THE VALUE OF A GOOD BUSINESS PLAN: How a Business Plan can Enhance Chances of Success of an Enterprise

A business plan can help the proprietor secure financing for the business or attract promising partnerships with others. This is actually one of the main reasons why the business plan has a section for financial plans and projections.

A sound business plan will make potential partners or investors see that making a profit is assured. They will be excited when, for example, they see a big market in the market analysis; they see huge turnovers in the sales projections or previous sales; or they see much weaker competition in the competitive analysis. When a business can obtain a loan or grant, or can attract important partners, its chances of success generally become brighter.   

A business plan is a management tool. For both current and future managers, the business plan is a vital instrument for managing the enterprise. The objectives tell one what is to be achieved. The strategies tell one what is to be done to achieve the objectives. So, a manager just has to look at the business plan to know what is to be done. This is what makes a business plan a management kit.

A business plan is a control tool. Even though control is part of management, it is covered separately because of its importance. Since the business plan contains projections of sales, for example, these serve as a pointer to the manager to what is expected. The manager uses the business plan as a reference tool. The manager can compare actual achievement with planned achievement. If actual is less than planned, the manager will know they are automatically instructed to take steps that will result in achieving what was targeted. This is what is to happen if, for instance, the sales projection for, say, January 2025, is $1,000,000, but the manager has achieved only $900,000. In this way, a business plan as a control tool enhances chances of success.

A business plan creates a sense of purpose. To have clear goals has the potential to make managers and their staff more eager to work. So, managers and their sub-ordinates wake up wanting to achieve something. Naturally, this should have the effect of improving the chances of success of the business. If managers and their teams did not have any sense of purpose, they would likely not achieve much or anything.

A business plan is an important historical reference point. Because a business plan is usually in writing, or recorded in another form, it can be archived for reference way into the future. That way, a business plan provides interested parties a record of where the enterprise is coming from. That would help understand the business better. A good business person is often one that understands their organisation and business well.

A business plan can also help in making decisions in the future. It does not necessarily mean that what worked in the past will work in the future. However, studying what worked and what did not, and the conditions that existed at the respective points in time, could make decision-making in the future a lot easier.

There is another potential benefit. Modifying an existing document to make it work or work better, after studying past business conditions, is potentially a lot easier and cheaper than creating one from scratch.

So, in the last three paragraphs, we see that an old business plan (as historical reference point) can serve as a tool for success of the business.

A business plan helps an entrepreneur set milestones. These are significant shorter-term objectives. For example, if the annual sales target by volume is $1,000,000, the milestones are $250,000 at the end of the first quarter; $250,000 at the end of the second quarter; $250,000 at the end of the third quarter; and $250,000 at the end of the fourth quarter, assuming a regular sales pattern. The importance of milestones is that they keep the bigger goals in sight and help maintain morale. So, one can say that by helping one establish milestones, the business plan increases chances of success.

A business plan gives an understanding of the competition. Competitor analysis is one of the components of the standard business plan. So, by its very nature, a business plan implores the business person or persons to establish important facts about the competition. Competitor analysis provides strategically important information on such matters as competitor’s product range, pricing, product quality, business philosophy and indeed future plans. A company’s survival has often rested on possession of such information on the competitor. That is because the business is then less likely to be caught off-guard by the competitor’s moves. The business can make useful early or pro-active responses to competitor actions and plans. That way, then, the business plan helps raise the chances of the business succeeding.

A business plan helps the business person better understand the customer. The market analysis component of the business plan is a means to provide key information on the customer. Without that information, the product made, for example, may not match the expectations of the potential consumer. Good marketing starts with appreciating well the needs and wants of the customer. As with competitor analysis, a business plan persuades the businesswoman or businessman to do market analysis because this is a standard ingredient. So, a business plan helps enhance the chances of an enterprise succeeding.

In fact, when doing market analysis, the business plan might reveal unsatisfied  customer needs. Such discoveries also increase the chances of a business doing well.

A business plan is a way of attracting top talent to the enterprise. Many gifted managers and ordinary people will be interested in knowing the prospects or viability of a business idea before committing to giving their services as employees. A nicely-prepared business plan will be a magnet to everyone, skilled and unskilled, gifted and not so talented. The business is then able to choose the best of the best. This raises its chances of not only survival but also success. Without a business plan, the enterprise may not be so attractive to some go-getting potential employees, and its chances of surviving or succeeding, as a result, may be dim.

