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CIMA E1

ORGANISATIONAL MANAGEMENT
Aim of Paper

• This paper focuses on the structure and principles


underlying the operational functions of the
organisation, their efficient management and
effective interaction in enabling the organisation to
achieve its strategic objectives.
• It will prepare candidates for Paper E2, Project and
Relationship Management, and Paper E3, Strategic
Management.
• Paper E1 is mainly a discursive paper.

1
Syllabus

Introduction to organisations 25%


Managing the finance function 15%
Managing technology and information 15%
Operations management 15%
Marketing 15%
Managing human resources 15%

2
Exam Format

E1 is tested in two exams:

90 minute computerised objective test exam


 Test comprises 60 questions of equal weighting.
 Each component learning outcome will be tested and the syllabus weightings will be reflected in the
exam.
 A range of question types will be used. The main types will be multiple choice, multiple response,
number entry, drag and drop, drop down and hot spot.
 Some questions might relate to a common scenario.

3 hour computerised operational level integrated case study


 4 sittings per year
 Made up of a number of timed sections
 Consists of a pre-seen scenario and supporting resources such as emails, articles or meeting
minutes
 Each section will have one or more tasks for candidates to complete and will require a written
response

3
Session 1 The Different Purposes
of Organisations

4
Overview Session One

The different purposes of organisations


• What is an organisation?
• Different types of organisation
• Mission, vision and objectives
• Creating value for stakeholders

5
What is an organisation?

Organisations are social arrangements for the controlled


performance of collective goals.

Organisations allow people to:


Share skills and knowledge
Specialise
Pool resources
This results in synergy.

6
Different types of organisation

7
Mission, vision and objectives

Mission is the most generalised type of objective and can be seen as


an expression of the organisation’s reason for being.

Vision sets out how an organisation sees itself in the future.

Detailed objectives will help in the achievement of the mission.


Objectives should be SMART:
specific
measurable
achievable
relevant and
time-constrained.

8
Creating value for stakeholders

Stakeholders are virtually everybody who has anything to


do with an organisation.

9
Session 2 Organisational Structure

10
Overview Session Two

Organisational structure
• What is organisational structure?
• Mintzberg’s effective organisation
• Types of structure
• Structural dimensions
• Organisational forms and boundaries

11
What is organisational structure?

Organisational structure is concerned with the


way in which the work is divided up and
allocated. It outlines the roles and
responsibilities of individuals and groups within
the organisation.

12
Mintzberg’s effective organisation

Mintzberg said that an organisation is made up of a


number of distinct parts.

13
Types of structure

14
Structural dimensions

Factors influencing organisational structure:


size
strategy
organisational type
technological change.

15
Organisational forms and boundaries

16
Organisational forms and boundaries

Outsourcing means contracting-out aspects of the work,


previously done in-house, to specialist providers.
It may not be wise to outsource aspects of the work in
which the organisation has a core competency.

Offshoring is the relocation of corporate activities to a


foreign country.

17
Organisational forms and boundaries

A tall organisation has many levels of management (a long scalar


chain and a narrow span of control).
A flat organisation has few levels of management (a short scalar
chain and a wide span of control).
A shared service approach involves restructuring the provision of
certain services within the organisation so that the service is
centralised into one specific part of the organisation.
A strategic alliance is a co-operative business activity, formed by
two or more separate organisations for strategic purposes, that
allocates ownership, operational responsibilities, financial risks and
rewards, to each member, while preserving their separate identity/
autonomy.

18
Session 3 Governance, regulation,
ethics and corporate
social responsibility

19
Overview Session Three

Governance, regulation, ethics and CSR


• Stakeholders
• Ethics
• Corporate social responsibility and sustainable development
• Corporate governance
• The impact of regulation on the firm
• Business/ government relations

20
Stakeholders

A stakeholder is a group or individual, who has an interest in


what the organisation does, or an expectation of the
organisation. There are three categories of stakeholder:

Internal, e.g.
employees and
managers

Connected,
External, e.g.
e.g.
local
shareholders,
community,
customers and
government
suppliers

21
Ethics

Ethics is the system of moral principles that examines the concept of


right and wrong.
Business ethics is the application of ethical values to business
behaviour.
In order to achieve the objectives of the accountancy profession,
CIMA qualified accountants have to observe five fundamental
principles:
1 Integrity
2 Objectivity
3 Professional competence and due care
4 Confidentiality
5 Professional behaviour

22
CSR and sustainable development

Sustainable development: aims to balance economic, environmental and


social needs.

