Pharmacy Administration

Glossary

Chapter - 1

Introduction to Business

When we look around us, we observe that most of the people are engaged in one activity or the other. Teachers teach in the schools, farmers work in the fields, workers work in the factories, drivers drive vehicles, shopkeepers sell goods, doctors attend to patients and so on. In this way, people are busy during the day and sometimes during the night throughout the year. Now the question arises as to WHY we all keep ourselves busy. The answer is to satisfy our wants. By doing so, we either fulfill various obligations or earn money through which we can buy goods and commodities.

Human Activities

Activities which human beings undertake are known as human activities. These may be cultivating land, growing plants, rearing animals, teaching in a school or college, working in a factory or office, watching television, listening to radio, reading newspaper, business studies, playing football, etc. We can divide these activities into two broad categories as (i) economic activities; and (ii) non-economic activities.

(i)   Economic activities: Activities, which are performed with an objective to earn money, are known as economic activities. For example, a fanner grow crops to sell them, a factory or office employee works and gets wage or salary, a businessman earns profit through buying and selling of goods.

(ii)  Non-economic activities: Activities, which are not perfonned to earn money but to get some satisfaction, are called non-economic activities. These activities are performed to discharge social obligation or for physical fitness or for recreation. People visiting places of worship, providing relief to the victims of flood and earthquake, engaging in sports activities, gardening, listening to radio or watching television are all examples of non-economic activities.

Types of Economic Activities

We know' that economic activities are undertaken to earn money. Generally, people engage themselves in such activities on a regular basis and are said to be engaged in their occupation. Thus, occupation means keeping oneself engaged or occupied in some gainful economic activity on a regular basis to earn one’s livelihood. For example, doctors treat patients, lawyers provide legal services, workers work in offices and factories, teachers teach in schools and colleges and shopkeepers buy and sell goods to earn their livelihood.

In this way, they are all engaged in occupations.

Occupations may be classified into three broad categories.

(a)   Profession

(b)   Employment

(c)   Business

Let us now understand each of them:

(a)   Profession: A person may not be an expert in every field. So, we require services of others who specialize in one field or other. For example, we need the services of doctors for our treatment, lawyers to get legal support etc. They are all engaged in when an individual is regularly engaged in a particular economic activity, it is known as his/her occupation. Individuals engaged in profession are called professionals.

Thus, profession refers to an occupation, which requires specialized knowledge and training to pursue it.

The characteristics of a profession:

(b)   Employment: Employment refers to an occupation in which a person works regularly for others and gets wage/salary in return. Government servants, company executives, bank officials, factory workers are all said to be in employment. Let us leam about the characteristics of employment:

(c)   Business: Business refers to an occupation in which goods and services are produced, sold and exchanged in return of money. It is carried out on a regular basis with the prime objective of making profit. Mining, manufacturing, trading, transporting, storing, banking, and insurance are examples of business activities.

Vocation: Sometimes people earn their livelihood through vocation. Vocation basically means possession of a specific skill and its application towards earning a livelihood. For example people like carpenter, tailor, plumber, beautician, musician, electrician, computer operator etc. are said to be in a vocation as they all possess some special skills to keep themselves occupied either in business or in employment.

Meaning of Business

You find a variety of goods available in the market. You buy those goods as and when you require them. Do you know how these goods come to the market? Who makes these goods and who brings them to the market? Actually, all these goods are produced at some specific places, and then somebody brings these goods from the place of production to the market. Only then we are able to buy these goods and use them as per our requirement.

Again you must have observed some people are engaged in activities like transportation of goods and passengers, banking, insurance, advertising, supply of electricity, telephone etc. These are all service activities and are performed by the people to earn their livelihood.

In all the above activities, be it production, distribution, purchase or sale of goods and services, monetary gain is expected in each case and also, they are performed on a continuous basis. Tlius, business refers to any human activity undertaken on a regular basis with the object to earn profit through production, distribution, sale or purchase of goods and services.

Business may be defined as an activity involving regular production or purchase of goods and services for sale, transfer and exchange with an object of earning profit.

Importance of Business

Business is an integral part of modem society. It is an organised and systematic activity for earning profit. It is concerned with activities of people working towards a common goal.

