Business Fundamental Essay Example

  • Category:
    Management
  • Document type:
    Essay
  • Level:
    Masters
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    4
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    2364

11BUSINESS FUNDAMENTALS

Business Fundamentals

  1. Introduction

Fundamental principles of management may be defined as the guiding principles used by mangers in decision making. They are indispensable principle factors that form the basis for successful management. Success of any business is determined by the application of the management principles, ability to uphold them, and make amendments where necessary. Management principles are applied in all aspects of an organization including business environment, mission, culture, structure, and type of work. Every manager ought to understand managerial principles, in order to effectively lead an organization and achieve the set goals. The purpose of this paper is to elaborate on key fundamental principles of business, practically apply them on business, and portray the relationship between theory and practice.

2.0 Nature and Scope of Business

My case study is a group of retail stores, supermarkets, hotels, and gaming outlets known as Woolworths Limited. Woolworths limited is a chief company in Australia with widespread interest in retail marketing (Dee 2011 p. 78). By revenue, Woolworths Limited is the second largest company in Australia. Its products include food stuffs, liquor, hotel services, stationary items and poker machine operators. Woolworths Limited forms over eighty percent of the supermarkets in Australia, with one thousand operating stores across the country (Dee 2011, p. 84). For several decades, Woolworths Limited has emerged among the leading companies in Australia owing to its well established customer base.

Woolworths Limited has a total number of 205,000 employees (Dee 2011, p. 84). It is headed by a Chief Executive Officer (CEO), who is assisted by a Chairman of the Board of Directors. Their core role is to oversee the operations of the company. Under them is a team of directors who are the heads of different management committees that head departments such as business, strategy, control, legal, human resource, and service delivery. The board of directors works under a board charter that outlines and defines the responsibility of each director. Other employees include managers, head of departments, supervisors, and the subordinate staff, who work in their respective groups.

3.0 Business assessment Against Drucker’s Theory of the Business (1994) Theory

Drucker’s Theory of the Business lies in the question ‘what to do’. Drucker (1994, p. 95) observed that numerous business management teams face the challenge of determining their next course of action, even after enjoying long-term success. In his Analysis, Drucker realized that a huge number of businesses stagnate after reaching the top not because things are done in the wrong way or simply poorly, but because of the assumptions on which the companies have been built (Drucker 1994, p. 98). Such assumptions dictate the behavior of an organization, influence the decisions of what is to be done and what is deemed meaningful. Additionally, they form the basis on which companies determine their competitors and their customers, their core values, principles, strengths, and weaknesses. In general, these assumptions define what a company simply gets paid for (Drucker 1994, p. 102).

Understanding Business Environment

For a company to succeed, it must be well acquainted with its operating environment. These include knowing its customers, their needs and demands, the competitors, and a good approach to current and future technology advancements (Arico & Srinivasan 2014, p. 4). According to Schermerhorn et al. (2003), strategic planning assists in defining the direction, as well as the scope of an organization. Succes in Woolworths Limited was as a result of strategic planning. For example, general purpose credit cards enabled Woolworths limited attract a high number of clients. Clearly, understanding the business environment and proper application of strategic plans lead business expansion.

Woolworths’ great success has been as a result of well defined principles, objectives and values. Superior strategies have seen the company move to the top as well as defining what Woolworth Limited gets paid for (Drucker 1994 p. 102). Obviously, Woolworths Limited has reached the top through the formulation of top-notch management strategies that have defined what is to be done and what is not to be done.

Well Defined Mission

A clear vision in any organization leads to success. In the historic foundation of management principle, Schermerhorn et al. (2003), strategic management begins with establishing clear objectives. Additionally, the objectives must be specific, measurable, attainable, and realistic as well as time bound (Drucker 1994, p. 104). For example, in the year 2011, the company had a goal of opening 150 stores by 2015. This short-term goal saw the company significantly increase its number of stores. Following this, it is clear that well defined goals are easier to evaluate and thus gauge the extent of achievement.