Corporate social responsibility: the company is sensitive to the needs of all


stakeholders and not just shareholders. Benefits to the company include:
• Method of differentiation
• Attract and retain quality staff
• Brand strengthening
• Lower costs
• Identify new market opportunities and changing social expectations
 Increase in profitability as a result of the above

23
Corporate governance

Corporate governance is the set of processes and policies


by which a company is directed, administered and
controlled. It includes the appropriate role of the board
of directors and the auditors of the company.
 The need for corporate governance arises because of
the separation of ownership and control.
 It helps the business to achieve its objectives in a way
that is acceptable to ALL stakeholders.
 Governance should lead to sustainable wealth
creation.

24
Corporate governance continued

Systems of corporate
governance

UK principles-based US rules-based approach: the


approach: guidance on Sarbanes-Oxley Act requires
the role of the chairman auditor independence, an
and CEO, NEDs, audit committee, an internal
remuneration , control report, increased
nomination and audit financial disclosures and
committees adherence to the US stock
exchange regulations

25
The impact of regulation on the firm

Regulation should
be:

Effective – ensuring a Efficient– the total benefit to


safe and effective the nation should be greater
product/service is than the total cost
delivered, whilst not
inhibiting the function of
the business

26
Regulation continued

Regulation in the
UK

Regulation of the level of Regulation of Regulation of externalities:


competition: people in business: i.e. costs or benefits of
1. Competition Act prohibits 1. To prevent production experienced by
anti-competitive insider trading society but not by producers
agreements or abuse of a 2. To prevent or consumers themselves.
dominant position trading if the Regulation using:
2. Office of Fair Trading company is 1. max/ min prices
investigates businesses insolvent 2. taxes/ subsides
suspected of breeching 3. fines and quotas
Competition Act
3. The Competition and
Markets Authority deals
with cases referred by the
Office of Fair Trading

27
Regulation continued

International
regulation

The US Sarbanes-Oxley Regulation of trade:


Act 2002: only impacts 1. Free trade supported by
UK companies that are the World Trade
registered on the US Organisation
stock exchange 2. Regional trading
organisations, e.g. EU
and NAFTA, allow free
trade between specific
countries

28
Business/government relations

Corporate political activity (CPA) refers to the involvement of


firms in the political process, with the aim of securing particular
policy preferences.
Two types of CPA:

Buffering – proactive Bridging – a more reactive


political actions on form of behaviour, e.g.
behalf of firms, e.g. by tracking the development of
employing lobbying new laws/regulations so that
compliance is in place when
the legislation is passed

29
Session 4 The Purpose of the
Finance Function

30
Overview Session Four

•Activities
•Components
•Conflict within the finance function

31
Activities

Five key activities are fundamental to the role of


the finance function:
1.accounting operations
2.analysis
3.planning
4.decision making
5.control

32
Components

33
Conflict within the finance function

Three key factors can result in conflict:


1.interdependence versus independence
2.short-term versus long-term
3.capital versus revenue expenditure.

34
Session 5 The Contemporary
Transformation of the
Finance Function

35
Overview Session Five

• Changes in the finance function


• Driving forces for change
• Bureaucratic to market orientation
• Outsourcing
• Offshoring
• Business process re-engineering (BPR)

36
Changes in the finance function

Focus has changed from financial control and


reporting to business support.
New role called the hybrid accountant.
Accountants don’t necessarily work in a
separate accounting function.

37
Driving forces for change

Management structure
Technology
Competition.

38
Bureaucratic to market orientation

Traditional function of finance Modern function of finance staff


staff
Transaction processing, i.e. number Transformational role, i.e.
crunching. contributing to strategy and
business decisions and focusing on
value adding activities such as
outsourcing, offshoring and BPR.
Bureaucratic nature Market orientated, i.e. focused on
meeting customer’s needs.

39
Outsourcing

For most organisations, financial services are


non-core and there are benefits from outsourcing
these services.

Internal outsourcing (i.e. the formation of a


shared service centre) may be carried out as the
first step to full outsourcing.

40
Outsourcing continued

Benefits of internal outsourcing Drawbacks of internal outsourcing

Headcount reductions Fall is staff morale

Reduction in cost of premises Cost of redundancies

Systems consolidation Lack of systems integration

Tax savings Major set up costs

Favourable labour rate Full outsourcing may be a better option

Improvements in quality

41
Offshoring

Cost savings may be achieved through offshoring


some aspects of the finance function.
Alternatives to offshoring include:
retention of the finance function in-house.
near-shoring, i.e. moving tasks to a
neighbouring country.

