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Managerial Economics

How to Make a Successful Participative Management

Last Modified: 29 December, 2020 Leave a Comment

For successful and effective participative management it’s important to satisfy the worker’s urge for self-expression, initiative, and self-actualization. Also to raise the worker’s level of motivation through the satisfaction of his non-economic needs.

How to Make a Successful Participative Management
How to Make a Successful Participative Management

Good participative management manages resistance to change and to secure the effective and smooth implementation of decisions.

Requirements of a Successful Participative Management

It is suggested that to ensure effective workers participation in management, the following conditions must be fulfilled:

1. Clarity of Objectives

Management and workers must understand clearly the objectives of participation.

2. Free Flow of Information

There must be a free flow of information and communication between the management and the workers.

In this way, distrust and suspicion will be avoided, and workers will become responsible and mature.

3. Democratic Attitude

The attitude of the management must be broad, progressive, and democratic.

It must be willing to associate the workers to discuss the organizational problems freely and frankly with them and find joint solutions to the problems.

4. Real Workers

The representatives of workers must be drawn from the worker themselves.

The participation of outside trade union leaders should be discouraged.

5. Mutual Faith

The existence of an atmosphere of trust, faith, confidence, and recognition is a must for cooperation between the workers and the management.

There must be a genuine desire on the part of the management and the workers to understand each other to arrive at decisions acceptable to both parties.

Learn More: Things Required for Collective Bargaining Succeed.

6. Strong Union

Strong and effective trade unionism is necessary for the success of participative management.

Politicians and, the multiplicity of trade unions defeat the purpose of participation and management.

7. Providing Training

For successful participation of workers in management, it is necessary that the workers are sufficiently informed about participation programs in the enterprise and are given proper training in the field.

strategies for creating a successful participative environment
strategies for creating a successful participative environment

They must be educated about what is expected of them.

8. Change of Heart

The effectiveness of participation depends on a change of heart on the part of employers and employees.

To expedite these positions, some sort of legislative action is also necessary.

There should be no tension in the relations.

9. Continuity

WPM must be an ongoing process.

It should not be treated as a one-time affair.

WPM should not be used merely as a fire fighting instrument for handling industrial relations.

10. Financial Cost should be Regulated

The cost of participation should not exceed its benefits and values.

Workers cannot devote all their time to participate at the cost of their work.

Related: Basic Limitations of Workers Participation in Management,

11. Congenial Work Environment

Participation requires a congenial work environment to motivate workers to give wholehearted cooperation for its success.

12. Proper Implementations

Worker’s participation must be an ongoing process and should not be treated as a one-time affair.

Worker’s participation should note merely a fire fighting instrument for handling industrial relations problems.

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Top 10 Need & Importance of Workers Participation in Management

Last Modified: 1 May, 2021 Leave a Comment

The concept of workers’ participation in management crystallizes the concept of industrial democracy and indicates an attempt on the part of an employer to build his employees into a team which workers towards the realization of a common objective.

need and importance of workers participation in management
need and importance of workers participation in management

It increases productivity for the general benefits of the enterprise, the employers, and the community.

Need and Importance of Participative Management

Participative management has assumed great importance these days because of the following advantages:

1. Reduction in Industrial Unrest

Conflicts arise due to the self-interested behavior of the other.

Worker’s participation cuts at this very root of industrial conflict.

It tries to remove or at least minimize the diverse and conflicting interests between the parties.

It creates cooperation, unity of objectives, and common interests.

18 Ways to Build Up Employee Morale in the Workplace.

2. Removal of Misunderstanding

Participation helps to dispel employee’s misunderstandings about the outlook of management in the industry.

These misconceptions would otherwise die hard, and their damaging effect needs no explanation.

3. Harmonious Relations

Workers’ participation in management (WPM) helps in developing a technology to resolve conflict and to achieve constructive cooperation among the partners of production.

4. Higher Productivity

Increased productivity is possible only when there exists the fullest cooperation between labor and management.

It has been empirically tested that poor labor-management relations do not encourage the workers to contribute anything more than the minimum desirable to retain their jobs.

Thus, the participation of workers in management is essential to increase industrial productivity.

5. Improved Communication

Participation tends to break the barriers of communication flow.

It makes the information and the consequences of the implemented decisions, available to the managers.

