CBSE Class 12 Business Studies - Nature and Significance of Management 


Management is defined as a process of getting things done with the aim of achieving goals effectively and efficiently.

“Management is the process of working with and through others to effectively achieve organizational objectives by using limited resources in the changing environment” - KREITNER


So there are three terms which need to be elaborated:

  1. Process
  2. Effectiveness
  3. Efficiency

Process – It means the primary function that the management performs to get things done. These functions are planning, organizing, staffing, directing and controlling. We will be studying these functions in the later chapters. 

Effectiveness – It means completing the given task. It is concerned with doing the right task, completing activities and achieving goals. It is concerned with the end result.

Efficiency – It means doing the task correctly with minimum cost. Efficiency is concerned with using lesser inputs for maximum output. The input resources are money, materials, equipment and human resources.

  • Effectiveness and efficiency are two different terms but they both are interrelated. It is important for management to achieve goals with minimum resources i.e as efficiently as possible.
  • Effectiveness and efficiency are two sides of the same coin they must go hand in hand.

FOR EXAMPLE- Ria is responsible for producing 100 units in a day, she produces 100 units but due to mishandling of machine, it broke down. Though Ria produced 100 units at a higher cost, in this case, Ria was effective but not efficient.


Management should complete its task with minimum resources i.e. a balance should be maintained between efficiency and effectiveness


1. Management is Goal - Oriented process: An organization has certain goals which are the basic reason for its existence. The different organization may have different goals. For instance, the goal of XIAOMI is to be the market leader in an affordable smartphone.

2. Management is Multi-Dimensional - As it involves complex    activities and has the following three dimensions:

  1. Management at work: All organization exist for the performance of some work. In a showroom customers’ needs are satisfied, in college students are taught and so on. It’s the duty of management to translate this work into small achievable goals and provide resources to achieve them.
  2. Management of people: Human resources is the most precious asset in an organization. The task of the Management is to make people work towards achieving organizational goals. Management must deal with employees as an individual with different needs & behavior. On the other hand, it should also deal with individuals as a group of people.
  3. Management of operations: In order to survive the organization must have some product or service to provide to its customers. Therefore the management should manage the process of transforming inputs into desired outputs.
  4.  Management is a group activity – An organization is a group of individuals with different needs. Every member of the group has a different purpose for joining the organization. But as a team, they work in one direction i.e. fulfilling the organization goal. Management as a team can contribute more effectively and efficiently than an individual.
  5. Management is an intangible force - Management is an intangible force that cannot be seen but its presence can be felt.When targets are achieved, employees are happy and customers are satisfied one can feel the presence of management.
  6. Management is a continuous process Management is a continuous process as it involves series of continuous, composite but separate functions – planning, organising, directing, staffing and controlling. These functions are performed by managers at all times.
  7.  Management is pervasive – Management is essential in all organisation and in all departments, whether big or small. There are certain common activities that are performed in all type of organisations. A school, hospital, shopping mall – all require management.
  8. Management is a dynamic function – There are various factors such as social, economical, legal, political and technological that effects an organisation. In order to be successful management should adapt and change its goals accordingly

FOR EXAMPLE-In order to be successful in Indian food industry pizza hut made major changes in its menu for satisfying Indian customers.


In an organisation, there are different objectives and management t has to achieve all objectives in an effective and efficient manner. The objectives of management can be classified as follows:

  1. Organizational/ Economic objectives:

Management has to achieve various objectives while considering the interest of all stakeholders including shareholders, employees, customers and the government. The main objective of any organization must be to utilize human and material resources to the maximum possible advantage.

  The Economic objective of business are:

  1. Survival: The primary /basic objective of any organization is survival. Management of an organization must ensure the survival of the organization by earning enough revue to cover the cost.
  2. Profit: Mere survival is not the motive of any organization. The main motivating factor in any business is profit, therefore, the management must ensure that the organization makes enough profit to cover the cost and risk of the business. For Example, Ria has established a bakery, the cost that she incurs per cake is $10, so she must sell her cake above$10 to make the sale profitable.

