Training material

1. INTRODUCTION TO BUSINESS ADMINISTRATION
Table of Contents Page
1. Purpose of the Presentation 2
2. Objectives of the Training Workshop 2
3. Forms of Business Enterprise 2
4. Business Ownership 2
5. The Managerial Role 4
6. Managerial Skills 5
7. The Management Process 5
8. Crisis Management 8
9. Summary 9
10. Way-forward 9
11. Bibliography 10

2. 1. Purpose of the Presentation
1.1. To increase knowledge about business administration as identified by Molemo
Development Foundation (MDF) to be a major challenge of businesses in
Lesotho.
1.2. To assist existing and potential entrepreneurs attending this course to better
manage their business ventures for growth.
2. Objectives of the Training Workshop
At the end of the session, participants will be able to:
2.1. Identify the two overall sectors in the economy;
2.2. Define three basic forms of business ownership;
2.3. List the four steps in the management process;
2.4. Cite three leadership styles, and explain why no one style is best;
2.5. Enumerate the five steps in the control cycle;
2.6. List five measures that companies can take to better manage the crisis;
3. Forms of Business Enterprise
The economy can be divided into two overall sectors comprising a total of eight
subsidiary sectors:
3.1. Service Sectors
3.1.1. Wholesale and retail trade;
3.1.2. Finance and insurance;
3.1.3. Transportation and utilities;
3.1.4. Other services.
3.2. Goods-Producing Sectors
3.2.1. Manufacturing;
3.2.2. Construction;
3.2.3. Mining;
3.2.4. Agriculture
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3. 4. Business Ownership
The three most common forms of business ownership are:
4.1. Sole Proprietorship
This is a business owned (and usually operated) by just one person, although it
may have many employees. It is the easiest form of business to start with
limited funds.
4.2. Partnership
This is a legal association of two or more persons as co-workers of a business for
profit. In a General partnership, all partners are legally equal and are liable for
the business’s debts. In a limited partnership, one or more people act as
general partners and run the business; the remaining partners are passive
investors whose liability is limited to the amount of their capital contribution.
4.3. Corporation
This is legally chartered enterprise with most of the legal rights of a person,
including the right to conduct a business, to own and sell property, to borrow
money, and to sue or be sued. A corporation has five important characteristics.
4.3.1. It is an artificial person with specific legal standing.
4.3.2. It has an unlimited life span;
4.3.3. It is empowered by the state to carry on a specific line of business.
4.3.4. It is owned by shareholders (stockholders).
4.3.5. Its shareholders are usually liable for damages only to the extent of their
holdings.
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4. 4.4. Advantages and Disadvantages of the Three Forms of Business
Ownership
FORM OF
OWNERSHIP
ADVANTAGES DISADVANTAGES
Sole
Proprietor
• Easy of formulation and
dissolution
• Limited potential for big profits
• Control and freedom • Restricted financial resources
• Secrecy of operations • Reliance on owner for all managerial
skills
• Tax advantages • Unlimited liability
• Life of business limited to owner’s
interest or life span
Partnership • Easy of formulation • Unlimited liability of general partners
• Tax advantages • Ever-present danger of interpersonal
conflict between partners
• Ownership opportunities for
skilled persons
• Potential for aggressive competition
among employees for partnership
status
• Legal standing in case of
disputes
• Lack of clear-cut management
responsibility
• Increased capital and credit
resources
• Ability to continue despite
changes in ownership
Corporation • Limited liability for
shareholders (owners)
• Requirements for public disclosure
• Investment liquidity • Costs to establish and dissolve
• Unlimited life span • Tax rates
5. The Managerial Role
5.1. Management is a process of coordinating resources to meet an objective.
5.2. Why should there be such an interest in management? It is because
management is universally necessary in organizations. It is the force holding
everything in a business enterprise together and setting everything in motion; it
is the coordination of an organization’s resources – land, labour, and capital – to
meet an objective. Whenever people work together to achieve a goal, someone
must take decisions about who will do what when and what money and other
resources are to be used.
