization as a hole and as a part of
the larger external environment.
• Systems theory tells us that the activity of any segment of an organization affects, in varying
degree the activity of every other segment.
• Production managers in a manufacturing plant, for example, prefer long uninterrupted
production runs of standardized products in order to maintain maximum efficiency and low
costs.
• Marketing managers on the other hand who want to offer customers quick delivery of a wide
range of products would like a flexible manufacturing schedule that can fill special order on
short notice.
• Systems oriented production managers make scheduling decisions only after they have
identified the impact of these decisions on other department and on the entire organization.
• The point of system approach is that managers cannot wholly with in the traditional
organization chart.
• They must mesh their department with the whole enterprise.
• To do that they have to communicate not only with other employees and departments, but
frequently with representative of other organization as well.
• Clearly, systems managers grasp the importance of the webs of business relationship to their
efforts.

DYNAMIC ENGAGEMENT APPROACH
• To emphasize the intensity of modern organizational relationships and the intensity time
pressures that governs the relationship
• We call this flurry of this new management theory the dynamic engagement approach.
• “Dynamic engagement in our term”
• In times when theories are changing, it is often true that the last thing that happens is that
happens is that someone assigns a name to the new theory.
• We use dynamic engagement to convey the mood of current thinking and debate about the
management and organizations.

Six different themes in management theory.

1. NEW ORGANIZATIONAL ENVIRONMENT
• The dynamic engagement approach recognizes that an organization environment is
not some set of fixed, impersonal forces.
• Rather it is a complex, dynamic, web at people interacting with each other.
• As a result Managers not only pay attention to their own concerns, but also
understands what is important for other managers with in the organization and in other
organization.
• They interact with theses other managers to create jointly the condition under which
these organizations prosper and struggle.
• The theory Of competitive strategy developed by Michael porter focuses on how
managers can influence in conditions in an industry when they interacts as Rivals
buyers, suppliers, and so on .
• Another variation in on the dynamic engagement approach, most notably argued by
Edward and jean garner stead in management for a small planet.
• Place ecological concern at the center of management theory.
2. ETHICS AND SOCIAL RESPONSIBILITY
• Managers using a dynamic engagement approach pay close attention to the values that
guide people in their organizations.
• The corporate Culture that embodies those values, and values held by the people
outside the organization.
• This idea came in to prominence with the publication in 1982 Of in search of
excellence by Thomas peters and waterman.
• From other study of ‘EXCELLENT’ companies. Peters and waterman concluded that
“the top performers create a board, uplifting, shared culture, a coherent frame work
• Within which charged up people search for adoptions. Robert Solomon has taken this
idea little further, arguing that managers must Exercise moral courage by placing the
values of excellence at the top of the Agenda.
• In dynamic engagement, it is not enough for managers to do things in the way they
always have, or to be content with matching their Competitors.
• Continuously striving towards excellence has become an organizational theme of the
1990s.
• Because values, including excellence ,are ethical concepts.
• The dynamic engagement approach moves ethics from the Fringe of management
theory to the heart of it.

3. GLOBALIZATION AND MANAGEMENT
• The Dynamic engagement approach recognizes that the world is at the manager’s
doorstep in 1990s.
• With world financial markets running 24 hours a day, and even the remotest Concerns
of the planet only telephone call away, managers facing the twenty first century think of
themselves as global citizens.
• A simple comparison illustrates how things have changed.
• If you were to look through the 1940s you would find very little about international
factors with good reason in the time and place.
4. INVENTING AND REINVENTING ORGANIZATIONS
• Managers who practice dynamically engagement continually search for ways to
unleash the creative potential of their employees and themselves.
• A growing chorus of theorist is urging managers to rethink the standard organization
structures to which they have become accustomed.
• Peter is once again at the forefront. His concept of ‘LIBERATION
MANAGEMENT’ challenges the kind of rigid organization structure that inhibits
people creativity.
• Peter’s heroes succeed in spit of those structures.
• Michael hammer and James champ have made their concept of reengineering the
corporation into a bestseller.
• Hammer and champ urge managers to rethink the very process by which organization
function and to be courage’s about replacing process that get in the way of
organizational efficiency.
5. CULTUERS AND MULTICULTURALISM
• Managers who embrace the dynamic engagement approach recognize that the various
perspective and values that people of different cultural backgrounds bring to their
organizations are not only a fact life but a significant source of contributions.
• Joanne martin has pioneered the cultural analysis of organizations. she explains how
difference create unprecedented challenges for modern managers.
• Charles Taylor is a prominent proponent for the so called “Communitarian”
movement.
• Taylor claims that people can preserve their sense of uniqueness –their authenticity
• Only by valuing what they hold in common in the organization and communities in
which they live.
• Multiculturism is a moving target as more and more people become conscious of their
particular traditional and ties.
6. Quality

By the dynamic engagement approach, total quality management (TQM)
should Be in every manager’s vocabulary.
• All managers should be thinking about how Every organizational process can be
conducted to provide product and service.
• That is responsible to tougher and tougher customer and competitive services.
• Strong and lasting relationships can be fruitful by product of quality frame Of mind
and action by this view.
• Total quality management adds one more Dynamic dimension to management
because quality too is always a moving Target.
• Dynamic engagement is an example of the changing face of management theory.
• Not everyone we have mentioned in this overview of the dynamic approach called
himself or herself as a management theorist.
• Some are philosophers and some are political scientists.
• The dynamic approach challenges us to see organization and management as integral
part of modern and global society.
• This was not always a tenet of management theory.

Nature of Organization:
An organization is a social group which distributes tasks for a collective goal. The word itself
is derived from the Greek word organon, itself derived from the better-known word ergon - as
we know `organ` - and it means a compartment for a particular job.
Definition
A social unit of people, systematically structured and managed to meet a need or to pursue
collective goals on a continuing basis. All organizations have a management structure that
determines relationships between functions and positions, and subdivides and delegates roles,
responsibilities, and authority to carry out defined tasks. Organizations are open systems in
that they affect and are affected by the environment beyond their boundaries.
When two or more people get together and agree to coordinate their activities in order to
achieve their common goals, an organization has been born. There is really no doubt about the
present meaning of organization. Its purpose is to create an arrangement of positions and
responsibilities through and by means of which an enterprise can carry out its work. An
academic textbook definition of organization can be formulated as follows: “a. the
responsibilities by means of which the activities of the enterprise are dispersed among the
(managerial, supervisory, and specialist) personnel employed in its service; and b. the formal
interrelations established among the personnel by virtue of such responsibilities.”
It must be emphasized that an organization should not be seen as rigid as the term
“framework” implies. In reality, almost all organization structures must be occasionally

reviewed due to various changes in the external environment of the organization in question.
Moreover, internal changes also occur oftentimes due to the development of various informal
relationships.

