Cm du Toit

The management function

This chapter outlines the functioning of management in a firm. The management function relates to all management activities performed in, or on behalf of, the firm and therefore, this function must not be regarded as a separate department in the organization structure of the firm. Management activities are performed in each of the different departments, primarily with the purpose of contributing toward the attainment of the firms objectives. The large number of contributions toward the development of management thought throughout the centuries could also be classified meaningfully according to different periods: management in ancient times; management during the Middle Ages; management in the 18th and 19th centuries; and management in the 20th century. A group of people must work together toward a specific goal. The emphasis is obviously not placed on individual ability but on a team effort that challenges management to ensure that the employees are able to make a concerted effort to reach a goal.

Marketing, purchasing and public relations

This chapter reviews various aspects related to market, purchasing, and public relations in a firm. In spite of the coherence between the marketing and purchasing principles, a closer examination of the activities involved in these two functions requires that they also be considered separately. The established firm that manufactures tangible products serves as the most popular model in marketing and purchasing literature. The coherence between marketing and purchasing is most apparent by looking at the contribution made by these functions toward the objectives of the firm, their involvement with the market, the role played by each in planning the budget of the business, and the similarity found in the principles governing the daily marketing and purchasing activities. Marketing and purchasing usually play a specific part in the planning procedure of the financial budget of the firm.

The functioning firm

This chapter provides details related to the functioning of a firm. No firm can function in isolation from the environment. From the viewpoint of the individual firm, the business environment and its subparts can be distinguished according to four basic criteria. Each of these distinctions carries a particular meaning in a business economics study. According to factors of a descriptive nature, it is possible to distinguish between the social, psychological, ethical, political and legal, physical, technological, and economic environment (general economy and specific industry). In the social environment, the characteristics of the population (demographic characteristics), social views, and social influences are of particular importance. A characteristic of the population, such as population growth, may offer opportunities to the firm, such as an increase in the demand for most goods and services; more workers may then be employed by the firm. Managers have to aim at gaining an advantage over competitors through keeping up with research and developments in the field of technology. Advanced means of transport, electronic computers, new materials, and automatic and sophisticated communication media are some examples of important developments in the technological environment of the firm.

Size and locational considerations

This chapter provides a preliminary solution on size and locational considerations. The size and locational aspects that must be considered when founding a firm are both of a comprehensive and complex nature. When founding a firm, the entrepreneur is faced with two basic size considerations: (1) the size of the one or more operational or technical units necessary to achieve the firms goal and (2) the size of the firm in its entirety. The optimal size required for the operational unit is also called the plant size. A decision on the optimal plant size implies selection, with due regard to the selling market, of a set of production means to be combined in the most favorable ratio possible in the long term.

The identity of the firm

This chapter presents details related to fundamental and broad-minded approach to all economic activities in a firm. The term production” may be used both in a broader and a narrower sense. Broadly speaking, production is the creation of economic utility and usefulness. In the business economic context, the term production is also used in a micro sense where it refers to one of several functions performed within the firm. This kind of internal production coincides with what is known in business economics literature as the technical function and concerns the creation of form utility. In view of the fact that all activities performed in the firm or other business units are geared toward creating utility, all activities such as marketing, manufacturing, and managing, thus, constitute production in the broader sense. The macro production structure of the developed society within which the firm has to determine its identity is extremely complex. Various economic forces have in the course of time come into effect in the form of laws. These laws have contributed to the orderly functioning of the large number of business units constituting the total production structure.

The scientific identity of business economics

This chapter outlines the scientific identity of business economics. Economics can be traced back to the Greek word oekonomus that originally meant housekeeping. Sometimes a distinction is drawn between the economic principle and the economic motive. The economic motive is seen as the underlying force or motor of economic life and refers simply to the striving to satisfy needs. The economic principle, on the other hand, stresses the basic problem of economic life, that is, to satisfy many needs with relatively scarce means. Groeneveld, who subscribes to a definition of the business economic identity without emphasizing any particular type of business unit, differentiates between a general cognitive object and a particular cognitive object. According to this author, economics and business economics share only the general cognitive object, that is, the general striving for welfare.

The nature of business activity

This chapter focuses on the nature of business activity. Many of the initial and daily activities of sole proprietorships, partnerships, companies, cooperatives, public corporations, municipalities, government departments, universities, and other business units are of a typically business economic nature. A simple example of a person wanting to establish and operate a firm may be used to provide some idea of the phenomena that may be described as typical business economic problems. When interpreting such an example, it should be borne in mind that this is a simplified representation of the real position. A scientific approach to business economics and business in general offers further advantages to a person like Adler. It will equip him with the crucially important principles and systematic method needed to face the fierce demands of business effectively. This explains the emphasis placed on the underlying laws and principles. Allowance is always made for the fact that business economic principles are to a large extent also applicable to the units encountered in the public sector.

The decision regarding the form of enterprise

This chapter focuses on the decision regarding the form of enterprise. The decision regarding the form of enterprise is often described as being primarily a founding decision. Situations do arise, however, in which an established firm has to decide on founding an additional business unit because of the need to expand, reorganize, or enter into new markets. A distinction must be made between decision making and deciding or decision taking. Decision making is a wider concept than decision taking and consists of various steps eventually lead to a decision being taken. The decision-making process may be approached from various points of view. A decision rule is formulated according to which the most rewarding results can be identified and selected and a decision can be taken. The decision criterion is, as such, qualified further and made more decisive by the decision rule. The sole proprietorship is undertaken by a single person. This person finances the business from his own or borrowed funds, often manages it himself, and receives the profits.

Business economics – a historical and scientific perspective

This chapter elaborates a historical and scientific perspective related to business economics. Apart from considering the specific identity of business economics as such, a fuller comprehension of the scientific character of this subject also depends on the historical development of the subject and the position it occupies in relation to other sciences. This calls for a chronological and interdisciplinary comparison. Although business units were already found in a primitive form in ancient times, the first signs of the development of what would eventually be called business economics are usually associated with the Middle Ages. From time to time, attention was focused on particular types of business units. Whereas development was first characterized by its institutional nature, a second trend that developed almost simultaneously was largely functional by nature. Specific activities or functions within business life were singled out for closer examination. The systems approach as applied in the United States of America is a particularly integrated approach to the life of American business units, irrespective of whether these units are profit-seeking or not.

The organisation structure of a firm

This chapter discusses several aspects related to the organization structure of a firm. Through organizing, interpersonal relationships are developed in every business enterprise of more than one person. This in turn necessitates a coordinating authority structure in all directions. Business activities are grouped in an orderly manner. Division of labor (within the firm) is followed by the particularization (rearrangement) of the activities of the internal business structure in both a vertical and a horizontal direction. The particularization process aims mainly at furthering the firms objectives and allocating certain duties to managers and their subordinates. The informal effects and relationships may lead to the development of an informal structure parallel to the formal organization structure, particularly in cases where the formal structure lacks the flexibility for solving problems. With the formation of the organization structure, management endeavors to provide a formal framework in which the firms activities may be carried out in such a way that its objectives can be achieved. The ultimate aim is to ensure that equilibrium is obtained between the various sections of the organization structure.