Business Studies (BUSS2)

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A guide to business studies UNIT 2 covers everything apart from marketing mix (there was no room to include it)

Resource summary

Business Studies (BUSS2)
  1. USING BUDGETS
    1. BUDGET DEFINITION: An agreed plan establishing the expected revenue and expenditure of an organisation.
      1. INCOME BUDGET: Shows the planned inflows to the organisation over a period of time.
        1. EXPENDITURE BUDGET: Shows the planned outflows of the organisation over period of time.
          1. PROFIT BUDGET: Shows the planned profit of the business over a period of time.
          2. GOOD BUDGETING
            1. Consistent with the aims of the organisation
              1. Based on the opinions of as many people as possible.
                1. Challenging but realistic targets
                2. VARIANCE ANALYSIS: This is the process where the actual figures are compared to those that were budgeted for.
                  1. ADVERSE VARIANCE: When a business has done worse than expected.
                    1. Actual costs were higher than budgeted for
                      1. Actual revenue was lower than budgeted for
                      2. FAVOURABLE VARIANCE: When a business has done better than expected.
                        1. Actual costs were lower than budgeted for
                          1. Actual revenue was higher than budgeted for
                      3. IMPROVING CASH FLOW
                        1. CASH FLOW DEFINITION: The flow of money in and out of a business.
                          1. RECAP ON CASH FLOW: Cash flow forecast is a prediction. Cash flow statement is the actual. Used by managers, owners & lenders.
                            1. SOLUTIONS
                              1. Increase sales revenue
                                1. Reduce costs
                                2. CAUSES OF CASH FLOW PROBLEMS
                                  1. Seasonality
                                    1. Poor financial planning
                                      1. Poor debtor management
                                        1. Poor creditor management
                                          1. Overheads unmanageable
                                        2. MEASURING & INCREASING PROFIT
                                          1. RECAP:
                                            1. Profit = Revenue - Costs
                                              1. Gross Profit = Revenue - Cost of Sales
                                                1. Net Profit = Revenue - All Costs
                                                2. NET PROFIT MARGIN: The amount of profit that an organisation is making expressed as a %.
                                                  1. CALCULATED: Net Profit / Turnover x100
                                                    1. The greater the profit margin, the better the organisation is performing.
                                                      1. Need to pick out from the income statement the figures require to conduct this.
                                                      2. GROSS PROFIT MARGIN: The amount of profit an organisation is making on each item sold, expressed as a %
                                                        1. CALCULATED: Gross Profit / Turnover x 100
                                                          1. The greater the gross profit magin, the better the orgainisation is performing
                                                            1. This profit margin should always be greater than the net profit margin
                                                            2. 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.
                                                              1. CALCULATED: Net Profit / Capital Invested x 100
                                                              2. IMPROVING PROFITABILITY
                                                                1. iNCREASE SELLING PRICE
                                                                  1. Reduce demand
                                                                    1. Depends on price elasticity
                                                                    2. REDUCE COSTS
                                                                      1. Reduce quality
                                                                        1. Damage reputation
                                                                          1. Reduce added value
                                                                      2. OPERATIONAL TARGETS: QUALITY
                                                                        1. QUALITY DEFINITION: A quality product is one that meets the customers expectations and would be fit for purpose.
                                                                          1. 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.
                                                                            1. 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.
                                                                              1. QC OR QA?
                                                                                1. Quality control tends to be cheaper in the short term, due to reduced training requirements & reduced employee responsibility.
                                                                                  1. Quality control can lead to more wastage.
                                                                                    1. Quality assurance can increase motivation.
                                                                                      1. Quality assurance can actually identify specific problems in the production process.
                                                                                2. EFFECTIVE OPERATIONS: CUSTOMER SERVICE
                                                                                  1. CUSTOMER SERVICE DEFINITION: This is the service given to customers before, during and after purchase to a standard that meets the customers expectations.