In the social sciences, organizations are the object of analysis for a number of disciplines, such
as sociology, economics, political science, psychology, management, and organizational
communication. The broader analysis of organizations is commonly referred to as
organizational structure, organizational studies, organizational behavior, or organization
analysis. A number of different perspectives exist, some of which are compatible:
• From a process-related perspective, an organization is viewed as an entity is being
(re-)organized, and the focus is on the organization as a set of tasks or actions.
• From a functional perspective, the focus is on how entities like businesses or state
authorities are used.
• From an institutional perspective, an organization is viewed as a purposeful structure
within a social context.
• There are a variety of legal types of organizations, including: corporations,
governments, non-governmental organizations, international organizations, armed
forces, charities, not-for-profit corporations, partnerships, cooperatives, and
universities. A hybrid organization is a body that operates in both the public sector and
the private sector, simultaneously fulfilling public duties and developing commercial
market activities. As a result the hybrid organization becomes a mixture of a
government and a corporate organization.
Organisational Purpose: To attract and keep stakeholders, be profitable, and grow.

It’s a short description, but provides a comprehensive framework upon which full
understanding of ‘Purpose’ can emerge. The description can even apply to both profit and
non-profit organizations alike since to be profitable, as against making a profit, can mean to
keep within budgets for the output delivered, thus avoiding loss-making.

• To attract stakeholders demands full attention to the expectations of identifiable
stakeholder groups. It means representing some promise of satisfaction in the mind of the
stakeholder. Coca-Cola link thirst with Coke, and Mitre-10 folks are currently linking
themselves with help and DIY renovations. To convert potential customers into actual
customers, it requires effective marketing of a product or service that wants or will want.
To attract quality employees it means being known as the preferred place of employment
(not the most liked or easy-going employer). The focus is on attention to effectiveness.
What do they really want or need? What is their language when they seek it?

• To keep valuable stakeholders requires the organization to deliver high comparative
quality and value on an ongoing basis to them. The focus includes attention to efficiency,
quality, promptness, fairness, relationships and many others. Becoming the preferred
organization in the mind of the stakeholder will involve different goals and strategies
according to the stakeholder group. What would make them go away? What will keep
them here? They are two very different questions, and there are two clusters of answers to
each.

• We might lose someone because they are pushed away by us, or pulled from us by
someone else (One question – two types of answers).
• We might keep someone because we pull them tight or because our competitors push
them back to us (One question – two types of answers).

In other words, we must constantly assess our relationship with stakeholders, and keep a
constant watch on our competitors. Changes happen when people are motivated to move in
response to a push or a pull.

• To be profitable means more than merely high returns to investors, because investor return
is a cost of attracting and keeping those stakeholders. Profits are what remain to fund
organic expansion and or improvements.

• Growth generally indicates success and may be associated with any combination of
creativity, innovativeness, strategic prowess and so on. However, growth may be expected
in munificent or monopolistic environments. Growth under adversity is the worthy
challenge.

To support the organisation’s ‘Purpose’, goals are therefore set to target stakeholders
(effectiveness - attract and then keep), be profitable (efficiency), and encourage growth in all
its forms. There should be no strategy or strategic plan that is not linked to a goal, and no goal
that is not directly linked to the ‘Purpose’.

SOLE PROPRIETORSHIP:
A sole proprietorship, also known as a sole trader or simply a proprietorship, is a type of
business entity that is owned and run by one individual and in which there is no legal
distinction between the owner and the business. The owner receives all profits (subject to
taxation specific to the business) and has unlimited responsibility for all losses and debts.
Every asset of the business is owned by the proprietor and all debts of the business are the
proprietor's. This means that the owner has no less liability than if they were acting as an
individual instead of as a business. It is a "sole" proprietorship in contrast with partnerships.

A sole proprietor may use a trade name or business name other than his or her legal name. In
many jurisdictions there are rules to enable the true owner of a business name to be
ascertained.
A sole proprietorship is the most common type of business. There are sole proprietorships
everywhere. Small grocery stores, STD booths are mostly proprietorship businesses.

A “Sole Proprietorship” business means that there is only ONE owner. There may be
employees or helpers hired under the owner, but there is only one “head” who administers and
runs the show.

The definition of a Sole Proprietorship is: A business enterprise exclusively owned, managed
and controlled by a single person with all authority, responsibility and risk.

The basic advantage of a sole proprietorship is that since you are the only owner, you are free
to run the business just the way you want to run it. Also, in a sole proprietorship you get to
keep all the profits.
The biggest disadvantage is that there is “unlimited liability” on the “Sole Owner”.

What is the meaning of unlimited liability?
In the case of “Sole Proprietorship”, the Govt. does not see any difference between the firm
and the individual. If you are a plumber named Raju Sharma and you start a plumbing service
firm called “Flush” which is a sole proprietorship, the government does not differentiate
between “Flush” and “Raju Sharma”
This means that if someone sues “Flush” and “Flush” owes that person a huge sum of money,
it is as good as Raju Sharma owes that person a huge sum of money. Raju Sharma's bank
accounts, property and even his house may be used to settle the claim.
This is the biggest disadvantage of sole proprietorships. Because of this reason, sole
proprietorships are generally started if the business is small and there is “not much risk
involved”.

If the concept of unlimited liability is not clear, dont worry. It shall be cleared when you
consider the other kinds of business.

Nature of Sole Proprietorship:
To properly understand the nature of a sole proprietorship, here are a few characteristics of a
sole proprietorship explained in detail:

Single Ownership:
A single individual owns the sole proprietorship! That individual owns all the assets and
properties of the business. He alone bears all the risk of the business.
No sharing of profit & loss:
The entire profit out of the sole proprietor ship business goes to the sole proprietor. If there is
any loss, it is also borne by the sole proprietor alone. Nobody else shares any of the profit and
loss of the business.
Low capital:
The capital required by a sole proprietorship is totally arranged by the sole proprietor. He
raises the capital either from his personal resources or by borrowing from friends, relatives,
banks or financial institutions. Since there is only one person raising capital, very low capital
can be raised.
One-man control:
The controlling power in a sole proprietorship business always remains with the owner alone.
The owner or proprietor alone takes all the decisions to run the business. He may take
decisions though a consultant or some advice, but the final decisions are always in his hand.
Unlimited Liability:
The liability of the sole proprietor is unlimited. This implies that, in case of loss the business
assets along with the personal properties of the proprietor shall be used to pay the business
liabilities.
Almost no legal formalities:
The formation and operation of a sole proprietorship requires almost any legal formalities.
However, the owner may be required to obtain a license from the local administration or from
the health department of the government, whatever is necessary depending on the nature of the
business.