A business plan is a risk management instrument. Writing a business plan can reveal what can be done and what cannot be done. In fact, some business people have ended up changing the type of business to be done altogether upon realising that the original idea was in fact not so viable.  In such situations, doing a business plan has helped prevent possible financial and other loss. In other words, the business plan also worked as a viability study and revealed danger, which was then avoided or minimised by changing the type of business.

A business plan makes one an overall industry expert. Doing a business plan forces the businesswoman or man to do plenty of research on the many different areas of a business plan. The result is that one becomes an expert on the industry as a whole. The expertise gained is invaluable in matters of decision-making. In this way, the business plan improves the probability of an enterprise succeeding.

A business plan can help achieve smoother expansion. A business plan gives revenue projections. Normally, the projections show a growth trend. By looking at the projections, therefore, the business person is able to work out how much more office or factory space and human resource, for example, will be needed after, say, five years. The business person can then plan for these future requirements well in advance and avoid sudden pressure to look for additional space or to recruit more employees.

To conclude, it often takes a while and a lot of work to prepare a good business plan, but the likely benefits suggest it is well worth the effort and time.

SIGNIFICANCE OF THE DEMOCRATIC REPUBLIC OF CONGO (DRC) AND CHINA AS ZAMBIA'S TRADING PARTNERS

QUESTION: DISCUSS THE SIGNIFICANCE OF THE DRC AND CHINA AS ZAMBIA’S TRADING PARTNERS

SUGGESTED ANSWER: 

INTRODUCTION

Trading partners as parties engaged in a commercial agreement. Zambia has many trading partners. Two of them are the Democratic Republic of the Congo (DRC) and China. This paper examines the significance of the two countries the DRC and China as Zambia’s trading partners. We look at each country in turn.

THE SIGNIFICANCE OF THE DEMOCRATIC REPUBLIC OF CONGO (DRC) AS ZAMBIA’S TRADING PARTNER

Zambia and the DRC export and import from each other. Zambia’s exports to the DRC, amount to over US$1.00bn per year, according to some reports.

The Zambian exports to DRC have consisted partly of sulphur, sulphuric acid, chemicals and copper ore in the industrial sector. In the consumer area, Zambian exports include beverages, cleaning products, cereal meal and raw sugar.

The exports of the Democratic Republic of Congo to Zambia amounted to over US$600m in 2022. They consisted primarily of copper ore and cobalt oxides.

Effects of the Zambia-DRC trade partnership

Employment creation. When Zambia exports, manufacturing companies keep their workers in employment. When people work, they are able to support their families, keeping them healthy and sending the children to school. In short, exporting to the DRC ultimately results in better standards of living in Zambia.

Earning foreign exchange. Zambia earns foreign exchange (forex) by exporting to the DRC. The forex is used to support importation of necessities such as some medicines Zambia does not manufacture or does not manufacture in sufficient amounts.

Earning revenue. Exports mean more revenue to the exporting companies. That revenue is taxed by the government to provide essential services such as road infrastructure and education facilities. So exports to the DRC support Zambia’s export agenda.

The effects of the DRC exporting to Zambia is the same on the economy of that country. In short, by being trading partners, the two countries are basically in a win-win situation. One notes, however, that in financial terms, Zambia potentially gains more because it has a trade surplus against the DRC. There have been no services exported either way in recent times.

Significance of Neighbours Trading

There is something to be said about neigbouring countries trading. Zambia and the DRC are next-door neighbours and that brings additional benefits (to the gains presented above), some of which we now look at.

Training ground.  Because of the proximity of the two countries, Zambian firms can use exporting to (and importing from) the DRC as low-cost training grounds before they can take on the more challenging task of exporting to or importing from farther-away countries.

Cheaper and faster trade. It should generally be quicker and cheaper for Zambia and the Congo to export to and import from a next door neighbour than it is exporting to or importing from, say, Japan, which is many thousands of kilometres away. The gain in time and reduced cost, all things being equal, should translate to higher profits, quicker transactions and higher economic growth rates for the two countries.

