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  Organisational Theory  


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Association denotes formal or informal affiliation of manufacturers and traders based on agreement among them. Naturally, they are brought into existence for the protection of certain common interest. Associations are non profit making bodies and their members retain their separate identity. Associations may take the form of trade associations, Chambers of Commerce of informal agreements.

More Notes on  ASSOCIATIONS 

A business enterprise is a living entity an the urge to grow is inherent in the nature of business firms operating in a free market economy. In fact,growth is a pre-condition for the survival of a business firm. If a firm does not plan for growth, its sales will start declining after a few years and after that it may have to be wound up because of its obsolete products. Thus, it is very important for a business to plan its growth strategy so that it is able to face competition and survive in the market and also expand its operations.


The first question to be settled in organising business operations is that of th ownership organisation. Ownership of business is represented by the right of an individual or a group of individual to acquire legal title to assets for the purpose of controlling them and to enjoy and gain profits from such possession and use.


The co-operative form of organisation is different from others in one basic respect. It is st up not with profit as the guiding motive but with the fundamental objects of organising and rendering service for the organisation and its members.


` ` The complete consolidation is a form of business organisation which is established by the outright purchase of the properties of constituent organisations or the merging or amalgamating of such properties into a single business unit. ` ` In case of complete consolidation, there is complete fusion of the combining units. It may take two forms: (i) Merger, and (ii) Amalgamation.

Merger and amalgamation differ in the method of their formation, but there is no difference regarding their objectives. In case of merger, one of the companies already in existence absorbs one or more enterprises. In case of amalgamation, the existing companies go into voluntary liquidation an there assets are taken over by a newly incorporated company. Thus, in case of amalgamation, a new company is formed to take over the existing companies, and in case of merger, one business unit is absorbed by another.


Generally, there has been a tendency of the business firms towards increase in their size in order to achieve economies in production, marketing, finance and management. In practice, different firms operate at different levels of operations. This is an important reason which explains that different firms are not able to operate with equal efficiency. Many economists have attempted to explain the size of a business firm which every business firm should try to achieve. The important concepts about size of business unit which must be distinguished are:

(i) Representative Firm
(ii) Equilibrium firm and
(iii) Optimum Firm.


Commerce is that aspect of business activity which is concerned with the distribution of goods and services produced by industry. Modern commerce, in its highly developed form, consists of a complex and well developed system of exchange and a well-organized system of exchange and a well-organized system of transport, insurance, were housing and other allied activities which facilitate trade.


The history of the rise of modern capitalism is the history of the rise of company form of organisation. No other form of business organisation has affected the lives of billions of people the world over as this form has.


Meaning and Scope of Business

'Business' is an elastic but composite word covering the series of processes by which available things are extracted from the earth, fashioned an transformed b man and difference tarried from place and stored through time an placed in the hands of more who rare ready to pay for them.” It is indeed nothing more or less than “human activity directed towards producing or acquiring wealth though buying or selling goods. It includes both 'commerce' and ' Industry.' Materials are collected from every corner of the world; they pass through an enormous variety of industrial processes in order to be reduced to some practical form and by means of 'Commerce' the goods thus produced are conveyed all over the world into the hands of those who want them. Business aims at satisfying material needs and spiritual cravings. A large part of the business is concerned with providing the wherewithal to keep the body comfortable: food to eat, clothes to wear, furniture and cooking utensils, houses for shelter-things such as these provide 'material' satisfaction in the sans that they are connected with physical comfort and well being. It is somewhat different when it comes to buying a book. The publishing of books is a business enterprise and the result is material objects which occupy room on shelves, yet the joy of reading is far from a material pleasure as pleasure can be. Man cannot live by eating alone and by wearing clothes; he has a spiritual nature which is every bit as imperious as is need of food and clothes. The businessman recognizes this, and produces books, gramophones, radio and television sets accordingly.

Business provides services as well as goods. When a person goes to a cinema, or takes out an insurance policy on his life, he receives nothing material in return for his money but a piece of paper. A cinema house or an insurance company is none but also a business concern. What each of them provides cannot be classified as goods; thy are rather opportunities-an opportunity to see something which will give pleasure, and opportunity to save money and make provision for a wife an family after death. Generally, such things can be termed services, an a very large amount of business enterprise is directed to supplying an enormous variety of such services. Hotels provide accommodation, railways and aeroplanes provide means of getting from one place to another. Shipping companies cater also or health by means of holiday cruises.