Now we shall discuss each of the characteristics in details.

i. Single Ownership: A single individual always owns sole proprietorship
form of business organization. That individual owns all assets and properties of the business.
Consequently, he alone bears all the risk of the business. Thus, the business of the sole
proprietor comes to an end at the will of the owner or upon his death.
ii. No sharing of Profit and Loss: The entire profit arising out of sole proprietorship business
goes to the sole proprietor. If there is any loss it is also to be borne by the sole proprietor alone.
Nobody else shares the profit and loss of the business with the sole proprietor.

iii. One man’s Capital: The capital required by a sole proprietorship form of business
organization is totally arranged by the sole proprietor. He provides it either from his personal
resources or by borrowing from friends, relatives, banks or other financial institutions.
iv. One-man Control: The controlling power in a sole proprietorship business always remains
with the owner. The owner or proprietor alone takes all the decisions to run the business. Of
course, he is free to consult any body as per his liking.
v. Unlimited Liability: The liability of the sole proprietor is unlimited. This implies that, in
case of loss the business assets along with the personal properties of the proprietor shall be
used to pay the business liabilities.
vi. Less Legal Formalities: The formation and operation of a sole proprietorship form of
business organisation requires almost no legal formalities. It also does not require to be
registered. However, for the purpose of the business and depending on the nature of the
business, the sole proprietorship has to have a seal. He may be required to obtain a licence
from the local administration or from the health department of the government, whenever
necessary.

Advantages of Sole Proprietorship
The sole proprietorship form of business is the most simple and common in our country.
It has the following advantages:

i. Easy to Form and Wind up: A sole proprietorship form of business is very easy to form.
With a very small amount of capital you can start the business. There is no need to comply
with any legal formalities except for those businesses which required licence from local
authorities or health department of government. Just like formation it is also very easy to wind
up the business. It is your sole discretion to form or wind up the business at any time.
ii. Direct Motivation: The profits earned belong to the sole proprietor alone and he bears the
risk of losses as well. Thus, there is a direct link between effort and reward. If he works hard,
then there is a possibility of getting more profit and of course, he will be the sole beneficiary of
this profit. Nobody will share this reward with him. This provides strong motivation for the
sole proprietor to work hard.
iii. Quick Decision and Prompt Action: In a sole proprietorship business the sole proprietor
alone is responsible for all decisions. Of course, he can consult others. But he is free to take
any decision on his own. Since no one else is involved in decision making it becomes quick
and prompt action can be taken on the basis of this decision.
iv. Better Control: In sole proprietorship business the proprietor has full control over each and
every activity of the business. He is the planner as well as the organiser, who co-ordinates
every activity in an efficient manner. Since the proprietor has all authority with him, it is
possible to exercise better control over business.
v. Maintenance of Business Secrets: Business secrecy is an important factor for every
business. It refers to keeping the future plans, technical competencies, business strategies, etc.,

secret from outsiders or competitors. In the case of sole proprietorship business, the proprietor
is in a very good position to keep his plans to himself since management and control are in his
hands. There is no need to disclose any information to others.
vi. Close Personal Relation: The sole proprietor is always in a position to maintain good
personal contact with the customers and employees. Direct contact enables the sole proprietor
to know the individual likes, dislikes and tastes of the customers. Also, it helps in maintaining
close and friendly relations with the employees and thus, business runs smoothly.
vii. Flexibility in Operation: The sole proprietor is free to change the nature and scope of
business operations as and when required as per his decision. A sole proprietor can expand or
curtail his business according to the requirement. Suppose, as the owner of a bookshop, you
have been selling books for school students. If you want to expand your business you can
decide to sell stationery items like pen, pencil, register, etc. If you are running an STD booth,
you can expand your business by installing a fax machine in your booth.
viii. Encourages Self-employment: Sole proprietorship form of business organization leads to
creation of employment opportunities for people. Not only is the owner self-employed,
sometimes he also creates job opportunities for others. You must have observed in different
shops that there are a number of employees assisting the owner in selling goods to the
customers. Thus, it helps in reducing poverty and unemployment in the country.

Limitations of Sole Proprietorship

One-man business is the best form of business ogranisation because of the above-discussed
advantages. Still there are certain disadvantages too. Let us learn those limitations.
i. Limited Capital: In sole proprietorship business, it is the owner who arranges the required
capital of the business. It is often difficult for a single individual to raise a huge amount of
capital. The owner’s own funds as well as borrowed funds sometimes become insufficient to
meet the requirement of the business for its growth and expansion.
ii. Unlimited Liability: In case the sole proprietor fails to pay the business obligations and
debts arising out of business activities, his personal properties may have to be used to meet
those liabilities. This restricts the sole proprietor from taking risks and he thinks cautiously
while deciding to start or expand the business activities.
iii. Lack of Continuity: The existence of sole proprietorship business is linked to the life of
the proprietor. Illness, death or insolvency of the owner brings an end to the business. The
continuity of business operation is therefore uncertain.
iv. Limited Size: In sole proprietorship form of business organisation there is a limit beyond
which it becomes difficult to expand its activities. It is not always possible for a single person
to supervise and manage the affairs of the business if it grows beyond a certain limit.
v. Lack of Managerial Expertise: A sole proprietor may not be an expert in every aspect of
management. He/she may be an expert in administration, planning, etc., but may be poor in

marketing. Again, because of limited financial resources it is also not possible to employ a
professional manager. Thus, the business lacks benefits of professional management.

Suitability of Sole Proprietorship Form of Business

Let us consider the type of businesses where sole proprietorship form is most suitable.
Sole proprietorship form of business organisation is suitable:

Where the market for the product is small and local. For example, selling grocery items, books,
stationery, vegetables, etc.
Where customers are given personal attention, according to their personal tastes and
preferences. For example, making special type of furniture, designing garments, etc.
Where the nature of business is simple. For example, grocery, garments business, telephone
booth, etc.
Where capital requirement is small and risk involvement is not heavy. For example, vegetables
and fruits business, tea stalls, etc.
Where manual skill is required. For example, making jewellery, haircutting or tailoring, cycle
or motorcycle repair shop, etc.

PARTNERSHIP:
According to section 4 of the Partnership Act of 1932, "Partnership is defined as the relation
between two or more persons who have agreed to share the profits according to their ratio of
business run by all or any one of them acting for all". This definition superseded the previous
definition given in section 239 of Indian Contract Act 1872 as – “Partnership is the relation
which subsists between persons who have agreed to combine their property, labour, skill in
some business, and to share the profits thereof between them”. The 1932 definition added the
concept of mutual agency.
A partnership firm is not a legal entity apart from the partners constituting it. It has limited
identity for the purpose of tax law as per section 4 of the Partnership Act of 1932.

