Chapter 7 - Management Process

Four key business functions

Operations, finance, marketing, human resources

Goods

Physical product made by a business that is tangible and can be touched

Services

Intangible product of the business, that cannot be touched. Assistance or advice during or after a sale.

Interdependence

The two-way, mutual reliance of each key business function, they are dependent upon the assistance of one another to perform their return key role in order for the first key business functions to perform its role.

Transformed resources

An input into the production process which is used up, or transformed in someway during production processes. These include materials, information and customers.

Transforming resources

a resource which is used to act on transformed resources in order to produce the output of the business. This includes human resources and facilities.

Facilities

Equipment, factories and other non-human resources which act upon transformed resources in order to produce outputs of the business.

Elements of the output of the business

The good, the service and any warranties that are provided in relation to the goods and services.

Monitor

obtain data about processes or outcomes during production processes

Control

Compare the data obtained through monitoring to targets for those measures and take corrective action where required

Improvement

Make changes to transform to transforming resources in order to achieve an increase in the performance

Quality control

Processes to monitor and control quality within operations processes

Quality assurance

A documented system about all the processes and controls monitoring and controlling in relation to quality throughout the entire production enterprise

Continuous improvement

A culture of working to continuously improve the level of quality achieve within production processes.

TQM

Total quality management, a managed approach for an organisation, centred on quality, based on the participation of always members and Amy at long-term success through customer satisfaction, and benefits to all members of the organisation and society.

Elements of the six step marketing process

Conduct situation analysis, conduct market research, establish market objectives, identify target market, develop marketing strategies and implement and monitor and control.

Ways in which the market can be segmented

Geographic, demographic, psychographic and behavioural

Niche market

A small specialised market for a particular product or service, the market for which is identified through market segmentation.

Mass market approach

Where a business targets the entire market

Primary target market

The segment of market which a business believes will provide the best chance to sell

Secondary target market

An additional target market, with the business is going to target. Generally speaking a secondary market will provide a more difficult target market to sell to, and maybe targeting a smaller overall volume of sales.

Marketing mix

A range of strategies are used to successful market to consumers, including product, price, promotion, place.

Seven Ps of marketing mix

Product, price, promotion, place, people, processes, physical evidence.

Product

The specification of the good or service the business produces, including materials, product design, product features, performance, quality, durability, packaging, warranty and branding.

Price

The price for the product, which will be determined through either a mathematical process (pricing method, including cost plus a margin) or a strategic process (pricing strategy) having regard to the novelty of the product, and what the business is trying to achieve with the product (for example price skimming or price penetration for new products, or loss leaders to encourage customers into the store to purchase other full price items).

Promotion

The specification of how target consumer awareness and interest will be developed in order to achieve the market objective. This will include plans for advertising, promotion, public relations, sponsorship and the like.

Place

The specification of where the customers will be able to purchase the goods, which includes the strategy for digital and retail sales environments, warehousing, distribution and stock levels. Whilst operations will implement the place strategy, it is marketing's responsibility to design the strategy for all of the logistics and distribution of the product which will be required.

People

The specification for the people at the business who will be involved in the delivery of the good or service, and also in pre and post sales activities, in promotion activities, and in finance activities which engage with the target market. This strategy will affect recruitment, culture, training and remuneration budgets.

Processes

The specification for the processes encountered by people in the target market as they obtain information about the goods and services, purchase the goods and services, attend to warranty, repairs, after sales service and further purchases of the business' products. Typically these processes are a mix of interpersonal contact (in person or telephone), digital interpersonal contact via email or text, or no human contact automated ordering and other processes via websites and mobile applications.

Physical evidence

The specification for the brand elements that the e customers in the target market encounter including the store, signage, the invoice, the website - this includes all elements of artifacts (other than the product) which people in the target market encounter in relation to the business and its products.

Brand

The intangible son of a product attributes. What's potential purchase of things of when I hear the brand name.

Cost plus a margin pricing

setting the price for a product which commences by totalling all cost element in production and adding a percentage, the margin, to that number.

Market based pricing

A method of setting prices where the prices determine not by the business but by the relevant market in which the product or service is sold

Competition based pricing

Prices which I said having regard to the relative prices of competitive businesses.

Promotion

The strategy for any type of marketing communication used to inform or persuade target customers of the relative merits of a product, service or brand. The objective of promotion is to increase awareness, create interest, generate sales or create brand loyalty.

Elements of the promotion mix

Advertising, personal selling, relationship marketing, sales promotions, publicity, public relations

Advertising

A paid message by those who send a message intended to inform or influence people who received it.

Mass market

A wide separation between business and consumer and indirect communication.

Direct marketing

The business present information about their company, product, or service to the target market without the use of advertising middleman.

Relationship marketing

Forming a long-term relationship with customers rather trying to encourage a one time sale. Relationship marketing focuses on fostering customer loyalty by providing exemplary products and services and actively managing the relationship with the customer.

Public relations

Activities designed to create and maintain goodwill of a businesses various publics often through publicity and other non-paid forms of communication.

Publicity

An activity within public relations, which refers to a form of public relations to provide information in the media that relate to the business' products, and unlike advertising is not paid for by the business.

