09 prelim revision

HIGHER BUSINESS MANAGEMENT

Role of managers in relation to company objectives

• Plan and set objectives – give instructions to others -Take responsibility for performance or organisation

• Delegate authority to achieve objectives

• Organise jobs within departments

• Control activities

• Monitor performance

• Motivate staff

Stakeholders

• 2007 1 2• Local business owners – concerned about

investment in the area• Community/tax payers – can petition when

unhappy with events. Vote in/out councillors• Employees – their efficiency, attendance and

contribution to the quality of work – can go on strike

• Managers – can change staffing levels, have impact of company matters such as investment, ensure objectives are met 4

Franchise

• Discuss the benefits of Franchising for the Franchisee and the Franchisor

• Franchisee is buying into an established business and is supported by the franchisor who may provide training etc.

• Franchisor benefits by increasing market share without investing further capital. Franchisor is paid a percentage of the franchisees profits or sales. Franchisor can still control the business and how it is run to a degree. (4)

External factors

• 2004 2 4d • Recession, • high interest rates, • exchange rates, political unrest, war. Legislation

– competition act, • competitors may offer better product, lack of

finance, • staff problems, staff skills, • lack of equipment 4

• 2007 1 4b• Political – terrorism, government legislation• Economic – inflation, exchange rates affecting tourism,

recession• Social factors – changes in population aging population,

smaller families women into work• Technological – e-commerce, use of e-mail and internet

for marketing• Environmental – changing weather patters, storms, more

rain• Competitive factors – competition from European and

other uk resorts6

Finance – sources for PLC

• SHARE ISSUE

• DEBENTURES

• VENTURE CAPITAL

• BANK LOAD

• MORTGAGE

• EUROPEAN FUNDING

Advice

• 2007 2 1d• Provide training for start-up businesses,

can give advice on many different areas of a business. Help prepare business plan. Business managers will give advice on financial planning, preparing a business plan. Loan or overdraft. Give advice on setting up. Provide useful local contacts. Advice on Taxation. 4

It and functions

• INTERNET

• INTERACTIVE CD

• CAM/CAD

• DESK TOP PUBLISHING

• ACCOUNTING PACKAGES

• SPREADSHEET PACKAGES

IT

• Internet – advantages of 2-mail for fast 2-way communication with no time barrier

• Video conferencing allows communication to take place – visual and oral – from 2 or more remote locations

• Telephone advances

• Networks and all the advantages it brings – learn them

IT - restrictions/barriers

• Cost

• Training staff

• Reluctant staff

• Union problems

• Software compatibility

• Availability

• Lack of support

DATA PROTECTION ACT 1998

• S

• p

• A

• R

• K

• O

Computer misuse act 1990

• Protects against unauthorised

• Altering or access to computer data to commit an offence

Freedom of information act

• Public org info only

• Right to receive a reply within 20 days

• Some info may be withheld

Discuss the methods a Manager might use to evaluate decisions

• Objects reached?

• Staff turnover/absence decreased

• Stall moral improved

• Efficient and effective operations

TACTICAL AND OPERATIONAL decisions

• ACQUIRING PREMISES AND MACHINERY

• EMPLOYING STAFF• SETTING UP

FACTORY• SETTING TARGETS

• TRAINING STAFF• ORGANISING WORK

ROTATION• ORGANISING STAFF

DUTIES

swot

ADVANTAGES• No rash decisions made• Identifies internal and external• Ideas improved

DISADVANTAGES• Time consuming

• May stifle creativity/gut reaction• Time has to be made to think of alternative

Constraints/decision making

• Financial

• Company policy

• Staff probs

• Technological probs

• Management limitations

WIDE SPAN OF CONTROL

Advantages• Empowers staff• Few managers/less

wages• Communication is

improved due to less levels

• High quality staff should exist

Disadvantages• Managers may make

rash decisions due to overload when supervising staff

• Managers will have less time for planning

• Subordinates may make decisions they are not trained to make

GROUPINGS

1. Function• STAFF GROUPED TOGETHR, EACH FUNCTION EMPLOYS

SPECIALISTS• STAFF KNOW WHO TO GO TO WHEN NEED JOB DONE

• ORGS MAY BCOME TOO LARGE• UNRESPONSIVE TO CHANGE

• Product• Each group deals with different products or service• Allows orgs with different products to concentrate on them• Easier to manager• Expertise an develop

• Unnecessary duplication of resources and staff and equipment• Competition between divisions may occur

GROUPINGS

Customer• Divisions dealing with diff types of customer• Product service suited to customer• Customer loyalty builds up

• Additional staffing required therefore costly• Duplication of procedures

TECHNOLOGY• Business activities are grouped according to technical process• Only suitable for large orgs which have different products

LINE / staff• Orgs divided into line departments and staff departments

providing support for the whole org. eg human resources - finance

DELAYERING/DOWNSIZING

• DELAYERING• Involves removing a

whole level of management to flatten structure

• DOWNSIZING• Involves closing

specific areas of the organisation to cut costs –

• Narrows span or control• Increases comm and efficiency• Reduces costs• Increases competitiveness• Empowers staff

Narrows span or controlIncreases comm and efficiencyReduces costsIncreases competitivenessEmpowers staff

OUTSOURCING

• Allows organisation to concentrate on core activities

• Specialist firms can carry out the work

• Orgs will have specialist equipment

• Reduces costs of area being outsourced

• Organisation only pays for the activity when it is required

HR – industrial action

• LOSS OF PRODUCTION

• LOSS IN SALES REVENUE

• LOSS OF LOYAL CUSTOMERS

• BAD IMAGE TO ORG

• DAMAGE TO REPUTATION

• FALL IN SHARE PRICFE?

• REDUNDANCES?