42
Business process re-engineering (BPR)

BPR is the fundamental rethinking and radical redesign of business


processes. The main stages of BPR are as follows:

43
Session 6 The Purpose and
Management of the
Technology and
Information Function
44
Overview Session Six

• The relationship between data, IT and IS


• Evaluating a new information system
• Systems development
• Systems implementation
• System maintenance
• IS implementation – avoiding user resistance and non-usage
• IS outsourcing
• Privacy and security
• Ethics and IT/ IS
• IT enabled transformation

45
Information and information systems

Data consists of numbers, letters, symbols, raw facts, events and


transactions which have been recorded but not yet processed into a
form that is suitable for making decisions.
Information is data that has been processed in such a way that is
has a meaning to the person who receives it, who may then use it to
improve the quality of decision-making. Good information should
be ‘ACCURATE’ (accurate, complete, cost-effective, understandable,
relevant, accessible, timely and easy to use).
Information systems (IS) refers to the provision and management of
information to support the running of an organisation.
Information technology (IT) is the supporting equipment (hardware)
that provides the infrastructure to run the information systems.

46
Evaluating a new information system

Costs of a new Benefits of a new


system system
Initial costs: • Enhanced efficiency and
• design and development capacity
costs or purchase costs • More ‘accurate’ information
• testing and implementation • Better access to information
• training • Better sharing of information
Running costs: • Improved communication
• labour time • Better decision making and
• cost of material, e.g. customer service
replacement parts
• cost of service support

47
Systems development

Systems development follows a cycle called the systems


development life cycle (SDLC):

48
Systems implementation

Four methods of
system changeover

Direct: Parallel: Pilot: Phased:


appropriate appropriate appropriate appropriate
when there is when the when the when the
confidence in system has system can system can
the new not been be operated be
system or it is used in different implemented
not a critical elsewhere or geographical in distinct
business it is a critical regions parts
system business
system

49
Systems implementation continued

Advantages Disadvantages

Direct Quick High risk


Cheap
Parallel Low risk Expensive
Output can be verified Slow
Users rely on old system
Pilot Less risk than direct Slower than direct
Less costly than parallel Riskier than parallel
Phased Staff have time to adjust Slower than direct
Less risky than direct Links between parts of the system
make it difficult

50
System maintenance

Three methods of
system maintenance

Corrective: the Adaptive: Perfective


correction of changes to (preventative):
technical the system upgrades the
difficulties, e.g. are made to hardware and
due to virus reflect the software to
infection, changing maximise speed
hardware needs of the and
failure organisation functionality of
the system

51
IS implementation – avoiding user resistance and
non-usage
Reasons for project failure:
 Insufficient user involvement
 Lack of management support
 Project too complex
 Poor planning
 Unrealistic deadlines
 Poor monitoring and control
 IT staff don’t have the necessary management skills

52
IS implementation – avoiding user resistance and
non-usage continued
Kotter, Schlesinger and Sache identified six methods of
dealing with resistance:
 Education and communication
 Participation
 Facilitation and support
 Negotiation
 Manipulation and co-optation
 Power/ coercion

53
IS outsourcing

IS outsourcing involves purchasing from outside the


organisation the IS services required to perform
business functions.

A service level agreement (SLA) setting out the terms


and conditions of the outsourcing arrangement,
should be drawn up between the client and the
supplier.

54
Privacy and security

General controls Application controls


Personnel controls Completeness checks
Access controls Validity checks
Computer equipment Identification and
controls authorisation checks
Business continuity Problem management
planning facilities

55
Privacy and security continued

Potential threat Possible solution


Natural disasters Fire procedures
Malfunction Back-up procedures
Viruses Virus software
Hackers Firewall software
Electronic Data encryption
eavesdropping
Human errors Training
HR risk Ergonomic design of
workstation

56
Ethics and IT/ IS

Ethical issues connected with IT/IS

Data protection, Incorrect systems


e.g. of customer use, e.g.
information downloading
improper materials
or violating
copyright laws

57
IT enabled transformation

IT enabled
transformation

Virtual companies: Virtual teams within Homeworking


1. Operate with organisations: IT developments
little physical 1. A team of people not have enabled
presence present in the same employees to
2. IT has allowed office or organisation work at home
people to 2. Work independently rather than being
collaborate but are guided by a based in an office.
without meeting common purpose Hot desking has
face to face 3. IT allows information to also become
3. Outsource most/ be sent/ shared common
all functions remotely and for virtual
meetings to be held

58
IT enabled transformation continued

Benefits of virtual Drawbacks of virtual


companies companies
• Can exploit opportunities • Difficult to negotiate
• Look bigger than they are revenue sharing agreement
• Flexibility • Loss of control may result
• Lower costs in a fall in quality
• Loss of competitive
advantage if outsourcing
company work for
competition

59
IT enabled transformation continued

Challenges of virtual Potential solution to these challenges


teams
1. Forming a team can 1. Spending time getting to know each other,
be difficult e.g. team identity, jokes
2. Knowledge sharing 2. Regular and predictable communication
patterns
4. Difficult to establish 3. Training in technology and teamwork plus
processes/ goals clear roles and responsibilities
5. Cultural differences 4. Detailed, timely feedback between the leader
and the team members
5. Leadership 5. Pay attention to cultural differences
6. Morale 6. Choose independent and self-reliant people

