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Business Management

Nature of Management Features of effective management: Managers are necessary because society could not function without businesses and businesses cannot function without managers. The production is suiting customer demand To be efficient in your operations Good coordination in all levels of business Meet the needs of all stakeholders Main role is to achieve the businesses goal Skills of management Interpersonal (people) skills: skills needed to work and communicate with other people and understand their needs. Communication skills: the exchange of information between people. Without effective communication the most detailed plans and brilliant strategies will most probably fail. Strategic thinking: involves thinking about the businesses direction and what future goals the businesses want to achieve. Vision: it is the clear shared sense of direction that allows people to obtain a common goal. To share the vision and inspire others, managers need strong leadership to influence others. Problem solving: means finding and then implementing a course of action to try and solve it. There are six main steps in the problem solving process. Identify problem and causes gather relevant information develop alternative solution analyse the alternatives choose one alternative and implement it evaluate the solution Decision making: the process of identifying the options available and then choosing a specific course of action to solve a specific problem. Managers must have an effective decision making environment so goals can be achieved. Flexibility and adaptability to change: successful managers are those who anticipate and adjust to changing circumstances. They must be flexible, adaptable and proactive. Reconciling the conflicting interests of stakeholders: satisfying one set of stakeholders will probably most result in other stakeholders being dissatisfied. To maintain profit the management of a business may choose to cut costs or reducing costs by sacking employees or compromising on product quality or safety.

Achieving business goals


o Profits: maximising your profits by increasing your sales and this could be done by drop the price increase sales, innovate. Total sales x price = Total Revenue Total expenses incurred in operating business = Total costs Profit = TR TC Maximum profit = TR at maximum difference from TC Market share: refers to the businesses share of the total industry sales for a particular product. Usually only a goal for large businesses. Important goal because they can dominate the small markets where they often gain large profits.

Growth: businesses can achieve growth internally or externally. Internal involves employing more people, increasing sales, increasing innovate products, purchasing new equipment. External merging with or acquiring other businesses Merger two businesses join together to become one Acquisition business purchased by another. o Share Price: a share is a part ownership of a public company; shareholders are therefore the real owners. Reasons for buying shares: selling them for a higher price or owning shares in a company entitle an investment or to be a part of a companys profits. To be successful they must maximise the returns of their shareholders by keeping share price rising and paying back healthy dividends. o Social goals: Community service: sponsorship of many programs and events Provision of employment: many small businesses want their business to continue and may employ people or might be unemployed. Social justice: a business will set policies to ensure the employees and or other community members. o Environmental goals: Adopting practices such as recycle, renew and regenerate, and environmentally friendly practices, products and ideas. o Sustainable development Governments are imposing stricter environmental regulations on business practices. Achieving mix of business goals: Conflicts of maximising Profits Change too high to get max. Profits back cash from customers. Consumers may resent the low prices and buy their products from other businesses Managers may prefer lower profits to discourage potential competitors from entering the industry Long term profits at expense of ST profits Change lower prices due to competition = decrease in profits initially. Staff Involvement: Innovation: occurs when a new idea is applied to improve an exciting product or idea. - Gain a competitive advantage if it innovates successfully - Entrepreneurs: employees who take on the entrepreneurial roles within a business - To maintain competitive advantages staff must be encouraged and given the opportunity to be innovative. Motivation: the individual, internal process that directs energises and sustains a persons behaviour. - High levels of motivation = rates of productivity

To motivate employees in the workplace they may use rewards (e.g. increased pay) or punishments (e.g. reprimand, demotion, dismissal) - Motivating staff: make clear expectations, communicate regularly, implement conflict, encourage suggestions etc. Mentoring: done by tutoring, coaching, and modelling of acceptable behaviour. - Mentoring programs aims to provide advice and help with socialisation - Socialisation: the process in which a new employee undergoes in the first few weeks of employment through they learn to cope and succeed. - They are beneficial because: Ensures access to mentors Assists with the training and development of all Provides career and psychological support Increases the possibility of skill transfer. Training: the process of teaching staff to perform their job more efficiently and effectively by boosting up their skills and knowledge. - Allows employees to adapt to change, provide better customer service, participate effectively in work teams and gain promotion commitment to business better. - Usually in forms of conferences and seminars