Two types of distribution strategy

Direct distribution where no other parties are involved between the business and the consumer, and indirect distribution where the consumer does not purchase the product from the business that made the product, but the purchase occurs as a result of the actions of one or more other businesses between the producer and the consumer

Distribution channels

Business to consumer (direct), business to retail to consumer (indirect), business to wholesale to retail to consumer (indirect).

People

Refers to staff and sales people who work for the business - particular those will interact with the customers at any time.

Processes

Refers to the activities, actions, procedures and protocols by which the service or product is created and acquired by the customer including pre-sales processes, sale and delivery processes and post sale process

Physical evidence

All elements of environment in which a good or service is delivered which are perceived by the customer.

Profit:

revenue less expenses for a period of time

Liquidity:

the ability of a business to meets its financial obligations in the short term

Solvency:

the ability of a business to meet its financial obligations in the long term

Gearing:

the extent to which debt has been used to fund the business

Asset:

something of value owned by the business - like cash, or a building

Liability:

an amount payable by the business - like an outstanding loan, or unpaid amounts to suppliers

Equity:

the financial value of the owners' interest in the business which is calculated as assets less liabilities

Current assets:

assets which are cash or will be converted to cash within 12 months

Non current assets:

assets which will not be converted to cash within 12 months

Current liabilities:

liabilities which will be paid within 12 months

Non current liabilities:

liabilities which will not be paid within 12 months

The three financial statements

The cash flow statement, the income statement and the balance sheet.

Cash flow forecast

A monthly projection of cash movements in an out of the business in future.

Cash flow statement

The annual statement for past movements of cash in and out of the business.

Opening cash

The amount of cash in the business has available in the bank or on hand on the first day of the relevant period.

Closing cash

The amount of cash the business has available in the bank or on hand at the end of last day of the relevant period.

Overdraft

An arrangement with the bank where the business can overdraw their account up to a specified limit and pay interest on the amount overdrawn as a form of short-term funding.

Cost of goods sold

The cost of acquiring the goods which have been sold during the year. Calculated as opening inventory, plus purchases less closing inventory.

Gross profit margin

Gross profit divided by sales

Gross profit

Revenue less cost of goods sold

Net profit margin

Net profit divided by total sales

Net profit

Gross profit then taking away other expenses incurred in selling and administration processes.

Question answered by cash flow forecast

Will the business have sufficient cash in the months ahead

Question answered by cash flow statement

How have the operations, financing and financing and investing activities of a business influenced cash in the business over the last 12 months

Question answer by the income statement

Has the business made a profit over the last 12 months

Question to answer by the balance sheet

What does the business own and owe at the end of the accounting period.

Examples of assets

Cash, equipment, vehicles, amounts over the business by customers, land and buildings, stock of the business has on hand for sale.

Examples of liabilities

Loan to the business from the bank or other lenders. Amounts owed by the business to suppliers that have not yet been paid.

Accounting equation

Assets equals liabilities plus equity

Cash

Cash on hand in the business or the bank account for the business

Inventory

Goods ready for sale to customers - also known as inventory or finished goods

Accounts receivable

Amounts payable by customers of a business for invoices sent to customers but not yet paid by customers. Also known as dead as a trade receivables.

Overdraft

Amount currently overdrawn on the overdraft facility

Accounts payable

Amounts payable by the business to suppliers with the goods and invoice have been received but the invoice has not yet been paid. Also known as creditors or trade payables.

Goodwill

An asset that arises where a business purchases another business and pays more for that business than the current value of the assets. The difference between the sale price paid and the assets acquired is then recorded on the balance sheet of the acquiring business and called goodwill.

Mortgage

A long-term loan from the bank which is secured by mortgage over I said to the business.

Debenture

A long-term loan with a fixed interest rate and fix date for a payment with a loan secured over property.

Unsecured notes

A long-term loan with a fixed interest rate for repayment where the loan is not secured.

Equity on the balance sheet

Includes issued capital, the amount paid for the shares and also retained profits which is profits of a business which have not been distributed to shareholders in the form of dividends.

Human resource cycle

Acquisition, development, maintenance, separation

Acquisition

Labour is acquired by the human resources to end of the business, to be used within each of the key business functions

Development

Employees within the business I developed through training, development and performance management

Acquisition, development, maintenance, separation

Acquisition

Maintenance

Labour is paid a range of mantra not mandatory benefit in accordance with the contract and legal requirements

Separation

Human resource processes include voluntary separation of employees resignations retirement voluntary redundancies and also in voluntary separation for me to contact or involuntary redundancy.

Elements of the acquisition process

Planning needs, recruitment, selection

HR Development

Management take time to consider individual employee career growth, the employee's long-term ambitions and needs are discussed in performance reviews

Job description

An outline of the tasks to be performed by the role.

Job specification

An outline of the skills and experience as required to perform a job description

Recruitment

The process with nature by which qualified candidates are attracted to apply for open positions.

Selection

Choosing the right candidates from the pool of eligible candidates to fill the bacon job positions in the business.

Development

An element of the human resource cycle which relates to the training and development of employees in the business.

Training

Activity designed to ensure the employees have the skills and knowledge necessary to perform their current jobs