Similarity in consumption habits. In general, the nearer a country is to another, the greater the similarities in culture and consumption patterns. It means what is consumed in Zambia is likely to be not very different from what is consumed in the DRC. In fact, an example is maize meal. In terms of export implications, when Zambia has more than enough for its own use, a product could be exported to the DRC, and vice-versa, without the extra costs incurred when the importing country requires the product to undergo a little adaptation to suit its market tastes. So, maize meal that cannot be consumed in Zambia can be exported exactly as it was manufactured, to the Congo.

Flexibility in currency requirements. When countries are neighbours, the need to use an internationally acceptable currency potentially becomes smaller, especially if there is a lot of trade between them. Each country could accept the other’s local currency in an export transaction, comfortable that they will use it soon in a reverse (an import) transaction. So, to have the DRC as a trading partner of Zambia reduces need for use of Dollar or Euro and hence promotes business that benefits the economies of the two countries.

Economic integration becomes easier. To have the DRC and Zambia as trading partners would help make the much talked about African economic integration, a more realistic pursuit. Integration could be achieved by way of neighbour-trade expanding to more distant countries. It would enable greater intra-Africa trade and potentially boost the performance of economies in the region as a whole.

Increased export potential. According to some experts, there is a great chance that a country will start to export what is exported by the neighbour. That means, if the DRC started exporting, say, motor vehicles, the likelihood would be Zambia also starting to export motor vehicles soon.

Recommendations on DRC as Zambia’s trading partner

While the significance of the DRC as Zambia’s trading partner is huge, it is possible that there are many other ways Zambia could increase its exports to the Congo. For example, Zambia could invest heavily in improving its education physical infrastructure (like expanding the number of teaching facilities and hostels at Zambian public universities). It could also expand infrastructure at the major hospitals and give more doctors specialized training. This could open up a new frontier of exports (services) to the Democratic Republic of the Congo.

THE SIGNIFICANCE OF CHINA AS ZAMBIA’S TRADING PARTNER

China is one of Zambia’s biggest trading partners. Zambia’s exports to China are valued at more than US$2bn per year.  They are mainly raw copper, refined copper and nickel ore. Export values have been increasing steadily over the past few years.

China’s  annual exports to Zambia have recently hovered around US$1.00bn. That has represented mainly delivery trucks, rubber tyres, clothes and electrical products.

One major, well known, though ironic, advantage of trading with China is that it is a source of low-cost products, unlike the EU and United States where union power and labour laws make salaries higher. That contributes to making products more expensive. Low cost products make if easier for low-income Zambians to buy certain products they may not ordinarily afford, and hence enjoy a more decent standard of living.

 China as an importer of commodities from Zambia

China imports the bulk of world copper concentrates. The value is at least US$40bn annually. China is also the second biggest importer of commodities after the United States.

Zambia, like many other developing countries, exports mainly commodities. It is those commodity exports that enable Zambia to earn the foreign exchange it needs to make its own imports of essential and other products. If China did not import the copper commodities it imports from Zambia, two problems would arise:

-          Reduced Zambian export earnings. Indeed Zambia would earn less from exports by way of exporting less. That makes China as a trading partner valuable.

-          Reduced commodity prices. Less demand means lower price. If China did not import commodities from Zambia, or imported less, the price of the affected commodities, according to the law of supply and demand, would plummet. For Zambia, that would decrease export earnings further.

 Recommendations on China as Zambia’s trading partner

The world’s economic configuration is always changing. China may be an importer of commodities from Zambia today, but there is no guarantee that it will continue to be, or that it will import the same quantities tomorrow. Zambia needs to consider the following:

-          Investing more in value addition. Instead of exporting commodities, Zambia could stimulate manufacture of finished products and seek markets around the world. That would earn the country higher revenues and insulate it against any reductions in the export of commodities.

-          Invest in ways to make the citizens the extractors and exporters of the natural resources of the country. That means moving away from seeking foreign firms to do mining of the country’s copper or gold, for example. The gains would then be two-fold. It would make the citizens doing the mining, for example, richer, and it would bring the country more money into the tax basin. In the current scenario, the country only gains from tax, and there are questions as to whether or not all due tax is paid by the foreign mining firms.

     CONCLUSIONS ABOUT THE DRC AND CHINA AS ZAMBIA’S TRADING   PARTNERS

      Zambia exports to the Democratic Republic of Congo and imports from that country. Both countries gain from the partnership in terms of employment creation, taxes and revenue. Zambia has a trade surplus with the DRC and therefore, in financial terms, perhaps gains more foreign exchange than it loses. However, Zambia needs to look at other ways of deepening and widening its exports to the DRC, and could consider making its education and health sectors as possible offerings to the DRC. 