Management Approaches Classical approach Planning: preparation of a predetermined course of action for a business 1. Strategic planning (long term) planning for three to five years. This level of planning will assist in determining where in the market the business wants to be and beat competitors. 2. Tactical planning (Medium term) flexible, adaptable usually one to two years. Allows the business to respond quickly to changes. 3. Operational planning (short term) Provides specific details which controls the day to day operations e.g. daily and weekly operational plans Organising: the structuring of the organisation to translate plans and goals into actions - There are three main steps: Determining the work activities, breaking into smaller steps Classifying and grouping activities Assign work and delegating authority to a responsible person. Controlling: compares what was intended to happen with what has actually occurred. - The control process: establish standards, measures performance and take corrective action. - Control methods: A) Quality of control: control method that inspects final products that can lead to wastage. B) Quality assurance: inspects both during and after production which assures the products are produced to pre-set standards. C) Total Quality management: Most comprehensive form of control which encourages all employees in the workplace and about the quality with everything they do. Management hierarchy is the arrangement that provides increasing authority of higher levels of hierarchy

Autocratic/ Authoritarian leadership style:

Advantages: Procedures and directions are clearly defined and less change of uncertainty Employees roles and expectations are set out plainly, so management can monitor their performance Control is centralised at top level management Disadvantages:

No employee input allowed Ignores the importance of employee morale and motivation Conflict or potential conflict increases Behavioural approach Leading: successful leaders are those who tried to empower others and give them the belief that they can go above and beyond the call of duty. Some qualities are: keeping an open mind, delegates tasks, motivate, flexible Motivating: workers who are motivated are those who will perform at their best. This is the managers job. To motivate a business employee managers must: reward, positively reinforce, respect, trust, enhancing their self esteem etc. Communicating: Without effective communication the most carefully detailed plans and brilliant strategies will most likely fail. The form of communication is also a motivator. Teams: involves people who interact regularly and coordinate towards a common goal. If team members/ employees were to have no common purpose and lack belonging within the workplace the teams effectiveness will be diminished. Businesses are adopting flatter structures which result in: - Delaying of hierarchical structure - Establishment of market focused work teams - Each work team are responsible for a wide range of production functions Participative or democratic leadership style: where the manager consults with employees to ask their suggestions when making decisions. They actively involve them in the decision making process: good for a business undergoing environmental rapid change (most effective). Contingency approach Each solution requires its own unique solution. Managers need to be adaptable and flexible in problem solving It stresses that an appropriate management response to one set of circumstances may be quiet inappropriate to another. To adopt this approach sample all past and present ideas on offer (smorgasbord approach).

Management process Large business functions require quite different skills and knowledge, as a business grows it becomes more complicated. They are often separated into divisions or departments and small businesses tend to overlap. Operations: refers to the processes that involve transformation or more generally production. Good and/services: Tangibles are goods that can be touches. Intangibles include services that cant be touched. Many businesses today produce a combination of both manufactured goods and services. The production process: - Inputs: resources used in the process of processing. Material inputs: raw materials consumed or converted by the transformation process. Capital equipment: includes the plant, machinery, property Labour: refers to people involved in the operations function. Information from a variety of sources contributes to the transformation process. Time and its efficient use are critical to all businesses. A Co-ordinating resource within appropriate time frame limits cost and wastage. Money: generally considered the most flexible of all resources- can be easily converted. - Process/transformation Is the conversion of inputs (resources) into outputs (good and /services) - Transformation processing manufacturing businesses. Elaborately transformed manufactures: highly processes and valued, complex because of the amount of processing they have undergone. Simply transformed manufactures: ability to be further processed in a wide range of processes. These are goods that are intermediate with nature

Outputs: finished goods or services which is delivered or provided to the customer. Efficiency and flexibility must be balanced.

