Existing management theories, amidst their difference, agree with each other in numerous ways. They seek to project optimum output by utilising small administrative work units that work cohesively. The ‘Systems Management Theory’ interprets a successful system as, essentially, multiple components working harmoniously so that the larger system can operate optimally. The ‘Scientific Management Theory, similarly, raises that the division and simplification of complex procedures into smaller and more manageable tasks will amount to greater output and reward for a business. Yet the theme of managerial economics is not limited to previously projected theories – it looks at the concept of strategic decision which aims to stimulate business prosperity. A basic introduction to management covered, this paper intends explore where the potential strengths of a traditional business may lie.
Leadership
The first pillar of business strength analysis is leadership. Research and observation have shown the concept of leadership to be misjudged. Leadership is wrongly seen as an indication of one worker, in the mechanism of business, set above another worker or group of workers, and the role is leaders is to manage the job of those below them. However, as I and others see it, there is a clear-cut division between managing and leading. Managing is, indeed, watching over and managing the work of those beneath them. Leadership, however, is watching over the ‘people’ who do the work and contribute. To raise a point by Simon Sinek, ‘a potential problem that arises in current society is that those in a position to assert leadership have failed to make a transition from managing.’ Managing indicates they have excelled at their profession and have therefore been granted the position of watching over the previous tasks they themselves carried out. Nevertheless, leadership is a skill much like any others – it requires practice and learning. The ability to transition into a leader would amalgamate into a core tenet of a strong business. Essentially, leadership transforms the working environment of a company. One example being an empathetic leader who, unlike the corporate world today, cares more about the person outputting rather than just the output.
The cost-effectiveness of emotional intelligence is a relatively new idea for business, one some managers may find it hard to accept. A study of 250 executives found that most felt ‘their work demanded their head not their hearts.’ In the Status Quo, many fear that feeling empathy for those they managed would put them in conflict with their organisational goals. Criticism in all cases is voiced as personal attacks as opposed to the intended complaints that are to be acted upon. On the contrary, being attuned to the feelings of those we deal with, being able to handle disagreements so they do not escalate, having the ability to get in to flow states while doing work all demonstrate the strengths and potentials of business following this new interpretation of leadership.
Adaptability and Organisational set-up
Considering, for example, the Brexit negotiations or the threat of US-UK-EU recession, all businesses are looking for opportunities to prepare for a worst-case scenario. To a certain extent, it comes to the role played by managerial economics to foretell and explain how a firm may refine its trajectory of output when faced with the relevant data points. When specific components of a business model are affected by external or internal incidents, enterprises should be able to take appropriate countermeasures. By this means, business models have to be flexible enough to adapt their strategies and business processes to changing factors to stay competitive. So far, existing approaches in most cases focus on static aspects, not sufficiently taking into account the huge amount of dynamic factors that influence a company’s business model (Chesbrough & Rosenbloom, 2002; Bouwman, de Vos, and Haaker, 2008).
To adapt, a company must realise changes in the external environment, decode them, and aptly redefine its business strategy and even reshape the industry’s information landscape. The speed of adaptation is a function of the cycle time of decision making. In a fast‐moving environment, companies need to accelerate change by making annual planning processes lighter and more frequent and sometimes by making episodic processes continual. An adaptive organisation can’t expect to succeed unless it provides people with some substitute for that certainty.
A veiled reference can be made, as well, to the implementation of organisational structures as part of the business model. The concepts of ‘private bank work ethic’ and ‘individualism’ are often synonymously used. Therefore, there comes a question whether the essence of implementing an organisational structure tase any considerable impact on the strength of a business. Following an enquiry into such models, I assumed through public banks tend to adopt a ‘Flatter organisational model’ whereas private banks have more hierarchical structures. As evident, flatter models facilitate output as a combined effort, where co-operation trumps individual rivalry. Since there aren’t any such universally recognised structures, it is impossible to judge their relevance to the strength of a business. Yet it does raise questions as to how a business sees workers working as a unit, and how worker motives impact the strength of a business.
Playing the game
The final assessment of business strength comes down to their objectives. Not profit objectives as much as how they intend to compete and grow.
In Game Theory, there are two types of games – there are finite games and infinite games. Finite games are those where all players are identified, the rules and guidelines are clear, and all players have an agreed-upon outcome. For example, Monopoly. Infinite games, however, are far more ambiguous, it consists of both known and unknown players, the rules can be altered and the objective is to keep the game in play. For example, the Cold War. So we begin to ask ourselves, what game is business?
Business is unequivocally an infinite game, there is no winner. Business started before all companies that exist today, and will continue to exist once all existing companies have passed. Business does not have any agreed-upon rules. Take, for example, a ranking system for the top companies – a company ranked 1 means nothing if there is no consensus surrounding the guidelines for picking that one company as the best, over all others. Weighing factor may range from employment statistics to levels of pay, meaning there essentially no recognition of a ‘winner’. Despite this, companies still say their strategic aim is to tackle competition and be the best company in the market.
What does this mean? Companies, in an infinite playing field, are playing finite games, with few exceptions namely Apple and Wal-Mart. In essence, company strategy is predominately focused on beating competition so often that they fail to realise internal defaults and weaknesses. They fail to give themselves a comparative advantage over other existing companies. To an extent, we can argue that all past examples of mergers&acquisitions and bankruptcies are examples of the infinite game in action, since companies are not able to sustain themselves in the game, and therefore drop out. A businesses’ strength, in fact, comes from realising the game that they are playing, and act accordingly to prioritise their trajectory of output.
Final remarks
This is a highly opinionated paper on what I feel are few of the many key tenets to a strong business, therefore any assertion I make is only corresponding to my views. Nevertheless, it is highly evident that all three pillars of analysis adumbrate to the concept of re-allocation and decision making with respect to the conditions of the market – a clear reference to the management of a business. Therefore, the first conclusion is that managerial economics has a large influence over the strength of a business, through its discussion of allocative effective with respect to market setting.
We can also conclude that, currently, there is reason to see many corporations built on an ill-judged foundation of the concept of leadership and competitions. Redefining these terms may be the first step into ensuring the strength of a business.
