Management Practices and Business Functions Study Notes

Features of Effective Management

• Effectiveness: Measures the degree to which a goal has been achieved.

• Efficiency: Compares the resources needed to achieve a goal (costs) against what was actually achieved (benefits).

• Social Process: Management involves working with and through others to achieve goals in a changing environment.

• Resource Coordination: Managers must coordinate limited resources efficiently; the most efficient coordination occurs when benefits exceed costs.

• Essential Tasks:

  • Planning: Setting objectives and deciding on methods to achieve them.

  • Organising: Structuring the organisation to translate plans into action.

  • Leading: Influencing and motivating people to work towards objectives.

  • Controlling: Evaluating performance and taking corrective action.

Essential Management Skills

• Interpersonal: Involves empathy, emotional intelligence, conflict resolution, and teamwork.

• Communication: Clarity, conviction, concreteness, and active listening through various tools (e.g., emails, meetings).

• Strategic Thinking: Identifying risks and trends to create a big-picture view for problem-solving.

• Vision: Clear, aspirational statements providing long-term purpose (e.g., "To make people happy").

• Problem-Solving: Navigating challenges using analytical thinking and resilience.

• Decision-Making: Identifying choices, gathering information, and assessing alternatives.

• Flexibility and Adaptability: The capacity to alter operations in response to new information or market signals.

• Reconciling Stakeholder Interests: Finding common ground among stakeholders with opposing values or resource needs.

Achieving Business Goals

• Profits: Essential for survival. Profit maximisation occurs at the maximum difference between Total Revenue ($TR$) and Total Cost ($TC$).

  • $Profit = TR - TC$

  • $TR = \text{Total sales} \times \text{Price}$

  • $TC = \text{total expenses incurred}$

• Market Share: The business's share of total industry sales, expressed as a percentage.

• Growth: Can be internal (new products, equipment) or external (mergers and acquisitions).

• Share Price: Companies aim to maximise shareholder returns through rising share prices and healthy dividends.

• Social Goals: Includes community service, providing employment, and promoting social justice.

• Environmental Goals: Adopting practices like "recycle, renew and regenerate" to ensure sustainability.

Staff Involvement and Human Capital

• Innovation: Creating or improving products and services. Success requires a safe environment that rewards new ideas.

• Motivation: The internal process that directs behavior. High motivation increases productivity.

• Mentoring: Experienced employees acting as guides to strengthen dedication and commitment in protégés.

• Training: An investment in human capital visant to improve productivity and develop multiskilled employees. Continual skill upgrading is essential for maintaining a competitive, adaptable workforce.

  
  

Management Approaches

• Classical-Scientific: Focused on efficiency and productivity. Principles:

  1. Examine tasks for efficiency.

  2. Select and train suitable workers.

  3. Cooperate with workers on methods.

  4. Divide work responsibility between management and workers.

• Strict hierarchical structure, clear lines of communication, and specialization. Features discipline and fair rewards.

• Harder worker effort led to higher output + greater profits

• Focus on saving time to improve efficiency

• Management as planning (strategic = long term, tactical = medium term, operational = short term), organising (determining work activities, classifying & grouping, assigning & delegating), controlling (establish standards, measure performance, set benchmarks, take corrective action)

Autocratic leadership style

• Makes all decisions, dictates work methods, limits worker knowledge about what needs to be done to the next step to be performed and frequently checks employee performance + sometimes gives punitive feedback

• Behavioural Approach: Focuses on social and psychological needs. Acknowledges that worker satisfaction increases output; employees = main focus

• Recognises importance of worker participation

• Successful management depends on understanding employees’ needs, expectations

• Feeling part of a team increases job satisfaction and output.

• Businesses support employees through facilities and flexible working conditions.

• Management as leading, motivating, communicating

  Advantages	Disadvantages
  Increased empowerment of employees; can take ownership of their work Worker recognition and appreciation should lead to increased motivation Improved relationships between managers and staff	Lack of control Powerful people can disrupt the process Communication is no longer top-down, so confusion may arise It’s difficult to accurately predict employee behaviour

Democratic Leadership style

• Managers encourage employees to share opinions and suggestions, recognising that the best solutions often come from experienced team members with technical expertise.

Teams: involves people who interact regularly to coordinate their work towards a common goal.

• Fosters cohesion among members = reduced conflict + enhanced efficiency as new/ diverse ideas a being brought

• Flatter structures give employees greater responsibility, empowering employees and promoting more collaborative work environment/ stronger workplace culture

• Builds trust + achieving common goal

Contingency Approach: Stresses flexibility and the need to blend different management techniques to suit unique, changing circumstances.

• No two situations are exactly the same; each requires unique solution

Operations Management

• Outsourcing: the use of external sources or businesses to undertake business functions or activities for the business

• Transformation Process:

  • Inputs: Includes Transformed Resources (materials, information, customers) and Transforming Resources (human resources, facilities).

  • Transformation processes: The conversion of inputs into outputs. In manufacturing, it may involve assembly or creating Elaborately Transformed Manufactures (ETMs). In services, it is less visible and relies on customer interaction. STMs = simply transformed manufactures; manufactured goods intermediate by nature and have small amount of value.

  • Outputs: The final good or service provided to the consumer. Output must always be responsive to customer demands. 

• Quality Management:

  • Quality Control: Physical checks and inspections against benchmarks to reduce problems/ defects. In a service business, an inspection of employee performance can be used as a means of quality control.