Quality Management: strategy which a business used to make sure that its products meet customer expectations. - Three main quality approaches: control, quality assurance and total quality management - When managing quality businesses try to minimise waste, defects. Marketing Target market: Three broad approaches can be adopted when selecting a target market: The mass marketing approach, the market segmentation approach or the niche market approach. Mass marketing approach: seeks a large range of customers.

A business segments its market so it can better direct its marketing strategies to specific groups of customers. It occurs when the total market is subdivided into groups of people who share one or more common characteristic. Target market refers to the group of customers to which a business intends to sell its product to. A niche market is narrowly selected target market segment The Marketing mix 4 ps - Product: involves the product positioning which is the development of a product image compared with the image of competing products, product packaging involving the development of a container and the graphic design for a product, product branding is the name, term or symbol that identifies a specific product. - Price: There are 4 methods for calculating price Cost plus margin: calculating the total cost of production and adding a percentage for profit. Market price: pricing according to the interaction between the quantities that customers are willing to purchase the quantity that producers are able to supply. Competitors price: choosing a price that is either below, equal to or above that of the competitors. Discount price: reducing the price of stock that is not selling to stimulate demand. - Promotion: refers to the methods used by a business to inform, persuade and remind customers about its products. AIM: Attracting customers , increasing brand loyalty, encouraging customer to purchase more. Personal selling: sales assistant outlines the features of the good or service to the customer. main advantage of this method is that the message can be modified to suit the individual customer's needs. However, it is a time-consuming and expensive technique. Sales promotion: activities and materials are used to attract interest and support for the good or service. Examples include free samples, coupons. Publicity: sets up a free news story about its product enhancing the image of the product, highlight a business's favourable features, and help reduce any negative image that may have been created. Advertising: print or electronic mass media are used to communicate a message about the product. Place: A crucial decision in any marketing mix is to correctly identify the distribution channels. three main distribution channels: -Selling to the customers: Whether you sell by yourself ( as retailer) whether you employ a sales force, you are in these cases in front of the final customer. There are not intermediaries between you and him. Unfortunately, except for the retailer business, this situation is far to be the general case. -Selling to the retailers: For example, you manufacture the fun boards and you sell them to the Arizona retailers. This practice could be a bit complicated. -Selling to the wholesalers: There are maybe four or five sport articles wholesalers in Arizona. You sell your fun boards to these big men. On turn the wholesalers sell the fun boards to the retailers which finally sell to their customers.

Finance
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Cash flow statement: shows the movement of cash receipts and cash payments. E.g.(cash inflows) cash sales, credit sales, other income. E.g.(cash outflows) payments for stock, expenses, nonoperating expenses.

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Liquidity is used to describe whether a business has a good or adequate cash flow. Cash flow reports are vital for the information they give on the timing of payments and receipts of income. Cash flow statements are divided into three categories: cash flows from operating activities, those from investing activities and those from financing activities. Income statement: a summary of all the income earned and the expenses incurred over a period of trading. There are five main categories: revenue /income, COGs, gross profit, expenses, net

profit.
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Net sales: the amount of revenue a business has earned from sales when the effects of sales returns are deducted. Gross profit = Sales COGs Tells a business how much its mark up is on the cost price of the goods it has sold. Mark up on COGs determines the level of overall income. COGs = Opening stock + Purchases Closing stock Opening stock: value of a business has at the start of the financial year. Closing stock: value of a business has at the end of the financial year.

Expenses: cost incurred in the process of acquiring or manufacturing a good or a service.

Net profit = Gross profit Expenses It is the remaining amount when operating no operating expenses are deducted from the gross profit.

Balance Sheet: statement of the financial positions of a business at a certain time of the year. Showing that a business owns (assets) and what it owes (liability).
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Assets: items of value to the organisation that can be given monetary value. Divided into current, non-current, tangible and intangible.

Current: expected to base upon or turned over within 12 months. Non-current: items which are expected life of 3-5 years. Intangible: things that isnt included.

Liabilities: items of debt owed to other organisations and include loans, accounts, which are divided into current and non-current.

Current: expected to be paid within 12 months. Non-current: long term debts over 12 months.