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5. 6. Managerial Skills
Whatever the type or size of organization, managers must employ three basic kinds of
skills:
6.1. Technical
This is the ability to perform the mechanics of a particular job. A person who
knows how to operate a machine, prepare a financial statement, program a
computer, or pass a football has technical skills.
6.2. Human Relations
These are skills required in order to understand other people and to interact
effectively with them. Managers need human relations skills in countless
situations, because their main job is to get things done through people. One of
human relations skill that all managers must have is communication skill – that
is, a skill at exchanging information.
6.3. Conceptual
This is the ability to understand the relationship of parts to the whole. Managers
must be able to think – to see the organization as a whole and to understand the
relationships among its parts. Managers use their conceptual skills to acquire and
interpret information, analyze the information, infer the underlying principles,
see relationships, find both problems and opportunities, come to conclusions,
make decisions, and formulate plans.
7. The Management Process
Managers at all levels participate in all phases of the management process – planning,
organizing, directing and controlling. However, the degree of responsibility a manager
has in each phase depends on her or his position in the management hierarchy.
7.1. The Planning Function
Planning is the first function of management and the one on which all other
aspects of management depend. It has to do with an establishment of objectives
for an organization and determination of the best ways to accomplish them. The
manager has to consider budgets, schedules, data about the industry and the
general economy, the company’s existing resources, and resources that may
realistically be obtained. Through the planning process, the company’s mission
must be supported by statements of goals and objectives. Goals are the broad,
long-range targets of the organization. Objectives are the specific short-range
targets. Goals and objectives are typically set in eight areas:
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6. 7.1.1. Market standing: What is the desired position of the company or its
product compared with others.
7.1.2. Innovation: What types of new products or services or procedures, or
improvements in old ones, should be developed?
7.1.3. Productivity: How much work should come from each of the organization’s
resources?
7.1.4. Physical and financial resources: how much of these basic resources will
be needed to accomplish other objectives?
7.1.5. Profitability: How much of the organization need to get back from its
business activities?
7.1.6. Manager performance and development: What are today’s leaders
expected to accomplish, and where will tomorrow’s leaders come from?
7.1.7. Worker performance and attitude: What is required of lower-level
employees?
7.1.8. Social responsibility: How can the organization best fulfill its
responsibilities to society?
7.2. The Organizing Function
After planning, the second management function is organizing. This is a process
of arranging resources to carry out the organization’s plans. At this stage, the
manger must think through all the activities that employees carry out and all the
facilities and equipment that employees need to carry out those activities – from
programming of organization’s computers through driving its trucks to mailing its
letters. The most problematic area that managers face in organizing is figuring
out the division of labour best suited to the goals and objectives of the
organization and then staffing the various positions. Or finding and selecting
people who can do what needs to be done. Figuring out how to compensate
employees, helping them develop their skills, and evaluating their performance
are other important parts of the job.
7.3. The Directing Function
The third type of management activity is directing. This is a complex function
aimed at getting people to work effectively and willingly. While directing
employees, managers may assign work, demonstrate how to do the job, issue
orders, and evaluate and correct work. Directing consists of two different but
related processes.
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7. 7.3.1. Motivating which is the aspect that gives employees a reason to do the
job and to put forth their best performance.
7.3.2. Leading which is the aspect that involves guiding employees in a job, both
through actual demonstration of specific tasks and through the manager’s
own behaviour and attitude.
7.3.3. Leadership Styles
These are the ways authority is used by a manager to lead others. Three
broad categories have been identified as follows:
7.3.3.1. The Autocratic Leader
This is a manager who centralizes authority and does not involve
others in decision making. This manager uses authority in a
straightforward manner and simply issues orders.
7.3.3.2. The Democratic Leader
This is a manager who delegates authority and involves
employees in decision making, and encourages employee
participation and a free flow of communication, all the time
making it clear that he or she has the final say.