      China as a trading partner of Zambia offers a large market for commodities. Zambia could be more forward-looking, though. It could invest in increasing its capacity to manufacture finished products and make it easier for citizens to own and operate nature-given assets.

ADMINISTRATION - Decision-making models

  QUESTION:  What is decision-making? Contrast the comprehensive-rational Decision-making Model and the Bounded- rationality (satisficing) Decision-making Model. Which of the two models best explains decision-making processes in the Zambian public service? Give reasons for your answer. Word limit 2500 - 3000 words.

SUGGESTED ANSWER BELOW

ABSTRACT

Decision-making is the series of mental and physical steps taken in overcoming a challenge. The Comprehensive Rationality Decision Making Model and the Bounded Rationality Decision Making Model offer two possible logical ways of solving problems.

Comprehensive rational decision-making theory offers linear (successive) steps meant to lead to optimisation of benefits. The bounded rational decision-making model makes a modified rational process aiming at bringing realism into problem-solving. Its purpose is to arrive not at optimised benefits but simply a satisfactory outcome. The bounded rationality model in practice lessens the amount of information-evaluation proposed by comprehensive rationality theory.

The two decision-making models enriched the field of administration and in particular gave a better understanding of what may or may not work well in decision-making. Administrators who have studied the two models probably have to choose which to apply and to what degree.

 

KEY WORDS/PHRASES

Rationality – to be measured, examining available material before making conclusions.

Comprehensiverational decision-making – the decision-making in which decision-makers list and make full evaluation of facts and figures for and against.

Bounded rationality decision-making  model – a rational decision-making model in which there is less emphasis on full evaluation of available material.

 

INTRODUCTION

A decision is the choice made by the decision-maker, from a number of alternatives, to address some challenge in a specific situation. Decision-making is a problem-solving process which ends when an answer is found - normally from among a range of possible solutions. What is common in these two definitions is that decision-making involves selection of what to do.

 Decisions are made in public administration, politics, business, social situations and indeed in an endless list of other professions and circumstances.

The basic decision-making process has the four main stages of identification of goals, option generation, evaluation and choice, and follow-up and execution.

 

In this essay, we contrast the comprehensive-rational Decision-making Model and the Bounded Rationality (satisficing) Decision-making Model. We also attempt to explain which model is more in line with the decision-making process in Zambia.  

 

DEFINITIONS IN DECISION-MAKING:

1.      Rationality.

2.      Comprehensive-rational decision-making model.

3.      Bounded-rational decision-making model.

1.      Rationality

We start by explaining the word ‘rationality’. Rationality is reasoning that seeks to maximise the benefits, as dictated by the means available. Thus, the rational actor strives to avoid judgement based on emotion and arbitrariness. It may therefore be safely said that the rational actor attempts to make decisions and moves based on understanding why it is important to take one particular decision instead of another. For example, the rational actor will attempt to examine and understand facts and figures before deciding whether to buy a horse or a car as his/her daily means of transport. The principle of rationality has been used for a long time in economics in efforts to explain consumer choice.

 

1.      The Comprehensive Rational Decision-Making Model.  

Comprehensive rationality suggests that leaders seek to convert their vision to policy, supported by organisations which operate in a sensible and impartial manner. Accordingly, the Comprehensive Rational Decision-Making Process was conceived to have the following steps:

i.                    Identifying values and objectives/goals to be achieved.

ii.                  Listing and assessing all the different ways the objectives/goals can be achieved.

iii.                Determining how appropriate each of the listed objectives is.

iv.                Comparing the benefits of each option with its costs.

v.                  Picking the option that maximises achievement of values and objectives and goals. 

vi.                Execution.

vii.              Feedback.

  1.      The Bounded-rational decision-making model

 

The bounded rationality decision-making model seeks ‘sufficiency’ rather than ‘maximising’. Specifically, the model is based on:

·         The view that individuals and organisations cannot maximise their utility (degree of satisfaction); they instead are able to find a point that is ‘good enough’ or ‘satisfices’, and  

·         The reasoning that decision-makers do not have the means or the desire to consider absolutely all factors before deciding what course of action to take; they have to use the simple  'rule of thumb' (which is really a combination of rules and common sense) – focusing on the factors most relevant and making a decision.

