COURSE CODE : MGT 111

COURSE DESCRIPTION : Fundamentals of Management

TARGET POPULATION : All 1st year Students of Business Administration
COURSE FACILITATOR : MR. ELMORE
MAREKIT Q. NOCOS
C. EVARISTO

WEEK 1

CHAPTER 1. ORGANIZATION: STRUCTURE, FUNCTION, AND OBJECTIVES

Learning Objective:

Upon completion of this module, students are expected to:

1. Explain the nature and elements of an organization
2. Classify the organizations and enumerate their advantages and disadvantages
3. Compare the different types of business
4. Identify the environment affecting organizations

INTRODUCTION

The Organization: Structure, Function and Objectives, explain the nature of organizations
and its environment with particular emphasis on determining the advantages and disadvantages
of choosing a particular from of an organization. It covers the principles that most management
instructors have come to expect the planning, organizing, leading and controlling plus the issues
that today’s students need to be aware of and know in order to succeed customer focus,
globalism, diversity, entrepreneurship, work teams, including other issues and practices.
Management is the act of engaging with an organization’s human talent and using
the physical resources at a manager’s disposal to accomplish desired goals and
objectives efficiently and effectively. Management comprises planning, organizing,
staffing, leading, directing, and controlling an organization (a group of one or more
people or entities) or effort for the purpose of accomplishing a goal.
One of the most important duties for a manager is effectively using an organization’s
resources. This duty involves deploying and manipulating human resources (or human
capital), as well as efficiently allocating the organization’s financial, technological, and
natural resources.
Since organizations can be viewed as systems, management can also be defined as
human action, such as product design, that enables the system to produce useful
outcomes. This view suggests that we must manage ourselves as a prerequisite to
attempting to manage others.

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Lesson 1. Nature of Organization
Organization is a group of people who work together to achieve some specific purpose. The
purpose for which an organization would accomplish would either be for profit or non-profit.

Lesson 2. Elements of Organization

1. Objectives – are defined goals to accomplish as a group. It is the primary reason why
people coordinate their mental and/or physical efforts.
2. Relationship – organization involves interaction among the people to achieve the goal.
3. Systems – methods or plan of procedure combined with resources and people to
achieve the objective. It includes coordination of efforts and division of labor.
4. Authority – the key to a management job since without authority organized action will be
unattainable.

Lesson 3. Classification of Organization

As to purpose, organizations may be classified as commercial or non-commercial organizations.
Business – is any economic activity conducted primarily for profit.
1. Single Proprietorship – a business that legally has no separate existence from its owner.
Income and losses are taxed on the individual's personal income tax return. The
sole proprietorship is the simplest business form under which one can operate a
business.
Advantages Disadvantages
 Easiest to start and set up; only few legal  Unlimited liability – owner is legally liable
requirements. for all business debts.
 Only few (owners) decides for the  Limited resources (capital, managerial
business. skills, etc.)
 All profits are for the owner  All losses are borne by owner.
 Limited life – business is automatically
 The owner, not the business is taxed. terminated due to owner’s death, insanity
or imprisonment.
 Easy to dissolve.

2. Partnership – when two or more persons bind themselves to contribute resources to a

common fund in their co-owned business for a profit.
A partnership may be formed for the practice of a common professional like CPAs,
Lawyers, Medical Doctor or Engineers is called “general professional partnership”. A
partnership that is formed for commercial purposes other than a practice of profession is
called “general co-partnership”.

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 Advantages Disadvantages
 Easy to form – mere agreement  Unlimited liability – a general partner is
organizes a partnership. legally liable for the unpaid debts of the
partnership.
 Joint resources or resources (capital,  All partners may be held liable for the
skills, etc.) action of one partner.
 Lesser government supervision.  Consensual and restricted transfer of
ownership.
 Tax-exempt if professional  Limited life – disagreement or change of
partnership, but subject to tax, partner may dissolve the partnership.
corporate tax if commercial Incapacity, insanity, or death of a partner
partnership. terminates the partnership.

3. Corporation – is a more formal business organization than a partnership. It is composed

of five or more owners generally called “incorporators”, “corporators”, and/or
“stockholders”. It is registered as an artificial person under the operation of law.

Advantages Disadvantages
 Limited liability – shareholders are  Most costly and difficult to organize.
not legally liable for the corporate
unpaid liabilities.
 Power of succession – it can continue  Only the board of directors and other
to exist in spite of death, withdrawal authorized officers can bind the
or changes of officers and corporation in contracts.
shareholders.
 Unrestricted transfer of ownership.  Shareholders have limited access
and control over management and
operations.
 Greater source of resources  More stringent government
(capitalization, skills, etc.) supervision and restrictions.
 Renewable and perpetual life – a  Corporation are taxed at a flat 30%
corporation may renew its registered income tax rate. If a corporation
life every 50 years. incurred loss in its 4th year of
operation, it should still be taxed of
2% based on its gross income.