Elements of Partnership:

Important elements of partnership are:
(1) Association of 2 or more persons
(2) Existence of contract

(3) Carrying on a business
(4) Sharing of Profits
(5) Mutual Agency
A partnership firm cannot create another partnership firm as they cannot enjoy the legal person
in action. There must exist a contract between the partners.

Characteristics of Partnership:
The main features of partnership are given below:
1. Agreement
There must be agreement between the parties concerned. This is the most important
characteristics of partnership. Without agreement partnership cannot be formed. "No
agreement no partnership." But only competent persons are entitled to make a contract.
There are some provisions contained in the partnership agreement. These are determined
clearly before the commencement of business. But it differs from business to business. These
documents may be written or oral. But it must be written so that disputes may be settled
according to the provisions of agreement.
2. Number of Partnership
There should be more than one person to form a partnership. But there is restriction for the
maximum number of partners. In case of ordinary business, the partners must not exceed 20
and in case of banking must not exceed 10 (before nationalization).
3. Business
The object of the formation of partnership is to carryon any type of business. It may be
manufacturing or merchandise type small or large scale business. But it should not be illegal
business in the country concerned.
4. Profit motive
The basic motive of the formation of partnership is to earn profit. This profit is distributed
among the partners according to agreed proportion. If there is loss it will be sustained by all
partners except the minor.
5. Conduct of Business
The business of partnership is conducted by all the partners or any or them acting for all. But
each partner is allowed to participate in the management by law.
6. Entity
It has no separate entity apart from its members. It is not independent of the partners. Law has
not granted it any legal entity.
7. Unlimited liability
This is the prominent feature of partnership that the liability of each partner is not limited to the
amount invested but his private property is also liable to pay the business obligations. If assets

of the business are not sufficient to meet the liabilities of creditors then private property of
partners can be used to meet them. The creditors can claim their dues from anyone or all the
partners. If these liabilities are met by one partner then he is entitled to receive rateable
contributions from other partners.
8. Investment
Each partner contributes his share in the capital according to the agreement. Some persons
become partners without investing any capital to the business. But they devote their time,
energy and ability to their business instead of capital and receive profit.
9. Transferability of share
There is restriction to transfer the share from one partner to another person without the consent
of existing partners. So the investment in the partnership remains confined into few hands.
10. Position
One partner is an agent as well as principal to other partner. He can bind the other person by
his act. In the position of an agent he can make contract with another person or parties on
behalf of his concerned firm.
11. Mutual Confidence
The business of the partnership cannot be conducted successfully without the element of
mutual confidence and cooperation of partners. So the members must have trust and
confidence in each other.
12. Free Operation
There are no strict rules and regulations to control the partnership activities in our country i.e.,
no restriction for the audit of accounts, submission of various reports and other copies to any
government authority. So this organization may operate freely without any interference.

Types of Partners:
There are various types of partners in a partnership firm. They are as follows:
Active Partner:
Partner who takes an active part in the management of the business is called active partner. He
may also be called 'actual' or 'ostensible' partner. He is an agent of the other partners in the
ordinary course of business of the firm and considered a full fledged partner in the real sense of
the term.
Sleeping or Dormant Partner:
A sleeping or dormant partner is one who does not take any active part in the management of
the business. He contributes capital and shares the profits which is usually less than that of the
active partners. He is liable for all the de of the firm but his relationship with the firm is not
disclosed to the general public.
Nominal Partner:

A partner who simply lends his name to the firm is called nominal partner. He neither
contributes any capital nor shares in the profits or take part the management of the business.
But he is liable to third parties like other partners. A nominal partner must be distinguished
from the sleeping partner. While the nominal partner is known to the outsiders and does not
share in the profits, the sleeping partner shares in the profit a his relationship is kept secret.
Partner in Profits:
A partner who shares in the profits only without being liable of the losses is known as partner
in profits. He does not take part in the management of the business but he is liable to third
parties for all the debts of the firm.
Sub-partner:
When a stranger share the profits derived from the firm by a partner he is regarded as a sub-
partner. A sub-partner is in no way connected with the firm or he not a partner of the firm. He
is simply a partners' partner. Therefore, he has no rights again the firm nor he is liable for the
debts of the firm. He only shares profits from a partner.
Partner by Estoppel or Holding out:
When a partner is not a partner but represent to the outside world that he is a partner in a firm,
he is stopped or prevented from denying the truth. He is considered as a partner in the eyes of
law. Similarly, if a person is declared i be a partner by a partner of a firm and such person
remained silent without denying it, he also considered a partner by holding out. Thus, such
persons are liable to outsiders i partners on the principle of estoppel or holding out because on
faith of their representation action outsiders have granted credit to the firm.
Minor Partner:
Partnership arises from contract and a minor is not competent to enter into contract. Therefore,
strictly speaking, a minor cannot be a full-fledged partner. But with the consent of all the
partners he can be admitted into partnership for benefits only. He is not personally liable to
third parties for the debts of the firm, on attaining majority, if he continues as a partner, his
liability will become unlimited with effect from the date of hi original admission into the firm.

Advantages of Partnership:
i. Easy formation:
The formation of partnership is very easy. Simply an agreement among the partners in oral or
written words can bring a partnership into existence. It includes very less legal formalities and
expenses.
ii. Large resources:
A partnership is in a position to accumulate large resources as more than one contributes
capital. The added financial strength of the partners can be utilised to increase the scale of
operation of the business. New partners can be admitted to meet the additional requirement of
fund.
iii. Diverse skills and expertise:

Partnership provides a scope for association of persons with diverse skills and expertise.
Partners having expertise and skills in different functional areas of business can manage the
business efficiently.
iv. Flexibility of operations:
Like that of sole proprietorship the partnership can bring changes in its operation easily and
quickly looking at the changing circumstances. Such changes cannot be implemented in a
company with ease because of the restrictions imposed.
v. Sharing of risk:
The losses of the firm and other associated risk in business are shared by the partners. Hence,
the share of risk of each partner is less in comparison to sole proprietorship.
vi. Benefits of unlimited liability:
Since the liability of the partners is unlimited it acts as great check against speculative
activities and partners shall not be careless in managing the business. Further, the firm enjoys
good credit standing and easily obtain loans because the creditors can realise their loan amount
from the private property of the partners.
vii. Promptness in decision making:
Since the partners meet quite frequently, they can arrive at decisions promptly. Thus, business
opportunities requiring quick decision shall not be lost.
viii. Close supervision:
Partners take active part in the management of the business. The close supervision of partners
eliminates wastage and leads to greater efficiency.
ix. Reduced management cost:
Since different functional areas are managed by the partners themselves, the huge managerial
expenses can be saved to a great extent.
x. Secrecy:
There is no statutory obligation on the part of partnership to publish the accounts of the firm.
Hence, the business secrecy can be maintained to a certain extent.
xi. Protection of minority interest:
Every partner has a right to participate in the management. All important decisions are taken
unanimously by the partners. There is no scope to disregard the interest of a minority group of
partners.
xii. Relationship between effort and reward:
There is a direct relationship between effort put by partners and reward. If the business is
managed efficiently, the reward shall be in the form of more profit, better customer satisfaction
and good image of the business.