60
Session 7 Emerging IS Trends and
their Role in Supporting
Organisational Strategy
and Operations

61
Overview Session Seven

• E-business
• Managing knowledge
• Customer relationship management (CRM) systems
• Wireless and hand-held technology
• Cloud computing
• Social media
• Big Data

62
E-business

E-business is the transformation of key business processes through


the use of internet technologies.
Categories of e-business:
business to business (B2B)
business to consumer (B2B)
consumer to business (C2B)
consumer to consumer (C2C)

E-commerce is trading on the internet.

Digital goods are any goods that are stored, delivered and used in
an electronic format, e.g. e-books and music downloads.

63
Managing knowledge

Businesses need to gather, organise, share and


analyse their knowledge. Knowledge resides in human
capital and structural capital.

64
CRM systems

CRM systems help the organisation to know their customers better


and to use that knowledge to serve customers better.
Benefits of CRM Criticisms of CRM
Improved co-ordination and integration of Software purchase and associated costs
systems
Improved customer relations Cost of staff training and disruption
Improved control and management Opportunity costs
Improved motivation Adjustment of business processes to fit software
A source of competitive advantage Cost of getting staff buy-in
Cost effective

65
Wireless and hand-held technology

There has been huge growth in the ownership of i-pads,


android tablets and other hand-held computing
technologies.

Firms have:
made websites tablet friendly
developed apps
used tablets to access key information.

66
Cloud computing

Cloud computing means storing and accessing data and


programs over the internet instead of on a computer’s
hard drive.

67
Social media

Includes a range of sites that provide different social


actions, such as Twitter, Facebook, LinkedIn and
Instagram.
Opportunities include:
advertising
brand development
method of listening to customers
communication
recruitment and selection.

68
Big Data

Big Data refers to large volumes of data beyond normal


processing, storage and analysis capacity of typical
database tools.

69
Big Data continued

Big Data Management is the storage, administration and


control of vast quantities of structured and unstructured
data.
Big Data Analysis is the process of scrutinising Big Data
to identify patterns, correlations, relationships and other
insights.
Hadoop is an open source programming framework
which enables the processing of large data sets by
utilising multiple servers simultaneously.

70
Big Data continued

Benefits of Big Data Risks associated with Big data


Drives innovation Skills to use systems may not exist
Improved customer service Security of data
Storage of transactional data in a digital Data protection issues
format
Use to develop the next generation of Integration difficulties
products or services
Access to external information Processing may not add value
Can create new revenue streams Change of perspective required
Source of competitive advantage

71
Session 8 The Purpose of the
Operations Function

72
Overview Session Eight

• Definitions
• The four V’s of operations
• Porter’s value chain
• Sourcing strategies
• Purchasing vs supply
• Reck and Long’s strategic positioning tool
• Cousin’s strategic supply wheel
• Relationships with suppliers
• Process design
• Sustainability in operations management
• CSR and operations management

73
Definitions

Operations involves the transformation of inputs into outputs in order to


add value.

Operations management refers to the activities required to produce and


deliver a product or service. It includes purchasing, warehousing and
transportation.

Operations strategy – an organisation can achieve significant competitive


advantage over its rivals through superior operating capabilities of its
resources, e.g. assets, workforce skills, supplier relationships.

74
The four V’s of operations

Operations may vary according to:


 volume
 variety
 variation
 visibility

75
Porter’s Value Chain

Porter developed his value chain to determine


whether and how a firm’s activities contribute
towards its competitive advantage. Margin, i.e. profit
will be achieved if the customer is willing to pay more
for a product/ service than the sum of the costs of all
of the activities in the value chain.
The approach involves breaking the firm down into
five ‘primary’ and four ‘support’ activities and then
looking at each to see if they give a cost advantage or
a quality advantage.

76
Porter’s Value Chain continued

Infrastructure
Human Resource Management
Technology
Margin
Procurement

Inbound Outbound Marketing


Operations Service
Logistics Logistics and Sales

77
Sourcing strategies

Strategy Explanation
Single The organisation chooses one source of
sourcing supply
Multiple The organisation chooses several sources
sourcing of supply
Delegated The organisation chooses one supplier
sourcing and this supplier co-ordinates and works
with other suppliers to ensure the supply
requirements are fulfilled
Parallel The organisation uses a mix of the three
sourcing approaches

78
Purchasing vs supply

Purchasing Supply
• Concentrates on the day to A more modern approach dealing
day buying of goods with issues beyond the day to day,
• Emphasis in on price, quality for example:
and accurate delivery of goods • planning and implementation of a
• May be viewed as an out of supply strategy
date approach to supply chain • managing the overall supply
management process
• considering the appropriateness
of outsourcing arrangements
• investigating whether strategic
partnerships could be developed
• the number of suppliers to use

79
Reck and Long’s Strategic Positioning Tool

Passive

Independent

Supportive

Integrative

80
Cousins’ Strategic Supply Wheel

Structure

Performance
Relationships
measures

Strategy

Competences Cost/benefit

81
Relationships with suppliers

Past approach – competitive (opportunistic)


relationships, e.g. using tendering to minimise the
cost of purchases.