To find decisions that satisfice, decision-makers should be free thinkers. They must be able to process information well and use the most appropriate rule of thumb to ensure they are most effective. 

Some organisations are large and complex. Decision-making that considers every relevant fact can be really time-consuming and tiresome. Decision-making could be impracticable. So, the rule of thumb is supposed to help a decision-maker decide with relative ease.

CONTRASTS BETWEEN THE COMPREHENSIVERATIONALDECISION-MAKING PROCESS AND THE BOUNDED RATIONALITY MODEL

1.      One difference is that the comprehensive rationality model assumes that the decision-making process is linear (moves from one clearly-defined stage to another) in a sequential fashion. The bounded rationality model recognises that decision-making may not always move that way, especially in very big organisations. 

However, it still goes to the credit of the comprehensive rationality model that there is, at least, some formal approach to decision-making.

 

2.      While the comprehensive rationality model is about examining all relevant available facts and figures, the bounded rationality model embraces the impracticality of evaluating vast amounts of data and proposes minimisation of material to examine. It proposes that it is necessary to start out with only some key facts to consider, unlike in the comprehensive rationality model. It can also not be presumed that an individual or organisation will be able to generate the many alternatives that may require discussing in some cases.

Indeed, even the bounded rationality model does not dismiss rationality - the examination of facts available. It only proposes minimising their examination.

 

3.      The comprehensive model seeks listing of values and objectives in order of importance. By not suggesting that approach, the bounded rationality model appears to recognise the fact that sometimes, the objectives can be difficult to list in order of importance.

 

4.      The two models are both rational, but with a difference. It is 'absolute rationality' that is not embraced by the bounded rationality model. Mere rationality itself is not a problem.

 

5.      The comprehensive rationality decision-making model assumes that all the information that will be needed will be there, accurate, reachable and not expensive.  In actual fact, information can be scarce, inaccurate, unreachable and too expensive. The bounded rationality model acknowledges that decision-making is limited by how much relevant information the decision-maker can get.

 

6.      Comprehensive rationality aims at decisions that ‘maximise’gains – the highest possible benefit out of the alternative chosen. Bounded rationality treats maximum benefit as impracticable, and therefore seeks to only ‘satisfice’. In bounded rationality, therefore, it is enough if a decision is ‘satisfactory’.

 

7.      The comprehensive model makes the assumption that decision-makers will have the capacity and resources to do evaluation of alternatives in a technical way. This is not so, in real life. For example, a decision-maker may not know the evaluation criteria. Decision-makers are likely to have only sufficient knowledge to have a fair idea of benefits and consequences. 

   Decision makers both on the streets and in the boardroom often have competence handicaps and choose what is good enough (whether in shops buying shoes or in the boardroom discussing who to promote to a vacant position). Bounded rationality recognises the fact that decision-makers are not always technically competent.

 

8.      There are times when it is necessary to act in advance when one has a mere idea of the dangers of not doing so. For example, many countries and regions went on lockdown after the breaking out of the Coronavirus. While some countries may certainly have done a comprehensive analysis of the various alternative courses of action, many appear to have simply used the ‘good enough’ idea they had of the effects of Covid-19 afflicting their communities and locked down. The contrast here is that bounded rationality – unlike comprehensive rationality - advises openness of mind and pragmatic practice.

 

9.      Another contrast is that there are factors (such as ethics, feelings, loyalty, respect) that cannot be measured but are still very important. There seems no room for them in the comprehensive rationality model which argues that relevant factors must be identified and measured against consequences. That is, if a factor cannot be measured, it may have to be left out, and not be considered (even if it is an important factor to consider). On the other hand, the openness of mind encouraged in the bounded rationality model suggests that there is room for non-quantifiable factors.

WHICH MODEL BETTER DESCRIBES THE ZAMBIAN DECISION-MAKING PROCESS?

Both the comprehensive rational decision-making approach and the bounded rationality philosophy are evident in Zambia. Which of the two models best describes the decision-making process in Zambian public service, however, seems to depend on the type of public sector entity being looked at. We expand this statement under two sub-headings:

The public sector

In the Zambian public sector, including the legislature and civil service institutions, decision-making appears to strongly be in the line of comprehensive rationality. The reasons are:    

-          Government procedure in decision-making is clearly spelt out in writing and must always be followed to the book. Decisions always have to follow the procedure of providing information for evaluation before approval is given. That is a characteristic of comprehensive rational decision-making.  