6. Industrial Democracy

Participation helps to usher in an area of democracy in industry. It is based on the principle of recognition of the human factor.

It tends to reduce class conflict between capital and labor.

It also serves as a support to political democracy.

WPM is the first step to establish democratic values in society at large.

Related: How to Make a Successful Participative Management.

7. Increased Commitment

Participation creates greater commitment towards organization and work.

Why is participative management important?
Why is participative management important?

Worker’s involvement provides an opportunity to express themselves at the workplace rather than being absorbed into a complex system of rules, procedures, and bureaucratic system.

It creates a personal sense of gratification.

8. Individual Growth

WPM enhances worker’s creativity. It improves response to job challenges.

It also improves a worker’s natural ingenuity and ability to give creative ideas.

If participation is allowed, workers will be encouraged to improve their initiative, creativity, and expectations.

Thus, facilitates an individual’s growth.

Related: 18 innovative approaches towards employee motivation.

9. Social Justice

In the view of social thinkers workers, participation in management should be encouraged for achieving social justice.

It prevents worker exploitation.

It is a human approach to work.

10. Establishment of Socialist Society

Through participation in management, workers can be made to feel that they are helping to build a progressive state.

The creation of industrial democracy is thus a prerequisite to the establishment of a socialist society.

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15 Characteristics of Capitalism Economy (With Examples)

Last Modified: 5 February, 2020 Leave a Comment

Capitalism economy is a system of the economic organization featured by the private ownership and use for the private profit of man-made and nature-made the capital.

characteristics of capitalism economy
characteristics of capitalism economy

There is private ownership of the means of production and distribution which are used for earning maximum profits according to the competition available.

The existence of the capitalism economy had been possible only by the amendments made from time to time.

So many defects have to be overlooked. Pure capitalism which was born in the 19th century has become an extent of the world economy.

In America, England, and many Western countries, capitalism economy are present now also.

Characteristics of Capitalism Economy

The main characteristics of capitalism economy system are:

1. Market imperfection

Perfect competition is not found in the modern capitalism system, So both the buyers and sellers find market Imperfection.

In the buyers’ attitude, we find Monopsony, divopsony, and Oligopsony are present and on the seller side, we find Monopoly, duopoly, and oligopoly system.

Product differentiation tradition pattern of advertisement is in invisible in perfect competition but visible in perfect imperfect competition.

2. Importance of Professional Management

The modern economy needs factors like large-scale production, knowledge of Technical know-how and efficient Management.

Which is present only in the modern capitalism economic system.

The drawback of this capitalism economic system was widening the gap between the owners of the concern and management of the concern and giving rise to monopoly.

Related: 21 Pros and Cons of Capitalism Economy (With Examples).

3. Existence of Labour Trade Unions

Economic and social exploitation of labour in the enterprises lead to the growth of the trade union.

Protecting the interests of labours and safeguarding them from the hands of capitalism were the main activities of the trade unions.

4. Importance of Public Utility Concerns

Public utility concerns are given the importance because serving the people is the social responsibility of the concerns.

Therefore, providing national security, basic infrastructural facilities and public services like electricity, L.P.G., telecommunication its necessary.

Related: 13 Characteristics of Socialism Economy (With Examples).

5. Expansion in the state control

Business is connected to society in various forms and Thus they should fulfil the obligation towards social responsibility.

A business owes the obligation of making plans for increasing production, distribution, consumption, saving, investment, employment, balanced regional development and overcoming the hurdles of the economy is the aim of modern capitalism economy/system.

6. Right of Private Property

Private ownership is the main component of capitalism economy.

Thus, every individual can have.

Right to hold and Freedom for the use of private property

The right of inheritance like the passing of the property inheritance to the coming generation.

Related: 15 Pros and Cons of Socialism Economy (With Examples).

7. Economic Freedom

The second important characteristic is the economic freedom which is enjoyed by the individual in the form of:

  • Free entrepreneurship
  • Freedom for entering into a contract and mutual agreement.
  • Right to use one’s own private property according to one’s will.

According to Robertson economic freedom includes:

  • Freedom of enterprise.
  • Freedom of contract.
  • The Freedom of selection.

Thus, in the capitalism economic system, there is no interference of the government in private ownership of the property and utilization of property.

