Business Management Exam Notes Term 2 Flashcards
Management
the process of co-ordinating all resources (physical, human, financial, information) to achieve business goals
Effectiveness
“good” decision making - achievement of business goals and objectives
Efficiency
maximising output and minimising inputs -relationship between inputs & outputs OR how well resources are used in production
Stakeholder
Any person who has interest in business or affected by the business’s activities eg. employees, customers, competitors, the environment
A goal
desired outcome (target) individual or business intends to achieve within a certain time frame
Mentoring
process of developing another individual by offering coaching and modelling acceptable behaviour (being a role model)
Chain of command
how instructions are passed from one person to another
Division of labour
each worker is to specialise and become an expert/professional in ONE area of the business
Span of control
the number of subordinates who report directly to a manager or leader, the more employees assigned to a manager, the wider their span of control
Autocratic Leadership
a style of management using instructions and commands, jobs/tasks dictated by managers, little freedom of staff, expected obedience and close supervision of all work activities
Bureaucratic System
rules and regulations are established that all employees must comply with/follow
Pyramidal and Hierarchical Management Structure
a formal organisation of jobs into functional areas with clearly defined top-to-bottom management levels/ranks
Democratic and Participative Leadership
style of management where employees take part, discuss and share the decision-making role with management. Staff input and knowledge are encouraged.
An autonomous workplace
staff are given more responsibility, flexibility, freedom and opportunity to complete jobs/tasks as they see best. This means less monitoring by managers.
Job rotation
management encourages multi-skilling to avoid staff becoming bored of repetitive jobs/tasks
Flatter Management Structure
not as hierarchical, as there are fewer management levels due to closer relations and communication systems between managers and workers.
Contingency
is something that can happen but is not anticipated -> Business environment is dynamic (i.e. constantly changing)
Functional structure
operations are organised according to the business functions and employees are grouped according to their specialist skills e.g. marketing, production, human resources, accounting and finance. Often used by larger businesses and manufacturers.
Product structure
large businesses may have several product lines with specific skills needed for each product line e.g. Car manufacture with multiple models built different ways
Process structure
the functions of the business support operations in producing the product by informing them on customer needs, labour available and finance
Geographic structure
each division performs its own business functions in different geographic locations. It is often used by transnational corporations e.g. Coca-Cola Amatil is separate to Coca-Cola USA
Matrix structure
for businesses working on several projects where specialists work on one area of the firm before moving onto the next e.g. research and development work on cars, then aeroplanes, then boats and once they have finished each, operations commences its tasks.
Interdependence
mutual dependence that exists between the key business functions of a business
Outsourcing
is when a business pays another business to perform or carry out a particular function. Eg. Production, marketing, recruiting staff, cleaning, catering
++++++ for: Insufficient labour and capital resources to carry out a task, The b. may not have the skill level to do the task.
———– against: Job losses within the b. = poor public image, Quality may be inferior resulting in a loss of brand image
Operations
production process - business processes that involves transforming inputs
(raw materials, labour, financial, capital and information resources) into outputs (goods/services for sale)
Inputs
resources used in the production process and include raw materials, capital equipment (machinery), labour, information, time and money
Transformation process
the conversion (changing) of inputs into outputs - this is the activity/procedure/process that raw materials go through
Outputs
the finished goods or services
Quality control
inspections at various points in the production process to check for problems and defects. Employee performance is measured in relation to set standards or benchmarks
Quality assurance
assures customers that the products of a business are fit for purpose by achieving set standards throughout the production process, thereby preventing defects or problems before they occur. Proactive measure taken by the business (precautionary)
Total Quality Management (TQM)
ongoing, business-wide commitment to excellence that is applied to every aspect of the business’s operation. E.g. empowering employee to be involved in ideas to improve business performance; continuous improvement; improving customer focus
Marketing
all activities that plan, price, promote and distribute (place) products to existing and potential customers. Marketing identifies customer wants and aims to satisfy these wants in order to achieve the business goals
Market segmentation
subdividing the total market (all the possible customers) into groups of people who share one or more common characteristic. E.g. age, gender, income, lifestyle or education levels etc
Target market
the group of customers that the business aims to sell its products to
Mass marketing approach
seeks a large range of customers (businesses sell a standard product) eg. Classic Coke, Mineral Water, Milk, Bread
Market segment approach
seeks a business segments (breaks all the customers into separate groups of people that share similar characteristics)
Niche market approach
seeks a narrowly selected target market segment (a micro market - often a business will customise their product to the specific needs of customers) eg. Caffeine Free Diet Coke, Gluten Free Bread