The modem society cannot exist without business. The importance of business can be described as follows:

Types of Business Activities

Broadly, business activities are classified into two categories:

(i)   Industrial activities; and

(ii)  Commercial activities.

Industrial activities refer to activities related to production or extraction of goods through utilisation of various resources. Growing crops and plants, extracting oil, natural gas and minerals from the surface of the earth, processing raw materials into finished and semifinished goods, construction of buildings, dams and bridges are examples of Industrial activities. A commercial activity includes all those business activities which are undertaken for sale or exchange of goods and services and facilitates their availability for consumption and use.

Thus, it includes trading activities and other service activities like transport, banking, insurance, warehousing etc. These service activities are known as auxiliaries to trade or aids to trade. They facilitate the business by carrying goods from the place of production to the place of consumption, providing finance, undertaking risk, systematic storing of goods etc.

1.1 Features of Business Organisation

Characteristics of Business

The essential characteristics of business are as follow:

Characteristics/Features of Organisation

The main characteristics or Features of organisation are as follows:

Outlining the Objectives: Bom with the enterprise are its long-life objectives of profitable manufacturing and selling its products. Other objectives must be established by the administration from time to time to aid and support this main objective.

Identifying and Enumerating the Activities: After the objective is selected, the management has to identify total task involved and its break-up closely related component activities that are to be performed by and individual or division or a department.

Assigning the Duties: When activities have been grouped according to similarities and common purposes, they should be organized by a particular department. Within the department, the functional duties should be allotted to particular individuals.

Defining and Granting the Authority: The authority and responsibility should be well defined and should correspond to each other. A close relationship between authority and responsibility should be established.

Creating Authority Relationship: After assigning the duties and delegations of authority, the establishment of relationship is done. It involves deciding who will act under whom, who will be his subordinates, what will be his span of control and what will be his status in the organisation. Besides these formal relationships, some informal organizations should also be developed.

Importance / Need I Advantages I Significance of Organisation

The well-known industrialist of U.S.A, late Andrew Canmegi, when sold his famous 'United State Steel Corporation', showed his confidence in organisation by uttering the following words, Take away our factories, take away our trade, our avenues of transportation, our money, leave nothing but our organisation, and in four years, we shall re-established ourselves. Since ages and in every walk of life, organisation has been playing a vital role. The significance or main advantages of organisation are as follows:

It Facilitates Administration and management: Organisation is an important and the only tool to achieve enterprise goals set b administration and explained by management. A sound organisation increases efficiency, avoids delay and duplication of work, increases managerial efficiency, increases promptness, motivates employees to perform their responsibility.

It Helps in the Growth of Enterprise: Good organisation is helpfill to the growth, expansion and diversifications of the enterprise.

It Ensures Optimum Use of Human Resources: Good organisation establishes persons with different interests, skills, knowledge and viewpoints.

It Stimulates Creativity: A sound and well-conceived organisation structure is the source of creative thinking and initiation of new ideas.

A Tool of Achieving Objectives: Organisation is a vital tool in the hands of the management for achieving set objectives of the business enterprise.

Prevents Corruption: Usually corruption exists in those enterprises which lack sound organisation. Sound organization prevents corruption by raising the morale of employees. They are motivated to work with greater efficiency, honesty and devotion.

Co-ordination in the Enterprise: Different jobs and positions are welded together by structural relationship of the organisation. The organizational process exerts its due and balanced emphasis on the co-ordination of various activities.

Eliminates Overlapping and Duplication of work: Over lapping and duplication of work exists when the work distribution is not clearly identified and the work is performed in a haphazard and disorganized way. Since a good organisation demands that the duties be clearly assigned amongst workers, such overlapping and duplication is totally eliminated.

