MODULE 5: FUNCTIONAL AREAS OF

MANAGEMENT
Introduction to functional areas of management,
• Operations management,
• Human resources management,
• Marketing management,
• Financial management

• Entrepreneurship,
• Business plans,
• Corporate social responsibility,
• Patents and Intellectual property rights
OPERATIONS MANAGEMENT
• Operations
• Manufacturing operation: a conversion process that includes manufacturing,
yields a tangible output: a product,
• Service operation: a conversion process that includes service, yields an
intangible output: a deed, a performance, an effort.

• Operations system converts inputs in order to provide outputs, which

are required by a customer.
• physical resources into outputs (to satisfy customer wants).
• A combination of goods and services may also form a
product.

• For instance, meals served in a restaurant comprise

both the tangible physical core product and
intangible services aspects, such as cleanliness,
ambience, delivery, etc.
 Operations Management - Definition

• Operations management refers to planning, organizing, and

controlling all resources and activities to provide goods and services,
which applies equally to manufacturing and services in the private
and public sectors and even governments.

• Operations management refers to the process which transforms

inputs such as materials, machines, labour, capital and
management, into outputs (i.e., goods and services)
 • Inputs - needs of customers,
information, technology, management
and labor, fixed assets, and variable
assets that are relevant to the
transformation process.

• Outputs - products and services and

may even be information,

• Managers and workers use the information

and physical factors to produce outputs.

• The transformation process incorporates

planning, operating, and controlling the
system.

• Feedback(control) - for improving the

system.

• operations are influenced by external

factors
Resources
• Human resources - key assets of an organisation.
• Material resources - physical facilities and materials (major assets)
• Capital - stock, bonds, and/or taxes and contributions (vital asset).

Systems
• Systems are the arrangement of components designed to achieve objectives
according to the plan. (contains subsystem)
• A systems approach to operations management recognises the hierarchical
management responsibilities.
• The ability of any system to achieve its objective depends on its design and its
control.
• System design is a predetermined arrangement of components. It establishes the
relationships that must exist between inputs, transformation activities and
outputs in order to achieve the system objectives.
• Transformation process and value adding activities
• The objective of combining resources under controlled conditions is to
transform them into goods and services having a higher value than the
original inputs.
• The transformation process applied will be in the form of technology to
the inputs.
• The transformation process in 'operations' can have different forms, such
as:
• Physical: As in Manufacturing Operations
• Locational: As in Transportation or warehouse operations
• Exchange: As in retail operations
• Psychological: As in entertainment
• Physiological: As in health care
• Informational: As in communication
• The transformation process incorporates planning, operating, and controlling
the system.

Planning
• activity that establishes a course of action and guide future decision-making.
• defines the objectives for the operations subsystem of the organisation, and
the policies, and procedures for achieving the objectives.
• also involves product planning, facility designing and using the conversion
process.

Organizing
• establish a structure of roles and the flow of information within the operations
subsystem.
• determine the activities required to achieve the goals and assign authority and
responsibility for carrying them out.

Controlling
• activities that assure the actual performance in accordance with planned
performance.
• by measuring actual outputs and comparing them to planned operations
management.
• The effectiveness of the production • improving the transformation
factors in the transformation efficiency and to increase the ratio.
process is known as productivity.
• Therefore in any operation, the
• operations are a function or system economic value of output should
that transforms inputs into outputs be greater than the economic value
of greater value. of input.

• Productivity = Output/lnput • To illustrate, a finished automobile

has a higher value than raw steel or
a graduating management student
• The firms overall ratio must be should have higher economic value
greater than 1, than a fresher.
 Role of an operation manager
• concerned with planning, organising, and controlling the activities, which
affect human behaviour through models.

• prime responsibility for processing inputs into outputs.

• They must bring together under production plan that effectively uses the
materials, capacity and knowledge available in the production facility.

• Given a demand on the system, work must be scheduled and controlled to

produce goods and/or services required.

