business management

management

the process of working with and through other people to achieve business goals in a changing environment

efficiency

how effectively a company generates products and services related to the amount of time and money needed to produce them

business goals

targets to work toward in the longer term; the overall accomplishments the organisation plans to achieve

business objectives

detailed set of targets that a business wants to achieve by a stated time. objectives are more detailed, shorter-term, and specific than goals

POLC

principles of business management → planning, organisation, leading and controlling

planning

the preparation of a predetermined course of action for a business and involves setting goals and objectives whilst taking into account the current position of the business

organisation

the structuring of the organisation to translate plans and goals into actions and involves working out the steps needed to achieve the business goals

leading

motivating employees to work hard to achieve the business goals and involves communicating, directing, and motivating staff

controlling

comparing what was intended to happen with what has actually occurred and involves monitoring the business to see if it achieved its goals - and making changes if necessary

skills of management

interpersonal, communication, strategic thinking, vision, problem-solving, decision-making, flexibility, adaptability to change, reconciling the conflicting interests of stakeholders

strategic planning

long term planning for a business as a whole, developed by senior management

achieving business goals

profit, market share, share price, growth, social, environmental

market share

the percentage of total sales a business has compared with its competitors in a particular market

social goals

relate to the impact that the organisation has on the wider community in which it operates.

* aim: ensure the business is a good ‘corporate citizen’

staff involvement

involving employees in the decision-making process and giving them the necessary skills and rewards

innovation

The process of introducing a new product or improving an existing one through new ideas, methods, systems, and procedures.

motivation

Refers to the process of stimulating people and the processes that initiate, guide and maintain goal-oriented behaviour where employees are interested and committed to their jobs.

mentoring

A method of informal training whereby a less knowledgeable and less experienced employee is guided by a more senior member of staff.

induction

the process of welcoming newly recruited employees and supporting them to allow them to adjust to their new roles and working conditions

tactical planning

medium-term plans that affect specific areas of the business and are developed by middle management

operational planning

short-term plans that affect the day-to-day operations of the business and are more detailed about the way in which the business will operate

benchmark

the process of measuring performance against established standards such as a comparison of a firm’s performance against standards set by competitors in the same industry in the domestic market

world’s best practice

comparison of a firm’s performance with the highest standards achieved globally

classical approach

* autocratic leadership style where manager held total control


* hierarchal structure based on division of labour
* goal was to maximise employee productivity whilst saving time

chain of command

the strict line of authority

span of control

the number of workers that a manager directly controls

behavioural approach

* attempts to satisfy social relations and personal fulfilment to motivate employees to seek their best performance
* flatter hierarchal structure
* participative/democratic leadership style
* employees are included in decision making processes

contingency approach

* flexible approach based on the company’s internal and external needs and current business position

operations

* the function responsible for combining and transforming inputs to produce a final output or provide a service
* involves planning, organising, and controlling all the activities necessary to combine inputs into outputs

services

* intangible
* quality of service is determined by the knowledge and skills of the employees

production process

inputs → transformation processes → outputs

job production

a production method where only one product is completed at a time. Each order is unique and meets the specific requirements of the customer.

batch production

outputs are made in groups or small amounts of the same output. if demand increases for a particular good increases, the business can add more batches and vice versa

flow production

continuous flow of inputs that are transformed into outputs. outputs have the same features and there is less use of labour

quality management

a strategy used to ensure that the quality of the product meets the expectations of the business and customer

quality control

establishing standards and measuring the outputs of a business against those standards.

quality assurance

Establishing and using a set of procedures and/or processes that will prevent products from having problems (such as faults or errors).

total quality management

An approach to quality control that relies on continuous improvement in all aspects of the business.

marketing

the business function that connects the business to its customers and is the main revenue-generating activity of the business. Marketing involves developing a product that suits the tastes and preferences of consumers, then pricing it, promoting it, and placing it on the market for purchase.

market research

Market research involves gathering, tabulating, and analysing the data collected from the target market to gain key information to help the business ensure that its product is what the customer wants.

target market

The focus of the firm’s marketing strategy. It will include existing as well as potential customers. The target market essentially comprises the people who the business believes will be the buyers and users of its products.

market segmentation

the division of the total market into small segments based on the similar or common characteristics of a customer group such as demographic, behavioural, geographic, and psychographic factors

mass market

includes all consumers

niche market

a highly specialised market with a small number of potential customers

geographic

the state, city, or region the consumer lives in

demographic

features of individual customers such as age, gender, education, and income

psychographic

a person’s internal characteristics such as attitudes, values, personality, and lifestyle

behavioural

a customer’s behaviour when interacting with the company such as brand loyalty, purchase occasion, usage rate

marketing mix (4 p’s)

the process of developing a product that meets the needs of consumers and implementing a series of promotion, pricing, and distribution strategies that will encourage consumers to purchase the product

product

* refers to a good or service that can be exchanged in the market
* strategies - tangible and intangible qualities and intended to differentiate the product from others

positioning

the image of the level of quality of a product in the mind of the consumer compared with alternative products offered by the firm’s competitors

brand

A name, design, or symbol that distinguishes a particular product from the product of another business.

