All businesses around us do not operate by themselves. There is always someone or a group of individuals who take care of the business – that is management.
The success of any business depends to a large extent on how well it is managed. Well-managed businesses tend to perform well, while poorly managed ones experience poor performance and may eventually close.
In this chapter you will learn about the concept of business management, levels of management, organisational structure and the importance of good management. The competencies developed will help you manage businesses more effectively.
Around the world, more than 90% of new businesses fail within the first five years. The main reason is not lack of money or ideas – it is poor management. Good management is the difference between survival and success.
The Concept of Business Management
What is a Business?
A business is an organised effort of individuals with the goal of providing products (goods or services) to consumers. It includes all activities that create utility (value) for both providers and users.
Businesses can operate in different forms:
Sole proprietorship
Partnership
Company (private or public)
Public enterprise
Co-operative
Joint venture
A business may be for profit or non-profit. Its main goals are usually to serve customer needs, satisfy social needs, or make a profit.
What is Management?
Management is the coordination and administration of tasks to achieve a goal. It includes:
Setting the organisation’s strategy
Coordinating the efforts of staff
Using available resources effectively
Traditionally, management was seen as “getting things done through other people.” It involves acquiring and combining human, financial and physical resources to achieve organisational goals.
The modern view sees management as the process of coping with both the external and internal environment by recognising the organisation’s strengths and weaknesses.
Business Management
Business management is the process of applying the functions of management to business affairs. It involves combining the basic resources of the organisation to maximise the value of the business. It requires effective and efficient use of resources so that business goals are achieved. The exact nature of management varies depending on the size and type of business.
Question: Define business and management in your own words.
Answer: Business is an organised activity that provides goods or services to customers in order to create value and (usually) make a profit. Management is the process of planning, organising, leading and controlling resources to achieve organisational goals.
Functions of Management
The main functions of management are traditionally summarised as:
Planning – deciding in advance what to do, how to do it, when to do it and who will do it.
Organising – arranging resources and tasks in a structured way so that plans can be carried out.
Staffing – recruiting, selecting, training and developing the right people for the jobs.
Directing / Leading – guiding, motivating and supervising employees so they work towards the goals.
Controlling – checking actual performance against planned performance and taking corrective action when necessary.
Management also involves coordinating the factors of production: land, labour, capital and entrepreneurship.
Remember: These functions are universal – they apply in all organisations and at all levels of management around the world.
The five functions of management (planning, organising, staffing, directing, controlling) were first clearly described by the French industrialist Henri Fayol in the early 20th century. His ideas are still taught in business schools more than 100 years later.
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In most organisations there are three main levels of management. Each level has different responsibilities.
1. Top-Level Management
Top-level managers control and oversee the entire organisation. They set the overall direction, make major decisions and are responsible for the long-term success of the business.
Examples: Managing Director, Chief Executive Officer (CEO), General Manager, Board of Directors.
Main responsibilities:
Setting organisational goals and strategy
Making major policy decisions
Representing the organisation to the outside world
Allocating major resources
2. Middle-Level Management
Middle-level managers execute the plans and policies made by top management. They act as a link between top management and lower-level managers.
Low-level managers directly supervise the day-to-day work of employees. They ensure that tasks are performed correctly and on time.
Examples: Supervisors, Section leaders, Foremen, Team leaders.
Main responsibilities:
Assigning work to employees
Directing and controlling daily activities
Maintaining discipline and solving immediate problems
Reporting to middle management
Question: Name the three levels of management and give one example of a position at each level.
Answer:
Top level – e.g. Managing Director or CEO
Middle level – e.g. Departmental Manager
Low level – e.g. Supervisor or Foreman
In large global companies the distance between the CEO and the front-line supervisor can be many layers. In small businesses the owner often performs all three levels of management at the same time – planning strategy in the morning and supervising staff in the afternoon.
Importance of Business Management
Effective business management is important because it:
Helps the organisation achieve its goals efficiently
Ensures optimal use of limited resources
Improves coordination between different departments and people
Helps the business adapt to changes in the external environment
Increases productivity and profitability
Creates a clear structure of authority and responsibility
Motivates employees and improves working relationships
Question: Why do well-managed businesses tend to perform better than poorly managed ones?
Answer: Well-managed businesses use resources efficiently, have clear goals and plans, coordinate activities effectively, adapt to change, and motivate staff. Poorly managed businesses waste resources, lack direction, and often experience conflict and low performance.
Suggested Answers
1. Define business and management
Business: An organised activity that provides goods or services to customers in order to create value and (usually) earn a profit. Management: The process of planning, organising, staffing, directing and controlling resources to achieve organisational goals.
2. Three levels of management with examples
Top-level management – Managing Director, CEO, General Manager
They use resources efficiently, set clear goals, coordinate activities well, adapt to change, and motivate employees. Poor management leads to waste, confusion and eventual failure.
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