Business Studies (BUSS2)

Business Studies (BUSS2)

1. USING BUDGETS

   • BUDGET DEFINITION: An agreed plan establishing the expected revenue and expenditure of an organisation.
     • INCOME BUDGET: Shows the planned inflows to the organisation over a period of time.
     • EXPENDITURE BUDGET: Shows the planned outflows of the organisation over period of time.
     • PROFIT BUDGET: Shows the planned profit of the business over a period of time.
   • GOOD BUDGETING
     • Consistent with the aims of the organisation
     • Based on the opinions of as many people as possible.
     • Challenging but realistic targets
   • VARIANCE ANALYSIS: This is the process where the actual figures are compared to those that were budgeted for.
     • ADVERSE VARIANCE: When a business has done worse than expected.
       • Actual costs were higher than budgeted for
       • Actual revenue was lower than budgeted for
     • FAVOURABLE VARIANCE: When a business has done better than expected.
       • Actual costs were lower than budgeted for
       • Actual revenue was higher than budgeted for

2. IMPROVING CASH FLOW

   • CASH FLOW DEFINITION: The flow of money in and out of a business.
   • RECAP ON CASH FLOW: Cash flow forecast is a prediction. Cash flow statement is the actual. Used by managers, owners & lenders.
   • SOLUTIONS
     • Increase sales revenue
     • Reduce costs
   • CAUSES OF CASH FLOW PROBLEMS
     • Seasonality
     • Poor financial planning
     • Poor debtor management
     • Poor creditor management
     • Overheads unmanageable

3. MEASURING & INCREASING PROFIT

   • RECAP:
     • Profit = Revenue - Costs
     • Gross Profit = Revenue - Cost of Sales
     • Net Profit = Revenue - All Costs
   • NET PROFIT MARGIN: The amount of profit that an organisation is making expressed as a %.
     • CALCULATED: Net Profit / Turnover x100
     • The greater the profit margin, the better the organisation is performing.
     • Need to pick out from the income statement the figures require to conduct this.
   • GROSS PROFIT MARGIN: The amount of profit an organisation is making on each item sold, expressed as a %
     • CALCULATED: Gross Profit / Turnover x 100
     • The greater the gross profit magin, the better the orgainisation is performing
     • This profit margin should always be greater than the net profit margin
   • RETURN ON CAPITAL: This is the % return on capital invested. Typically this could be used to measure the return your getting from your investment in the business.
     • CALCULATED: Net Profit / Capital Invested x 100
   • IMPROVING PROFITABILITY
     • iNCREASE SELLING PRICE
       • Reduce demand
       • Depends on price elasticity
     • REDUCE COSTS
       • Reduce quality
       • Damage reputation
       • Reduce added value

4. OPERATIONAL TARGETS: QUALITY

   • QUALITY DEFINITION: A quality product is one that meets the customers expectations and would be fit for purpose.
     • QUALITY CONTROL (QC): This is the process of inspecting the product at the end of the production process. Typically completed using a sample of products.
     • QUALITY ASSURANCE (QA): This is the system that ensures that quality standards are being met throughout the production process. Typically completed using a sample of products.
       • QC OR QA?
         • Quality control tends to be cheaper in the short term, due to reduced training requirements & reduced employee responsibility.
         • Quality control can lead to more wastage.
         • Quality assurance can increase motivation.
         • Quality assurance can actually identify specific problems in the production process.

5. EFFECTIVE OPERATIONS: CUSTOMER SERVICE

   • CUSTOMER SERVICE DEFINITION: This is the service given to customers before, during and after purchase to a standard that meets the customers expectations.
   • EXAMPLES OF CUSTOMER SERVICE
     • Offering advice pre sales
     • Ensuring the item about to be purchased meets the customer needs
     • Help lines to answer questions after purchase
     • Dealing with customer issues fairly and successfully
   • HOW DO BUSINESSES GO ABOUT MEETING CUSTOMER EXPECTATIONS?
     • MARKET RESEARCH: Surveys, questionnaires focus groups.
     • TRAINING: Staff know what makes good customer service
     • QUALITY, ASSURANCE & CONTROL: Ensuring staff get it right the first time.
   • MONITORING CUSTOMER SERVICE: It's important for an organisation to monitor its levels of customer service.
     • Typically they will use:
       • Satisfaction surveys
       • Focus groups
       • Tracking surveys
       • Online/mobile surveys
   • IMPROVING CUSTOMER SERVICE
     • Improve quality of products/service
     • Value customers
     • Speed of service
     • Friendliness of service
     • Efficient dealing with complaints
     • Staff trained and competent