7.3.3.3. The Laissez-faire Leader
This is a manger who leads by taking the role of consultant,
leaving the actual decision making up to employees. This
approach encourages group members to express themselves
creatively, but it may fail if the group pursues goals that do not
match the organization’s goals.
No one manager always uses one style. Instead, different
situations may call for different styles.
7.4. The Controlling Function
The fourth crucial management function is controlling. This is a process of
ensuring that organizational objectives are being attained, resetting the course if
the objectives change to meet changing conditions and of correcting deviations if
those objectives are not reached. When managers control, they compare where
they with where they should be. Top managers usually establish control systems
and set standards. These are criteria against which performance may be
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8. measured. The control cycle has five basic steps involving all management
levels:
7.4.1. Top management sets the standards by which the organization’s overall
performance will be measured;
7.4.2. All levels of management establish a feedback system for regular
progress reports:
7.4.3. These progress reports are used to compare actual performance to the
previously established standards;
7.4.4. Appropriate corrective action is taken;
7.4.5. Standards are revised as necessary.
8. Crisis Management
Successful crisis management is a system for minimizing the harm that might result
from some unusually threatening situation. Companies that experience a crisis for which
they are ill prepared seem to make a series of mistakes. First, warnings about possible
problems are ignored at one or several management levels. Then the crisis hits. Under
pressure, the company does the worst thing it could do: it denies the severity of the
problem or its role in the problem. Finally, when the company is forced to face the
reality, it takes hasty, poorly conceived action. There is a better way of handling a
crisis.
8.1. The management experts caution that the first 24 hours of a crisis are critical.
The first move should to explain the problem – to both the public and company’s
employees – in order to squelch rumours and stop panic.
8.2. Simultaneously, the offending product should be removed from store shelves,
and the offending action should be stopped or the source of the problem,
whatever it is, should be brought under control to the extent possible.
8.3. Set up crisis teams composed of people who respond well under stress. These
teams identify the areas where their companies are most vulnerable.
8.4. They plan ways to deal with the most serious threats.
8.5. As a final step, the best prepared companies hold drills, simulating crisis
conditions to test the systems they have developed.
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9. 9. Summary
9.1. The two overall sectors in the economy are:
9.1.1. The service sector, which include wholesale and retail trade, banking and
insurance, transportation and utilities and others.
9.1.2. The goods-producing sector, which includes manufacturing, construction,
mining and agriculture.
9.2. The three basic forms of business ownership are:
9.2.1. Sole proprietorship;
9.2.2. Partnership;
9.2.3. Corporations.
9.3. The four steps in the management process are:
9.3.1. Planning;
9.3.2. Organizing;
9.3.3. Directing;
9.3.4. Controlling.
9.4. The three leadership styles are:
9.4.1. Autocratic;
9.4.2. Democratic:
9.4.3. Laissez-faire
Each style may be best in a different situation and leaders should be flexible
enough to respond with the best approach for the situation.
9.5. The five steps in the control cycle are as follows:
9.5.1. Setting standards;
9.5.2. Establishing a feedback system;
9.5.3. Comparing performance to the standards;
9.5.4. Taking corrective action; and
9.5.5. Reevaluating the standards.
9.6. The five measures that companies can take to better manage the crisis:
9.6.1. Explain the problem to the public and to the company’s employees;
9.6.2. Control the source of the problem;
9.6.3. Set up a crisis team of people who react well under stress;
9.6.4. Plan ways to deal with the most serious threats; and
9.6.5. Hold drills under simulated crisis conditions.
10.Way-forward
10.1. The knowledge about business administration as discovered to be a challenge for
many businesses in Lesotho should be increased and,
10.2. The participants should be in a better position to manage their businesses for
growth.
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10. Bibliography
1. David J. Rachman, Michael H. Mescon, Courtland L. Bovee’, John V. Thill,
Business Today. 6th
Ed., McGraw-Hill Publishing Company, 1976, United
States of America.
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