HR – JOB/PERSON SPEC/REFERENCE

• Job des title, location duties and responsibilites, holidays benefits hours. Shows what will be required of successful applicant

• Person spec – description of the right person for that job – qualifications, experience, qualities, skills interests. Shows the right kind of person needed for that job

• Reference – statement by a former employee attesting to good character/work reference. Describes if the person is reliable, trustworthy etc.

HR - HASAWA 1974

• Employees have a duty to take care of their and others health and safety and employers duties include providing a safe and healthy, faciliyy and place of work

LEGISLATION

• RACE RELATIONS• Must not discriminate

against race, colour, religion of new and existing employees

• EQUAL PAY ACT• Men and

women/everyone must be paid the same rate for the same job

HR – SELECTION PROCESS

• Application forms sent out• Application forms VC, references received from

applicant• Short list of interviewees made• Interview takes place• May include different types of testing• Second interviews are sometimes necessary• Successful candidate informaed

HR VALUE OF APPRAISAL

• 2-way communication to identify

• Future training needs

• Possibility of promotion

• Setting targets

• Feedback on past performance

• Development needs

MARKETING – PRODUCT ENDORSEMENT

• CONSUMER ASSOCIATED PRODUCT WITH PERSONALITY

• GOOD IMAGE• CONSUMERS PERCEPTIONS• INCREASED SALES IF PERSON IS

SUCCESSFRUL• HIGH COSTS

• ANY PERSONALITY PROB WITH HAVE A NEGATIVE IMPACT

GOOD PUBLIC RELATIONS

• IMPROVES IMAGE – ENCOURAGES SALE

• IMPROVED PROFILE FOR THE FIRM

• EMPLOYESS MAY FEEL MOTIVATED

Product innovation

In order to keep ahead of the competition organisations must think ahead, come up with new ideas being innovative

Stages in innovation• Coming up with the idea – brainstorming• Analysing the ides – market research• Make a prototype - test the market/pilot the scheme• Evaluate success• Make any necessary changes• Launch the product/service

PRICING TACTICS

• SKIMMING

• PREMIUM - USP

CHANELS OF DISTRIBUTION – choosing the right one

• Product

• Consumers buying habits

• Legal restrictions

• Image

• Finance

PRIMARY RESEARCH

• PERSONAL INTERVIEW

• TELEPHONE SURVEY

• POSTAL SURVEY

• HALL TESTS

• CONSUMER AUDIT

• TEST MARKETING

• OBSERVATION

LOSS LEADERS

• Customers come into shop – while they are they they will hopefully spend money not only on the advertised product but on other products too – PRICE DROP TV – marketing campaign - advertising Sony 19” TV for £199 – this was a loss leader (they only had 100)

• Sales with increase hopeflly profit too

INTO PIPELINE PROMOTION

• Point of sale materials – posters

• Bulk buying discounts

• Staff training

• Competitions

• Sale or return

• Dealer deals

MARKET SEGMENTATION

• Age

• Gender

• Socio-economic

• Income

• Education

• Lifestyle

• Religion

MARKET SEGMENTATION ADV

• TARGET SPECIFIC GROUPS

• ABLE TO DIFFERENCIAT PRODUCTS

• HELPS IDENTIFY GAP IN MARKET

• DIFFERENT MARKETING MIX FOR EACH GROUP OR SEGMENT – EG PRICES DIFFERING, ADVERTISING DIFFERING TO SUIT THE SPECIFIC MARKET

JIT

JIT – stock arriving just in time for production

• Advantages:

• Orders can be produced when they are needed

• No need to store orders in warehouse

• No warehouse costs

• Products will not deteriorate

QUALITY

• TOTAL QUALITY MANAGEMENT

• QUALITY CIRCLES

• QUALITY ASSURANCE

• QUALITY STANDARDS

• BENCHMARKING

• BEST MATERIAL AND EQUIPMENT

• WELL TRAINED WORKFORCE

Gross profit/ Net profit

• Sales • Less cost of sales =

GROSS PROFIT

• GROSS PROFIT• Less expenses =

NET PROFIT

CAUSES OF CASH FLOW PROBS

SOURCE OF CASH FLOW PROBLEM

• Too much cash tied up in STOCK

• Allowing customers too much CREDIT

• Customers NOT PAYING on time

• Owners taking too much DRAWINGS

• BORROWING too much finance at high interest rates

RESOLVING CASH FLOW PROBLEMS

• Sell unnecessary FIXED ASSETS

• Encouraged customers to pay• Arrange CREDIT with

SUPPLIERS• Find means of investing

CAPITAL (new partner)• PROMOTIONAL activities to

encourage sales and reduce stock levels

Cash is vital to a company. Without it the firm cannot exist. Firms can fail for a variety of reasons, one of which is poor cash flow. A firm can appear profitable but have no cash it too many customers purchase on credit and do not pay within the greed credit terms. The business then has little cash to pay such expenses as wages, bills and insurance.

BALANCE SHEET/PROFIT AND LOSS ACCOUNT

• BALANCE SHEETShows a snapshot of the

worth of the business on one specific date eg as at 31 March 2008

Balance Sheets shows:1. Assets – the things that

the business own2. Liabilities3. Capital

• PROFT AND LOSS ACCOUNT

A statement for both internal and external reporting

Tells a story of trading activities over a period of time eg financial year

• Records Sales • Less cost of sales = GROSS

PROFIT• Less expenses = NET

PROFIT

FINANCE TERMS

Fixed Assets are owned Fixed Assets are owned for a long timefor a long timePROPERTYPROPERTYMACHINERYMACHINERYVEHICLESVEHICLESSHOP FITTINGSSHOP FITTINGS

Current Assets owned for less than a year (listed in the reverse order of how easily turned into cash)

• STOCK• DEBTS DUE• BANK• CASH