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About this book

This textbook presents an overview of how the activities of an organisation can be managed to satisfy the needs of stakeholders through the cost effective, operationally efficient and sustainable transformation of resources into outputs. Taking an interdisciplinary approach, the authors show the relationship between management and economics and within this framework present the key areas of management activity. The book explains the connections between these areas and provides tools and instruments for successful management. The book's approach and content is relevant for all kinds of organisation - private or public sector, service or manufacturing, non-profit, large or small. Each chapter provides cases to illustrate what has been discussed and some questions to test comprehension. Throughout the book is a continuing project in which the reader is put in the position of owning their own business and must think and make decisions about what the chapter has discussed. The book combines Anglo-American and German approaches to management and management studies, making it a valuable resource both for those who are studying management and those who are working as managers.

Table of Contents

Frontmatter

1. Understanding Economic Activity

Abstract
This chapter first introduces the different economic agents and types of economy that make it possible for needs to be satisfied. Types of economic entity are presented, and the point is made that not only companies are economic entities, but also institutions like hospitals, city administrations and schools. An overview is provided of local, regional, national and supranational economies. Economic efficiency and effectiveness are discussed and it is emphasised that these principles are important for all economic entities, not just firms. Secondly, there is a discussion of the tasks of business administration and of economics as academic disciplines. The areas of interest are outlined and the links between the two areas are made clear. In addition, neighbouring disciplines that are relevant for the study of economic activities are described. Possible approaches that can be taken to study economic entities and economic activities are presented. Thirdly, the argument is made that those interested in the study of economics, business and management should understand the building blocks of reality as our actions as humans are driven by our perceptions, thought processes and learning processes. Finally, there is a discussion of research as the quest for truth.
Peter Eichhorn, Ian Towers

2. Economies and Needs

Abstract
The chapter discusses the relationships between needs and the supply of the tangible and intangible goods that can satisfy these needs. A shortage of resources is confronted with an unlimited number of needs, which means that choices have to be made. Efficiency and effectiveness in the use of limited resources is shown to be necessary. The various types of need are identified, categorised and described. After presenting mechanisms for determining needs, the chapter goes on to identify, categorise and describe the various types of goods and ways in which demand can be managed. Attention is paid to public tasks and ways in which they can be executed are outlined. The different economic systems (market and planned) are described and the economic constitution is presented—the components are the state, the legal system, and the social and ecological orders.
Peter Eichhorn, Ian Towers

3. Individuals and Institutions in the Economy

Abstract
The chapter develops a typology of economic agents to aid analysis. Various classifications are discussed, such as primary, secondary and tertiary sectors, public and private, and type of good. Four basic types of economic agent are identified: households, firms, associations and administrations. The point is made that there are sometimes grey areas so examples of economic entities are provided which exhibit characteristics of more than one type. There is a discussion of the features of each type, its sources of finance and revenue, tasks and goals, as well as legal aspects. Special attention is paid to households, associations and administrations as these are rarely covered in the literature on business administration despite the fact that the principles of economic efficiency and effectiveness are as relevant for them as for firms.
Peter Eichhorn, Ian Towers

4. A Principle for Action

Abstract
The chapter discusses the different kinds of rationality and points out the limitations of the idea that economic entities are purely rational. Goals and objectives are defined, and a distinction is made between effectiveness, efficiency and economic efficiency. The point is made that there are different kinds of efficiency—economic, technical and political. The principles of maximum return and minimum means are presented as approaches to the conversion of inputs into outputs. The difference between economic efficiency and profitability is made clear and four combinations of these two concepts are outlined. Different kinds of economy are discussed: the economy of needs where the principle of solidarity is important, the economy of returns where financial goals have priority, the economy of self-interest and of common interest. Finally, the individual and the aggregate economy are presented.
Peter Eichhorn, Ian Towers

5. Goals, Production Factors and Results

Abstract
The chapter discusses the role of goals for economic entities. Different types of goals are identified, such as original and derived goals, successive and simultaneous goals, complementary and competing goals. Goals become part of a goal system with formal goals and economic, ecological and social goals. Different forms of economic entity have different goal systems and goal concepts. The factors of production are discussed, and a universal system of factors is introduced consisting of seven interlinked factors of production: personnel, capital, material, energy, services, the law and the natural environment. The use of factors as inputs is discussed along with the diseconomies they can cause. The outcomes of the use of factors of production are discussed, with output, outcome and impact being identified as types of result. The chapter concludes by reviewing ways in which the effects can be measured.
Peter Eichhorn, Ian Towers

6. The Conceptual Basis

Abstract
After discussing the necessity of operationalisation and the differences between nominal and real values, the chapter presents the different payment streams, with receipts of payment and outpayments being the two fundamental concepts behind the flows of financial resources. Various ways of ensuring liquidity are described, and short-term and long-term coverage ratios are presented as measuring instruments. Cash flow calculations are shown to be significant for financial management and budgeting. The characteristics of expenditures and revenues are shown, and finance calculations and forms of financing are introduced. The different types of expenses and income are explained, as are methods for calculating earnings, including income statements. Cash flow statements and balance sheets are also presented. Operational and external costs and outputs are described, leading to the proposal for new kinds of financial statement where these are taken into account, using social and ecological accounting to produce outcome-impact statements.
Peter Eichhorn, Ian Towers

7. Calculating Economic Efficiency

Abstract
The chapter begins with a discussion of ratios, which are essential for management activities, as they make planning, implementation and supervision easier. There are three types of ratio: classification figures, relationship figures and indexes. Not everything can be captured in numbers, which is where different kinds of performance indicators play a role. There are two main types of calculation methods used in capital budgeting—static and dynamic. Capital budgeting is involved in investment decisions. Cost comparison, profit comparison, profitability and payback calculations are examples of static calculations, while the present value method and internal rate of return method are dynamic calculations. Various tools are presented for optimisation, including linear programming. Forecasting is an essential business activity and tools such as time-series analysis and regression analysis are described.
Peter Eichhorn, Ian Towers

8. Economic Efficiency in Practice

Abstract
This chapter is concerned with how to apply the concepts of economic efficiency and effectiveness in practice. Various areas of activity are discussed—procurement, transport, inventory management, manufacturing, administration and marketing—and in each case ways in which business entities can carry out the activities in an economically efficient way are described, and the appropriate tools are presented. The chapter additionally pays particular attention to the ecological environment and describes the circular economy, an approach to doing business that makes the production and consumption of goods part of a cycle.
Peter Eichhorn, Ian Towers

9. Managerial Methods

Abstract
The chapter discusses management systems, describing functional, hierarchical and hybrid systems. The concept of the goal matrix is introduced and the elements of the management systems needed to reach the goals are discussed: tasks, structure, team, style and support. The management process consist of planning, execution and supervision and takes the form of a circuit. Emphasis is placed on controllership as a key element of management support, with checking, auditing and feedback shown to be fundamental to success. Tools for the development of strategy are presented, as are the tasks of human resource management and finance management. We conclude this book with a discussion of the key aspects of auditing, paying particular attention to reporting and monitoring, since decision making has to be efficient and effective.
Peter Eichhorn, Ian Towers

Backmatter

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