Modern approach – collaborative approach aiming to


work with the supplier and to use their knowledge
and skills to reduce costs and improve quality.

82
Process design

Processes may be improved using methods such as:

Change
Supply
to reflect
Process chain
BPR TQM Kaizen processes
maps managem
not
ent
functions

83
Sustainability in operations management

Sustainable development is about meeting the needs of the


present without compromising the ability of future
generations to meet their own needs.
Sustainability impacts operations management in a number of
ways:
Process design, e.g. designed to minimise waste
Product design, e.g. use of recycled inputs
Supply chain management, e.g. choose suppliers that adopt
sustainable development policies
Quality management should help to improve efficiency and
reduce waste

84
CSR and operations management

Organisations need to be aware of how effective supply


chain ethics can help them to avoid costly product recalls
and brand damage that results from an unethical supply
chain decision.

85
Session 9 Tools and Techniques of
Operations
Management

86
Overview Session Nine

• Managing operational capacity


• Forecasting demand
• Inventory management systems
• Process technology
• Layout and flow
• Work study
• What is quality?
• Quality related costs
• TQM
• Quality control
• Lean management
• JIT
• Reverse logistics

87
Managing operational capacity

Capacity planning – aims to balance customer


demand with production.
Three possible approaches:
 level capacity planning
 chase demand planning
 demand management planning

88
Forecasting demand

89
Inventory management systems

Methods of managing
inventory

Continuous Periodic ABC system:


inventory system: inventory managers focus
each addition and system: their attention
withdrawal is inventory is on inventory
recorded and an checked on a items of high
automatic order is regular basis and value and there
placed when a variable order is little
inventory falls to a is placed management
pre-determined depending on control of
level usage during the inventory items
period that are least
used

90
Process technology

91
Layout and flow

Layout and flow is a big design consideration in operations


management.

A fixed position layout involves the movement of employees and


machines to the product which remains stationary. Used when the
product is large or bulky and the cost of moving it would be too high.

With cellular manufacturing, work units are arranged in a sequence


that supports a smooth flow of materials and components through the
production processes with minimal transport or delay.

92
Work study

The theorist, Taylor, was one of the first people


to study the work process scientifically.

By organising work in the most efficient way, the


organisation’s productivity will be increased and
this will enable the organisation to reward its
employees with the remuneration they desire.

93
What is quality?

Quality is difficult to define. However, the need


to satisfy customer’s needs is critical in most
definitions of quality.

94
Quality related costs

Four types of quality


cost

Prevention: cost Appraisal: cost Internal External failure:


of preventing of quality failure: costs costs arising from
defects before inspection and arising from a a failure to meet
they occur testing failure to meet quality standards.
quality Occurs after
standards. product has
Occurs before reached the
product has customers
reached the
customers

95
TQM

Fundamental features:
Prevention of errors before they occur
Continual improvement
Real participation by all
Commitment of senior management

96
TQM continued

TQM techniques:
Quality circles
Kaizen
5-S practice
Six sigma

97
TQM continued

1. Senior 2. Establish 3.
4. Establish 5. 6. Monitor
management quality steering Presentations
quality circles Documentation progress
consultancy committee and training

98
Quality control

Quality control (QC) involves a number of


routine steps which measure and control the
quality of the product/service as it is
developed.

99
Lean management

A philosophy that aims to eliminate waste, i.e.


Inventory
Waiting
Defective units
Effort
Transportation
Over-processing
Over-production

100
Lean management continued

Characteristics Criticisms
• Improved production • High initial outlay
scheduling • Requires a change in
• Small batch or continuous culture
production • Part adoption
• Continuous improvement • Cost may exceed benefit
• Zero inventory
• Zero waiting time

101
Lean management continued

Six sigma

Cellular
manufacturing JIT

Six core methods


of lean
production

TPM Kaizen

5-S practice

102
JIT

Requirements for the successful operation of a JIT


system include:
Flexible production
The speed of throughout should match demand
Elimination of non-value added activities
Higher quality and reliability
Lower costs

103
Reverse logistics

Reverse logistics is the return of unwanted or surplus


goods, materials or equipment back to the organisation
for reuse, recycling or disposal. It is important for an
organisation to understand the reasons for returns and to
take action to reduce the volume of returns.