Sound or Good Organisation

Organisation is not an end it itself but a means to achieve an end. Whether an organisation is good or bad depends on the fact as to how much efficiently and promptly it is in a position to achieve the objectives. An ideal organisation is one which is expected by all. Some people think that an ideal organisation stands in a dream only and actually it does not exist. However, it is a wrong concept. An ideal organisation is a reality which can be achieved through the active cooperation of all the members of an organisation and also by following the principles of organisation is not an exact science as physics and chemistry. Though a sound organisation is mainly based on the active cooperation of all the members of the organisation and on certain principles but also it is based on the capabilities of the individuals available to work along with its simplicity and flexibility. An organisation conceived and developed on the above lines will reward its leaders and well as its members (Personnel). Not only will the objectives be achieved more easily, and conveniently, but the physical operation of the organisation will also be greatly enhanced. Tlius, a sound or good or ideal and result-oriented organisation must posses the following characteristics.

Realization of Objectives: Organisation is tool of achieving objectives of an enterprise. For this purpose, the organisation should be divided in several department, subdepartments, branches and units etc.

Harmonious Grouping of Functions etc: For achieving the organisation objectives there must be harmonious grouping of functions, jobs and sub-jobs in such a way so that there is action, consultation and co-ordination without any delay and difficulty.

Reasonable Span of Control: Another characteristic of organisation is that it should have reasonable span of control. Ordinarily, a person (personnel) cannot control more than five or six subordinates.

Clear-cut allocation of Duties and Responsibilities: There must be clear-cut allocation of duties and responsibilities in any scheme of sound organisation. Every executive must know his scope of activities, the ideal number is three.

Promotion of Satisfaction: The most important element of any human organisation is the promotion of satisfaction of workers. Man works in a group or in an organisation and hence the success or failure of any organisation depends on as to how much the organisation is in a position to provide satisfaction to individuals or group working under him.

Fullest Utilization of Manpower: Another important characteristic of an ideal organisation is as to how far it is successful in making fullest and economical utilization of the available manpower.

Provision and Development and Expansion: Another important of an ideal organisation is that there exists the necessary provision for development and expansion so that it is possible to expand and develop any organisation according to needs and requirements and necessary changes alternatives may be made.

Coordination and cooperation: In order to achieve the objectives of the enterprise, there must be close coordination and cooperation in the activities of everybody working in the organisation. Further, there should also be active coordination and cooperation amongst the various departments and sub-departments. It will also assist in elimination of the evil of red tape.

Unity of Command: There must be unity of command. No one in any organisation should report to more than one line supervisor, and everybody must know to whom he reports and who reports to him. No subordinate should get orders from more than one supervisor, otherwise it will lead to confusion, chaos any conflict.

Effective System of Communication: An ideal organisation must possess effective system of communication. The inter-communication system should be clear and easier and there should be no ambiguity at any level.

High Morale: An ideal organisation is that in which the workers possess high morale. They work with full capacity, energy, enthusiasm, devotion and sincerity.

Flexibility: The last but not the least important characteristic of an ideal organisation is that it should be flexible so that necessary changes or modifications in the size of the organisation as well as technology could be easily and conveniently effected.

1.2 Organisation

An organization (or organisation) is a social arrangement which pursues collective goals, controls its own performance, and has a boundary separating it from its environment. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon.

In the social sciences, organizations are the object of analysis for a number of disciplines, such as sociology, economics, political science, psychology, management, and organizational communication. In more specific contexts, particularly for sociologists, the term institution may be preferred. The broader analysis of organizations is commonly referred to as organizational studies, organizational behavior or organization analysis

Organization in Sociology

Sociology can be defined as the science of the institutions of modernity; specific institutions serve a function, akin to the individual organs of a coherent body. In the social and political sciences in general, an organization may be more loosely understood as the planned, coordinated and purposefid action of human beings working through collective action to reach a common goal or construct a tangible product. This action is usually framed by formal membership and form (institutional rides). Sociology distinguishes the term organization into planned fonnal and unplanned informal (i.e., spontaneously formed) organizations. Sociology analyzes organizations in the first line from an institutional perspective. In this sense, organization is a permanent arrangement of elements. These elements and their actions are determined by rules so that a certain task can be fulfilled through a system of coordinated division of labor.

An organization is defined by the elements that are part of it (who belongs to the organization and who does not?), its communication (which elements communicate and how do they communicate?), its autonomy (Max Weber termed autonomy in this context: Autocephaly (which changes are executed autonomously by the organization or its elements?), and its rules of action compared to outside events (what causes an organization to act as a collective actor?).