• Control must be exercised over such parameters such as costs, quality and
inventory levels.
OPERATIONS MANAGEMENT OBJECTIVES
Customer service
• to utilize resources
for the satisfaction of
customer wants.
• OS must provide
something to a
specification, which
can satisfy the
customer in terms of
cost and timing.
• ‘right thing at a right
price at the right
time’ can satisfy
primary objective.
Resource utilisation
• to utilize resources for the satisfaction of customer wants effectively.
• Customer service must be provided with the achievement of effective
operations through efficient use of resources.

• The extent of the utilisation of the resources’ potential might be

expressed in terms of the proportion of available time used or
occupied, space utilisation, levels of activity, etc.

• Each measure indicates the extent to which the potential or capacity of such
resources is utilised.
MAIN FUNCTIONS OF OPERATION MANAGEMENT
1. Planning
2. Scheduling
3. Organizing
4. Purchasing
5. Controlling
6. Quality control
7. Inventory control
 Controlling
Planning
• assures the actual performance in accordance with planned
• Includes choosing a location for the performance.
business and scheduling production.
• Among the factors to consider are • exercise control by measuring actual outputs and comparing them to
nearness to markets, raw materials, labor planned operations management.
supply, and transportation facilities. • Controlling costs, quality, and schedules are the important functions
Scheduling here.
• setting beginning and ending times for Quality control
each step in the production process. • checking the quality of the goods produced.
• ensures that work will be finished on time
• It involves overseeing the grade or freshness of goods, their strength
or workability, the workmanship or design, harmlessness, adherence
to federal or industry standards, and many other factors.
Organizing
• establish a structure of roles and the flow of Inventory control
information within the operations subsystem. • manufacturers and businesses need inventories
• determine the activities required to achieve the • keep inventories - costly.
goals and assign authority and responsibility for
carrying them out. • more inventory - less capital it has for other activities.
Purchasing • In deciding how much inventory to keep on hand, those in
• In order to do business, a company needs charge of inventory control also have other costs to
resources consider.
• The people who buy goods for a business have to • Some businesses may decide that the discounts outweigh
decide what to buy, from whom, and at what the other costs of maintaining a large inventory.
price.
ORGANISATION OF OPERATIONS MANAGEMENT
•The organization of operations management
can be categorized into three specific levels:

• Strategic/top level/long term management

• Tactical/functional/medium term/middle level
management
• Operational/short term management
Strategic management • After assessing the potential within
• highest level of operations an industry, an overall
management. organizational strategy must be
• decisions which have long-term developed, including some basic
consequences choices of the primary basis for
competing.
• affect the organization as a whole.
• Their specific functions include
Decisions about: • priorities - following four
• Products to make (product development) characteristics:
• Make or buy decisions • Quality (product performance).
• How to make products (process and layout • Cost efficiency (low product price).
decisions) • Dependability (reliable, timely
• How much to procure delivery of orders to customers).
• Production site location • Flexibility (responding rapidly with
• How much capacity is needed, (high level new products or changes in volume)
capacity decisions)
Tactical management Operational management
• decision related to specific functions or • low level managers in operations.
departments within the organization
• decisions related to the day to day
• medium term consequence (i.e. less functions
than three years but more than one
year). • consequence is short-term (less
• Their specific functions include:
than one year).
• Addressing the material and labor • Their specific functions include:
resources within the Constraints. • Planning: execution and control
• Labour planning; how many workers are decisions.
needed. • Scheduling: What to process and
• Inventory and replenishment planning: when
level of stock required and when should it
be delivered. • Sequencing: What is the order to
process requirements
• Determining shifts needed for work:
Whether overtime or subcontractors are • Loading: How does the work utilize
required the resources
• Detailed capacity planning • Assignments: Who does the work
 CORPORATE SOCIAL RESPONSIBILITY

PATENTS AND INTELLECTUAL PROPERTY RIGHTS

CORPORATE SOCIAL RESPONSIBILITY
• Profit maximisation – old objective;
• New concept – Profit maximisation + owe responsibility to society as
they owe to business enterprises.