FOR EXAMPLE-Ria has established a bakery, the cost that she incurs per cake is 150, so she must sell her cake above 150. I.e 200 to make her sale profitable. So, she earns a profit of 50 .

Profit = Income – Cost

 2. Growth: Every organization wants to grow in the big run. Management must use the profits to expand and grow the business. Growth of the business can be measured in terms of increased sales, number of employees, number of products, market share, etc.

Social objectives:

The social objective involves the creation of benefit for society. Since business operates in society by utilizing its scarce resources, society expects something in return.

 As a part of society every organization whether it is business or non- business has a social obligation to fulfill. This includes:

  • Using environmentally friendly methods of production.
  • Giving job opportunities to disadvantaged sections of society.
  • To supply good quality goods and services at a reasonable price.


Personal objective: Personal objectives refer to the objectives which are related to the employees of an organization. Different people with different experiences and objectives become part of the organization to satisfy their different needs.

  • Financial needs like salaries, incentives, and other perks.
  • Social needs like recognition in the organization.
  • Higher-level needs which include growth and development.

In order to bring harmony in the organization, management has to integrate personal goals with the organizational goal.


Management is an integral part of an organization without management everything will be at the chaos.

A business rises because of its management and if fails it will be because of management.

Therefore we can conclude that anything minus management is nothing.

Anything- Management = zero

  1. Management helps in achieving goals: An organization have certain goals that it expects to be achieved, management helps to achieve these goals through the employees of the organization.    
  2. Management increases efficiency:   Management helps to increase the efficiency of the organization by reducing cost and improving productivity, it does so through better planning, organizing, directing, staffing and controlling the activities.
  3. Management creates a dynamic organization: A business runs in an environment that is ever-changing. People resist change and it’s the duty of the management to help people by introducing them to the benefits of these changes so that the organization is able to maintain its competitive edge.
  4. Management helps in achieving personal objectives: A manager motivates and leads his team in such a manner that individuals are able to achieve personal goals while contributing to the organizational objectives.
  5. Management helps in the development of society: An organization has various goals which it needs to fulfill. In the process of fulfilling all its goal organization helps in the development of society.
  1. Provides good quality products at reasonable price.
  2. Creates employment opportunities.
  3. Introduce new technology for greater good of the society.


Today the term ‘management’ has several different connotations that highlights various aspects of its nature.

Over a period of time, management has grown into a dynamic subject with its own characteristics. The study of management has evolved. However, one question that needs to be addressed in regard to the nature of management, whether it is science or an art or both?


Art is the skillful and personal application of existing knowledge to achieve desired results. It can be learned through books, experience and observation. As art is concerned with application of human creative skills and imagination its. Application will change/differ person to person.

Following are its basic features:

  1. Existence of theoretical knowledge -   Art pre - supposes the existence of certain theoretical knowledge. Experts in their fields have extracted certain basic principles which are applicable to a particular form of art for example: literature, art, and dance.
  2. Personalised application:  The use of basic knowledge differ from person to person. Art, therefore is a very personalised concept. For ex. Two speakers, two actors, two dancers will always differ.
  3. Based on practice and creativity: Art involves the creative practice of existing theoretical knowledge. For example, All music is based on seven basic notes but a musician uses these notes differently in a certain manner.

Management can be said an Art as it satisfies the following criteria:

  1. Existence of theoretical knowledge: There is a lot of literature available in various areas of management like marketing, finance and human resource which the manager has to specialize in.
  2. Personalized application: There are various theories and principles of management propounded by management thinkers, manager applies these principles and knowledge in a given situation. A good manager works through a combination of practice, creativity, imagination and innovation.
  3. Based on practice and creativity: A manager applies this acquired knowledge in a personalized and skillful manner in the light of the realities of a given situation.

CONCLUSION- The best managers are highly trained and educated with qualities such as ambition, self- motivation, creativity, and imagination. What distinguishes a successful manager from a less successful manager is the ability to put these principles into practice.