By coordinated and planned cooperation of the elements, the organization is able to solve tasks that lie beyond the abilities of the single elements. The price paid by the elements is the limitation of the degrees offreedom of the elements.

Advantages of organizations are enhancement (more of the same), addition (combination of different features) and extension. Disadvantages can be inertness (through co-ordination) and loss of interaction.

Organization in management and organizational stud Management is interested in organization mainly from an instrumental point of view. For a company, organization is a means to an end to achieve its goals - which are to create value for its stakeholders (stockholders, employees, customers, suppliers, communities

Organization Theories

Among the theories that are or have been most influential are:

Weberian organization theory (refer to Max Weber's chapter on Bureaucracy in his book 'Economy and Society')

Marxist organization analysis

Scientific management (mainly following Frederick W. Taylor)

Human Relations Studies (going back to the Hawthorne studies, Maslow and Hertzberg)

Contingency theory

New institutionalism and new institutional economics

Network analysis

Economic sociology

Organization ecology (or demography of organizations)

Agency theory (sometimes called principal - agent theory)

Studies of organization culture

Labour Process Theory

Critical Management Studies

Complexity Theory and Organizations

Transaction cost theory/Transaction cost Economics (TCE)

Garbage can model

Actor-Network Theory

Social entrepreneurship

Organizational Structures

The study of organizations includes a focus on optimizing organizational structure. According to management science, most human organizations fall roughly into four types:

Pyramids or hierarchies

Committees or juries

Matrix organizations

Ecologies

Pyramids or hierarchies

A hierarchy exemplifies an arrangement with a leader who leads leaders. This arrangement is often associated with bureaucracy. Hierarchies were satirized in The Peter Principle (1969), a book that introduced hierarchiology and the saying that in a hierarchy every employee tends to rise to his level of incompetence.

These structures are formed on the basis that there are enough people under the leader to give him support. Just as one would imagine a real pyramid, if there are not enough stone blocks to hold up the higher ones, gravity would irrevocably bring down the monumental structure. So one can imagine that if the leader does not have the support of his lesser leaders, the entire structure will collapse.

An extremely rigid, in terms of responsibilities, type of organization is exemplified by Filhrerprinzip.

Committees or Juries

These consist of a group of peers who decide as a group, perhaps by voting. The difference between a jury and a committee is that the members of the committee are usually assigned to perform or lead further actions after the group comes to a decision, whereas members of a jury come to a decision. In common law countries legal juries render decisions of guilt, liability and quantify damages; juries are also used in athletic contests, book awards and similar activities. Sometimes a selection committee functions like a jury. In the Middle Ages juries in continental Europe were used to determine the law according to consensus amongst local notables.

Committees are often the most reliable way to make decisions. Condorcet's jury theorem proved that if the average member votes better than a roll of dice, then adding more members increases the number of majorities that can come to a correct vote (however correctness is defined). The problem is that if the average member is worse than a roll of dice, the committee's decisions grow worse, not better: Staffing is crucial.

Parliamentary procedure, such as Robert's Rules of Order, helps prevent committees from engaging in lengthy discussions without reaching decisions.

Staff Organization or Cross-functional Team

A staff helps an expert get all his work done. To this end, a "chief of staff' decides whether an assignment is routine or not. If it's routine, he assigns it to a staff member, who is a sort of junior expert. The chief of staff schedules the routine problems, and checks that they are completed.

If a problem is not routine, the chief of staff notices. He passes it to the expert, who solves the problem, and educates the staff - converting the problem into a routine problem.

In a cross functional team, like an executive committee, the boss has to be a nonexpert, because so many kinds of expertise are required.

Organization: Cyclical structure

A theory put forth by renowned scholar Stephen John has asserted that throughout the cyclical nature of one’s life organizational patterns are key to success. Th rough various social and political constraints within society one must realize that organizational skills are paramount to success. Stephen John suggests that emphasis needs to be put on areas such as individual/ group processes, functionality, and overall structures of institutions in order to maintain a proper organization. Furthermore, the individual's overall organizational skills are pre-determined by the processes undertaken.

