Flashcards in Paper 1 Summer 2014 Deck (28)
the key decisions that must be taken by a marketing department in order to ensure the effective marketing of a product – product design and performance, price, promotion, and place.
Importance of "place"
• Place is where and how a product will be sold to customers.
• Place decisions concerned with how products should pass from manufacturer to the final customer.
• Place is about convenience to the customer.
• The product must get to the right place at the right time.
• Place involves decisions about distribution channels, e.g. direct selling/retailers/internet.
•HRM is concerned with the effective management of staff in a business to ensure that those staff enable the business to be productive and efficient.
• Essential purpose of HRM is to recruit, train and use staff in the most productive way to assist the organisation in achieving its objective.
Cashflow forecast to new business
• Cash flow forecasts are estimates of the future cash inflows and outflows of a business.
• They show periods of negative cash flow and so allow plans for additional financing, e.g. a bank overdraft or additional owner finance.
• Or plans can be made in negative cash flow periods to reduce expenditure or increase cash inflow by discontinuing credit sales.
• Cash flow forecasts give information to investors and bankers – a vital requisite for business start up and development.
•Operations management has been defined as the discipline of managing resources to achieve efficient on-going production/provision of goods and services.
• Concerned with workflow at the operational level – how work will be performed, who will do it, how resources will be combined.
• The conversion of strategic goals into operational activity.
Technology effects on operations
• greater efficiency in production/service processes.
• the need to update equipment and require new investment.
• Impact of technological change on employees - can they change/cope?
• If the business does not keep up with technological change the operations management may contribute to a fall in demand for the product/service.
• Possible impact on productivity and costs.
• Could mean less/different staff required.
Maslow and Herzberg's differences
• Maslow essentially concerned with identifying and classifying human needs.
• Application to the work organisation is the presumption that satisfied needs at work lead
to greater productivity.
• Hierarchy of needs – from physical needs to self-actualised needs.
• Herzberg – focus on a two-factor theory.
• Hygiene factors (e.g. working conditions, salary), extrinsic factors can cause
dissatisfaction – these need to be removed but satisfaction with hygiene factors will not
necessarily create a motivated workforce. Motivating factors – intrinsic factors – are the
key to productivity (achievement, recognition, responsibility).
Business needs both effective managers and effective leaders
• Managers said to deal with the ‘now’ – set objectives, plan, co-ordinate, motivate, direct and control (Mintzberg classification may be cited).
• Leaders – said to be more about the future – giving clear direction, and vision and purpose for an organisation.
• Each requiring different qualities and skills.
• Arguably successful organisations need both effective managers and leaders – they can be the same people – but not necessarily!
• Accept a discussion of the concept of informal leaders.
Published accounts to stakeholders
• Published accounts are financial records of business transactions which provide essential information to groups within and externally to a business (e.g., internal managers, staff, shareholders, banks, etc.).
• Published accounts give information on profitability, value of fixed assets, liquidity, growth/investment potential.
• Interested stakeholders may use accounts and examine performance indicators such as net profit margin, level of sales, long-term liabilities. These provide indicators of performance and
financial stability/strength – more than one year’s accounts may be examined.
• While of potential value to an interested stakeholder, published accounts have limitations:
○ contain only information required by law
○ it is historic information
○ do not give details of each section of the business
○ may not include future budgets or financial plans
○ there may be ‘window dressing’
○ qualitative factors such as internal health of the business not in the remit of published accounts.
Differences bw batch and flow production
Batch production – a single product made in batches to an individual specification –production process divided into a number of different stages – each operation at each stage carried out in a batch, e.g. there is a demand for 500 bread rolls – allows each batch to be matched to a specific demand specification – flexible and some economies of scale if large batches.
Flow production – mass production of identical standardised products – continuous sequence of a range of different operations – large quantities produced – automatic – lower unit costs – semi-skilled workers required.
Implications of changing batch into flow
Factors that could affect a business as it moves from batch production to flow
○ new machinery/technology – cost implications.
○ impact on staff – redundancy implications.
○ impact on morale/motivation of staff.
○ implications for inventory requirements.
○ impact on unit costs.
○ impact on quality standards of products.
○ the need to plan and manage this change.
○ impact on consumer – standardised products.
• The effect of these factors and implications for the business also determined by the context of the business and its products, e.g. existing levels of automation, the industrial relations situation, the managerial competency within the business.
identifying different segments within a market and
targeting different products or services at them – a customer-focused strategy.
identifying sub-groups in a market in which consumers have similar characteristics.
Factors affect profitability of a business
– Costs of business change.
– Operational efficiency changes.
– Level of demand changes.
– Level of competition changes.
– Product mix/portfolio is tired.
– New products marketed.
– Quality of business management/leadership changes.
– Credit any other relevant factors.
– Efficiency, cost control, pricing, supply costs, rent, quality of decision-making,
effectiveness of advertising, level of sales, degree of government intervention.
Why business objectives change overtime
– Business objectives are the stated, measurable targets of how to achieve aims and a sense of purpose.
– Business objectives may include: survival, growth, profit, maximisation, sales growth, ethical
and socially responsible objectives.
– Business objectives may change for several reasons, including:
○ initial objectives achieved (e.g. survival).
