The business environment is the sum total of all external factors that influence the functioning of a business enterprise. The combination of internal and external factors that influence a company's operating situation. The business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends.

The two terms Effectiveness and Efficiency mean different but are related to each other. Effectiveness aims to achieve the goals within time. Efficiency focuses on optimum use of resources to achieve the goals. Yes, the production manager of Vaibhav Garments Ltd. is effective as he could achieve the target to produce 10,000 shirts in a month.

The policies of liberalisation, privatisation and globalisation by the government affect the functioning of the business enterprises. The following points highlight the impact of government policy changes on the business and industry.
i. Increased Competition: As a result of the policies such as relaxation of the licensing policy and reduction of import duties, the competition faced by the domestic firms increases. India companies experienced competition in service industry such as telecommunication, banking, insurance, etc.
ii. Increased Demand: As competition increases, the choice of goods and services for the consumers also increases. Thus, consumers also gain from quality products and greater variety.
iii. Change in Business Policies: The government policies directly impact the functioning of the business enterprises. As a result, they have to alter their policies appropriately.
iv. Technological Changes: As competition increases firms tend to find new and innovative ways to survive in the market. In such a scenario, technological improvements become imperative.
v. Need for Trained Personnel: Innovations and improvement in product, application of improved technologies requires skilled and trained personnel. Thus, there arises a need for the development of human resources.
vi. Greater Market Orientation: With increased competition, the production has become market oriented. That is, the enterprises produce as per the demand market.
vii. Less Reliance on Budgetary Support by Public Sector Enterprises: To survive the increased competition, the public sector enterprises must improve efficiency and productivity rather than relying on budgetary support to cover their losses.

Simplification means eliminating superfluous sizes, varieties and dimensions. Too many designs spoil the real beauty of a masterpiece.  Its aim is to:

1. Eliminate unnecessary diversity of products and thereby reduce costs.
2. Help in achieving economy in the use of required machines and tools.
   Standardization of work is the technique of scientific management, which helps in establishing interchangeability of manufactured parts and products.
   It is the process of setting standards for every business activity, process, raw materials, time, machinery and methods to achieve efficiency.
   Standardization of the product implies that the size, design, quality, shape, etc of the product should meet the requirements and tastes of consumers.  Moreover, it also makes the product competitive in the market.
   The objectives of standardization are 
   1. To maintain quality standards.
   2. To set up performance standards for men.
   3. To provide interchangeability of manufacture and products.
   4. To achieve targeted production.
   5. To get hold of the customers,
   6. To enable a further improvement in the product, if required.
   7. To make the product highly competitive.
   8. To cut down unwanted cost expenditure.

Four points which highlight the importance of principles of management are

1. To Provide Managers with Useful Insights into Reality: Principles of management are derived on the basis of continuous observation and analysis of events which managers face in real world situations. They help managers to improve their knowledge, ability and understanding of managerial situations These principles enable managers to learn from past mistakes and conserve time by solving recurring problems quickly. Thus, management principles increase the efficiency of managers.
2. Optimum Utilisation of Resources and Effective Administration:  Optimum utilisation of resources emphasise that resources(physical, financial and human) should be utilised in such a manner that they should give maximum benefit with minimum cost. Principles of  management help in organising various activities in such a way that results in elimination of unwanted activities thereby reducing inefficiency and wastage of resources. It also increases the efficiency of management, as through these principles managers adopt a systematic and logical approach to overcome the problems and discard hit and trial approaches.
3. Scientific Decision: Management principles help in thoughtful decision making because they are based on logical reasoning after making detailed research and investigation rather than blind faith or guess work. Such decisions are free from bias and prejudice. These principles develop a scientific approach as they give a realistic and subjective measurement for evaluation. Management principles are based on the objective assessment of the situation.
4. Meeting Changing Environment Requirements: Modern business environment is complex and ever-changing. In order to be survive and grow, organisations have to adapt to these changes. Although, principles are general guidelines but they are flexible and can be frequently modified as per business environment, which are favourable and profitable for the business.

The nature of principles of management can be described in the following points:

1. Universal applicability i.e. they can be applied in all types of organizations, business as well as non-business, small as well as large enterprises.