Disadvantages of Partnership:

Even though, partnership form of business is comparatively better than sole proprietorship
form of business, still it is not the only best option available to an entrepreneur. The following
are some of the important shortcomings of partnership form of organisation which must b
carefully studies before finalization of this form of business.
i. Limited capital:
There is a limit to the maximum number of partners in a partnership Therefore, the capital that
can be raised from the partners is limited. Large-scale business requires huge capital and
partnership is not the proper form to meet the requirement.
ii. Unlimited liability:
Like that of the sole proprietorship, unlimited liability is a important drawback of partnership.
The risk of loss of private property of the partnership influences the partners to avoid further
risk and play safe.
iii. Instability:
There is instability in existence because a successful firm can be dissolve on the death,
insolvency or lunacy of a partner. The difference of opinion may also bring about closure of
the business. The sudden closure of a successful business is a great social loss.
iv. Risk of implied authority:
A partner acts as an agent of the firm and his acts bind the firm and other partners. A dishonest
or incompetent partner may lead the firm in difficulties because the other partners shall have to
pay for the dishonesty or inefficiency < a partner.
v. Lack of harmony:
Difference of opinion is the natural consequence in partnership. The conflicts and lack of
harmony among the partners may not be beneficial for the business and sometimes even that
lead to dissolution of the firm.
vi. Non-transferability of interest:
No partner can transfer his interest in a firm to third party without the consent of the other
partners. Thus, a partner does not enjoy the freedom of converting his interest in the firm into
cash.
vii. Lack of public confidence:
There is no legal binding on the firm to publish accounts. The public may suspect that the firm
is earning huge profit at the cost of the consumers. Thus, the firm lacks confidence of the
public.
viii. Cautious approach:
The very approach of unlimited liability makes the partners over cautious. This restricts the
partners in taking up any risky ventures and thus misses ma business opportunities.

Partnership Deed:

“A partnership deed can be defined as a document that is prepared to explain important points
so that the chances of clash among partners are minimized to a great extent. ”

Whenever a partnership is formed, the partners are bound in two kinds of responsibilities. One
is the individual responsibility of each partner and the other is the collective responsibility of
all the concerned partners.

The acts of partners in normal course of business unite the firm. If the partners work with
understanding and collaboration, the company is sure to function flawlessly.

If there is mistrust among them, conflicts are bound to surface every now and then. It is
because business is so complex a job that various kinds of decisions are to be taken almost on a
daily basis.

The past experience of partnership firms show that there are disputes among partners over
countless things and this result in the shutting down of the business.

So, a partnership deed can be defined as a document that is prepared to explain important
points so that the chances of clash are minimized to a great extent. Such a document consists of
all the significant clauses like name of the business, contribution of capital, allocation of profit
and the like.

Partnership is a document containing all the matters according to which mutual rights,
responsibilities and duties of the partners in the carrying out and administration of the matters
of the firm are determined. The deed is surely to be signed by all the partners.

A partnership deed can be affected by word of mouth or can be in black and white. In some
countries a written accord among partners is indispensable to bind them lawfully whereas in
USA such an accord can be oral or on paper.

A written accord should be favored because then nobody can create a row as regards the
contents of the deed. There may be disagreements about what was agreed upon earlier if the
contents are not presented in writing. A clause mutually agreed to by the partners should only
be made a part of the partnership contract.

However if the point of allocation of profit is not addressed to in a deed, each partner is
deemed to get an equal share of profits and is also to bear equal burden in case of loss.

Co-operatives:

A co-operative is where a number of individuals or businesses work together to achieve a
common purpose. They are normally formed so individuals and small businesses can benefit
from being part of a larger group, meaning they have more power to buy or bargain.

There are three main types of co-operatives:

• Retail co-operatives
• Marketing or trader co-operatives
• Worker co-operatives

The co-operative movement has been necessitated to protect the interest of weaker sections of
society. The primary objective of this movement is “how to protect economically the weaker
sections of society.”

The Indian Co-operative Societies Act, 1912 defines; Co-operative in section 4 as “society
which has its objective the promotion of economic interests of its members in accordance with
co-operative principles.”

Principles of Co-Operatives:

i. Voluntary membership: Everyone is at liberty to enter or leave the co-operative
society as and when he likes. Nobody is compelled tom join a co-operative society. The
members are also free to use or not use the services of the society.

ii. Political & religious Neutrality: The membership of a co-operative society is opened
to all irrespective of religion, caste, creed, colour or political affiliation. The is no place
for caste or discrimination in co-operatives.

iii. Democratic Management: The management of co-operative society is always on
democratic lines. All the members of a society elect a body of persons to conduct and
control the day-to-day working of the society. The management is elected through one-
man one-vote system,

iv. One man, One Vote: In co-operative societies every member is given one vote
irrespective of his contribution towards their capital. All members have equal voice in
the management of the society.

v. Service Motive: The primary objective of co-operative societies is to provide service to
their members. The aim is not to earn profits as is the case in all other forms of
organizations. The societies earn a small amount of profit to cover-up administrative
expenses. The profit is generally earned when goods are sold to non-members.

vi. Distribution of Surplus: The societies earn surplus from their services. This surplus is
not divided according to capital contribution. It is distributed according to purchases
made by the members in case of consumers in case of consumer-cooperatives and
according to goods delivered to society for sale in case of producers’ cooperatives.

vii. Cash Trading: Another principle of co-operative societies is trading on “cash basis”.
Co-operatives flourish only when cash trading principles is strictly followed. It ensures
economy and eliminates bad debts and collection expenses.

viii. Limited Interest on Investment: The pioneers of the co-operative movement
wanted to give certain percentage of capital contribution in the form of the dividend.
This is an incentive to the members for keeping money with the society as deposits.

ix. State Control: the co-operative societies are to follow certain rules and regulations
frames by the government.

x. Co-operative Education and Training: The success if co-operative will depend upon
the awareness of its members towards the principles of co-operation. The members
should be properly educated about the aims and objectives of the society. The members
should be trained to perform various activities of the society.