 

-          There is linearity in the way government ministries and departments make decisions. This is exhibited in the award process of contacts by the Zambia Public Procurement Authority ZPPA). Linearity is also shown in the way the national assembly operates. For example, laws start as bills which have to go through four sequential steps namely first reading, second reading, third reading and eventually being signed by the republican President before they become statutes.

-          It is possible to see assumptions associated with comprehensive rational decision-making. An example is the apparent assumption that there will be enough time for all the required procedure. There obviously is also the assumption that by being so procedural, the outcome will be the maximised utility.

In many ways, it is understandable using the comprehensive rational decision-making model in government institutions. They are normally very large and complex and if procedure were not rigid, it would increase the incidence of vices such as employing unqualified personnel and awarding undeserved business.

The parastatal sector

In quasi-government businesses (parastatals), there is some departure from the rigid system of procedure. For example, people can be dismissed more easily and at the local level than in the totally government sector. It is not so in the pure government sector. Firing a junior civil servant in remote Mbala (for instance) can require the involvement of very senior officers (normally the Permanent Secretary) in the capital city. Because of being slightly more autonomous and being in business, parastatal businesses enjoy a bit more flexibility in procedure. Overall, parastatal businesses suffer from many of the limitations (comprehensive rational decision-making burdens) as the pure government sector. This is because they operate within policy set by government and must achieve government objectives (not profit objectives) at the end of the day.

 

CONCLUSION

The formulation of the Comprehensive Rational Decision Making process, notwithstanding the weaknesses of the model, gave the world of administrators a crucial first step in how to go about solving problems. Being an initial step, it was bound to have imperfections. Other important theories such as Maslow’s Hierarchy of Needs, have also been found to have weaknesses (for example, it has been proven that one need does not have to be completely satisfied for a new, higher need to emerge).

When the Bounded Rational Decision Making process was proposed, it benefited from the existence of the comprehensive model evidenced by the fact that its proponents frequently refer to the comprehensive model in their writing. 

In fact, in many ways, the bounded rational theory was a strengthening of the comprehensive model out of appreciating the theory. If the comprehensive model had not been appreciated, the bounded rationality theory could have been made totally different.

And so, it could probably be stated that both the comprehensive and rational model of making decisions and the bounded and rational approach were attempts not to compete; they were attempts to solve a common enemy of mankind which was apparently insufficient decision-making tools. They each have validity.  

  

TRANSACTIONAL AND CONSTRUCTIVIST COMMUNICATION MODELS

 

QUESTION

With relevant examples, describe in detail any two communication models used in the business environment.

    Look at those red new leaves! Beautiful! The leaves are red when young, starting to turn green from about one to one-and-a-half weeks. 
 

SUGGESTED ANSWER

Communication is the exchange of meanings between individuals through a shared system of sounds, signs and other forms of message.

                       The Transactional Model of Communication

In the transactional model of communication, at one point party A is the sender and party B is the receiver; in the next moment, party B becomes the sender and party A becomes the receiver. That is, the sender/receiver status alternates between the two parties. In other words, when one party receives a message from the sender, they become the sender themselves when they give feedback. The original sender now becomes the receiver (the feedback is the message they receive).

As a result of the switching of status from sender to receiver and back, parties A and B are referred to as communicators rather than sender and receiver. This also explains why the model is said to be “transactional”, whichis a word normally associated with the commercial activities of buying andselling. Indeed, in business transactions, there is something to give and also something to receiver for each of the parties (who we call C and D). We give an example of a business transaction in the next paragraph.

C is selling a wrist watch and D is buying the wrist watch at $25. One set of actions involves C physically offering the watch to D and D taking possession of the watch (in which C could be called the sender and D the receiver). There is then a second set of actions in which D physically offers $25 to C and C accepts the money (this now makes D the sender and C the receiver). This is how transactional communication mirrors a commercial exchange.

            Transactional communication is two-way interaction. It is real-time exchange of messages. As a result, both parties are normally present, though not necessarily in the same place. Examples of transactional communication include face-to-face speaking, a skype talk and a message exchange in a chat room.

