Six Key Systems in Markets and Organizations

Alfredo A. Brown

MGT 5012- Dr. Bahaudin G. Mujtaba

Introduction

Markets and organizations are just like any other aspect in business. They have moving

parts. Business is like a well-oiled machine with moving parts that create the final product. It is

necessary for all the parts to be in good shape and working effectively. Without all six key systems in

markets and organizations flowing smoothly and properly a business or business system cannot

function properly as a “well-oiled machine”. Results can be quite dramatic based on the effectiveness

and functionality of these six key systems; when one of the systems is off it affects the rest of the

markets and organizations around it. On the other hand, when all six of these systems are working in

sync and effectively, societies can flourish and advance in knowledge on a personal and organizational

level.

Division of Labor and the Mission System

It is amazing sometimes to think why certain people have certain jobs and why those

jobs are in the field they are in. Why is it necessary to have a CFO, CEO, manager, cashier, or even a

custodian? The answer is simply, the division of labor. Just like the key systems as a whole, the

division of labor is much like a machine with moving parts. People become employees, employees

divide the labor, the labor results in a product or service, which subsequently results in value or profit.

By dividing labor, each person within that project or business now has a role in the production and

value of their service or product. This division is determined by an organization's mission system. The

mission system identifies which tasks and actions are necessary and most profitable for the foreseeable

future. By dividing these tasks up in the mission system, the tasks now become specialized and can

become one individual's expertise. When an organization can successfully put together experts and

even average employees for one common goal, the results are seamless and become a regular

expectancy. Specializing in activities that create most value for customers with minimal cost is and has

always been one of the best ways to create profit. Specialization, as mentioned before, is made easier

by the “social engineers” who determine where society should go and how it should get there. Its due to

planners and coordinators like the “social engineers” that there even is a division or work or a mission

system amongst society in the first place. However, when looking at how organizations determine such

information it is important understand that, just like in all businesses, the management at the top

structures the corporate mission and division of work. Much like the food chain in the animal kingdom,

the corporate work chain is a system set in place to achieve optimal results that can ensure future

development and growth.

Property rights, roles, and responsibilities

To an owner, property can be considered an extension of identity. Property can reflect on who

that person is as a business owner and as a person. Property plays a gigantic role in determining the

value of a business. Not only the does the property value effect a business, but a private property has

three fundamental characteristics that have significant social roles. Individuals who own private

property can obviously decide how they want to use their own private property. With that being said,

private property owners can earn income from their property and choose to sell their property freely to

whomever they want. Private property, can sometimes, be business owner's most important asset. With

all those options available to private property owners, its no wonder that private property can be such a

huge asset.

Voluntary trade, the exchange of money, property, and knowledge, helps to provide private

property owners with strong incentive to serve consumers and receive strong feedback on the quality of

service they are providing. When it comes to being a private property owner in society, owners are

permitted to have the individual choice of of how to use their property resources. The income created

from the privately owned property provides continuous feedback due to the system of profit and loss.

Lastly, the transferability of the property can lead to effective stewardship resources.

Rules, Values, and Cultures

Rules apply to so many people and organizations. Rules are made as guidelines to keep order in

society and in business. Not only do these rules keep order but they help make goals easier to

accomplish and make firms more prosperous. When rules are no longer followed, values are lost and

cultures and behaviors become unpredictable. When acceptable behavior is defined by rules in a

company, then a standard of work and a culture is established amongst everyone working there.

Corporate values and culture are important because they set a standard. By making everyone's actions

and values more predictable, a company can achieve success without being worried about their level of

behavior or their standard of work. In Koch Industries, a company mentioned in “Introduction to

Market-Based Management”, the rules are based off of certain key concepts such as: humility,

intellectual honesty, openness, receptiveness to new ideas, treating others with dignity and respect,

recognizing and using everyone's unique knowledge and abilities, and instilling a commitment to the

common mission.

Rules and values can always be published and established on paper or in a program,

however, they mean nothing if they are not instilled and actually followed by the members of an

organization, then the rules and values mean nothing. When rules like the aforementioned are not

followed it can lead to a divide in the office population; the same is true in society. Rules are broken all

the time in society, hence why we have gangs and all kinds of illegal activity that end in death and

destruction. Comparing a company to a gang is apples to oranges, but it shows that no matter whether

someone is following societies rules or a companies rules. In summary, when rules are followed and

values are established, a respectful culture is created. A respectful culture is absolutely necessary for a

successful society and a successful business.

The Price System and Internal Markets

Establishing prices are much like establishing rules. In society, prices can determine how people

will spend money and will determine how organizations will establish their market prices. Market

values do change and with those changes come a change in the price system and internal markets. The

numbers based on price effect everything. Organizations do their best to determine their investments in

corporate services by evaluating the value added. Once the value added is determined, the professional

staff within the organization make positive or negative movements in size according to their abilities to

serve internal customers.

Just like all markets and all businesses in society, when price changes move,

they indicate that resources have a need for reallocation. All in all, the people most affected by price

changes in the price system are the consumers and businesses. Price changes means more or less

money for the businesses and more or less spending for the consumers.

Generation and Communication of Knowledge

Whether it applies to life in society of the business world, communication is key. There should

always be a clear and concise way to communicate effectively. Unfortunately new ideas aren't always

accepted easily; even when communicated clearly. Leaders usually tend to be the most effective

communicators because there is a common respect and congruency between the leader and society.

These leaders are known as authority figures whose power is determined by their track record or

history of communicating effectively within and organization. In a market based system, individuals

are free to communicate how they wish and they may convey all new ideas and act on them; the same

can not be said about a command system. Organizations remain hierarchical and follow their chain of

command when communicating and passing on knowledge.

Incentives, Compensation, and Motivation

In all honesty, the world runs on incentives, compensation, and motivation. Incentives and

compensation motivates most, if not all, work. Society treats incentives and compensation in different

ways. Society is very arbitrary when it comes to compensation, incentive, and motivation. Obviously

not everyone gets compensated the same and incentives certainly vary from person to person, however,

motivation stays the same amongst nearly everyone. Entrepreneurs really tend to control the market

based society when it comes to profits. Society, much like professional organizations runs on

profitability; individuals with the most monetary compensation tend to hold the power.

Summary

Ultimately the six key systems in markets and organizations show the factors of how the

movement of money truly effects large and small markets. There are many similarities between society

and business, but there are even more differences that cause the principles of markets to differentiate

based on society and organizations. As times change, society and organizations change. Changes in

business become necessary as society changes and the free economy continues to make adjustments

based on markets. After looking at all the factors and changes in markets the most important factor is

communication and the transfer of knowledge as times change.

Works Cited

Koch, Charles G. Introduction to Market-Based Management. N.p.: n.p., n.d. Web