Matrix organization

This organizational type assigns each worker two bosses in two different hierarchies. One hierarchy is functional and assures that each type of expert in the organization is well-trained, and measured by a boss who is super-expert in the same field. The other direction is executive and tries to get projects completed using the experts. Projects might be organized by regions, customer types, or some other source.

Ecologies

This organization has intense competition. Bad parts of the organization starve. Good ones get more work. Everybody is paid for what they actually do, and runs a tiny business that has to show a profit, or they are fired.

Companies who utilize this organization type reflect a rather one-sided view of what goes on in ecology. It is also the case that a natural ecosystem has a natural border -ecoregions do not in general compete with one another in any way, but are very autonomous.

Chaordic organizations

The chaordic model of organizing human endeavors emerged in the 1990s. The idea is based on a blending of chaos and order (hence chaordic), and originated in the work of Dee Hock and the creation of the TISA financial network. Blending democracy, complex systems, consensus decision making, co-operation and competition, the chaordic approach attempts to encourage organizations to evolve from the increasingly nonviable hierarchical, command-and-control model.

Organizations that are legal entities: government, international organization, nongovernmental organization, armed forces, corporation, partnership, charity, not-for-profit corporation, cooperative, university.

The organization of the artist

The organization of the artist is a term first used by architect Frank Gehry to denote the organizational set-up he enforces in order to ensure that the architect/artist is in control of design through construction. The organization of the artist deliberately eliminates the influence of politicians and business people on design. The purpose of the organization of the artist is to ensure that it is the design of the architect/artist that is actually implemented and not some compromise decided by political and business interests.

Gehry initially developed the concept of the organization of the artist as a reaction against what he calls the marginalization of the architect/artist. Gehry explains:

There's a tendency to marginalize and treat the creative people like women are treated, 'sweetie, us big business guys know how to do this, just give us the design and we'll take it from there.' That is the worst thing that can happen. It requires the organization of the artist to prevail so that the end product is as close as possible to the object of desire [the design] that both the client and architect have come to agree on.

Gehry argues that the organization of the artist, in addition to making possible artistic integrity, also helps keep his buildings on time and budget, which is rare for the type of innovative and complex designs that Gehry is known for. The organization of the artist thus serves the dual purpose of artistic freedom and economic prude.

Leadership in Organizations

An organization that is established as an instrument or means for achieving defined objectives has been referred to as a formal organization. Its design specifies how goals are subdivided and reflected in subdivisions of the organization. Divisions, departments, sections, positions, jobs, and tasks make up this work structure. Thus, the formal organization is expected to behave impersonally in regard to relationships with clients or with its members. According to Weber's definition, entry and subsequent advancement is by merit or seniority. Each employee receives a salary and enjoys a degree of tenure that safeguards him from the arbitrary influence of superiors or of powerful clients. The higher his position in the hierarchy, the greater his presumed expertise in adjudicating problems that may arise in the course of the work carried out at lower levels of the organization. It is this bureaucratic structure that forms the basis for the appointment of heads or chiefs of administrative subdivisions in the organization and endows them with the authority attached to their position.

An effective leader must be able to develop people.-R.Hewett

Leadership in Informal Organizations

In contrast to the appointed head or chief of an administrative unit, a leader emerges within the context of the informal organization that underlies the formal structure. The informal organization expresses the personal objectives and goals of the individual membership. Their objectives and goals may or may not coincide with those of the formal organization. The informal organization represents an extension of the social structures that generally characterize human life — the spontaneous emergence of groups and organizations as ends in themselves.

In prehistoric times, man was preoccupied with his personal security, maintenance, protection, and survival. Now man spends a major portion of his waking hours working for organizations. His need to identify with a community that provides security. protection, maintenance, and a feeling of belonging continues unchanged from prehistoric times. This need is met by the informal organization and its emergent, or unofficial, leaders.

Leaders emerge from within the structure of the informal organization. Their personal qualities, the demands of the situation, or a combination of these and other factors attract followers who accept their leadership within one or several overlay structures. Instead of the authority of position held by an appointed head or chief, the emergent leader wields influence or power. Influence is the ability of a person to gain cooperation from others by means of persuasion or control over rewards. Power is a stronger form of influence because it reflects a person's ability to enforce action through the control of a means of punishment.