Types of Co-operative Societies:

Cooperative societies may be classified into different categories based on the objectives,
purposes and nature of activities performed by them. When some cooperative units are formed
for achievement of specific economic objectives, others are formed either with the purpose of
social upliftment of the members or to help consumers, small farmers or small producers,
Based on that the main type of cooperative societies are:
1. Consumers' Cooperatives:
These societies are formed by the members with an objective to provide goods and services at
the cheaper rate by eliminating middlemen commission by establishing direct relationship with
the manufactures or wholesalers. They purchase bulk goods and services directly from the
manufacturers or wholesalers and sell those among the members in small lots. The profit which
usually wholesalers or retailers avail is passed on by the societies to the members in form of
cheaper rate and balance as dividend. The main advantage of this type of societies is that
members of this society enjoy the steady supply of goods and services at reasonable price
without compromising the quality.
2. Producers' Cooperatives:
These types of cooperative societies are formed to assist the manufacturers/industrial units in
(i) setting up units (ii) producing goods and services, as well as (iii) marketing their products. It
assists the members in procuring the plants and machineries, raw materials and other necessary
factors of production so also taking the responsibility of marketing those products too. Thus,
the members of societies are left with only producing the goods and services. Small producers
are mainly benefitted out of this process and they concentrate only on production side.
3. Marketing Cooperatives:
Such cooperatives are established with a view to carrying on the marketing job of producers
directly by eliminating middlemen's profit. It is rather an association of similar type of
producers to market their products. It purchases all the products produced by the small
manufacturers in small lot, store the same in their warehouses and market them when the
market is favourable or at proper places where there is demand for the same.

4. Housing Cooperatives:
Housing cooperative societies are those voluntary associations of members who come to the
rescue of needy people in getting their dream of having an own house fulfilled. These societies
engaged in acquiring the land from general public, develop them, construct houses as per the
choice of the members and then transfer the said houses in favour of the members. In
consideration to that members pays the due price for the house may be on easy instalment basis
spread over as long years. Cooperative societies at times arrange finance/loans for the members
from different financial institutions to bear the cost of the house. Some societies also sale plots
to their members for construction of house at their level.
5. Credit Cooperatives:
Credit cooperative societies are formed for providing finance to the poor farmer and needy
members of the society at lower rate of interest. The society collects funds from its members in
form of share capital as well as accepts deposits from general public. It also avails loans from
state cooperative banks. The fund so collected are used in providing loans to the needy people,
generally to the members as loans and advances on easy terms and conditions. This process of
financing people save them from exploitation by the money lenders who usually charges high
rate of interest and stiff terms and conditions.
Credit cooperative societies are two types. Agriculture credit cooperatives and Non- agriculture
credit cooperatives. An agricultural credit cooperative society extends credit to the rural people
both for productive and non-productive purposes. A non-agricultural society is meant for urban
masses and meet their short-term financial requirement.
6. Cooperative Farming Societies:
In order to achieve higher rate of return from economies of scales, small farmers and marginal
farmers of a particular area may join their hands, form a cooperative society and go for mass
farming instead individual farming. They contribute capital, land and labour and jointly go for
any farm activity. This becomes beneficial to the members in many ways like - (i) mass
production, (ii) maximum output, (iii) application of advanced technologies, fertilisers and
manuals, (iv) pooled resources, land, labour and others, (v) proper irrigation, (vi) no shortage
of capital to meet day-to-day expenses etc.
a. Cooperative Better Farming Societies:
These societies are started to improve the methods of fanning among the members. They
arrange the machineries, seeds, fertilisers for the farmers. Farmers get higher output by
utilising the same. The members in turn, pay some charges for this service rendered by the
society. Thus, both the members as well as the societies are benefitted by that.
b. Cooperative Joint Farming Societies:
In this type of society, the land of the individual members is taken by the society, but the
ownership remains at the members. The members are allowed to spare their labour in
consideration to wages for doing work on the land. The outputs are sold by the society and any
profits realised are distributed among the members in the ratio of their land values.
c. Tenant & Joint Farming Societies:

This type of farming society takes the land on leasehold or freehold basis. The land is
distributed among the members and they cultivate those lands and grow agricultural products.
The members pay the rent for the utilisation of the land. Landless labourers having manpower
strength are more benefitted by this type of societies. In joint farming ownership lies with the
society. Whatever products are produced belong to the society. But in tenant farming society
members enjoy the output produced in the land owned by others and only pays certain amount
of charges for cultivating the land of others.
d. Collective Farming Societies:
The land is owned by the society. Members work collectively on the land. The members are
paid with the wages. Surplus of the society, if any, are distributed among the members in the
ratio of their wages. It is different from joint farming society in terms of ownership of land.

Advantages:
i) Open Membership: The membership of co-operatives is open to each
and every person.
ii) Service Motto: The co-operative societies are started not for profits
but for service.
iii) Supply of goods at cheaper rates: The societies purchase goods directly from producers
and cell them at cheaper rates.
iv) Democratic Management: The management is elected by the members among
themselves. All members are given equal voting rights irrespective of the numbers of
shares held by them.
v) Low Management Costs: The management of the co-operative society is in the hand of
the persons elected by the share holders, so there is no necessity of spending large
amount for management personnel.
vi) Surplus Shared by Members: The surplus earned by the society is distributed among the
members of the society on the basis of their purchases. Some part of the surplus is spent
on the welfare of the members.
Disadvantages:
i) Lack of Capital
ii) Lack of Unity among the Members
iii) Cash Trading
iv) Political Interference.
Statutory Corporations:
The statutory companies are also known as statutory corporations or public corporations, these
are actually public bodies established and operated by Statute. A statute is any formal authority
created by legislative authority that regulate or control a city, a state or a country.
Statutory Companies in India

In India, Statutory Companies are simply the public organizations that came into existence
through a special Act of Indian Parliament. The Act provides and defines various functions and
powers of a statutory body. The Act also defines various rules and regulations that regulate its
employees. Every stator company has a specially defined relationship with various departments
of government.
So, Indian definition of statutory companies says that “, A statutory company or corporation is
a special body formed by the legislature. This statutory body will have defined and provided
functions and powers. It will be financially independent and will have clearly defined
regulation over a specific activity or area”,
This is a corporate body created by the legislature with defined powers and functions and is
financially independent with a clear control over a specified area or a particular type of
commercial activity. It is a corporate person and has the capacity of acting in its own name.
Statutory corporations therefore have the power of the government and considerable amount of
operating flexibility of private enterprises. Few are
• Airports Authority of India
• Damodar Valley corporation
• National Highways Authority of India
• Central Warehousing Corporation
• Inland Waterways Authority of India
• Food Corporation of India
• National Human Rights Commission
.
Company:
A company is a business organization. It is an association or collection of individual real
persons and/or other companies, who each provide some form of capital. This group has a
common purpose or focus and an aim of gaining profits. This collection, group or association
of persons can be made to exist in law and then a company is itself considered a "legal person".
The name company arose because, at least originally, it represented or was owned by more
than one real or legal person.
Companies Act, 1956:
The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled
companies to be formed by registration, and set out the responsibilities of companies, their
directors and secretaries.[1]
The Companies Act 1956 is administered by the Government of India through the Ministry of
Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public
Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC)
handles incorporation of new companies and the administration of running companies.