                                                                                    1. EXAMPLES OF CUSTOMER SERVICE
                                                                                      1. Offering advice pre sales
                                                                                        1. Ensuring the item about to be purchased meets the customer needs
                                                                                          1. Help lines to answer questions after purchase
                                                                                            1. Dealing with customer issues fairly and successfully
                                                                                            2. HOW DO BUSINESSES GO ABOUT MEETING CUSTOMER EXPECTATIONS?
                                                                                              1. MARKET RESEARCH: Surveys, questionnaires focus groups.
                                                                                                1. TRAINING: Staff know what makes good customer service
                                                                                                  1. QUALITY, ASSURANCE & CONTROL: Ensuring staff get it right the first time.
                                                                                                  2. MONITORING CUSTOMER SERVICE: It's important for an organisation to monitor its levels of customer service.
                                                                                                    1. Typically they will use:
                                                                                                      1. Satisfaction surveys
                                                                                                        1. Focus groups
                                                                                                          1. Tracking surveys
                                                                                                            1. Online/mobile surveys
                                                                                                          2. IMPROVING CUSTOMER SERVICE
                                                                                                            1. Improve quality of products/service
                                                                                                              1. Value customers
                                                                                                                1. Speed of service
                                                                                                                  1. Friendliness of service
                                                                                                                    1. Efficient dealing with complaints
                                                                                                                      1. Staff trained and competent
                                                                                                                    2. WORKING WITH SUPPLIERS
                                                                                                                      1. SUPPLIERS
                                                                                                                        1. These are organisations who provide your business with a product or service.
                                                                                                                          1. Typically you want to establish a good relationship with your suppliers.
                                                                                                                            1. Suppliers can be critical to the overall success of your organisation.
                                                                                                                            2. FACTORS TO CONSIDER WHEN CHOOSING A SUPPLIER
                                                                                                                              1. Quality of materials/service supplied
                                                                                                                                1. Flexibility
                                                                                                                                  1. Reliability
                                                                                                                                    1. Value for money
                                                                                                                                      1. Technological investment
                                                                                                                                        1. Payment terms
                                                                                                                                        2. GOOD SUPPLIERS: The benefits of a good supplier should be
                                                                                                                                          1. IMPROVED CUSTOMER SERVICE: Delivery on time, good quality of product/service
                                                                                                                                            1. LOWER COSTS: Good discounts from economies of scale
                                                                                                                                              1. FLEXIBLE: Able to deal with changes in demand
                                                                                                                                            2. TECHNOLOGY IN OPERATIONS
                                                                                                                                              1. ROBOTICS
                                                                                                                                                1. PRODUCTION OF PRODUCTS (CAM)
                                                                                                                                                  1. ADVANTAGES: Increased production speed, Improved quality, Don't get bored, Don't take breaks
                                                                                                                                                    1. DISADVANTAGES: Expensive to purchase, Not flexible, Could demotivate existing employees
                                                                                                                                                  2. AUTOMATION STOCK CONTROL
                                                                                                                                                    1. JUST IN TIME (JIT)
                                                                                                                                                      1. ADVANTAGES: Reduced wastage, Reduced storage space, Improved cash flow, More accurate forecasting
                                                                                                                                                        1. DISADVANTAGES: Expensive to setup, Dependant on good supplier relationship, Doesn't take into account external factors
                                                                                                                                                      2. COMMUNICATION TECHNOLOGY
                                                                                                                                                        1. INTERNET/EMAIL
                                                                                                                                                          1. ADVANTAGES: Reduced wastage, Increased efficiency, Improved communication channels, Increased opportunities for outsourcing
                                                                                                                                                            1. DISADVANTAGES: Training required for employees, Cost of investing in equipment, Increased considerations in the management of its use
                                                                                                                                                          2. COMPUTER AIDED DESIGN (CAD)
                                                                                                                                                            1. DISADVANTAGES: Training required for employees, Cost of investing in software, Software could be used by rivals
                                                                                                                                                              1. ADVANTAGES: More efficient, Enables competitive advantage, Reduces lead time between design and production, Reduced need for physical prototypes
                                                                                                                                                              2. BENEFITS OF TECHNOLOGY
                                                                                                                                                                1. Reduced unit costs
                                                                                                                                                                  1. Improved communication
                                                                                                                                                                    1. Quicker operations processes
                                                                                                                                                                      1. Improved quality
                                                                                                                                                                        1. Reduced wastage
                                                                                                                                                                      2. ORGANISATIONAL STRUCTURE:
                                                                                                                                                                        1. DEFINITION: The ways jobs, responsibilities and power is organised within a business
                                                                                                                                                                          1. LAYERS OF HIERARCHY: Levels of management
                                                                                                                                                                            1. CHAIN OF COMMAND: Lines of authority in the organisation
                                                                                                                                                                              1. SPAN OF CONTROL: Number of subordinates who a manager directly controls
                                                                                                                                                                              2. HIERARCHAL: Tall & flat, Traditional methods, provide promotion opportunites
                                                                                                                                                                                1. MATRIX: Based around projects, People from each functional area working as a team
                                                                                                                                                                                  1. ENTREPRENEURIAL: Central control from owner, Quick decisions with small team around them
                                                                                                                                                                                    1. WORKFORCE ROLES
                                                                                                                                                                                      1. SUPERVISORS: Employees with control for one or more subordinate
                                                                                                                                                                                        1. TEAM LEADERS: Employees responsible for leading a team of employees
                                                                                                                                                                                          1. MANAGERS: Employees who are responsible for the operation of a specific area of the business
                                                                                                                                                                                            1. DIRECTORS: Appointed persons by the share-holders to run the organisations