8. Consumer’s Sovereignty

Consumers have the freedom for consumption according to their need, taste, and desire.

features of capitalist economy
features of capitalist economy

The consumer is the king of the market and thus production is done according to his will.

Manufacturing is done keeping in mind the consumption pattern of the consumers.

Related: 19 Features and Importance of Mixed Economy (With Examples).

9. Competition

There is competition present in the market among the buyers and sellers of the product.

Therefore, only efficient buyers and sellers are able to compare. Markets based on competition types.

10. Private Profit Motive

Under capitalism, profit motive acts as a basic yardstick of performance.

Profit-making is the heart of the economic activities undertaken in the capitalist society.

Private profit motive super-cedes the social serving motive of a firm.

11. Price Mechanism

Of all characteristics of capitalism economy, the economic activities of planning, coordination coordinating and controlling moves around the price mechanism.

Price mechanism works on the basis of what to produce, how to produce and for whom to produce.

All the decisions regarding savings, investment and consumption are also parts of the price mechanism.

12. Combination of Competition & Coordination

Capitalism economy is a combination of competition and coordination feeling is present on one hand leading to competition among the producers, sellers, consumers, And Labour and on the other side creating a feeling of co-ordinations among them.

Related: 8 Advanced Techniques of Motivation Research (Explained).

13. Inequality of wealth and distribution

Inequality of wealth and distribution creates the division among the individuals in the form of rich and poor, haves and have-nots.

14. Centralization

The centralization of wealth and economic power creates the feeling of suffering among the people.

15. Entrepreneurs Role

Entrepreneurs are the soul of capitalism economy and so they are very important.

In the capitalism economic system, the Entrepreneur who gets the risk is able to control the business so risk-taking and controlling go simultaneously.

Thus, now you know the major characteristics of capitalism economy.

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13 Characteristics of Socialism Economy (With Examples)

Last Modified: 5 February, 2020 2 Comments

Socialism is an economic system where the means of production are either owned and managed by the state maximum social benefits is the central idea of socialism.

characteristics of socialism economy
characteristics of socialism economy

Socialism is an economic organization of society in which the material, means of production are owned by the whole community according to a general economic plan, all members being entitled to benefits from the results of such socialism planned production on the basis of equal rights.

Characteristics of Socialism Economy

The main features or characteristics of socialism economy system are as under:

1. Proper Utilisation of Factors of Production

In the socialism economy, the best possible utilization of physical and human resources is done keeping in mind the benefits to the public.

They help in increasing production, consumption and income pattern whereas in capitalism importance is given to luxurious.

2. Quick Economic Stability

Rapid economic development takes place in socialism where economic stability and best utilization of resources as possible.

Related: 21 Pros and Cons of Capitalism Economy (With Examples).

3. Maximum Social Benefit

In the socialism economy means of production are owned by the government which is used to derive maximum benefits to the society.

4. Government Ownership

The main feature of socialism economy system is government ownership. Here the factor of production and personal where is taken up for Nationalisation.

It becomes easy for achieving the desired goal where resources are used in the planned manner for the social benefit.

In socialist economy, the state owns almost all of the means of production compelling the common man to act as Government employees.

5. Facilitate Central Economic Planning

In the socialist economy, central planning is given due importance.

The central planning commission is formed so that all activities are carried out in the planned manner for attending the specific objectives.

Related: 15 Pros and Cons of Socialism Economy (With Examples).

6. Government Control on Production and Distribution

The government acts as a central figure for deciding what is to be produced, when it is produced, how it is going to be produced, who is producing it and on the other hand, decide how the distribution will be done and what quantity.

features of socialist economy
features of socialist economy

Private ownership of an important role in the capitalism economy whereas govt.

Ownership is carried out in a socialism economy.

7. Maximization of social benefits

In the capitalism economy, the maximization of private profit is there whereas in the socialist economy social benefit is given due importance.

Here the main factors of production are owned by the government and are used for the maximization of the benefit of the public at large.

Related: 19 Features and Importance of Mixed Economy (With Examples).

8. Absence of Exploitation

In the socialism economy, there is government ownership of the factors of production leading to the Welfare of the public.

The exploitation of labors and Consumers is completely abolished in the social system.

9. Economic Equality

Private ownership, private profit, and exploitation also give rise to economic inequality in capitalism economy.