○ competitive environment changes.
○ technology might change product design.
○ new management and leadership.
○ new opportunities arise.
○ internal/external growth may lead to a revision of mission/purpose and objectives.
○ economic recession – external constraints.
○ becomes more ethical.
Value added can be defined as the difference in the production process between the cost of
raw materials and the price the finished goods are sold for – a key business objective – the
degree of value added to inputs.
Operations dpt contributing a the company's success
○ reducing costs.
○ reducing wastage.
○ increasing productivity.
○ taking out activities that do not add value.
○ improving design.
○ improving quality.
○ designing more efficient work methods.
○ better product development.
○ more efficient inventory management.
Theory X and Y
– Theory X and Theory Y are concerned with the attitude of managers to their workers.
– Theory X managers see workers as lazy, disliking work, unprepared to accept responsibility, needing close control and supervision.
– Theory Y managers see staff as enjoying work, they can be creative and will accept responsibility, and contribute to decision-making.
– The impact of either approach on workers is significant.
– It leads to different kinds of management/leadership and different reactions.
Benefits of teamworking
– While working in isolation is sometimes appropriate and successful, it is argued that working in teams can lead to high performance activity.
– For employees, team working provides an opportunity to form relationships with other employees – share tasks – multi-task – more motivation – more involvement – more ideas – more sense of ownership – job enrichment through teams being given complete tasks.
– For managers, less need for close supervision – happier employees – more productive ideas – better quality work (quality circles) – reduce management costs (de-layer the organisation).
– Recognition that producing high performance team work is not easy.
How the effectiveness of operational department can be influenced by HRM
– Operations management decisions involve making effective use of resources (inputs), land, labour and capital to provide outputs in the form of goods and services the
– Operations management and planning is concerned with:
○ which resources are needed to complete the production/service process.
○ how the work/process will be organised and scheduled.
○ who will perform the work.
– Clearly human resource management is a critical factor in efficient and effective operational management processes. People management decisions (HRM) will include issues such as recruitment/selection of appropriate staff for operational efficiency –
quality of staff, skills, competences of staff, training and development of staff are all
critical aspects of efficient operations management and planning.
The impact of HRM, generally on the motivation of staff, on the culture of the
organisation, and more specifically on the motivation and culture of the operations
Niche marketing is identifying and exploiting a small segment of a large market and developing
products to fit that segment – the opposite of mass marketing.
A written step-by-step process which a business commits to follow in every case where an employee needs to be warned, reprimanded or dismissed –
action taken by an employer to review and correct serious performance issues
e.g. habitual absenteeism, sexual harassment.
Importance of disciplinary procedures
– Provide information for employees about what is acceptable and unacceptable in the organisation.
– Give employees a clear statement of disciplinary rules and measures in place to review
certain performance activities.
– Protect management from allegations of discriminatory practice leading to actions for unfair dismissal or unlawful discrimination.
– An important and valuable management tool and a safeguard for employees.
– May be used to enable employers and employees to agree suitable goals and
timescales for improvement in performance and conduct.
– May reveal need for more employee training and development – a tool of HRM.
– Guarantees fairness for all employees and protects reputation of the business.
Factors affecting the level of inventory held by business
– Type of product/materials (e.g. perishable goods).
– Depends very much on the particular industry / activity of a business (manufacturing = many, retailer = not as much)
– Anticipated demand
– Hold inventory levels in order to qualify for bulk order
discounts, or special promotions, or to meet suppliers’ requirements for minimum order levels.
– A business needs to weigh up the costs and benefits of holding inventory – too much and costs are high – too little and sales may be lost.
– A business will be concerned about stock wastage as stock becomes out of date.
Uses of breakeven analysis
– Indicates break-even levels of production.
– Indicates the margin of safety – how much sales could fall without falling into loss.
– Useful indicator of the impact of a price decision, e.g. a marketing decision to increase a product price.
– Useful indicator of the impact of an operations management decision to lower variable costs with new equipment.
– A simple quantitative tool for managers that can be used in making a wide range of business decisions, including setting prices, preparing competitive bids, applying for loans and location decisions.
Why only NON- financial rewards
- Increased responsibility, job enrichment, development opportunities --> staff is engaged emotionally with the organisaiton
- High order needs (Maslow) and intrisic motivators (Herzberg) are accepted by many employers
- Financial rewards tried and failed or limited effect
- Unable to afford financial rewards
- Economic recession -> wise choice
Workforce planning is necessary
- It is the activity of systematically identifying and analysing what a business needs in terms of size, type and quality of workforce to achieve its objectives
-Determines what mix of experience, knowledge and skills is required
- Ensures that decisions are made on staffing linked to organisation's mission, strategy, resources
- While it's a necessary requirement for successful performance, it's not the only requirement and does not ensure 100% success.
Sole traders and PLCs ways to raise finance
- Sole: own capital, bank overdrafts, loans, unlimited liability.
- Severe restrictions on the amount borrowed
-PLCs have the legal right to sell shares to the public --> have potential to raise significant investment capital
- Have access to alternative funding sources
--> Each has its own features and access routes for short, medium and long term finance
- Different internal and external sources