The classical organisation theory which focused attention on th physiological and mechanical variables of organisational functioning was tested in the field to increase the efficiency of the organisations. Surprisingly, positive aspects of these variables could not evoke positive response in work. They discovered that the real cause of human behaviour was somewhat more than mere physiological variables. These findings generated a new phenomenon about the organisational functioning and focused attention on the human beings in organisations. These exercises, since departed from the earlier approach, were given new name. Such an approach is referred to as 'behavioural theory of orgnaisation', 'human view of organisation', or 'human relations approach in organisation,.

This approach, born out of the reactions to classical approach, has attracted lot of literature during the last four-five decades. The essence of behavioural approach is contained in two points: (i) organisational situation should be viewed in social as well as in economic and technical terms; and (ii) the social process of group behaviour can be understood in terms of clinical method analogous to the doctor's diagnosis of human organism. The behavioural approach emphasises on the task of complementing for some of the deficiencies in classical doctrine. Though the behavioural approach takes the postulated of classical school regarding the pillars of organisation as given, these postulates are regarded as modified by people acting independently or within the context of the informal orgnaisation. Thus it views organisation as a combination of both formal and informal forms of organisation. The latter form as missing in classical approach. Another contribution of behavioural approach is the introduction of behavioural since in analyzing the nature of organisation. Through the use of this science, behavioural writers have demonstrated how the pillars of classical doctrines-division of labour, specialisation, structure, and scalar an functional processes-are affected and modified by human actions. Since this approach has suggested only modifications in the basic postulates of classical theory, it is referred to as neoclassical theory.


The word theory and its meaning is derived from Greek word Qewpix, meaning theoria, that is, looking at, viewing, or contemplation. Thus theory is a systematic grouping of interrelated principles. Principles are fundamental truths, or what are believed to be truths at a given time, explaining relationships between two or more variables. Rudner defines theory as a 'systematically related set of statements, including some law like generalization that is empirically testable and the sort of systematic relatedness is deductive relatedness. Organization theory may be define as the study of structure, functioning, and performance of organizations and the behavior of groups and individuals within them. Tosi has defined organisation theory as 'a set of interrelated constructs (concepts), definitions, and propositions that present a systematic view of behavior of individuals, groups, and sub-groups interacting in some relatively patterned sequence of activity, the intent of which is goal-directed', But all the propositions are not principles in the true sens. It would be better to call them formulations. Some formulations may be theoretic while others should more correctly be called non-theoretic.


Organs Of Company Management


One of the important decisions taken by the entrepreneur is the selection of a suitable form of ownership. This is generally made after the entrepreneur has decided upon other things regarding the proposed business, e.g., the nature and scale of operations, the persons to be associated with ownership initially, and of fourth. A proper decision in this regard can help the enterprise not only through initial success in business but also in later operation or re-organisation. The basic consideration governing the selection of an ownership organisation is attainment of the objectives decided upon by the entrepreneur. The best form of organisation for any business will, therefore, be one that leads to the best realisation of tis objectives.

Since business and entrepreneurial objectives vary, no single form of organisation can be considered as the best for all kids of business. To look for one best form of ownership organisation will be like looking for a cap that fits all heads.

The need for the selection of ownership organization arise: (a) for initiating the enterprise operations, and (b) for meeting the needs of growth and expansion. Let us, therefore, consider the factors in this decision at both these stages.


Public accountability refers to the obligation of a public enterprise to account for its performance or to be answerable to the representatives of the public so as to ensure that it is serving the public interest. The need for public accountability on the part of public enterprises arises due to the following factors:

(i) Public enterprises use public money and should, therefore, be accountable to the public.

(ii) They should be made accountable to the public to ensure that their operational autonomy is used properly

(iii) Through public interest of the general public. Control is necessary to ensure that employees, consumers and public are not exploited.

Thus, it is essential to provide some suitable methods and procedure ures whereby the results of the working of public enterprises are made known to the public and suitable control is maintained over their activities.