Since it's commencement, it has been amended many times, in which amendment of 1988,
1990, 1996, 2000 and 2011 are notable.

Definition:
A Company is “an association of many persons who contribute money or money’s worth to a
common stock and employ it in some trade or business, and who share the profit and loss (as
the case may be) arising therefrom.” - James Stephenson
According to Section 3 of Indian Companies Act 1956, “A Company means a company
formed and registered under this Act.” According to clause (ii) of Section 3, “Existing
Company means a company formed and registered under any of the previous company laws.”

Characteristics of Companies:
The distinctive features of the company form of organisation are as follows:
1. Separate legal existence:
A company has a distinct legal entity independent of its members. It can own property, make
contracts and file suits in its own name. Shareholders are not the joint owners of the company's
property.
A shareholder cannot be held liable for the acts of the company. Similarly, members of the
company are not its agents.
There can be contracts between a company and its members. A creditor of the company is not a
creditor of its members.
The separate legal entity of a company was recognised in the famous case of Salomon, v.
Salomon and Co. Ltd. The facts of the case were as follows:
Salomon formed a company which acquired his own shoe business. He took all the shares
except six shares which he distributed among his wife, daughter and four sons.
Salomon also purchased some debentures of the company which gave him a charge over its
assets. At the time of winding up, the company's assets were not sufficient enough to pay its
debts.
The creditors of the company (other than Salomon) argued that their debts should be cleared
before paying Salomon for his debentures because Salomon and the company was one and the
same person.
The Court decided that after incorporation, Salomon and Co. had an identity separate from
Salomon even though he owned virtually all the shares in the company.
2. Perpetual succession:
Perpetual succession means continued existence. A company is a creation of the law and only
the law can bring an end to its existence. Its life does not depend on the life of its members.

The death, insolvency or lunacy of members does not affect the life of a company. It continues
to exits even if all its members die. Members may come and go but the company goes on until
it is wound up.
3. Limited liability:
As a company has a separate legal entity, its members cannot be held liable for the debts of the
company. The liability of every member is limited to the nominal value of the shares bought by
him or to the amount of guarantee given by him.
For instance, if a member has 50 shares of Rs. 10 each, his liability is limited to Rs 500. Even
if the assets of the company are insufficient to satisfy fully the claims of the creditors, no
member can be called to pay anything more than what is due from him.
However, if the members of the company so desire, they may form a company with unlimited
liability.
4. Transferability of shares:
The capital of a company is divided into parts. Each part is called a share. These shares are
generally transferable.
A shareholder is free to withdraw his membership from the company by transferring his shares.
However, in actual practice some restrictions are placed on the transfer of shares.
5. Common seal:
Being an artificial entity, a company cannot act and sign itself. Therefore, it acts through
human beings. All the acts of the company are authorised by its common seal.
The name of the company is engraved on its common seal. The common seal is affixed on all
important documents as a token of the Company's approval.
The common seal is the official signature of the company. Any document which does not bear
the common seal of the company is not binding on the company.
6. Separation of ownership and control:
Members have no right to participate directly in the day-to-day management of a company.
They elect their representatives, called directors, who manage the company's affairs on behalf
of the members.
Thus, the ownership of a company is distributed among the shareholders while management is
vested in the board of directors. The management of a company is delegated and centralised.
7. Voluntary association:
A joint stock company is a voluntary association of certain persons formed to carry out a
particular purpose in common. Members of a company can join it and leave it at their own free
will.
8. Artificial legal person:
A company is an artificial person created by law. It exists only in contemplation of law. It is
competent to enter into contracts and to own property in its own name. But it does not take
birth like a natural person and it has no physical body of a natural human being.

9. Corporate finance:
The share capital of a company is generally divided into a large number of shares of small
value. These shares are purchased by a large number of people from different walks of life.
10. Statutory regulation and control:
Government exercises control through company law over the management of joint stock
companies. A company is required to comply with several legal formalities and to file several
documents with the Registrar of Companies.

Types of Companies:
Indian company law classifies companies but as laypersons, many of us are not aware of this.
Typically, a company is a group of individuals who come together for a common purpose,
mainly profit making and revenue sharing. The working of a business entity in India is
governed by the Companies Act, 1956. There are various types of business entities defined by
the Indian legal system, such as corporations, sole traders, cooperatives and partnerships.
A company can be classified as:
• Incorporated company
• Unincorporated company
The Companies Act: Incorporated Companies
All the companies registered under the Companies Act, 1956, carry out their business activities
as incorporated companies.
These can be further classified as:
• Public companies limited by shares.
• Public companies limited by guarantee.
• Public unlimited companies.
• Private companies limited by shares.
• Private companies limited by guarantee.
• Private unlimited companies.
• Foreign companies.
• Government companies.
The Companies Act: Unincorporated Companies
Unincorporated companies are formed with intention of establishing large partnerships. The
liability of the members is unlimited. This type of company persists even after the death or
insolvency of any member. The number of members is restricted up to 10 for the banking
sector and up to 20 for other industries.

The Companies Act: Basis of Classification
Companies can be classified based on the following:
On the basis of Incorporation:
• Statutory Companies: These companies are formed by particular act of
government. Example: Reserved bank of India.
• Registered Companies: These are companies which are registered under the
Companies Act, 1956.
On the basis of liability:
• Companies with limited liability: These can be subdivided as companies limited
by shares and companies limited by guarantee.
• Companies with unlimited liability: In such companies, every member is
accountable for debt of the company.
On the basis of number of members:
• A private company
• A public company

Concept of Holding Company & Subsidiary Company:
Holding Company: If a company can control the policies of another company through the
ownership of its share or through control over the composition of its Board of Directors, the
company is called a “Holding Company”. A company, the policies of which are controlled, is
called a Subsidiary Company. The holding company has a say in the formulation of policies
for other company.

Subsidiary Company:
A company is a called as subsidiary company when one of the following conditions is fulfilled.
a) If the information of bard Directors is controlled by another company
b) The other company controls more than half of the voting rights of this company
c) If it is subsidiary of a company which itself is the subsidiary of another company.
d) The other company owns more than half of the maximum value of the shares of the in
the company.
A holding company and a subsidiary company are separate companies having separate legal
entity.
International Organizations:
An international organization is an organization with an international membership, scope, or
presence. There are three main types:

• International nongovernmental organizations (NGOs): non-governmental
organizations (NGOs) that operate internationally. There are two types:
o International non-profit organizations. Examples include the World
Organization of the Scout Movement, International Committee of the Red Cross
and Medicines Sans Frontiers.
o International corporations, referred to as multinational corporations. Examples
include The Coca-Cola Company and Toyota.
• Intergovernmental organizations, also known as international governmental
organizations (IGOs): the type of organization most closely associated with the term
'international organization', these are organizations that are made up primarily of
sovereign states (referred to as member states). Notable examples include the United
Nations (UN), Organization for Security and Co-operation in Europe (OSCE), Council
of Europe (CoE), European Union (EU; which is a prime example of a supranational
organization), and World Trade Organization (WTO). The UN has used the term
"intergovernmental organization" instead of "international organization" for clarity
International organizations are entities established by formal political agreements between
their members that have the status of international treaties; their existence is recognized by
law in their member countries; they are not treated as resident institutional units of the
countries in which they are located.

