Key business functions

Operations

Transforming raw materials (inputs) into finished products (outputs).
Production goods (tangible products) and deliverance of service (intangible product)
In operations consistency is referred to as quality
Quality is about meeting production standards
The main role of the production process to manufacture a good or deliver a service with a high degree of quality
The production process refers to the transformation of products.
Quality management/control refers to minimizing variations to defined limits, building systems to ensure variation is minimized and within these limits
E.g Coca-Cola’s Northmead factory has set limits of 2 ml either side of 375 ml
Quality assurance means to involves putting into place systems and procedures that make sure an error or fault will not happen
E.g storing fresh meat at below 4 degrees Celsius will prevent salmonella bacterium

Finance

Sources of funds (sales revenue, borrowing (debt finance), owners contribution (equity finance), expenditure of funds

Marketing

Plan, price, promote + distribute products
A total system of activities designed to plan, price, promote and distribute products to present and potential customers.
The role of marketing is to develop of product that customers want
Marketing oriented companies place the ‘customer’ at the center of their thinking
The marketing concept is a business philosophy that states that all sections of the business are involved in satisfying a customer’s needs and wants while achieving their business’s objectives
The marketing plan needs to be integrated into all aspects of the business; Operations, Finance, Human resources

Human Resources (HR)

Management between employers and employees (has a huge effect on how marketing, finance and operations are done).

Marketing

Plan, price, promote + distribute products
A total system of activities designed to plan, price, promote and distribute products to present and potential customers.
The role of marketing is to develop of product that customers want
Marketing oriented companies place the ‘customer’ at the center of their thinking
The marketing concept is a business philosophy that states that all sections of the business are involved in satisfying a customer’s needs and wants while achieving their business’s objectives
The marketing plan needs to be integrated into all aspects of the business; Operations, Finance, Human resources

Identification of target market

Target market refers to a group of customers with similar characteristics who presently, or may in the future, purchase the product
3 approaches to Target Market
1) The mass market 2)

Marketing Strategies (the four p’s)

Product

Refers to all the benefits a good or service offers to a customer
Design and style features
Quality level
Image and brand
After sales service
Warranty
Products incorporate tangible and intangible features
Product life cycle - the life of a product over four stages: Introductions, Growth, Maturity and Decline
Positioning - the image of the product in the minds of customers compared with competing products

Price

The payment required to purchase a product.
There are a number of pricing strategies that can be used
Penetration pricing is prices set below the market standard
Skimming pricing is prices set above the market standard

Promotion

The methods used by a business to inform, persuade and remind customers about its products
Position - how a product is viewed by the community
E.g Tv, sponsorships, social media, billboards, posters
Person Selling - sales representative help customers, explain the benefits, inform
Sales promotion - (Below the line promotions) attract customer interest
Public relations (publicity) - communications with customers without having to pay to get the message across
Advertising - paid communication, includes tv, radio, newspapers

Place (distribution)

Refers to the distribution channels used to move finished products to the final consumer
Intensive distribution - as many outlets as possible e.g coke
Exclusive distribution -
3 main types of distribution
Producer to customer - no intermediaries, nearly all services
Producer to retailer to customer - the retailer is the intermediary (bulky of perishable)
Producer to wholesaler to retailer to customer (e.g consumer goods)

Human Resource Management

- The effective management of the relationship between employer and employees

Human resource Cycle

Acquisition

Hiring new employees
Planning: identifying staffing needs; jobs analysis (determining the exact nature of the position to be filled)
Recruitment: attracting people to apply for the position in the business; internal and external recruitment
Selection: choosing and hiring the most qualified; testing and interviewing

Development

Improving employees skills and abilities
Induction and training: teaching employees new skills; helping employees learn tasks associated with their jobs and to improve their skills
Skills inventory; cimple the skills of the employee

Maintenance

Motivating employees to remain with the business
Monetary benefits: rewarding employees efforts through financial compensation
Non-Monetary benefits: rewards such as improved working conditions

Separation

Employees leaving the business
Voluntary: employees leaving on their own terms; retirement, resignation
Involuntary: employees being asked to leave; retrenchment, dismissal
Unfair dismissal; discrimination,

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Finance

Main source of business income is sales
Businesses can also sell land, machinery, equipment, licenses - anything that the business owns
Businesses record these transactions, funds

Income statement (profit/loss statement, revenue statement)

For a period of time
1st of July a business needs to know how much stock it has to sell - opening stock
Purchases (of stock)
30th of June a business takes a stock take - closing stock
Opening stock + purchases - closing stock = cost of goods sold
Sales - Cost of goods solds

= Gross profit

- expenses

=Net Profit

Revenue - money coming into business
Expenses - money coming out of business
To compare the amount of sales with the actual costs of goods sold
Identify whether stock is too expensive
Identify all business expenses
Enables the adoption of cost management strategies

Balance sheet

For a particular day

Assets

Something the business owns e.g cash, property, stock
Current assets - can be converted to cash within a year
Non current assets - longer then one year to convert to cash
Accounts receivable - Business is waiting for customers to pay

Liabilities

Something the business owes e.g mortgage, overdraft
Current liabilities - pay it back within a year
Non current liabilities - longer than a year to pay back
Accounts payable - owed to suppliers

Owners equity

Belongs to the owners e.g capital, profit
Contributed to the business by owners

OE = capital + net profit - drawings

Drawings

Funds taken out of the business by an owner for personal use

Cash flow statement

Shows the flow of cash into and out of a business
Over a period of time usually over a 12 month period
Typical cash inflows: sales, interest earned
Typical cash outflows: taxes, wages, rent, insurance, payment to suppliers, borrowings

Net cash flows = cash inflows - cash outflows

Accounting equation

Assets = Liabilities + Owners Equity

Financial management

Accounting

The management tool that is concerned with providing information on the financial affairs of a business

Finance

Concerned with where the business sources its funding

Sourcing

Where will the funding come from
Once a business has secured funding

Cash flow

Refers to the cash that comes in to the business and the cash that comes out
Involves anticipating cash expenditure

Stewardship

Making sure that the businesses finances are spent ethically - to grow the business
Act free of self interest

Cost management

Trying to maximize profits
A business succeeds when it can minimeis cost whilst maintaining quality

Risk management

Not making risky investments as a business e.g Bitcoin