                                                                                                                                                                                          2. EFFECTIVENESS OF WORKFORCE
                                                                                                                                                                                            1. LABOUR TURNOVER: Number of leavers per year / Average of number of employees for year x 100
                                                                                                                                                                                              1. LABOUR PRODUCTIVITY: Total value of output / Total number of employees
                                                                                                                                                                                              2. RECRUITMENT, TRAINING & SELECTION
                                                                                                                                                                                                1. RECRUITMENT PROCESS
                                                                                                                                                                                                  1. Identify the vacancy
                                                                                                                                                                                                    1. Write a job description / personal specification
                                                                                                                                                                                                      1. Advertise position
                                                                                                                                                                                                        1. Receive and process applications
                                                                                                                                                                                                        2. TYPES OF RECRUITMENT
                                                                                                                                                                                                          1. INTERNAL (notice board, promotion)
                                                                                                                                                                                                            1. EXTERNAL (job adverts, agencies)
                                                                                                                                                                                                            2. SELECTION PROCESS
                                                                                                                                                                                                              1. Interview
                                                                                                                                                                                                                1. Presentations
                                                                                                                                                                                                                  1. Assessment centres
                                                                                                                                                                                                                    1. Psychometric tests
                                                                                                                                                                                                                    2. TRAINING
                                                                                                                                                                                                                      1. On the job
                                                                                                                                                                                                                        1. Off the job
                                                                                                                                                                                                                          1. Induction
                                                                                                                                                                                                                        2. MOTIVATION
                                                                                                                                                                                                                          1. WHAT MOTIVATES EMPLOYEES IN A WORKPLACE?
                                                                                                                                                                                                                            1. Pay
                                                                                                                                                                                                                              1. Responsibility
                                                                                                                                                                                                                                1. Praise
                                                                                                                                                                                                                                  1. Empowerment
                                                                                                                                                                                                                                    1. Rewards
                                                                                                                                                                                                                                    2. FREDRIK TAYLOR
                                                                                                                                                                                                                                      1. Workers enjoy work but go to work to earn money
                                                                                                                                                                                                                                        1. Theory based all around payment
                                                                                                                                                                                                                                          1. Believes that money does motivate and piecework is an effective method to use
                                                                                                                                                                                                                                            1. Workers trained to do one job well
                                                                                                                                                                                                                                            2. ELTON MAYO
                                                                                                                                                                                                                                              1. Believed workers are motivated by having special needs met
                                                                                                                                                                                                                                                1. Conducted a study known as the ''hawthorne effect''
                                                                                                                                                                                                                                                  1. CONCLUSIONS: Managers & Employees communicating motivates, Managers taking an interest motivates, Working in teams motivates
                                                                                                                                                                                                                                                2. ABRAHAM MASLOW
                                                                                                                                                                                                                                                  1. Devised a hierarchy of needs
                                                                                                                                                                                                                                                    1. Each level has to be fulfilled before the next motivates
                                                                                                                                                                                                                                                      1. Physiological needs (food, water, shelter)
                                                                                                                                                                                                                                                        1. Safety needs (security, protection)
                                                                                                                                                                                                                                                          1. Social needs (Sense of belonging)
                                                                                                                                                                                                                                                            1. Self esteem (praise, recognition)
                                                                                                                                                                                                                                                              1. Self actualisation (achieve dreams)
                                                                                                                                                                                                                                                            2. FREDERICK HERZBERG
                                                                                                                                                                                                                                                              1. Believes some factors motivate, some demotivate.
                                                                                                                                                                                                                                                                1. Motivators: Job enlargement, Job enrichment, Empowerment
                                                                                                                                                                                                                                                                  1. Demotivators: Anything else
                                                                                                                                                                                                                                                              2. EFFECTIVE MARKETING
                                                                                                                                                                                                                                                                1. The purpose of marketing is to meet the customers needs & wants
                                                                                                                                                                                                                                                                  1. NICHE MARKET: Small specialised market
                                                                                                                                                                                                                                                                    1. MASS MARKET: Larger more general market
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