Whereas the presence of government ownership of property, the absence of exploitation and avoidance of private profits give rise to economic equality in socialism economy.

10. Absence of Unearned Income

In the socialism economy, private ownership of the wealth is absent thus passing the wealth on hereditary is stopped and so if the person will works then only income will rise.

The chief principle of the socialism economy can be “No work, No bread”.

Related: 17 Scope and Importance of Macroeconomics (With Examples).

11. Absent of freedom of pricing the product

In the socialist economy, freedom of pricing the product is absent since the price of the product is decided not according to the force of demand and supply but are given by the Board of Central planning.

Only the government decides the prices because the ownership of means of production lies in their hand.

12. No Consumer Sovereignty

Wants of the consumer are generally not taken into consideration for the production of various goods.

The demand and the consumption pattern of a product are also decided by the government.

Desires of the consumer are overlooked and so they are completed to use the good of the government.

13. Other characteristics

  • Heavy and huge businesses are established by the government.
  • Personal freedom is lost.

Thus, now you know the characteristics of socialism economy.

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17 Scope and Importance of Macroeconomics (With Examples)

Last Modified: 4 February, 2020 Leave a Comment

Macroeconomics scope is wide and it studies the economic variable affecting the economy as a whole and other economies as well.

scope and importance of macroeconomics
scope and importance of macroeconomics

Macroeconomic is called income and Employment analysis.

It studies the effective demand and income, employment, investment economic variables.

Scope of Macroeconomics

The scope of macroeconomics is very wide following points can be studied under it:

1. Theory of Income and Employment

In it, the formulation of income and Employment level is done and the study of consumption, function, investment, function, multiple and accelerator is also done.

2. Theory of General Price Level

In it, the formulation of the general price level is studied and problems related to inflation, deflation are a prime subject matter of Macroeconomics.

Related: 7 Scope and Types of Microeconomics Analysis (With Examples).

3. Theory of Development and Planning

For a fast and balanced development, developing countries apply many economic theories.

So, the study of process and theories of economic development and planning is also an important subject matter of Macroeconomics.

4. Theory of trade cycle

In the macroeconomics study of the trade, the cycle is done.

The factor of Boom and Depression in the trade cycle, there effects and removal of these effects are studied in Macroeconomics.

5. Theory of International Trade and Foreign Exchange

It is also a subject matter of Macroeconomics.

Under its theory of International Trade, terms of trade, determination of foreign exchange rates, etc. Are studied.

6. Theory of Public Finance

In it, the study of theories, policies, and effects related to government income, expenditure loans, etc. are done.

The study of fiscal policy is the prime subject matter of public finance.

Related: 15 Importance and Limitations of Microeconomics (Explained).

7. Principles of Money and Banking

In macroeconomics, theories related to Money and banking, country’s monetary and credit system, functions of the central bank and other banks and international finance are studied.

8. Macro-Theory of Distribution

In macroeconomics study of the distribution of wages and profits in national income is done.

So, it is clear that the scope of Macroeconomics it’s very wide.

Importance of Macroeconomics

Following are the importance of macroeconomics:

1. Useful in Formulation of Economic Policies

Macroeconomics is very useful in the formulation of economic policies.

importance of macroeconomics
importance of macroeconomics

Macroeconomics is very important in the view of economic policies because economic policies of the government are related to the group of individuals and not with individuals.

Related: 12 Factors Affecting Entrepreneurship Development.

2. Understanding the Collective and Complex Operation of Economy

In Microeconomics knowledge of only individual units can be done but for the collective and complex operation of while the economy, Macroeconomics is helpful.

3. Helpful in Development of Microeconomics

It is helpful in the development of microeconomics because the formulation of laws and theories of microeconomics is done with the help of macroeconomics.

4. Solving various Economic Problems

Economists take the help of macroeconomics in solving the problem related to the whole economy, like-National income, National Savings, and investment, consumption, production, etc.

5. Useful in Economic Planning

At present, for the solution of economic problems and for fast and balanced economic development.

Every nation takes the help of economic planning and the determination of targets in plans is done on the basis of Macro Analysis.

Related: 5 Main Types of Disequilibrium in Balance of Payments (BOP).

6. Analysis of trade cycle

On the basis of macroeconomics by doing the analysis of factors boom and depression, important steps are taken for the removal of the cycles.