trademark

A symbol or name that a business uses and has registered to represent its products. It is part of a business’s intellectual property.

intellectual property

The research and ideas that a business has developed into a product, trademark, design, name, or artistic work that is unique to the business and can earn income. Intellectual property is an example of an intangible asset.

price

the price must be compatible with the marketing and financial objectives of the business. prices should ensure the business is able to make a profit but other factors may be taken into consideration such as competitor’s pricing

cost of production pricing

a profit margin or mark-up is added to the cost of production

demand pricing

the firm sets the price based on what consumers are prepared to pay for the product

competition based pricing

competitor’s prices are used as a guide

prestige pricing

based on the product’s ‘image’ established through positioning

loss leader pricing

the product is sold for less than it cost to make or supply

promotion

the process of creating and maintaining consumer awareness of and interest in a particular product

sales promotion

he business may offer incentives to the consumer through competitors or special offers

advertising

advertisements may appear in newspapers, in magazines, on billboards, on television or online.

direct selling

direct communication to consumer e.g. phone calls. emails, text messages

product placement

the product is used or demonstrated by the actors in a television show or movie

placement

Placement refers to how a product is distributed to its market – that is, the transportation used, the storage of goods, and the outlets and locations that will sell the product.

intensive distribution

this maximises the firm’s sales by ensuring that its products are available through as many outlets as possible

selective distribution

this makes a product available only to a limited number of approved retailers

exclusive distribution

only one retailer or wholesaler being permitted to sell a supplier’s product in a particular area or territory

finance

* concerned with acquiring and managing the funds that are necessary for goods and services to be produced
* the function responsible for organising the resources needed to pay for all aspects of each key business function.
* it involves tracking the cash inflows and outflows of the business to determine if the business is making a profit.

accounting

a management process that is involved with recording and reporting financial information in financial reports for use by stakeholders.

cash flow statement

a financial report that summarises cash transactions – involving cash flowing into and out of the business – that have occurred over a period of time.

income statement

a summary of all revenues generated and expenses incurred by a business over a specific period of time, such as a financial year. It is completed to work out the business’ profitability and efficiency.

balance sheet

A summary statement of the assets a business owns, the liabilities the business owes and the equity the owners have invested in the business.

equity finance

A method of raising capital for a company by issuing shares of stock to investors in exchange for ownership

debt finance

A method of raising capital for a company by borrowing money from external sources such as banks, financial institutions, or bondholders, which must be repaid with interest

liquidity

indicates the ability of a company to meet its short term obligations by having sufficient cash or easily convertible assets. Current assets are listed in order of liquidity, which is how easily they can be turned into cash.

liquidation

the process of converting a company's assets into cash, and using those funds to repay, as much as possible, the company's debts.

insolvency

a financial state in which a business cannot pay all of its liabilities, both current and noncurrent.

non current assets

assets that can earn revenue for a business over a long period of time, usually greater than 12 months such as land, equipment, and vehicles.

operating expenses

cash flow from normal operations of the business

investing expenses

cash flow from business investments

financial expenses

cash flow relating to finance

bank overdraft

an extension of credit from a financial institution to its customer when they execute a transaction for which the account holder has no sufficient funds.

profit / income formula

revenue - expenses = profit

cost of goods sold (COGS)

* a specific type of expense that relates directly to the production of the good or service.
* opening stock + purchases - closing stock = COGS

gross profit

* revenue remaning after paying for COGS
* sales revenue - COGS

net profit

* the amount of money the business earns after deducting all operating, interest, and tax expenses over a given period of time
* gross profit - expenses

assets

liabilities + owner’s equity

current assets

assets that are expected to be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer.

accounts receivable

Amounts owed to the business by its customers for goods or services provided on credit

goodwill

The value a company gets from its brand, customer base, and reputation associated with its intellectual property.

liabilities

Liabilities refer to the money or debts that the business owes and needs to repay; the financial obligations of the business

current liabilities

debts and obligations that are expected to be settled within one year or the normal operating cycle of the business

non current liabilities

debts and obligations that are not expected to be settled within one year or the normal operating cycle of the business

accounts payable

Amounts owed by a company to its suppliers or vendors for goods or services purchased on credit.

owner’s equity

the residual interest in the assets of a business after deducting liabilities. It is the ownership claim on the assets and earnings of the company by its owners or shareholders.

capital

The initial investment or contributions made by the owners or shareholders of a business to establish and finance the operations of the company

retained profits

net profit reinvested into the business