The public accountability may be ensured on the basis of the following criteria:
(a) Efficient and economical utilisation of resources

(b) the extent to which the specific objectives of the enterprise have been achieved

(c) contribution towards gross national product, equitable distribution of national income, balanced regional development, national integration, etc.


State ownership and control of business enterprises has become a common features today. In every country, the Government is engaged directly and actively in the setting up and management of industrial and commercial enterprises.  Even in the capitalist countries like the U.S.A and the U.K. Governments own and manage a large number of enterprises. Such enterprises owned and controlled by the Government are known as 'public enterprises', 'State enterprises', 'public sector undertakings' or 'Government undertakings'. All such enterprises in a country are collectively called the 'public sector'


Small business enterprises exist in every country of the world. But in developing country like India, the small scale sector occupies a special place in the industrial structure. In our country man-power is abundant but capital is relatively scarce. Small scale industries tend to be labour-intensive or capital-saving. Therefore, they provide better opportunities for generating employment, for better utilization of local resources, for wider dispersal of industries and for equitable distribution of national income. In view of the potential of small business, the Government of India is committed to the growth of small scale sector in the country.


It should be noted that in addition to shareholders certain other parties have also an interest in the affairs of a company. These parties are the debenture holders, banks, investment trusts, etc. In case of insurance companies, policy holders have a direct interest in their working. The general public as such has also an interest, although indirect, in the management of companies. The Government, therefore, has rightly taken powers under the Companies Act, 1956, to see that affairs of a company are manged without detriment to the interests of various parties and the general public. (The various matters which require approval of the Central Government have been listed in the chapter on Secretarial Practice.) Briefly we may say that the prior approval of the Central Government is required for any change in the controlling interest of an existing company and for the imposition of any change in the controlling interest of an existing company and for the imposition of any onerous terms on it by its management- present or future. The Central Government can order investigation into the affairs of a company and a special audit of its accounts.

Business and Profession Differ
Health services are not provided by shipping companies alone. There are such people as doctors, vaidyas and Hakeems, who have made healing their life's work, an have themselves studied all the known means of preventing it from arising and of treating it when it has arisen. The doctor, Vaidya or Hakeem, too, like the shipping company, aims at satisfying a human need, and offers services for doing so, and again, like the shipping company, for payment. Nevertheless he is not a businessman, and his work is called a profession, not a business.   Read Full Article Business and Profession Differ
Profit Motive and Service Motive
It is, therefore, only when a need, be it material or be it spiritual, transcends the particular and attains the general and ripens into a demand that it comes within the scope of business at all. For in private Enterprise it is purely a matter of profits. No one enters business for his health; he does so for th purpose of making money so that, like any other person, he may satisfy his various wants with the money that he earns. He seeks to earn his money by catering for the needs of other people and making a profit in doing so. The profit he earns is in fact the justification for his existence. Business is, as a consequence, founded on the exchange of goods, and the exchange to be fruitful should be made for mutual gains to both exchanger and the exchange. In a market economy or capitalistic production, no business, however big it maybe, can survive for any length of time if it is run on the noble doctrine of Nishkarma Karma of th Bhagavad Gita. An association with profits is thrust upon business by circumstances beyond its control and this association need not necessarily carry contamination with it, if it is remembered that profit is only th reward for the service that the businessman renders to the community.  Read Full Article Profit Motive and Service Motive
Meaning of Organization
There are numerous definitions of th term 'organisation', and many attempts have been made to lay down a standard definition, but none of them has been entirely successful, and there is no present intention of adding to th list. Only two are quoted, as they are simple and give almost a non-controversial description.  Read Full Article Meaning of Organization
Divisions of Business
Business activities may be classified into two broad categories: (a) Industry, and (b) Commerce.   Read Full Article Divisions of Business
The term 'industry' refers to that part of business activity which concerns itself with the raising. Production, processing or fabrication of products. The products of an industry may be used either by the final consumers or by another industrial undertaking for further production. Accordingly, these will be called consumers goods if used by final consumers, and producers' goods or capital goods if used in the production of other goods. When a concern engages in the production of cloth or toothpaste, or when it processes cheese, it maybe said to be producing consumers' goods. On the other hand, an engineering concern manufacturing machine tools an machinery is said to be producing producers' goods for th simple reason that these products will be used by factories for the production of certain other products.   Read Full Article Industry
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