Systematic body of knowledge that explains certain general truths is science

The basic features of science are as follows:

  1. Systematized body of knowledge: Scientific principles are based on a cause and effect relationship.
  2. Principals  based on experimentation: Scientific principles are first developed through observation and then tested through repeated experimentation under controlled conditions.
  3. Universal validity:  Scientific principles have universal validity and application. For example,  If anything is dropped from a height it will only come downward due to gravity.

Based on the above features we can say that management also share some of the features of science: 

  1. Systematic body of knowledge: Management has its own theory and principles that have been developed over a period of time but it also draws on another disciplines such as Eco, sociology etc.
  2. Principle based on experimentation: Management principles are evolved over a period of time by repeated experimentation and observation in different types of organisations. Since management deals with humans and whenever human factor is involved the outcome cannot be accurately predicted. Therefore management is an inexact science.
  3. Universal validity: As the principles of management are not exact as that of principles of science therefore, their application and use is not universal.
  • The principles of management are to be modified according to the situation.
  • Though some of the management principles can be used in different situations say for training and developed of managers.

CONCLUSION- Management principles are not universally accepted, it also involves human factors, therefore management is an inexact science.


According to Cambridge dictionary profession means “any type of work that needs special training or a particular skill, often one that is respected because it involves a high level of education.”

  1. Well defined body of knowledge: All professions whether legal, accounting, medical, etc. are based on a well-defined body of knowledge
  2. Restricted entry: Entry to any profession is restricted through an examination or educational degree.

FOR EXAMPLE- To be a Chartered Accountant (CA) a student is required to clear all the examination which are conducted by ICAI.

  1. Professional association: All professions are affiliated to a professional association. The association regulates entry and exit, grants certificate for practice and formulates code of conduct. For example, a chartered accountant needs to get a registration number from the institute of chartered accounts of India (ICAI) to practice and audit books of accounts.
  2. Ethical code of conduct: All profession are bound by a code of conduct which guides the behaviour of its members. For example all CA’s take the oath of ethical practise at the time they enter the profession.
  3. Service motive: The main motive of any profession is to give/provide dedicated and committed service to its clients. For example, The task of a lawyer is to ensure that it’s client get justice.
  4. Well defined body of knowledge:  Management is based on a systematic body of knowledge comprising well  defined principles based on a variety of business situation. This knowledge can be acquired through books, colleges and professional institutes. Management as a subject is thought at different institutions such as IIM (Indian Institute of management), Harvard, etc.
  5. Restricted entry: Anyone can be called a manager irrespective of one’s education qualification. There is no such restrictions on being assigned as a manager. But professional knowledge and training is considered to be a desirable qualification.
  6. Professional association: There is no such compulsion for management to be members of any association. Though there are several  association of practicing management in India, like the All Indian Management Association.
  7. Ethical code of conduct: Though AIMA has laid down a code of conduct to regulate activities of its members. But its membership is not compulsory for all managers.
  8. Service motive: The basic motive of any organisation is profit maximisation. Though organisation serves the society in many ways but the primary motive of any business is to earn profits. 


Management is a universal term which is used for certain functions performed by individuals in an organisation. Every individual in the hierarchy is responsible for completion of a particular task. To be able to fulfil that responsibility he is assigned a certain amount of authority or the right to take a decision.

This authority responsibility relationship binds individuals as superiors and subordinates and gives rise to different levels in an organisation. There are three levels in the organisation. They are as follows:


It consists of the senior- most executive of the organisation they are called by different names usually referred as chairman, the CEO (chief executive officer), chief operating officer, president and vice president.

Functions performed:

  1. Integrate diverse elements
  2. Coordinate the activities of different departments according to the overall objective of the organisation.
  3. Formulate overall organisational goals and strategies
  4. Analyse business environment and its implications. 
  5. They are responsible for all the activities of the business and for its impact on society.


Middle level management acts as a link between top and lower level of management. They are subordinate of top level management and superior of lower level of management.