104
Session 10 Introduction to
Marketing

105
Overview Session Ten

• Approaches to selling a product


• Understanding the marketing environment
• Consumer behaviour
• Factors affecting buying decision
• Types of buyer behaviour

106
Approaches to selling a product

Four possible approaches


to selling a product

Sales Production Product Marketing


orientation: uses orientation: orientation: orientation: starts
aggressive focus is on high focus is on by understanding
promotional volume continual the customers’
policies to entice production to improvement of needs and then
the customer achieve a low products produces products
unit cost assuming with benefits and
customers features to fulfil
simply want the these needs. The
best quality for best approach.
their money

107
Understanding the marketing environment

The following technique can be used to analyse the macro


environment:
• Political
• Economic
• Social
• Technical
• Ecological
• Legal
Each of these factors can be applied to the marketing function.

108
Consumer behaviour

Consumers go through a five stage decision-making process in any purchase:


Need Recognition

Information Search

Evaluating Alternatives

Decision to purchase

Post Purchase Evaluation

109
Theories of consumer behaviour

Cognitive
paradigm
theory

Learned Habitual
behaviour decision-
theory making

110
Factors affecting buying decision

Socio/cultural
influences, e.g.
reference groups,
role models, family

Personal Psychological
influences, e.g. influences, e.g.
age, family motivation,
status, beliefs and
occupation attitudes

111
Types of buyer behaviour

Fast moving consumer goods are relatively cheap,


habitual purchases, e.g. bread.

Durable goods are relatively expensive, irregular


purchases, e.g. a car.

112
Session 11 The Market Planning
Process and the
Marketing Mix

113
Overview Session Eleven

• The market planning process


• Market segmentation
• Targeting
• Positioning
• Market research
• The marketing mix
• Product
• Pricing
• Promotion
• Place
• Branding
• Big data

114
The market planning process

Situation analysis

Review mission/objectives

Set marketing objectives

Devise a marketing strategy

Plan the marketing mix

Implementation and review

115
Market segmentation

Market segmentation is the sub-dividing of the


market into homogenous groups to whom a separate
marketing mix can be focused.

Kotler suggested that segments should be:


Measurable
Accessible
Substantial

116
Market segmentation continued

Bases for segmentation

Demographic: Socio- Psychological: Situational


• age economic: • lifestyle (behavioural):
• sex • occupation • attitudes •occasion of use
• geographical • income • values •frequency of
area (geo- purchase
demographic) •customer
•family life loyalty
cycle

117
Targeting

Targeting is the process of selecting the most


lucrative market segment(s) for marketing the
product.

118
Positioning

Positioning involves the formulation of a definitive


marketing strategy around which a product would be
marketed to a target audience. Porter identified a
number of potential strategies:
 Concentrated marketing: specialises in one or two
of the identified markets only
 Differentiated marketing: the company makes
several products each aimed at a separate market
 Undifferentiated marketing: the delivery of a single
product to the entire market

119
Market research
Market research is the way in which organisations find out
what their customers and potential customers need, want and
care about.
Data gathering techniques

Primary research: Secondary research: data


collected for the specific that is already available,
purpose of the research e.g. market research
in question, e.g. focus agency data, Companies’
groups, observation, Annual Reports and
interviews, Accounts, trade and
experimentation technical journals

120
The marketing mix

The traditional marketing mix (4Ps):


Product: Factors such as quality, design, range,
packaging, branding and warranties
Place: Where to sell the products, distribution
channels, stock levels and warehouse locations
Promotion: Techniques such as advertising,
personal selling, public relations, sales promotion
and direct marketing
Price: level, discounts, credit policy and payment
methods
121
The marketing mix continued

Additional 3Ps for the service industry:


People: relates to both staff and customers
Processes: systems through which the service is
delivered
Physical evidence: makes the intangible service
more tangible

122
Product

Terms
• Product item: the individual product
• Product line: a collection of product items that are
closely related
• Product mix: total product lines. Consists of:
-width: the number of product lines
-depth: the number of product items within each
product line

123
Product continued

The product life-cycle

Sales
Intro Growth Maturity Decline

Time

124
Product continued

The Boston Consulting Group (BCG) matrix is used by managers to identify


the cash flow requirements of different products and to help to decide
whether a change in the mix of products is required.