  • Quality Assurance: Systems like ISO 9000 to ensure set standards are achieved. Businesses comply with their requirements to remain competitive locally and internationally.

  • Total Quality Management (TQM): Commitment to excellence emphasising continuous improvement in all aspects of business's operation by sharing responsibility among all members of business. Aim = create a defect-free production process, and maintain a customer focus in operations. Constant evaluation of + improvement in way things are done.

    
    

Marketing Strategies

• Marketing is the Process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.

• Finding out what the customers want then attempting to satisfy their needs.

• Target Market Identification:

  • Mass Marketing: One marketing mix for the entire market, no differentiation, seels large range of customers, i.e milk, electricity

  • Market Segmentation: Subdividing the total market based on demographic, geographic, psychographic, or behavioural factors.

  • Niche Market: A narrowly selected, highly specific segment

• Significance of Target Market

  • Allows business to better satisfy wants/ needs of a targeted group as business can:

    • Use marketing resources efficiently

    • Understand consumer buying behaviour

    • Collect + compare data over time

    • Refine strategies to influence consumer choice

• The Marketing Mix (7 Ps):

  • Product: Product’s core attributes. Customers will buy products that not only satisfy their needs but also provide intangible benefits i.e feeling of security, prestige, satisfaction or influence

Price: Price set too high could mean lost sales, unless superior customer service is offered. Price set too low may give customers the impression of a ‘cheap and nasty’ product.

• Promotion: The role of promotion is to inform, persuade and remind consumers about a business’s products to attract new customers, increase brand loyalty and encourage existing customers to purchase more.

• Place: Distribution channels (e.g., Producer to Wholesaler to Retailer to Consumer). Where is geographically located.

Financial

• Financial Reports:

  • Cash Flow Statement: Records movement of cash receipts (inflows) and payments (outflows).

    • $Opening balance + Inflows - Outflows$

    • Inflows 

      • Cash sales, money from selling assets, securing loans, receiving payments from debtors/ accounts receivable, dividends if investors

      Outflow

      • Expenses (inputs, repairs, wages, insurance, rent), paying creditors/ accounts payable, (creditors = people who you owe money)

  • Income Statement (Profit + Loss): Shows revenue and expenses incurred over the accounting period with resultant to determine profit or loss.

    • $Gross Profit = Sales - COGS$

    • $COGS = \text{opening stock} + \text{purchases} - \text{closing stock}$

    • $Net Profit = Gross Profit - Expenses$

    Selling	Administrative	Financial
    Expenses directly related to generating sales.	General costs of running the business operations.	Costs related to borrowing or managing money.

    • Balance Sheet (Statement of Financial Position): Represents assets, liabilities, and owner’s equity at particular point in time

    • Assists with process of financial decision-making + comparison of overall financial position with previous periods.$ASSETS=LIABILITIES-\text{ OWNER'S EQUITY}$

    • Proportion of liabilities compared to equity is gearing; measures relationship between debt and equity.

      • Highly Geared: A business that has more debt than equity.

      • Risk Correlation: The higher the gearing, the greater the risk.

      • Financial Stability: High gearing increases the risk of not meeting long-term financial commitments

    • Current = within 12 months, non-current = more than 12 months

  Financial Reports	Cash Flow Statement	Income Statement	Balance Sheet
  When they’re created	Weekly or monthly	Once or a few times a year
  What they tell us	Financial performance		Financial position
  Who creates them	Accountants write up financial statements.
  How they used	Stakeholders can read them and use information to make decisions.
  Why they’re important	Managers can see how the business is going financially and identify changes Useful for shareholders if they’re looking to invest

• Gearing: The relationship between debt and equity. High gearing indicates greater financial risk.

Human Resources

Acquisition:

Identifying staffing needs; businesses have to plan for positions.

• Job analysis: forecasting a business's staffing needs. Business must determine exact nature of a job before it can recruit right person to do it.

  • Job description: written statement describing employee's duties, tasks and responsibilities associated with the job.

  • Job specification: list of key qualifications needed for job i.e education, skills, experience.

• Recruitment: Finding + attracting the right people to apply for a job vacancy using advertisements, employment agencies.

• Selection (testing, interviews, background checks).

  • Employer chooses most suitable applicant for vacancy - identifying skills, qualifications and experience of each applicant, and relating them to the job specification to achieve the closest possible match.

  • Shortlisting applicants = testing, interviews, background checks

    
    

Training and Development:

Training focuses on immediate task efficiency; development focuses on long-term career growth.

Benefits of training: directly targets specific job-related information + improves task execution

Benefits of dev: acquires higher level knowledge/ strategic leadership skills, broad career wide learning/ training integration

Maintenance:

Retention of staff through monetary incentives (bonuses, fringe benefits like company cars) and non-monetary rewards.

• Employment Contracts: Legally binding agreements such as Awards, Enterprise Agreements, and Common Law Contracts.

• Separation:

  • Voluntary: Retirement, resignation, or voluntary redundancy.

  • Involuntary: Involuntary redundancy (retrenchment) or dismissal.

Management and Change

• Internal Influences: Managers and employees can serve as driving or restraining forces.

• External Influences: Competition, legislation, technology, and social pressures.

• Effective Management of Change: Requires Business Information Systems (BIS) for data gathering, setting achievable goals, and overcoming resistance through communication and support.