Chapter 13 Business planning and functional strategies Flashcards
1.1 Business plans
Business plans are typically produced when a business is applying for funding and is a critical document for potential investors. The aim of the plan is to provide the potential investor with sufficient details about the business and its future strategies so they make an informed decision regarding the finance the business would like to receive.
The contents tends to include cover page, references, executive summary, management team, products or services, market information, business operations, details of finance required and appendices.
3.1 Human resource management
This is a strategic and coherent approach to the management of an organisations people. HRM strategies consider the stages of human resource management. The cycle is selection, actual performance and then appraisal which can lead to rewards or training. HR planning may include the following:
- Recruitment plan: considers the balance between forecast supply and demand for human resources
- Training plan: ensures skills are up-to-date, relevant and comparable with the best in industry
- Productivity plan: sets out how productivity will be improved and how performance measured
- Redevelopment plan: considers how staff can be retained and transferred internally, including succession planning
4.1 Research and development
Types of research are product research (focuses on development of new products or adaptations to existing products) and process research (focus on goods/services are produced, to improve efficiency and quality).
Innovation is concerned with generation of new ideas. Generating and maintaining a creative environment involves the following aspects:
- Leadership: setting and communicating a vision which encourages new ideas
- Culture: nurturing a creative culture which views failure as a learning process
- People: adopting a team-based approach that encourages participation
- Structure: embracing working methods and flexible organisational structures
- Communication: greater openness in communication and sharing of ideas
5.1 Operations
Operations involve the transformational process of changing inputs into outputs in order to add value. Operations management involves the design, creation, implementation and control of these processes. Key factors to consider are as follows:
- Volume: higher volumes of production may lead to more capital-intensive, automated production processes and division of labour
- Variety: greater variety will reduce the ability to standardise processes and will increase the range of skills required
- Variation in demand: variations for the products or services will be a key consideration regarding capacity planning
- Visibility: when operation is highly visible, the employees will have to show good communication skills and interpersonal skills in dealing with customers
5.2 Capacity planning
There are three approaches to capacity planning:
- Made to stock: operating a constant level of activity will accumulate stock during quiet periods which can be utilised during busy periods
- Made to order: products are made as the customer requires them through the adoption of just-in-time production methods
- Manipulate demand: customers encouraged to switch to off-peak periods by using discrimination pricing to adjust the selling price at different times
Just-in-time methods is an approach to planning and control based on the idea that goods or services should be only produced when ordered or needed. This eliminates large inventories of materials and finished goods.
Just-in-time purchasing can be adopted with regards to raw materials and other purchases. This requires close relationships with trusted suppliers. The supplier will need to adopt their own flexible productions systems.
5.3 Quality management
Two key aspects of quality management are prevention (quality assurance: procedures and standards devised with aim of minimising defects) and detection (quality control: checking and reviewing work that has been done in order to detect defects).
Total quality management is continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for processes as well as outputs. All internal processes are treated as internal suppliers or internal customers to each other. Some organisations create formalised service level agreements between these internal operations. All parts of the firm need to work together, and a quality culture needs to be adopted across the whole firm.
6.1 Procurement
This is the purchasing of material resources and business services for use by the company. The purchasing mix is quantity, quality, price and delivery.
Ethical procurement is when a potential suppliers may be rejected, despite being cheaper due to ethical considerations. These can be treatment of employees, health and safety, environmental protection, transparency of contracts and fraud and corruption.
6.2 Supply chain management
This is the management of all supply activities from the suppliers to a business through to delivery to customers. The key factors to consider are responsiveness (is supplier capable and flexible enough to supply goods when required), reliability (can supplier meet company’s needs in terms of quality and delivery times) and relationships.
6.3 Sourcing strategies
For each input, it is important to decide whether to build a relationship with one single supplier or whether to use multiple suppliers. Advantages for single supplier include having a strong relationship and better commitment from them, economies of scale, better quality through quality assurance programmes, better communication and confidentiality.
Advantages of having multiple suppliers include reduced supplier power (competition drives down prices), less disruption if problems occur with one supplier and access to a wider range of knowledge and expertise.
7.1 Finance function as a business partner
Modern finance function has evolved to become an important business partner for operational units of the organisation. Acting as a business partner enables the finance function to:
- Provide real time support in data and information needs
- Enable business unit leaders to put together credible business plans for increased investment, before they go to senior managers
- Collaborate with business unit leaders in preparing budgets
- Help design information systems that meet the needs of operational managers