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Lesson 4. Primary Activities of Businesses
1. Servicing – to earn revenue, this business renders services to clients in exchange for a
fee. Therefore, the primary “product” of this business is “service/s”.
2. Merchandising – this engages in the “buying” and “selling” of goods. Its earning are
primarily derived from the mark-up (profit) it adds to the cost of goods it sells to the
customers.
3. Manufacturing – this business converts raw materials into finished goods that are to be
sold at selling price.
Lesson 5. Non-Commercial Organizations
Are organized primarily not for profit.
1. Public Sector Organization – refers to a tax-funded government organization, including
their agencies engage in governmental functions.
Government is the most examined organization by the public because it uses public
money for public service.
Basically, government officials and employees are called “bureaucrat”, which carries a
strong negative connotation of inefficiency, waste, and red tape.
2. Non-profit Organizations – as a group, they are called foundations, associations,
not-for-profits, or tax-exempts.
The non-profit organization exist primarily to provide programs and services that are of
benefit to others and might not be provided by local, and national government.

Lesson 6. Key Personnel

For sole proprietorship business, it refers to the owner and/or the manager of the small
business – the person involve in the day-to-day economic decisions in achieving business goals.
It has a simple organization structure because owner/manager has direct contact with the work
and the workers.
For partnership form of business, the key person is the managing partner. He is appointed to
run the partnership business. Greatly encourages management participation among the partners.
The corporate form of business, plays a more complex key personnel structure because not all
owners who are called shareholders can directly participate in managing the affairs of the
business.
In a profit oriented corporate business, to become a shareholder, an investor would simply
purchase capital share. Because of the huge number of shareholders, their corporate ownership
is represented by the certificate of stock.

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 Key personnel of a corporate organization:

S t o c k h o l d e r s

Board of Director (BOD)

President

Vice- Corporate Corporate

Presidents Secretary Treasurer

The shareholders (stockholders) are the owners of the business from which the BOD are
elected. The member of the BOD are the policy makers and vested with the power to exercise
the powers of the corporation. The BOD is head by the Chairman of the Board.

The BOD are the Operations of Managers of the Corporation:

 The Corporate President must be a member of the BOD according to law.
 Other Officers of the corporation need not to be members of the BOD unless stated in
the Corporate By-Laws.
 The corporation may employ several Vice-Presidents who may be assigned to the
operation, finance, marketing, production, etc.
 The Corporate Secretary is responsible to keep the corporate records such as
minutes of the meeting, entries of stockholders votes, directors and stockholder’s
resolutions in directing the affairs of the corporation.
 The Corporate Treasurer is authorized to receive and keep the money of the
corporation. He may disburse the funds of the corporation based on the authorization
given to him.

Lesson 7. Structuring Organizations

An organizational structure resembles the framework of a building or skeleton of the body.
Structuring an Organization is simply means that the organization’s components – its
departments divisions, boards, committees, or any subunit – are designed, arrange and
interrelated in achieving organizational objectives.
Organizational Chart identifies the division of labor, the reporting relationships, and the levels of
management in the formal organization.

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Lesson 8. Functions within Organizations
The numerous affairs in an organization can be classified into three major functions:
1. Administration – responsible for the welfare of personnel and safeguarding of physical
resources. This function is headed by the Vice President for Administration.
2. Finance – responsible of safeguarding corporate funds including cash flows and
budgeting. This function is headed by the Vice President for Finance.
3. Operation – concern with activities, work, productivity and production. This function is
headed by the Vice President for Finance.

Lesson 9. Organizational Environment

An organization operates in an internal and external environment.

The Internal Environment

Includes factors that affect performance from within its boundaries. They are called internal
factors because they are within the organization’s control which may include:

1. Management. Managers are responsible for the organization’s performance. They

perform the task of planning, organizing, leading and controlling.
2. Employees. They are the workers manage by the managers to accomplish the
organizational objectives.
3. Organizational culture. It consist of shared values, beliefs and assumptions of how the
members of the organization should behave. It is the organization’s personality that
reflects its image within and outside its boundaries.
4. Mission. The organization’s mission is its purpose or being. It guides the direction and
behaviour of the individuals within the organization towards its goal.
Managers with vision changes organization’s mission by offering products in demanded
by customers.
5. Resources – these include human, financial physical, and informational possessions that
an organization uses to achieve its goal.
Human Resources – are responsible for achieving the organization’s mission
and objectives.
Physical Resources – include the organizations facilities that are used to aid
workers’ in performing their jobs easier.
Financial Resources – are necessary to purchase and maintain the physical
resources and to pay employees.
Informational resources – include data processing system to facilitate
preparation of reports and communication within the
organization.