Leader in Organizations

An individual who is appointed to a managerial position has the right to command and enforce obedience by virtue of the authority of his position. However, he must possess adequate personal attributes to match his authority, because authority is only potentially available to him. In the absence of sufficient personal competence, a manager may be confronted by an emergent leader who can challenge his role in the organization and reduce it to that of a figurehead. However, only authority of position has the backing of formal sanctions. It follows that whoever wields personal influence and power can legitimize this only by gaining a formal position in the hierarchy, with commensurate authority.

Hybrid Organizations

A hybrid organization is a body that operates in both the public sector and the private sector, simultaneously fulfilling public duties and developing commercial market activities. As a result the hybrid organization becomes a mixture of both a part of government and a private corporation.

1.3 Sole Proprietorship

We go to the market to buy items of our daily needs. In the market we find a variety of shops- some of them small and some of them big. We may find some persons selling vegetables, peanuts, newspapers etc. on the roadside. We may also find cobbler repairing shoes on the footpath. Everyday you come across such types of shops in your locality. The owner invests capital to start the business, takes all decisions relating to business, looks after the day to day functioning of the business and finally, is responsible for the profit or loss. The owner does exactly all these things, in some businesses a single individual and in some businesses a group of individuals perform all these activities.

Meaning of Sole Proprietorship

'Sole' means single and 'proprietorship' means ownership. It means only one person or an individual becomes the owner of the business. Thus, the business organization in which a single person owns, manages and controls all the activities of the business is known as sole proprietorship form of business organization. The individual who owns Business Studies and runs the sole proprietorship business is called a ‘sole proprietor’ or ‘sole trader’.

A sole proprietor pools and organizes the resources in a systematic way and controls the activities with the sole objective of earning profit. Small shops like vegetable shops, grocery shops, telephone booths, chemist shops, etc. are some of the commonly found sole proprietorship form of business organization. Apart from trading business, small manufacturing units, fabrication units, garages, beauty parlors, etc., can also be run by a sole proprietor. This form of business is the oldest and most common fonn of business organization.

Definition of Sole Proprietorship

A business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk

Characteristics of Sole Proprietorship

Sole proprietorship fonn of business organisations has the following characteristics.

Advantages of Sole Proprietorship

The sole proprietorship form of business is the most simple and common in our country. It has the following advantages:

Limitations of Sole Proprietorship

One-man business is the best form of business organization because of the abovediscussed advantages. Still there are certain disadvantages too.

Advantages

•   Easy to form and wind up

•   Direct Motivation

•   Quick Decision and Prompt

Action

•   Better Control

•   Maintenance of Business Secrets

•   Close Personal Relation

•   Flexibility in Operations

Limitations

•   Limited Capital

•   Unlimited Liability

•   Lack of Continuity⁷

•   Limited Size

•   Lack of Managerial

Expertise

Suitability of Sole Proprietorship Form of Business

Sole proprietorship fonn of business organization is suitable:

•   Where the market for the product is small and local. For example, selling grocery items, books, stationery⁷, vegetables, etc.

•   Where customers are given personal attention, according to their personal tastes and preferences. For example, making special type of furniture, designing gannents, etc.

•   Where the nature of business is simple. For example, grocery, gannents business, telephone booth, etc.

•   Where capital requirement is small and risk involvement is not heavy. For example, vegetables and fruits business, tea stall, etc.

•   Where manual skill is required. For example, making jewellery, haircutting or tailoring, cycle or motorcycle repair shop, etc

1.4 Joint Stock Company

A joint stock company (JSC) is a type of business entity: It is a type of corporation or partnership involving two or more legal persons. Certificates of ownership (or stocks) are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their stockholding to others. In most countries, a joint stock company offers the protection of limited liability; a shareholder is not liable for any of the company's debt beyond the face value of their shareholding.

There are two kinds of joint stock company: Private and public companies. The shares of the former are usually only held by the directors and Company Secretary. The shares of the latter are bought and sold on the open market. The important features of a joint stock company are as follows