125
Pricing

Pricing is influenced by the 3Cs, i.e. cost, customers and


competitors.
Two forms of pricing for a new product are:
 skim pricing
 penetration pricing.
Other pricing options include:
 follow the leader pricing
 charging a high price if the company is the sole producer
 loss leader pricing
 low prices to crush competitors.
 variable pricing
 consideration of the product portfolio

126
Promotion

The promotion mix comprises the blend of methods that


a company uses to promote its products to existing and
potential customers.
Methods include:
Advertising
Personal selling
Public relations
Sales promotion
Direct marketing, e.g. direct mail/ telemarketing
E-marketing

127
Promotion continued

Some relatively new forms of marketing include:


Viral
Guerrilla
Experiential
Digital
Social media
Postmodern

128
Promotion continued

Mass media: non personal


and aimed at the whole
market

Three classes
of marketing
communication
Personal and direct: one way Personal and interactive: a
communication with the one to one dialogue between
customer, e.g. by letter the salesperson and customer

129
Place

Distribution involves getting the right products to the


right people at the right time.
Three forms:
 Zero level
 One level
 Two level
One and two level distribution involve:
Pull strategies – advertising creates consumer demand
forcing retailers to stock the product
Push strategies – retailers are offered high margins and
therefore stock the product

130
Branding

A brand is a name, symbol, term, mark or design that enables customers to


identify and distinguish the products of one supplier from those offered by
competitors.

Brand equity is the premium that customers are willing to pay for a brand
compared to a similar, generic product.

Characteristics of a strong brand Determinants of brand value


• Consistency • High loyalty
• A distinctive name • Name awareness
• Distinctive product features • Strong personality associations
• Perceived quality
• Other attributes, e.g. patents

131
Branding continued

Benefits of effective brand management include:


improved profitability
valuable asset
higher prices can be charged
method of differentiation
way of connecting with customers
assists with other marketing practices
customer loyalty.

132
Big Data

In the digital age, companies gather information


about their customers from a huge range of
sources. Sophisticated analysis using Big Data
technologies allows some companies to more
accurately predict demand.

133
Session 12 Further aspects of
marketing

134
Overview Session Twelve

• Differences between B2B and B2C


• Internal marketing
• Marketing sustainability and ethics
• Social marketing and corporate social responsibility
• Marketing in a not for profit context

135
Differences between B2B and B2C

Derived
demand
from
consumer
market

Technical Fewer
complexity Features of buyers
B2B
compared
to B2C
marketing

Closer
relationship High
between purchasing
buyers and power
sellers

136
Internal marketing

Internal marketing is the means of applying the


philosophy and practices of marketing to the people
who serve the external customers so that:
the best people can be employed and retained
the employees will do the best possible work.

137
Marketing sustainability and ethics

Typical issues surrounding ethics and marketing


include:
marketing’s responsibility for customers’
privacy and security
marketing’s responsibility to vulnerable people
marketing’s responsibility to employees
marketing’s responsibility for preserving
competitiveness in the market
responsible communication.

138
Social marketing and corporate social
responsibility
Acts as a
unique selling
point

Advantages of Increased
Change before adopting a sales, e.g.
new legislation socially customers may
is introduced responsible be willing to
approach pay more

Lower costs,
e.g. due to
using less
packaging

139
Marketing in a not for profit context

Charities employing the most appropriate marketing practices are most


likely to lever the generosity of peoples’ time and money.

Within the UK, political reforms have pushed the public sector into a more
commercial and managerial style meaning some managers need to make
marketing decisions.

NGOs use marketing to:


 find a position for themselves in the market
 distinguish client and donor needs
 formulate and communicate NGO requirements
 gain new supporters.

140
Session 13 An Introduction to
Human Resource
Management

141
Overview Session Thirteen

• Definitions
• Human resource planning
• HR in different organisations
• The HR cycle
• Recruitment
• Selection
• Induction

142
Definitions

Human resource management (HRM) can be viewed as a strategic


approach to acquiring, developing, managing and motivating an
organisation’s key resource. This should help the organisation
achieve its stated objectives through the best use of its employees.

Hard HRM treats employees simply as a resource of the business


(like machinery and buildings). There is little staff empowerment and
pay is just enough to recruit and retain sufficient staff.

Soft HRM treats employees as the most important resource in the


business and as a source of competitive advantage. Employees are
empowered and receive a competitive pay structure (including
performance-related pay).

143
Human Resource Planning

Stage 1: Strategic analysis

Stage 2: Internal analysis

Stage 3: Identify gap


between
supply and demand

Stage 4: Put plans in place to


close the gap

Stage 5: Review

144
HR in different organisations

HR practices vary depending on organisational:


size
culture
availability of specialist HR staff.

New forms of organisation have resulted in changing HR


needs, for example:
project-based teams
virtual organisations.

145
The HR cycle

146
Recruitment

Recruitment involves attracting a pool of suitable


candidates for the job.