• CSR denotes the way the companies integrate the general,

social, environmental and economic concerns of the society
into their own values, strategies and operations in a
transparent and accountable manner and thereby
contribute to the creation of wealth and improvement in the
standard of living of the society at large.
 Scope of Corporate Social Responsibility
1. Environment 3. Fair Business Practices 5. Community
• involves the environmental • This area concerns the relationship of the company to special Development
interest groups. In particular it deals with:
aspects of production,
• Employment of minorities • involves community
covering pollution control in activities, health-
the conduct of business • Advancement of minorities
operations, prevention or • Employment of women related activities,
repair of damage to the • Employment of other special interest groups education and the
environment resulting from • Support for minority businesses arts and other
processing of natural • Socially responsible practices abroad. community activity
resources and the 4. Human Resources disclosures.
conservation of natural
resources. • This area concerns the impact of organizational activities on the
people who constitute the human resources of the organization.
• more efficient technologies • These activities include:
6. Products
to minimize the use of
irreplaceable resources and • Recruiting practices • concerns the
the production of waste. • Training programs qualitative aspects of
• Experience building -job rotation the products,
• Job enrichment
• Wage and salary levels • it includes customer
2. Energy • Fringe benefit plans satisfaction,
• This area covers • Congruence of employee and organizational goals truthfulness in
conservation of energy in • Mutual trust and confidence advertising,
the conduct of business • Job security, stability of workforce, layoff and recall practices completeness and
operations and increasing • Transfer and promotion policies clarity of labelling
the energy efficiency of the • Occupational health and packaging.
company's products.
 Challenges to CSR Initiatives in India
1. Lack of Community Participation 4. Need to Build Local Capabilities
• Inadequate communication between the company and the • lack of transparency is due to inadequate local
community limits the scope of conducting CSR activities. capabilities.
• inadequate knowledge of CSR among communities, • need for building the capabilities of the local NGOs
coupled with poor communication, problems escalate. as there is a serious dearth of trained and efficient
organizations that can effectively contribute to the
ongoing CSR activities initiated by companies.
2. Narrow Perception of CSR Initiatives • Similarly, there are also challenges with respect to
• Many NGOs and government agencies presume that reaching remote and rural areas, the inabilitv to
companies involved in CSR activities are only interested in assess and identify the real needs of the community
funds. This de-motivates companies to initiate and and work with the corporate sector to ensure
implement CSR activities. successful implementation of CSR activities.

3. Transparency Issues 5. Lack of Consensus on Implementing CSR Issues

• lack of transparency on the part of local implementing • lack of consensus amongst local communities,
agencies, and that they do not make adequate efforts to agencies, government bodies, and companies while
disclose information on the progress of social programmes implementing CSR projects.
that have been initiated. • often results in duplication of activities by corporate
houses in their areas of intervention.
• a perceived lack of transparency negatively impacts the • results in a competitive spirit between local
process of trust-building between companies and local implementing agencies rather than a collaborative
communities. approach.
 Examples of CSR
COMPANY CSR
Infosys 'Infosys Foundation which attends social causes like water supply and
Technologies: toilet facilities to schools, guest houses to cancer patients and their
accompanying person, supply of computers to schools and colleges.

Sahara India: They sponsor important sports events like cricket, hockey and also
have contributed funds to various national calamity victims.

Birla Trust: Birla's Trust spends money on educational institutes, temple and old
age homes on a regular basis.

Tata Group: They invest in 'foot-ball academy', 'hockey academy' and sponsor
sports tournament. Give scholarship to merited students at All India
Level.
 Advantages of CSR
1. It displays care and concern and fellow feeling towards the society we
live in.
2. The owners of the company earn huge profits from a particular
state/region or nation. It becomes their duty to do something in return as
gratitude.
3. The executives who undertake CSR activities are held very high in public
opinion and are honoured by the society and government.
4. It is not possible for government alone to improve the standard of living
of people. If corporate also collaborate the living conditions of the people
improves.
5. The corporate image improves and it helps to sell their products more
and more.
6. The trend of CSR is a motivator to youngsters to take up such activities
when they grow up to become executives or entrepreneurs.
BUSINESS PLANS
 BUSINESS PLANS
• Business plan is a written statement of what an entrepreneur
proposes to take up.
• It is a kind of guide frost or course of action what the entrepreneur
hopes to achieve in his business and how is he going to achieve it.
• Serves like a kind of big road map to reach the destination
determined by the entrepreneur.
• The business plan is termed by different names by its different
intended interest audience.
• Bank - 'loan proposal
• venture capital group - 'venture plan' or 'investment prospects'
• common man - 'project report.'
• Whatever be the name - basic purpose - to serve as a roadmap in
setting up a business enterprise.
 Steps Involved In Writing a Business Plan
4. Prepare a Rough Draft:
1. Define Purpose: • Correct grammatical mistakes and break up the written
• serve its purpose better if its purpose is spelt account into meaningful sections.
out in the very beginning. • Compare your writing to your intended outline and make
• There may be multiple goals in writing the necessary changes.
business plan. • decide on the level of detail necessary to be included in the
• okay to have multiple goals, - customize business plan.
before placing it in front of different
audiences. 5. Do Financial Analysis:

2. Collect Information:
• After all costs and revenue estimates have been arrived at,
pro-forma financial statements are to be drafted.
• All sorts of information about the business • Do - sensitivity analysis, the ROI calculation, the break-even
and the industry should be collected. analysis, and other financial ratios.
• Do not rate the quality - gather it. - the more • The numbers should be realistic and consistent.
you can find the better.
6. Finalize the Plan:
3. Write Down Things:
• Think of a rough structure appropriate for • Check for errors, the numbers have to be scrutinized and
the business plan and start writing. formatting has to be completed.
• note down things on paper • should have a professional look about it. Set a deadline for
completing it and adhere to the deadline.
• Approach it like a brainstorming session. Do
not be critical of your efforts. 7. Get the Plan Reviewed:
• review - someone else – may be a number of people to do it.
 Types of Business Plans
1. Based on Time Span
Short-Term Plan:
• short period (1 year or less).
• determination of activities to accomplish short-term objectives
• operational (or tactical) plans
• developed within the framework of long-term planning. This plan is normally
prepared for a period of one year or less.

Long-Term Plan:
• long period (5 years or more)
• concerned with achieving the long-term goals
• determines long-term objectives
• providing the required information on various elements of the future
environment.
• provides a broad framework within which short-term action plans are developed.
 2. Based on Scope of Operation:
Strategic Plan: Functional Plan:
Operational (or Tactical) Plan:
• concerned with the optimum use of • determines how to achieve long- • for various functional
available resources for a shorter term goals (more than 5 years) of an
enterprise in a dynamic business
areas of the business
period of time (1 year or less). environment. enterprise
• concerned with simple, routine, and • strategic decisions for achieving long- • serves as a guide for the
repetitive problems. term overall goals of the enterprise. actions of employees of
• prepared at middle and lower levels • prepared at higher level of the concerned functional
of management (participation and
involvement of the middle and lower management department.
level managers) • Strategic plan covers vital matters • The departmental
• It is a blue print for current actions and issues concerning profitability,
within the framework of long range development, survival, and growth of managers formulate their
plans. the enterprise. functional plans for one
• helps in achieving tangible goals • designs the ways and means of year in consultation with
achieving growth, diversification, their subordinate officers.
• involves conversion of long-range and stability, etc. and develops integrated
strategic plans into detailed program of action accordingly. • require approval of the
operational programs (sub plans and • gives special emphasis on top management with or
programs). environmental changes and without modification.
• Operational planning is pragmatic as it uncontrollable factors.
requires actual commitment and • needs more managerial judgement • The master plan of an
utilization of resources. and expertise. enterprise is based on the
• E.g.: Production plan of a month functional plans of various
departments.
 3. Based on Repetitiveness:
Single-Use Plan:
• A single-use plan is meant for a particular situation.
• to accomplish a specific objective within a relatively short period.
• tailored to fit a specific situation.
• ceases to exist once the objective is achieved.
• non- repetitive in nature.
• Budgets, strategy, objectives, and programmes are examples of a single-use plan.

Standing (or Repetitive-Use) Plan:

• permanent plan.
• used again and again.
• to serve as a standing guideline and criterion on managerial decision-making.
• repeatedly used for tackling recurring problems and issues.
• Policies, procedures, methods, and rules are examples of standing plans.