Business Management: Definitions, Environments & Stakeholders

TAKEAWAYS:

• Business management is the art and science of coordinating resources (human, financial, physical, and technological) to achieve organizational goals efficiently.
• The organizational environment consists of internal factors (culture, structure, processes) and external factors (economic, political, social, technological, legal, and environmental forces).
• Stakeholders (owners, employees, customers, government, society) influence and are influenced by business decisions, requiring a balanced approach to profitability and social responsibility.
• The Friedman doctrine argues that a company’s sole responsibility is to maximize profits for shareholders, while critics advocate for corporate social responsibility (CSR).
• Nepal’s business challenges include political instability, infrastructure gaps, and cultural resistance to change, which affect planning and decision-making.
• Case analysis (e.g., TGSS e-commerce) shows how profitability vs. social expectations creates ethical dilemmas in real-world management.

1. Definition of Business Management

Business management is the process of planning, organizing, leading, and controlling resources to achieve predefined goals. It involves:

• Planning: Setting objectives and strategies.
• Organizing: Structuring resources (human, financial, physical).
• Leading: Motivating and directing employees.
• Controlling: Monitoring performance and correcting deviations.

Why it matters:

• Ensures efficiency (doing things right) and effectiveness (doing the right things).
• Helps businesses adapt to changes (e.g., Daraz adjusting to Nepal’s digital payment trends).

2. Objectives of Business Management

Businesses pursue economic and non-economic objectives:

Worked Example:

• NTC (Nepal Telecommunications Corporation) aims for profitability (economic) but also universal connectivity (non-economic), balancing stakeholder expectations.

3. Organizational Environment

The environment affects all business decisions. It is divided into:

A. Internal Environment (Controllable)

• Organizational culture (values, beliefs, norms).
• Structure (hierarchy, departments).
• Processes (workflows, decision-making).
• Human resources (skills, motivation).

Example:

• Pathao’s internal culture (flexible, tech-driven) helps it outperform traditional taxi services.

B. External Environment (Uncontrollable)

Divided into macro-environment (PESTEL) and micro-environment (competitors, suppliers, customers).

Real-World Trace:

• Nepal’s political instability (frequent government changes) forces businesses like Ncell to adapt quickly to policy shifts (e.g., telecom licensing).

4. Stakeholders in Business

Stakeholders are individuals/groups affected by or affecting the business. Classified as:

mindmap
  root((Stakeholders))
    Internal["1. Internal\n- Owners (Shareholders)\n- Employees\n- Managers"]
    External["2. External\n- Customers\n- Suppliers\n- Government\n- Society\n- Competitors\n- Media"]
    Primary["Primary (Direct Impact)\n- Owners, Employees, Customers, Suppliers"]
    Secondary["Secondary (Indirect Impact)\n- Government, Society, Media"]

Example:

• Khalti’s stakeholders:
  • Primary: Users (customers), merchants, employees.
  • Secondary: Government (regulations), banks (partners), media (public image).

Stakeholder Analysis for NEPSE (Nepal Stock Exchange):

5. Friedman Doctrine vs. Social Responsibility

A. Friedman Doctrine (1970)

• Milton Friedman’s view: A company’s only responsibility is to maximize profits for shareholders.
• Criticism: Ignores ethical obligations to society (e.g., pollution, exploitation).

B. Corporate Social Responsibility (CSR)

• Businesses should balance profit with social welfare.
• Examples in Nepal:
  • Nabil Bank: Microfinance for rural women.
  • Chaudhary Group: CSR in education (scholarships).
  • Daraz: Ethical sourcing from local suppliers.

Comparison Table:

Case Study: TGSS (The Giant Super Stores)

• Profit-driven approach: Focused solely on online sales growth, ignoring customer service complaints.
• Social responsibility approach: Could have invested in logistics (e.g., last-mile delivery) to reduce rural delivery delays, improving customer trust.
• Lesson: Balancing profit and ethics leads to long-term success.

6. Problems of Nepalese Business

Nepal’s business environment faces unique challenges:

Example:

• Daraz struggles with:
  • Infrastructure: Delivery delays in remote areas (e.g., Mustang).
  • Payment systems: Low digital literacy → cash-on-delivery dominance.
  • Competition: Hamrobazaar and local shops undercutting prices.

7. Business Ethics

Definition: Principles guiding right vs. wrong behavior in business. Key Ethical Dilemmas in Nepal:

• Bribery: Common in government contracts (e.g., road construction tenders).
• False advertising: Some local businesses mislabel products (e.g., "organic" tea that isn’t).
• Exploitation: Low wages in garment factories (e.g., Kathmandu’s textile industry).

Ethical Frameworks:

Case Study: Kathmandu’s Traffic Chaos

• Unethical behavior: Overloading trucks, illegal parking.
• Ethical solution: Kathmandu Metropolitan City (KMC) could enforce strict traffic laws (e.g., fines for overloading), improving public health and business efficiency.

In the Real World

1. eSewa (Digital Payments)

   • Idea Used: Stakeholder management (users, merchants, banks, government).
   • How: eSewa balances profit (transaction fees) with social trust (secure payments, customer support). Its partnership with Nabil Bank ensures regulatory compliance while expanding reach.

2. Pathao (Ride-Hailing)

   • Idea Used: Organizational environment (technological & social).
   • How: Pathao leverages mobile tech (app-based booking) and social trends (youth preference for convenience) to dominate Nepal’s ride-sharing market, adapting to competition from local taxis.

3. Nabil Bank (Microfinance)

   • Idea Used: Social responsibility vs. profit.
   • How: Nabil Bank’s microfinance loans (e.g., for women entrepreneurs) align with CSR while generating long-term profitability through financial inclusion.

Exam Tip

1. Definitions: Memorize key terms (management, stakeholders, Friedman doctrine) word-for-word—exams often test exact definitions.

   • Example: "Management is the process of working with and through others to achieve organizational objectives efficiently and effectively."

2. Case Analysis:

   • For TGSS or similar cases, structure your answer as:
     1. Problem identification (e.g., "TGSS ignored customer complaints").
     2. Stakeholder impact (e.g., "Customers switched to Hamrobazaar").
     3. Solution (e.g., "Implement CSR by improving logistics").
   • Use real examples (e.g., "Like Nabil Bank’s microfinance, TGSS could invest in rural delivery hubs").

3. Diagrams & Tables:

   • Draw PESTEL or stakeholder maps in exams—they add marks and show understanding.
   • Compare Friedman vs. CSR in a table (as above) to score high in analytical questions.

4. Nepal-Specific Answers:

   • Examiners love context. Link theories to Nepal’s challenges (e.g., "Political instability, like in Pathao’s expansion, requires contingency planning").
   • Mention local companies (Ncell, Daraz, Nabil Bank) to stand out.

5. Common Pitfalls:

   • ❌ Vague answers: Avoid "Businesses should be ethical" → Explain how (e.g., "Like Himalayan Java’s fair-trade model").
   • ❌ Ignoring trade-offs: If asked about profit vs. ethics, discuss both sides (e.g., "While CSR increases costs, it builds long-term trust like Nabil Bank’s microfinance").