Multi-National Companies:
A multinational corporation (MNC) or multinational enterprise (MNE) is a corporation
enterprise that manages production or delivers services in more than one country. It can also be
referred to as an international corporation. They play an important role in globalization.
A corporation that has its facilities and other assets in at least one country other than its home
country. Such companies have offices and/or factories in different countries and usually have a
centralized head office where they co-ordinate global management. Very large multinationals
have budgets that exceed those of many small countries.

Features & Characteristics:
A multinational company is one which has its home in one country but lives and operates
under the law and customs of other country. The head office of multinational company is in
one country and its branches are spread all over the world. Hindustan lever, Procter and
Gamble, Colgate Palmolive etc are examples of multinational companies

Following are the features of multinational company
1. Huge amount of capital:-
2. Large sized plant and machinery:-
3. Various activities:-

4. Expansion on large scale:-
5. Professional management:-
6. Advance technology:-
7. Market expansion:-
8. Profit is the main objective:-
9. Control of head office:-
10. Creation of new project:-

Multinational corporations (MNCs in short) are also known as Transnational Corporations
(TNCs), Super National Enterprises, Global companies, cosmocorps and so on.
According to Prof. John H. Dunning, "A multinational enterprise is one which undertakes
foreign direct investment, i.e., which owns or controls income gathering assets in more than
one country; and in so doing produces goods or services outside its country of origin, i.e.,
engages in international production."
A multinational corporation has also been defined as "an enterprise: which owns and/or
controls producing facilities in more than one country such as factories, mines, oil refineries,
distribution channels, offices, etc."'
According to another definition, "Any business corporation in which ownership, management,
production and marketing extend over several national jurisdictions is called a multinational
corporation." Today, in international economic affairs they constitute the most important
institutions. There are four participants in the drama of multinationals. First, the MNCs
themselves; secondly, the host countries ; thirdly, the home countries ; and fourthly, the
international community.
Characteristics of multinational corporations (MNCs):
The multinational corporations have certain characteristics which may be discussed below:
(1) Giant Size:
The most important feature of these MNCs is their gigantic size. Their assets and sales run into
billions of dollars and they also make supernormal profits. According to one definition an
MNC is one with a sales turnover of f 100 million. The MNCs are also super powerful
organisations. In 1971 out of the top ninety producers of wealth, as many as 29 were MNCs,
and the rest, nations. Besides the operations, most of these multinationals are spread in a vast
number of countries. For instance, in 1973 out of a total of (,000 firms identified nearly 45 per
cent had affiliates in more than 20 countries.
(2) International Operation:
A Fundamental feature of a multinational corporation is that in such a corporation, control
resides in the hands of a single institution. But its interests and operations sprawl across
national boundaries. The Pepsi Cola company of the U.S operates in 114 countries. An MNC
operates through a parent corporation in the home country. It may assume the form or a

subsidiary in the host country. If it is a branch, it acts for the parent corporation without any
local capital or management assistance. If it is a subsidiary, the majority control is still
exercised by the foreign parent company, although it is " incorporated in the host country. The
foreign control may range anywhere between the minimum of 51 per cent to the full, 100 per
cent. An MNC thus combines ownership with control. The branches and subsidiaries of MNCs
operate under the unified control of the parent company.
(3) Oligopolistic Structure:
Through the process of merger and takeover, etc., in course of time an MNC comes to assume
awesome power. This coupled with its giant size makes it oligopolistic in character. So it
enjoys a huge amount of profit. This oligopolistic structure has been the cause of a number of
evils of the multinational corporations.
(4) Spontaneous Evolution:
One thing to be observed in the case of the MNCs is that they have usually grown in a
spontaneous and unconscious manner. Very often they developed through "Creeping
incrementalism." Many firms become multinationals by accident. Sometimes a firm established
a subsidiary abroad due to wage differentials and better opportunity prevailing in the host
country.
(5) Collective Transfer of Resources:
An MNC facilitates multilateral transfer of resources Usually this transfer takes place in the
form of a "package" which includes technical know-how, equipment's and machinery,
materials, finished products, managerial services, and soon, "MNCs are composed of a
complex of widely varied modern technology ranging from production and marketing to
management and financing. B.N. Ganguly has remarked in the case of an MNG "resources are
transferred, but not traded in, according to the traditional norms and practices of international
trade."
(6) American dominance:
Another important feature of the world of multinationals is the American dominance. In 1971,
out of the top 25 MNCs, as many as 18 were of U.S. origin. In that year the U.S. held 52 per
cent of the total stock of direct foreign private investment. The U.E. has assumed more of the
role of a foreign investor than the traditional exporter of home products.
Significance of multinational corporations (MNCs):
The multinational corporations today have a revolutionary effect on the international economic
system. It is so because the growth of international transactions of the multinationals has
affected the more traditional forms of capital flows and international trade for many
economies. Today they constitute a powerful force in the world economy.
The value of the products sold by the MNCs in 1971 was more than $ 500 billion which was
about one-fifth of the GNP of the entire world, excepting that of socialist economies. In the
host countries, the volume of their production was about $ 330 billion. The present growth rate
of their output in the host countries is a spectacular 10 per cent per annum which is almost
double the growth rate of the world GNP.

In the field of international trade and international finance, the multinational firms have come
to exercise enormous power. In early seventies the MNCs accounted for about one-eighth of all
international trade- From the nature of their growth it may be presumed that in the early
eighties their share will rise to one-fourth.
Among the developing countries only India had an annual income twice that of General
Motors, which is the biggest multinational corporation. Otherwise the annual income of the
other less developed countries is much less than that of the giant MNCs. By their sheer size the
MNGs can disrupt the economies of the less developed countries, and may even threaten their
political sovereignty.
We may comprehend the relative economic power of the MNCs vis-a-vis the nation-states by
ranking them together according to gross annual sales and gross national product respectively.
As Lester R. Brown has shown, out of 100 entries in the merged list 56 were nation-states and
as many as 44 were MNCs.
According to one estimate by early eighties some 300 large MNCs will come to control 75 per
cent of the world's manufacturing assets.

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