Extension (product strategy)
adding new or improved products to existing product range eg. Cookies and cream and white chocolate Kit Kats
Contraction (product strategy)
remove a product from the range - stop producing it eg. Coke Life
Rejuvenation (product strategy)
redesigning or repackaging an “older” product eg. Freddo Frogs
Penetration Pricing (price strategy)
lower price than competitors to make a new product more attractive
Market (Price) Skimming (price strategy)
a high price for a product with no substitutes - “one of a kind”
Psychological Pricing (price strategy)
using “odd prices” (eg. $995) to give customers that the product is cheaper
Meet the Competition Pricing (price strategy)
prices are set at approximately the same level as competitors
Personal Selling (promotion selling)
face-to-face contact - using salespeople to sell products eg Cars, technological goods (phones), real estate (houses)
Opinion leaders (promotion selling)
involves the use of a well - known identity (celebrity, professional sports person) to endorse a business’s products eg Nike use Serena Williams, LeBron James
Relationship marketing (promotion selling)
the use of programs or strategies to maintain customer loyalty to the brand (eg. Woolworths Everyday rewards, Qantas’ frequent flyer program)
Intensive Distribution (place strategy)
product is placed in all possible locations Eg. soft drink - Coca Cola, Bottled Water, Milk
Selective Distribution (place strategy)
product is placed in a number of selected outlets Eg. Country Road clothing, Nike, Apple
Exclusive Distribution (place strategy)
location of products is limited to a few stores or outlets Eg. Ferrari, Lexus Cars, only being able to purchase the product online
Internal equity
finance is provided by existing owners eg. capital, retained profits
External equity
finance is provided by new owners to the business eg. when business becomes public company and sells shares
Short term debt
debts that will be repaid within a year eg. bank overdraft, credit card, creditors (also called accounts payable)
Bank overdraft
bank allows b. to overdraw their cheque account up to an agreed limit, to help overcome a temporary shortage of cash (A bank overdraft is usually used to pay day to day expenses)
Accounts Payable (trade credit)
b. buys goods and services from a supplier on credit. The b. receives the goods/services but pays for them later
Long term debt
debts that will take longer than a year to repay eg. mortgage, long term loan used to purchase a delivery vehicle
Mortgage
Is a loan for the purchase of property (land, buildings, factory, shop - something immobile). The property is used as security (collateral) and the loan is repaid over many (eg. 25) years
Leasing
b. rents or hires an asset (machinery, delivery vehicles, land) owned by someone else
Cash Flow Statement
Opening Balance + Cash Receipts (inflows) - Cash Payments (outflows) = Cash Balance (Closing Balance)
Gross Profit
Gross Profit (GP) = Sales Revenue (Income) - Cost Of Goods Sold (COGS)
Cost Of Goods Sold (COGS)
Cost Of Goods Sold (COGS) = Opening Stock + Purchases - Closing Stock
Net Profit (NP)
Net Profit (NP) = Gross Profit (GP) + Other Revenue (Income) - Other Expenses
Current Assets
assets that can be turned into cash within 1 year eg. Cash, Accounts Receivable/Debtors (money owed to the business by customers who have purchased goods and services on credit) and Stock (inventory)
CIA - cash, inventory, accounts
Non-Current Assets
assets that will not be turned (converted) into cash within 1 year eg. Machinery and Equipment, Land, Buildings, Motor Vehicles, Fittings and Fixtures
Non Current Liabilities
debts take longer than 1 year for the b. to repay (long term debts) eg. Mortgage, Long Term loans
Current Liabilities
debts b. is expected to repay within 1 year (short term debts) eg. Accounts Payable/Creditors (money owed by the business to suppliers it has purchased goods and services from on credit), Credit Card debts and Bank Overdraft
Owner(s) Equity
net worth b. or the owner(s) claim on the business. It is the difference between the assets and liabilities of the business.
- Capital
- Retained Profits (earnings)
- Drawings
The Human Resources Cycle (The Stages)
ADMS
A - acquisition (recruitment)
D - development (training & mentorship)
M - maintenance (monetary & non-monetary)
S - separation (redundancy)
Recruitment
finding, attracting and hiring suitable job applicants - through advertising (internal & external)
Training
development of employee skills and abilities (on the job & off the job)
Modern Award
minimum terms and conditions for a particular job in an industry or occupation
Enterprise Agreement (EA)
negotiated arrangement between employer and union (an organisation that exists to protect workers‟ rights) or a group of employees. Employees receive above Modern Award wages and working conditions.
Common Law (employment) contracts
exists when employees are not under any award or enterprise agreement. Employers and employees have the right to sue for compensation if either party does not fulfil their part of the contract. (These contracts are for high income earners e.g. executives, doctors, lawyers, celebrities and professional sportspeople)
Separation
ending of the employment relationship, which happens when an employee leaves the business
Retirement
the workers gives up doing any future paid work (voluntary separation)
Resignation
quit the job usually to go to another business (voluntary separation)
Dismissal
poor work performance/unacceptable behaviour or breaking the law (involuntary separation)
Retrenchment/redundancy
the job is no longer necessary because there is not enough work (involuntary separation)
Corporate Social Responsibility (CSR)
b. going above and beyond what is required by law eg. paying their workers above the minimum wage, using environmentally friendly packaging or phasing out single-use bags
A Business Information System (BIS):
gathers data, organises and summarises it, and then converts it into practical information that can be used by managers to make decisions.