Identifying Core Competencies

distinguished it from its competitors. Conclusively, identifying and upholding core competencies enables a company to remain competitive. timely services, which is one of the concepts in management theory, which is defined as coordination between several resources and expertise that enables a company to be outstanding in the marketplace (Mankins, Brahm & Caimi 2014, p. 76). Ability to manage time is one of the competencies that can enable a company emerge at the top (Mankins, Brahm & Caimi 2014, p. 74). Woolworths stores made over eighty percent of the successful stores in Australia because of its ability to provide fresh foods to their clients coupled withcore competencyIdentifying core competencies is vital for business success. A

4.0 Woolworths Limited Assessment against Nohria et al’s 4 + 2 Theory

Research shows that many businesses stagnate after reaching a certain level of success. The stagnation is not because they do things in the wrong way, but because they made wrong decisions at the beginning, which formed the basis of their strategies (Drucker 1994, p. 96). 4+2 Theory posits that the management must form strategies, execute them, and shape a culture and a structure to carry on with (Nohria, William & Bruce 2003, p. 49). Additionally, managers should be innovative, engaging high leadership skills, as well as merge and partner with other companies.

Primary Management Practices

Clear strategies

. Most departments in Woolwoths sustained superior performance because of the clear strategies that were stated at the beginning of the management planning.(Schwartz, 2007, p.422). Moreover, it defines a company’s direction, specifies the objectives and policies, as well as the designed plans, in order to achieve the set objectives (Schermerhorn et al. 2003). By so doing, it becomes easy for a company to achieve and maintain superior performance (Schwartz, 2007, p.422) A clear strategy is a vital for success of in business. It involves the formulation and execution of a company’s major goals, and assessment of both external and internal environments, which form the basis of competition

Execution

Changet must be planned and executed in all aspects of a business including culture, procedures, technology, and structure. In order to enhance execution, an organization must carry on every single step at a time, eliminate any obstacles, and offer continued support to the parties involved (Schermerhorn et al. 2003). In order to attract new customers, Woolworths Limited gradually introduced ready meals in its outlets, leading to an increase in revenue. Clearly, execution is a stage in the management process that leads to growth, if well implemented.

. Motivated employees are more productive (Koumparoulis & Viachopoulioti 2012, p. 424). Woolworths Limited formed a culture of displaying genuine interest in clients. By so doing, customers felt cared for and therefore, kept on coming back, causing rapid growth. Evidently, formation of a culture that guides on the most appropriate behavior enables businesses to achieve their objectives with ease. (Schwartz, 2007, p.425)Culture is the system of assumptions, core values and beliefs that are used by an organization to define what appropriate or inappropriate conduct is. Culture strongly influences the behavior of employees, and the overall company’s performance

Structure

Structure shows the relationship between authority and responsibility, and defines positions in an organization. An organizational chart is normally formed to show the structure of a company and clearly indicate who reports to whom(Celina & Geoff 2014, p.16). Moreover, a proper structure helps in improving teamwork, and provides a framework for effective coordination (Wiren 2009, p. 6). It also determines the level at which decisions are made, and defines patterns of authority, thereby promoting creativity and initiative (Celina & Geoff 2014, p.18). Woolworths formed a good organizational structure that defined the role of each member of staff. Through this structure, the members of staff understood their duties, responded to the right parties and were able to work together as a team. Without a doubt, well organized structure enabled Woolworths Limited emerge as one of the most successful companies in Australia.

Secondary management practices

Innovation

Innovation is the use of creativity to initiate new processes, ideas or products. Innovation is not limited to the management team, but rather involves employees from all levels of an organization (Celina & Geoff 2014, p.16). Innovation is entitled to contribute new ideas to the company’s development in terms of environmental, social and economic conditions of a business, market as well as other resources (Hajkowicz, Cook & Littleboy 2012). Woolworths Limited was the first company to use cash registers that produced receipts for the clients. This is an example of innovation that led to significant growth of the business in Woolworth stores. Following this example, it is clear that innovation is a vital aspect for business growth and success.

Mergers and partnership

Merger and partnership means combining forces with more than one business in order to increase productivity. This aspect has a number of benefits including new markets, huge talent base, more resources, and diversification as well as shared managerial roles (Mark, 2012, P. 66). In the year 2005, Woolworths Limited, ventured into the hotel industry. The company recorded great success in this venture simply because it got into partnership with Bruce Mathieson, and experienced hotel operator. Undoubtedly, merger or partnership results to rapid growth in any venture.