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 6. System Process. This factor refers to the methods or procedures an organization used
in producing its products or rendering its services to satisfy customers’ needs.
Quality – is an internal factor within a system process because it is within the control of
the organization that is embodied in its inputs, transformation, and outputs.
Customer value – is the purchasing benefits used by customer to determine whether or
not to buy a product or services.
Four Components of System Process
a. Inputs – are the start-up forces that provide the organization with operating
necessities.
b. Transformational – the conversation of inputs into outputs. The production process
that combines the required resources to bring out the needed product or service.
c. Outputs – it refers to the product or services offered to customers.
d. Feedback – provides a means of control to ensure that the inputs and transformation
process are producing the desired results.
7. Structure. Refers to the manner in which the organization classifies its resources to
accomplish its mission.

The External Environment

A set of forces and conditions outside the organization’s boundaries that have the potential
to affect the way an organization operates.
The external environment of an organization may be classified into task environment and general
environment.

GENERAL ENVIRONMENT

TASK ENVIRONMENT

THE
ORGANIZATION

Lesson 10. Task Environment

Forces and conditions on task environment have immediate and direct effect on management
decision because they affect the day-to-day business operations.

These forces are as follows:

1. Suppliers. They provide an organization with the needed input resources (such as raw
materials, operating supplies, component parts or manpower) that are used to make
products or render services.
Global Outsourcing – is the process by which organizations purchase inputs from other
companies or produce inputs themselves throughout the world to lower their production
costs and improve the quality or design of their products.

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 2. Distributors. These are organizations that help other organizations sell their goods or
services to customers.
3. Customers. Are individuals and groups that buy the goods and services that are being
produced by an organization.
4. Competitors. These are organizations that produce goods or services similar to a
particular organization’s goods or services.

Lesson 11. General Environment

Opportunities and threats resulting from changes in the general environment are often more
difficult to identify and respond to. Changes in these factors can have major impacts on
managers and their organizations.

Forces included in the general environment are:

1. Economic forces. They affect the general condition of a country or world region. These
forces include interest rates, inflation, unemployment and economic growth.
2. Technological forces. Is a combination of tools, machines, computers, skills,
information, and knowledge that managers use in the design, production, and distribution
of goods and services.
3. Sociocultural forces. Refer to pressures deriving from the social structure of a country
or society or from the national culture.
Social Structure is the arrangement of relationships between individuals and groups in a
society.
National culture is the set of values that a society considers important and the norms of
behaviour that are approve or sanctioned in that society.
4. Demographic forces. Forces that results of changes in, or changing attitudes toward the
characteristics of a population such as gender, age, ethnic origin, race, sexual orientation,
and social class.
5. Political and legal forces. These are the offshoot of changes in laws and regulations
resulting from the political and legal developments within the society.
6. Global forces. These are outcomes of changes in international relationships, changes in
nations’ economic, political and legal systems and changes in technology.

Reference/s:
Valencia, E., et. al, (2009), Principle of Management and Organization, the first edition, Valencia
Educational Supply

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ACTIVITY #1

Name: Year/Set:

Subject: Score:

Managerial Cases

Direction: Read and understand this module. Provide what is being asked. Write your answer at
the back and use long bond paper if necessary (Hand Written).

Case 1. Analyzing an Organization’s Task and General Environment

Pick an organization with which you are familiar either small or big organization. It can be an
organization in which you have worked or currently work or one that you interact with regularly as
a customer. For this organization do the following:
 Describe the main forces in the task environment that are affecting the
organization.
 Describe the main forces in the general environment that are affecting the
organization.
 Describe the main global forces that are affecting the organization.
 Explain how environmental forces affect the job of an individual manager within
this organization. How do they determine the opportunities and threats that its
manager must confront?

Case 2. How to Enter the Copying Business

You have decided to open a small printing and copying business in front of SEAIT. Your
business will compete with other copying business within the vicinity. You know that over 50% of
small businesses fail in their first year, so to increase your chances of cusses, you have decided
to do a detailed analysis of the task environment of the copying business to discover what
opportunities and threats you will encounter.
 Decide what you must know about:
(a) Future customers
(b) Your future competitors
(c) Other critical forces in the task environment if you are to be successful.
 Evaluate the main barriers to entry into the copying business.
 Based on this analysis, list some of the steps you would take to help your new
copying business succeed.

End of first week

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