Diagram 1, below, illustrates transactional communication.

 

Criticism of the transactional model

·         A response is a necessity. Without a verbal response, it is not easy for the sender to be confident the message has been received as intended.

·         Since the message exchange is concomitant, interference is a big possibility.

 

The Constructivist Model of Communication

Constructivism was first used by Jean Piaget to describe the learning and cognitive processes of children. The constructivist model of communication is, in the general sense, much in line with that, as it is based on the principle that the real meaning of what has to be conveyed in messages comes out through the social process of communication.

The constructivist model focuses on the common ground or negotiated meaning reached as the communicators (sender and receiver) clarify the key components of the messages going in each direction.

Constructivist communication is exchange of meanings that develops through reaching a common understanding on different things. It is bout people getting to a stage where they start getting the same meaning from particular signals, sounds and other kinds of communication package. The way a child learns to communicate is indeed one example of a constructivist model of communication.

Constructivism learning is influenced by past experience of the learners/teachers which enables them to ascribe meaning to different motions, sounds, and other specific types of communication effort.

To further help one conceptualise constructivist communication, one could imagine two people who spoke completely different languages coming to live together and somehow finding ways to understand each other.

 

Figure 2 illustrates the concept of constructivist communication.

 Significance of the constructivist model of communication

Constructivism in communication provides the basis for mutual understanding. The constructivist model is a reminder that there may not be effective communication if the communicating parties do not ensure that what one word or phrase means to party X is what it also means to party Y.

A lot of communication requires that action be taken by the sender/receiver in accordance with the message sent/received. No action is likely to address the expectation if the sender/receiver do not have a common interpretation of the ideas exchanged in the communication.

Criticism of the constructivist approach

A constructivist approach to communication, among students, could mean an undirected, principle-less study system that eventually leaves learners frustrated and ending up nowhere (as they may not know exactly where they are supposed to go).

Conclusion

The transactional and the constructivist communication models are not the only models of communication identified by different researchers on the subject. However, they are among the most basic and, in that way, could help set the foundation that scholars of communication can build on to uncover or create new perspectives on the subject.  

MERITS AND DEMERITS OF CENTRALISATION AND DECENTRALISATION IN MANAGEMENT

 

QUESTION

Briefly analyse the merits and demerits of centralisation and decentralisation.

 

SUGGESTED ANSWER

Centralisation

Centralisation is a management approach in which the top level of an organisation makes all the material decisions.

Advantages of centralised management

·         The command framework is clear. There is little confusion as to who directs what activity.

·         In times of emergency, response can be quick owing to plainness of authority and responsibility structure.

·         Employees tend to concentrate on developing a smaller skill set, which they tend to polish up well. They do not have to master any real management skills, which could simply be a strain on their obviously scarce time.

·         It is more likely the firm will operate as a single unit with minimal pulling in different directions.

Disadvantages of centralised management

·         Where a situation needs detailed information from a specific locality, top management

may not fully understand the situation. As a result, any action taken may also not be good enough.

·         Workers may not have enough motivation to work if everything appears dictated down to them by top management.

·         Repetitive and limited scope of work can be a disadvantage to employees interested in grown by way of learning and management responsibilities, especially as the organization expands.  

·         Overall company performance may go down when workers feel they are simply carrying out someone else’s instructions and not what they are part of.

·         Total centralisation may deny the organisation valuable input from talented people in lower echelons.

 

Decentralisation

This is when top management and lower-levels share management authority and responsibilities.

Advantages of decentralisation

·         Overall organisational levels of knowledge and effectiveness are raised because of marrying central and local-level perspectives.

·         Workers are more motivated because they feel they have a say in the running of the firm.

·         It reduces the potential of top management being overloaded.

·         Lower level employees become more alert as they feel they could be partly responsible as well if anything went wrong.

 

Disadvantages of decentralisation

·         Reporting lines can cause uncertainty and frustration as to who is in charge of what domain.

·         Passing the buck. More managers means the blame-game is easier to play.

·         Complex processes. It takes long for decisions to move through the established stages: in business, it is said that time is money.

 

Conclusion

Centralised and decentralised management each have positives and negatives. The best situation is probably leaving it to managers to decide whether their unique business situation will work better with centralisation or with decentralisation.  This means looking at such factors as type of business, size of organisation and capacity of human resource.