7. Analysis of Monetary Problems

Knowledge of the determination of monetary policy of a country, the study of its effect and cause of monetary problems and solutions for the removal of these problems is done only by Macro analysis.

8. Study Whole Economy

Due to micro paradoxes, it is essential to study the whole economy because those decisions which are applicable to individual units it is not necessary that the same decision will be applicable to the whole economy.

9. Analysis of Unemployment

In a country, the reason for unemployment is due to a lack of effective demand.

So for the removal of unemployment increase in effective demand is essential.

These factors of unemployment, its effect, and solutions for removal of these effects is possible through Macro Analysis.

Thus, now you know and understand the scope and importance of macroeconomics.

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15 Importance and Limitations of Microeconomics (Explained)

Last Modified: 4 February, 2020 Leave a Comment

The importance of microeconomics in the modern economic system is limited because it provides a solution to individual problems only. Its scope of the study is limited and it is a part of the macroeconomic analysis

importance and limitations of microeconomics
importance and limitations of microeconomics

From the above discussion, it is clear that microeconomics is an important branch of economic analysis.

Importance of Microeconomics

Following are the major importance of microeconomics:

1. Helpful to Study Economic Problem

Through the study of individual units separately, microeconomics make easy to study the whole economy.

Because construction of the whole economy is done by the combination of individual units.

2. Complementary of Macroeconomics

Microeconomics studies individual action and behavior.

Analysis of the whole economy becomes easy on the basis of individual savings, Individual investment and individual expenses.

So, Microeconomics helps in the macro analysis.

Related: 7 Scope and Types of Microeconomics Analysis (With Examples).

3. Management of Business Enterprises

These days, with the help of microeconomics business manager, take important managerial decisions.

In decision making knowledge of microeconomics is very helpful.

4. Analysis of Problems and their Solution

In microeconomics study of the problem of the individual economic unit is done and by examination and analysis these problems the solution is found.

5. Helpful in Analysing the Problems of Taxation

By studying the effects of different types of taxes with the help of microeconomics, it can be known that which tax is proper to impose and which tax is not.

Related: 7 Limitations and Types of Macroeconomic Analysis (Explained).

6. Important for Managers

The knowledge of microeconomics helps managers in maximizing the profit by analyzing demand and supply of commodity cost and revenue etc.

7. Helpful in Factor Price Determination of Services and Commodities

With the help of microeconomics, the price determination of any commodity is done by demand and supply of that commodity under different conditions of the market.

8. Helpful in Factor Price Determination

The price of rent, interest, wages, salary, etc. of different factors of production land, capital, labor, entrepreneur, and Organisation is determined with the help of microeconomics.

Related: 16 Factors Responsible for Rapid Growth of Sales Promotion.

9. Helpful in Explaining the Flow of Goods and Services

Microeconomics explains the flow of factors of production from household two firms and then the flow of goods and services from firms to the household.

10. Useful In Formulation of Economic Policies

Microeconomics is helpful in the formulation, analysis, and valuation of economic policies.

Related:

  • 17 Scope and Importance of Macroeconomics (With Examples)
  • 15 Advantages and Disadvantages of Socialism

Limitations of Microeconomics

Microeconomics is very helpful in the economic analysis but it has some limitations:

1. Lack of Knowledge of the Whole Economy

With the help of microeconomics knowledge of the whole economy cannot be done because in it only individual units studied.

limitations of microeconomics
limitations of microeconomics

2. Not Appropriate for the whole Economy

Conclusions and results taken with the help of Microeconomics are not appropriate for the whole economy like- saving is appropriate for the individual, but if all peoples of the country together save them it has a bad effect on the Economy.

3. Based on Unrealistic Assumptions

Microeconomics is based on unrealistic assumptions like fill employment, perfect competition, self-interest.

Related: 17 Importance and Role of Small-Scale Industries (Economy).

4. Some Economic Problems cannot be Studied through Microeconomics

Macroeconomics is not appropriate for analyzing the effects of government revenue.

International trade, monetary and fiscal policy economics planning.

5. Less Importance

In present, the importance of analysis and study were done on a small level is decreasing.

Because in place of the individual, the importance of society and groups in increasing.

Thus, now you know the importance and limitations of microeconomics.

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