Owners equity (capital): funds contributed by the owner to establish and build the business. This is considered a liability, because it is a type of debt the business carries.

Human Resources Recruitment (Aquisition) Planning: identifying staffing needs; job analysis Recruitment: attracting people to apply for the position in the business; internal and external recruitment. Selection: choosing and hiring the most qualified, testing and interviewing. Induction and training: teaching employees tasks associated with their hobs and to improve their skills. Skills inventory: complete database of skills and experience of all current employees. Monetary benefits: rewarding employees efforts through financial compensation; pay rates Non-monetary benefits: rewards such as conditions, fringe benefits. Voluntary: employees leaving on own accord; resignation, retirement. Involuntary: employees being asked to leave, retrenchment, dismissal. Maintenance: motivating employees to remain with the business Development: improving employees skills and abilities.

Separation: Employees leaving the business

Ethical Business behaviour


The majority of businesses want to be seen as responsible corporate citizens. The triple bottom line refers to the economic, environmental and social performance of a business. Ethics are standards that define what acceptable and unacceptable behaviour is. Business ethics is the application of moral standards to business behaviour such as: fair and honest business practices decent workplace relations conflict of interest situations accurate financial management truthful communication.

A corporate code of conduct encourages ethical business behaviour.

Management and change Responding to Internal and External Influences Transformational major changes: complete restructure throughout the whole organisation Incremental minor changes: usually involving a few employees under taking new operational procedures. Impact of change on organisational structure: business environment change = structure will change. Main structural changes: Outsourcing: contracting of some organisational operations to outside suppliers. Employ minimum full time staff keeping the cost at the lowest possible level. Flatter organisational structures: greater accountability and responsibility are transferred to the frontline staff. Work teams: allows businesses to be more flexible and responsive, also motivating employees and develop a broader view of goals and contribute to the business. Business culture: internal and external changes should be reflect on its business culture, so that managers and employees will have attitude which will lead them into success. Human resource management: The main changes are: Recruitment and selection Employees Training etc. Refitting and reorganising factories New advances in production technology Flexible manufacturing Emphasis on quality assurance

Operations management changes:

Managing change effectively Low risk: focuses on kepping employees informed about why changes are necessary and relying on communication, involvement, support and negotiation. High risk: considered high risk because it may cause failure to generate. Manipulation: skilful or devious exertion of influence over someone to get them to do what you want. Used in situations where other tactics will not work or are too expensive. Threat: involve loss of promotion, transfer. This leads to increase in resistance, sabotage, complaints. Identifying the need for change: achieving any vision requires holistic (looks at the whole picture) of the outside world and awareness of the potential impact on the business.\ Business information systems: a business success or failure is due to their ability to collect, organise, process and retrieve information quickly. Once processed and organised, information becomes that raw material for decision making. BIS gathers data, organises and summaries them into practical information.

Setting achievable goals A vision statement states the purpose of the business Changes should be made on goals if external business environment changes Goals attainable; realistic Management managers may be indecisive, poorly times and unclear of their decision causing employees to lose confidence.

Resistance to change: the most common reasons why change may be resisted include:

Fear of job loss it could threaten employee job status or security. Disruption to routine when there are new procedures that threaten established work routines Time not enough time to adapt to change. Fear of the unknown Leave employees uncertain of the future lading to anxiety. Inertia refers to an unenthusiastic response to proposed change. May occur when they have to work outside their comfort zone. Cost the financial cost of implementation even with access to finance a business must weigh up to the cost and benefits of change.

Driving forces are those forces that support the change and resisting forces are those forces that work against the change. Strategies for reducing resistance to change: The workplace culture created by the manager will affect the employees acceptance. Two of the most effective : Creating a culture of change and positive leadership Offer support Build trust Clearly articulate the purpose of the change Specify the nature of the change

Management consultants: someone who has specialised knowledge and skills within an area of business They provide: A wide range of business experiences Specialised knowledge and skills Access to latest research Aware of industries best practices

Change management is a methodical approach to dealing with change both from the perspective of a business and on the individual level. Best to hire from the institute of Management

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