147
Recruitment continued

Competency frameworks attempt to identify all the competencies that are required by
anyone taking on a particular role within the organisation.
A person specification is developed as part of the recruitment process. It defines the
personal characteristics, qualifications and experience required by the job holder in
order to do the job well. It therefore becomes the specification for the attributes sought
in a successful candidate for the job, a blueprint for the perfect person to fill the role.
Rodgers recommended that the following categories should be covered in a person
specification:
 Background/ circumstances
 Attainments
 Disposition
 Physical make-up
 Interests
 General intelligence
 Special attributes

148
Selection

Selection is aimed at choosing the best person for the


job from the field of candidates sourced using
recruitment.
The selection method must be:
• Reliable
• Valid
• Fair
• Cost effective

149
Selection continued

Application
form

Selection
References interview

Selection
methods

Assessment Selection testing


centre

150
Induction

The purpose of an induction is to ensure the most effective


integration of staff into the organisation, for the benefit of
both parties.

Benefits include:
• Quick assimilation of employees into the organisation
• The process reassures employees which increases
motivation/ performance
• Increased employee commitment
• Reduces staff turnover

151
Session 14 Appraisal, Training,
Development,
Motivation and
Retention

152
Overview Session Fourteen

• Appraisals
• Training and development
• Reward systems
• Workforce flexibility
• Knowledge workers
• Employee involvement
• Psychological contracts

153
Appraisals

Appraisal is the systematic review and assessment of an


employee’s performance, potential and training needs. It will
involve the following steps:
Identifying the criteria for assessment
Preparation of appraisal report by manager
Appraisal interview between job holder and manager
Agreement of future objectives and solutions to problems
Manager’s supervisor reviews the assessment for fairness
Follow up

154
Appraisals continued

Lockett’s barriers to effective appraisal


Confrontation
Judgement
Chat
Bureaucracy
Annual event
Unfinished business

155
Training and development

Training: formal learning to achieve the level of skills,


knowledge and competence to carry out the current role
Development: the realisation of a person’s potential through
formal and informal learning to enable them to carry out their
current and future role
Honey and Mumford suggested that there are four different
learning styles:
• Activists
• Reflectors
• Theorists
• Pragmatists

156
Training and development continued

Kolb’s experiential learning cycle:

Concrete Experience

Testing Ideas Reflection

Concept Creation

157
Reward systems

Motivation
To comply
with Attract/retain
legislation/ quality staff
regulation

Aims of a
To achieve reward system Consistency
organisational and fairness
goals

Recognise
factors other Reward
than job performance
performance

158
Reward systems continued

There are four main types of incentive scheme:


• Profit-related pay
• Piece rates
• Performance-related pay
• Non-financial rewards

A total reward package draws together all the


financial and non-financial benefits available to
employees.

159
Training and development continued
The stages in the training and development process:
1. Identify training
and development
needs

5. Evaluate the 2. Set training


training objectives

4. Deliver the
3. Plan the training
training

160
Workforce flexibility

Numerical
flexibility

Flexible working Four types of Financial


arrangements workforce flexibility
flexibility

Task or
functional
flexibility

161
Knowledge workers

Knowledge workers are people who create


knowledge and produce new products and services
for the organisation to sell.
For example:
• Research staff
• Chemists
• Architects

162
Employee involvement

Employees should be given the opportunity to


contribute to the organisation. High performance
work arrangements rely on all employees for their
ideas, intelligence and commitment to make the
organisation successful.

163
Handy’s psychological contracts

Psychological contracts exist between the


employee and the employer.
They can exert strong influence on behaviour
because it captures what employees really believe
they will get in return for what they give.

164
Session 15 Employment practices,
HR roles and ethics

165
Overview Session Twelve

• Employee practices
• HR roles
• Ethics

166
Dismissal

Dismissal is the termination of a person’s


employment with or without notice from the
employer.
Considerations when analysing if dismissal is fair:
conduct of the employee
capability of the employee
breach of statutory duty
redundancy
other suitable reasons, e.g. dishonesty.

167
Redundancy

True redundancy arises when the role the employee


performs is no longer required. Alternatives to
redundancy include:
recruitment freeze
natural wastage
retraining staff to fill vacancies elsewhere
job sharing
part time work/ reduced hours
retirement
voluntary redundancy.
168
Role of line managers and HR professionals

The role of the line manager and HR department is


different, e.g. the line manager may take a more
operational approach where as the HR department takes
a strategic, longer term view.

Organising the HR function:


centralised
decentralised
shared services
outsourced HR

169
Ethics

Ethics is a set of moral principles to guide behaviour.

How to deal with ethical dilemmas at work:


obtain further information
follow internal procedures
consult with line managers/ higher levels of
management or the audit committee as appropriate
seek advice from professional institute
consider withdrawing from situation/ engagement.

170