Introduction and History of Business Thinking Flashcards
3 Business Context
- Environmental Context
- Globalisation
- Institutional Frameworks
- Cultural Frameworks - Organisational Context
- Organisation
- International Organisation - Strategic Context
- Strategy
- Entrepreneurs and Owners
- Business Ethics
- Sustainability
Business Contexts
Business is the organised effort of individuals to produce goods and services to meet the needs of the public.
Strategic level: compromises a set of objectives and methods of achieving those objectives
Organisational level:
- goals
- structure
- ownership
- size
- organisational or corporate culture
Environmental level:
- economy
- state
- technology
- labour
- cultural and institutional differences
Interaction-Influence Model
Various elements of the Business in Context model interact with one another and influences go backwards and forwards across the various levels.
The idea of the interaction-influence model for business forms the basis of the systems and contingency approaches developed as part of organisation theory.
The Systems Approach
Assumes that all organisations are made up of independent parts which can only be understood by reference to the whole.
Views business in 2 related concepts:
1. business is made up of a series of interactions, involving business activities, the various aspects of an organisation and the environment
2. views business as a series of inputs from the environment, internal processes and eventual outputs
Inputs, processes and outputs must be balanced so the firm can obtain equilibrium, especially with its environment.
Inputs:
- materials
- labour
- methods
- finance
- technology
- information
Process
- strategy formulation
- innovation
- operations
- marketing
- human resource management
- accounting processes
Outputs:
- goods
- services
- profit
- information
- waste
- job satisfaction
- economic growth
Contingency Approach
Focuses on the relationship between the organisation and its environment.
Business activities and the way they are organised are products of the environment in which they operate.
Criticised for focusing on a limited range of environmental variables, for being deterministic, and for ignoring both the influence of the organisation on its environment and the values and behaviour of management and the workforce.
History of Business Thinking
- Bureaucratic Management (Max Weber)
- Scientific Management (Frederick Taylor)
- Human Relations (Elton Mayo)
- Systems Theory (Katz & Kahn)
- Network Theory (Mark Grannovetter)
Bureaucratic Management (Max Weber)
Proposes that the most appropriate way to run an organisation is to structure it into a rigid hierarchy of individuals governed by strict rules and regulations.
Organisation as hierarchies. Traditional authority empathised a form of leadership based on the importance of relationships, kinship (family), and customs and traditions. Allows for order and balance.
Criticised particularism
- particularism: hiring and firing of employees and leaders, due to unrelated features like religion, race, sex, relation, family etc
6 Principles:
1. Formal rules: explicitly stated that rules that determine what and why to organise
2. Hierarchy: pyramid structure, with workers at the base to supervisors and top management
3. Authority of office/position: authority linked to position and not people
4. Division of labour: expertise became developed in specific areas with specialised departments, linked to expertise and experience
5. Systematic pay structure: promotion and pay based on merit and not connections
6. Separation of work and personal life: not mixing of interest
Scientific Management (Frederick Taylor)
Claims that industrial growth increases the scale of production, increases complexity and raises the need for smarter management.
Main Concepts
- improve economic efficiency, especially labour productivity
- organisation as machines.
- to tackle the high costs of labour, Taylor created scientific management
- Homo Economicus: a worker is a rationally calculating machine, who is narrowly self-interested, desires to possess wealth and is mainly motivated by money
- efficiency first: standardisation of tasks, specialisation of tasks, piece wage
- separation of thinking & doing: planning and procedures, implemented via management hierarchy, disciplining of workers
- science: scientific analyses of work, scientific selection of workers
- time and motion studies: the least amount of time it took a worker to do a small msperarate task, and the least number of motions
- aiming to maximise efficiency and productivity
Human Relations (Elton Mayo)
Emphasises the need for managers to prioritise the interests of their employees, including appreciating and valuing their opinions.
Main Concepts
- saw organisations as social systems
- based his idea on Frederick Taylor and wanted to find out what more to do to improve efficiency and productivity
- work was too repetitive and wanted “rest breaks”
- Hawthrone studies: people will modify their behaviour simply because they are being observed (Hawthrone Effect)
- Hawthorne studies showed that worker attitudes and morale do a lot to counter the negative effects of repetition. Highlighted the importance of human relations: informal relations, social groups, effective informal leadership, participation, and team spirit.
Limits of the Hawthorne studies: workers didn’t show their natural behaviour as they were being watched, Hawthorne works difficult to generalise
Systems Theory (Katz & Kahn)
Organisations are intertwined with their environments to the extent that the organisation-environment boundary.
Main Concepts:
- saw organisations as open systems
- organisations are more complex than we thought because of influence of outside forces and organisations gre more complex increasing the range of products
- organisations need to adapt to the uncertainty and changing dynamics of the environment
- organisations as living organisms
4 Principles:
1. Permeability: systems are open, firms need to be dynamic and open to sense changes in the environment
2. Holism: organisation needs to be viewed as a whole, parts of an organisation are interdependent
3. Entropy: if you do not constantly take care of a system, it deteriorates, get the system back to homeostasis/equilibrium (maintaining balance)
4. Equifinality: there are many ways to organise
Network Theory (Mark Granovetter & Ron Burt)
Main Concepts:
- organisations as networks
- networks are relationships among multiple interdependent and self-organising units
- seeing organisations as networks rather than pyramids emphasised horizontal instead of vertical relationships
- networking emphasises trust over rules and managers as facilitating rather than directing
- the role of innovating became more important than instead of worker efficiency
- strong ties share the same kind of information whereas weak ties function as bridges to different/unique information
- internal networks -> Kaizen: continuously improving all functions and involving all employees of the internal network
- external networks -> Keiretsu: valuing long-term relationships, respecting extended external network of partners
Vulnerabilities of Global Networks:
- viruses travel fast and the world is interconnected so one virus may affect a larger part