6. WORKING WITH SUPPLIERS

   • SUPPLIERS
     • These are organisations who provide your business with a product or service.
     • Typically you want to establish a good relationship with your suppliers.
     • Suppliers can be critical to the overall success of your organisation.
   • FACTORS TO CONSIDER WHEN CHOOSING A SUPPLIER
     • Quality of materials/service supplied
     • Flexibility
     • Reliability
     • Value for money
     • Technological investment
     • Payment terms
   • GOOD SUPPLIERS: The benefits of a good supplier should be
     • IMPROVED CUSTOMER SERVICE: Delivery on time, good quality of product/service
     • LOWER COSTS: Good discounts from economies of scale
     • FLEXIBLE: Able to deal with changes in demand

7. TECHNOLOGY IN OPERATIONS

   • ROBOTICS
     • PRODUCTION OF PRODUCTS (CAM)
       • ADVANTAGES: Increased production speed, Improved quality, Don't get bored, Don't take breaks
       • DISADVANTAGES: Expensive to purchase, Not flexible, Could demotivate existing employees
   • AUTOMATION STOCK CONTROL
     • JUST IN TIME (JIT)
       • ADVANTAGES: Reduced wastage, Reduced storage space, Improved cash flow, More accurate forecasting
       • DISADVANTAGES: Expensive to setup, Dependant on good supplier relationship, Doesn't take into account external factors
   • COMMUNICATION TECHNOLOGY
     • INTERNET/EMAIL
       • ADVANTAGES: Reduced wastage, Increased efficiency, Improved communication channels, Increased opportunities for outsourcing
       • DISADVANTAGES: Training required for employees, Cost of investing in equipment, Increased considerations in the management of its use
   • COMPUTER AIDED DESIGN (CAD)
     • DISADVANTAGES: Training required for employees, Cost of investing in software, Software could be used by rivals
     • ADVANTAGES: More efficient, Enables competitive advantage, Reduces lead time between design and production, Reduced need for physical prototypes
   • BENEFITS OF TECHNOLOGY
     • Reduced unit costs
     • Improved communication
     • Quicker operations processes
     • Improved quality
     • Reduced wastage

8. ORGANISATIONAL STRUCTURE:

   • DEFINITION: The ways jobs, responsibilities and power is organised within a business
     • LAYERS OF HIERARCHY: Levels of management
     • CHAIN OF COMMAND: Lines of authority in the organisation
     • SPAN OF CONTROL: Number of subordinates who a manager directly controls
   • HIERARCHAL: Tall & flat, Traditional methods, provide promotion opportunites
   • MATRIX: Based around projects, People from each functional area working as a team
   • ENTREPRENEURIAL: Central control from owner, Quick decisions with small team around them
   • WORKFORCE ROLES
     • SUPERVISORS: Employees with control for one or more subordinate
     • TEAM LEADERS: Employees responsible for leading a team of employees
     • MANAGERS: Employees who are responsible for the operation of a specific area of the business
     • DIRECTORS: Appointed persons by the share-holders to run the organisations

9. EFFECTIVENESS OF WORKFORCE

   • LABOUR TURNOVER: Number of leavers per year / Average of number of employees for year x 100
   • LABOUR PRODUCTIVITY: Total value of output / Total number of employees

10. RECRUITMENT, TRAINING & SELECTION

    • RECRUITMENT PROCESS
      • Identify the vacancy
      • Write a job description / personal specification
      • Advertise position
      • Receive and process applications
    • TYPES OF RECRUITMENT
      • INTERNAL (notice board, promotion)
      • EXTERNAL (job adverts, agencies)
    • SELECTION PROCESS
      • Interview
      • Presentations
      • Assessment centres
      • Psychometric tests
    • TRAINING
      • On the job
      • Off the job
      • Induction

11. MOTIVATION

    • WHAT MOTIVATES EMPLOYEES IN A WORKPLACE?
      • Pay
      • Responsibility
      • Praise
      • Empowerment
      • Rewards
    • FREDRIK TAYLOR
      • Workers enjoy work but go to work to earn money
      • Theory based all around payment
      • Believes that money does motivate and piecework is an effective method to use
      • Workers trained to do one job well
    • ELTON MAYO
      • Believed workers are motivated by having special needs met
      • Conducted a study known as the ''hawthorne effect''
        • CONCLUSIONS: Managers & Employees communicating motivates, Managers taking an interest motivates, Working in teams motivates
    • ABRAHAM MASLOW
      • Devised a hierarchy of needs
      • Each level has to be fulfilled before the next motivates
        • Physiological needs (food, water, shelter)
        • Safety needs (security, protection)
        • Social needs (Sense of belonging)
        • Self esteem (praise, recognition)
        • Self actualisation (achieve dreams)
    • FREDERICK HERZBERG
      • Believes some factors motivate, some demotivate.
        • Motivators: Job enlargement, Job enrichment, Empowerment
        • Demotivators: Anything else

12. EFFECTIVE MARKETING

    • The purpose of marketing is to meet the customers needs & wants
      • NICHE MARKET: Small specialised market
      • MASS MARKET: Larger more general market

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