2. General Guidelines: They are general guidelines to action and decision making however they do not provide readymade solutions as the business environment is ever changing or dynamic.

3. Formed by practice and experimentation: They are developed after thorough research work on the basis of experiences of managers.

4. Flexible: Which can be adapted and modified by the practicing managers as per the demands of the situations as they are man-made principles.

5. Mainly Behavioural: Since the principles aim at influencing complex human behaviour they are behavioural in nature.

6. Cause and Effect relationship: They intend to establish relationship between cause & effect so that they can be used in similar situations.

7. Contingent: Their applicability depends upon the prevailing situation at a particular point of time. According to Terry, “Management principles are ‘capsules’ of selected management wisdom to be used carefully and discretely”.

It increases the efficiency of performing work. Functional foremanship provides for the orderly execution of work by employing eight foremen. other techniques such as motion,fatigue,time study are an attempt to understand workers problem and guide them towards increasing speed and the efficiency in performing tasks. They set time, provide frequent intervals of rest and eliminate unnecessary movements in order to achieve goals effortlessly.

A differential piece-rate system is a method of wage payment in which after tests have set a standard time for any task assigned the worker gets a high piece rate for completing the job within the allotted time and lower piece rate for completing the job beyond the allotted time.

Principles of Scientific Management

(1) Science, not rule of Thumb: There should be scientific study and analysis of each element of a job in order to replace the old rule of thumb approach or hit and miss method. We should be constantly experimenting to develop new techniques which make the work much simpler, easier and quicker.

(2) Harmony, Not discord: It implies that there should be mental revolution on part of managers and workers in order to respect each other’s role and eliminate any class conflict to realize organizational objectives.

(3) Cooperation not individualism: It is an extension of the Principle of Harmony not discord whereby constructive suggestions of workers should be adopted and they should not go on strike as both management and workers share responsibility and perform together.

(4) Development of each and every person to his or her greatest Efficiency and Prosperity: It implies development of competencies of all persons of an organization after their scientific selection and assigning work suited to their temperament and abilities. This will increase the productivity by utilizing the skills of the workers to the fullest possible extent.

Principles of Management

Principles of management are broad and general guidelines for managerial decision making and behavior (i.e. they guide the practice of management).

Scalar Chain: The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed upon by all parties and superiors are kept informed. Scalar chain clearly differentiates the authority and the job positions of the individuals in the organisation.

The Principle of “Unity of Command” is useful to the management because of the following reasons:

1. This Principle defines the authority-responsibility relationship between management and employees.
2. It helps in avoiding the dual subordination.
3. It ensures that orders and instructions issued to the workers are clear and precise.
4. It helps in preventing confusion and conflict regarding tasks to be done.
5. It helps in making a new employee aware of the job positions.
6. It brings more confidence among the employees to keep their interest ahead always.

The importance of management principles can be understood by considering the following points:

1. They help in providing useful insight to manage: Principles of management help in increasing managerial efficiency by adding to their knowledge and ability to understand the various situations more objectively. In simple terms, they act as a guide to overcome the situational hindrances.
2. Optimum Utilization of Resources and effective administration: Management principles help in organizing various activities in such a way that results in the elimination of unwanted activities and consequent wastage In short, overlapping of work.. Management principles help in managing organizations effectively. For example, Unity of Command helps to avoid confusion and conflicts Unity of Direction ensures unity of actions to facilitate coordination.
3. Scientific decisions: They help the managers in taking the decisions based on the objective assessment of a situation. Thus decisions taken are logical and free from any bias and prejudice.  Moreover they are firm decisions and are not based upon intuitions.
4. Meeting changing environment requirements: Though the principles are only guidelines for action yet they can be modified according to the need of changing situations. Thus principles of management help in meeting changing requirements of the environment.  Thus, it is truly said that Management principles are flexible in nature.
5. Fulfilling social responsibilities: Principles of management have been devised in such a way that they help in fulfilling social responsibilities.  for instance, the Principle of esprit de corps states that there should be harmony in action which brings a sense of respect and recognition for each other among the workers.
6. Management training, education and research: Principles of management are the fulcrum of management theory so that they are used as a basis for management training, education and research.  Depending upon the past mistakes, the principles are modified according to the present situation.