5.0 Critical management Issues Facing Woolworths Limited

Issues on Strategic management

In the recent past, Woolworths limited recorded a drop in their revenue. In the year 2015, Woolworths Limited announced the sale of one of its hardware since it was no longer profitable (Dee 2011, p. 75). The stagnation in the hardware can be linked to the Druckers Theory of the Business. Though the company’s board of directors had laid down strategies that saw the company get to the top, they were now facing the challenge of determining the next course of action, in order to remain profitable or simply increase the business revenue (Drucker 1994, p. 95). This is a clear indication that Druckers Theory of the Business is applicable in Woolworths Limited.

Poor Decision Making

Over the last few years, Woolworth Limited has recorded a significant drop in its share price from $37.32 to $26.99, which has wiped off its business value that is worth $10 billion (Treadgold, 2015, p. 2). Consequently, the management intends to close down the ill-fated stores and sell out the liquor outlets (Traedgold, 2015, p.3). The losses are associated with poor decision making (Treadgold, 2015, p. 5). Clearly, lack of an appropriate culture of making decisions can lead to huge losses, or simply business closedown.

Solution for Critical Management Issue in the Digital Economy

There are critical management issues in the present day digital economy. The digital economy has provided limitless growth opportunities for some organization, whereas others have been disrupted or simply displaced (Arico & Srinivasan 2014, p. 4). In order to be successful and sustain high performance in the digital economy, an organization must identify the precise needs of digitally empowered clients, enhance products in order to match the market need, become more innovative so as to remain competitive, and restructure the leadership hierarchy (Schachter 2010, p. 441). Without an iota of doubt, the current digital market requires companies to re-think their way of doing business in order to remain competitive and sustain high profitability.

6.0 Conclusion

In summary, fundamental principles of management are essential in running of successful businesses. The principles are applicable in all level business development and in each and every aspect of operation. Various theories have been used to illustrate the relevance of these principles in the day business operations. The success story of Woolworths Limited in Australia is a notable example of the effectiveness of putting theory into practice. However, there are gaps in the application of the principles, especially in today’s digital economy. Therefore, for these principles to remain relevant, the management ought to acquire the necessary skills on how to deal with the rapidly changing economic environment.

References

Arico, S, & Srinivasan, V 2014, Enabling Australia Digital Future: Cyber Security Trends and Implication, CSIRO.

Dee, M 2011, ‘National Competition Policy and the Retail Sector’.The Journal of Australian Political Economy, pp.68-84.

Drucker, F 1994, ‘The Theory of the Business’. Harvard business Review Vol. 72, no. 5, pp. 95- 104.

Celina, s, & Geoff, L 2014, ‘Building a Social Case for Business Sustainability’.Journal of Economic and Social Policy, Vol. 16, no. 2, pp. 1-22.

Hajkowicz, S, Cook,H, & Littleboy, A 2012, ‘Our Future World: Global Megtrends that will Change the Way we Live’, CSIRO.

Koumparoulis Nikolaou, D & Viachopoulioti, A 2012, ‘(One Hundrend Years of Taylorism: Is It Still Relevant Today?), The Evolution of Scientific Management’. Academic Research International, Vol. 3, No. 4, pp. 420-426.

Makins, M,Brahm, C & Caimi G 2014, ‘Your Scarcest Resource’. Harvard Business Review, Vol. 92, no. 5, pp. 74-80.

Mark, P 2012, ‘Partnership Versus Public Ownership of Accounting Firms: Exploring

Relative Performance, Performance Measurement and Measurement Issues’.

Australasian Accounting Business & Finance Journal, Vol. 6, No. 3, pp.65-84.

Nohria, N, William J, & Bruce R 2003, ‘What Really Works’, Harvad Business Review, Vol. 81, no.7, pp. 42-52

Schermerhorn et al., 2014, ‘Management, Asia-Pacific, 5th Edition, New York, Wiley and Sons.

Schachter Laver, H 2010, ‘The Role Played by Fredrick Taylor in the Rise of the Academic Management fields’. Journal of Management History, vol. 16, no. 4, pp. 437-448.

, 42(3), pp.419-426.Australian Journal of Social IssuesSchwartz, M 2007, ‘Corporate Responsibility and Australian Business: Identifying the Issue’.

Treadgold, T 2015, ‘Management Mistakes Cost Woolworths’, Business News Western Australia, Retrieved from: https://www.businessnews.com.au/article/Management- mistakes-cost-Woolworths

Wiren Daniel, A 2009, ‘A Prologue to the Past, in The History of Management Thought’. The Evolution of Management Thought, 6th Edition.