They are also known as division heads. (Example: HR manager, production manager, marketing manager, finance manager, plant supereindent, regional manager, divisional manager)

Functions of middle management:

  1. Responsible for implementing and controlling plans developed by top management.
  2. They are responsible for all the activities of first line managers.
  3. Their main task is to carry out the plans formulated by the top managers.


They perform the activities or carry on the task according to the plans of top and middle level management.

It refers to the lower level in the hierarchy of the organisation, Forman and supervisors comprise the operation management.


  1. Superiors directly oversee the efforts of the workforce but their authority and responsibility is limited.
  2. Through their efforts quality of output is maintained, wastage of materials is minimised and safety standards are maintained.
  3. They represent the workers grievance before the management and maintain discipline among the workers.


The process by which management synchronised the activities of different departments is known as coordination.

Coordination is sometimes considered a separate function of management, however it is the essence of management,

Coordination is implicit and inherit in all function of an organisation.

  • The process of coordinating the activities of an organisation begins at the planning stage. Top management plans for the entire organisation.
  • According to the plans organisational structure is developed.
  • As per the need of the organisational plan, staffing function is performed.
  • Directing is required for execution of these plans, staffing function is performed.
  • Directing is required for execution of these plan
  • Controlling helps to scrap out any discrepancies between actual and planned activities.

CONCLUSION- We can say that coordination is one of the important process in the organisation without which everything will be a chaos. It ensures that the organisational objectives are achieved with minimum conflict.

Characteristics of coordination:

Following are some of the features of coordination that we can find from the definition:

  1. Coordination integrates group efforts: It’s the main task of coordination it unifies diverse interests into purposeful activity. It gives a common focus to group effort to ensure that performance is as it was planned and scheduled.
  2. Coordination ensures unity of efforts:
  • The purpose of coordination is to secure unity of action in the realisation of a common purpose.
  • It acts as a binding force between departments coordination ensures that all actions is taken in achieving the goal of the organisation.
  1. Coordination is a continuous process:
  • Coordination begins at the planning stage and it continues till controlling. Top management plans for the entire organisation .according to these plans, the organisational is developed and staffed.
  • Directing is required for execution of plans and controlling corrects any deviation between planned standards and actual performance
  1. Coordination is an all – pervasive function: It is required at all level of the management. it helps to integrate the efforts of various departments of the organisation. In the absence of coordination there is overlapping and chaos instead of harmony and integration of activities.
  2. Coordination is the responsibility of all managers: Coordination is the function of every manager in the organisation. Top level managers are required to coordinate with subordinates to ensure that the overall policies and plans are duly carried out.

Middle level management coordinates with both the top level and first line managers. Operational managers coordinates the activities of its workers to ensure that work is conducted according to plans.

Importance of coordination:

Coordination is important as it integrates the efforrts of individuals, departments and specialists. The primary reason for coordination is that departments and indicduals in the organisation are interdependent, i.e. they depend on each other for information and resources to perform their respective activities.

Managers need to reconcile differences in timings, effort or interest. At the same time, there is a need to harmonise individual goals and organisational goals. The need for coordination arises because of the following reasons:

  1. Growth in size: As an organisation grows in size, the number of people employed also increase. At times, it may become difficult to integrate their efforts and activities. For management, it is necessary to ensure that all individuals work towards the common goals of the organisation. But employees may have their individual goals also. Thus, harmonise individual goals and organisation gals through coordination.
  2. Functional differentiation: In an organisation there may be separate departments of production, finance, marketing and human resource. All these departments have their own objectives, policies and strategies. Therefore coordination is required as to avoid any confusion and conflict as it acts as a binding force between various departments.
  3. Specialisation: Due to increasing complexities of modern technology and diversity of tasks, organisation need to employ a number of specialists. Specialists usually think that they only are qualified to evaluate, judge and decide. They do not take advice or suggestions from other members of the organisation. This often leads to conflict between them. Therefore, coordination is required to avoid any type of conflict between the specialist and the other members of the organisation.