Business Objectives And Strategic Decisions Flashcards
Business aims
The overall long term goals of the business.
Business objectives
The specific and measurable results the business is trying to achieve.
Strategic objectives
The longer term specific objectives.
Tactical objectives
The short term specific objectives.
Operational objectives
The objectives of each functional area.
Why set objectives? (x4)
Gives the business direction
Helps set targets
Helps with decision making
Helps write the business plan and seek investment
SMART objectives
Specific
Measurable
Achievable
Realistic
Time related
Job production
Making a unique and specific product to the customers’ order.
Batch production
Making a specific quantity of a product.
Mass / flow production
Making very large quantities of the same product on the one machine.
Advantages of job production (x4)
Can charge high prices
Can meet specific customer needs
Motivated staff (end product)
Interesting work for staff
Disadvantages of job production (x7)
May take a long time to receive a full payment
Time consuming
Need to break customer loyalty to other businesses
Expensive (staff, resources etc) - high cost of production
Training staff
Only specific customers
Cash flow issues
Advantages of batch production (x6)
Can make a wide variety of products
More interesting for workers - variety
Greater quality control
Producing smaller quantities can reduce waste
Useful for seasonal items
Machinery isn’t continually active - reduced running costs
Disadvantages of batch production (x5)
Time consuming to change batches
Possible high cost of errors
Periods of downtime where the specialist machinery must be altered
Increased storage costs for large quantities of produced products
High training costs
Advantages of flow production (x8)
No downtime
Efficient
Consistent
Reduced labour costs - low skilled employees
Produce a high number of products at a low cost
Production can happen 24/7
Can benefit from economies of scale
Fewer human mistakes
Disadvantages of flow production (x7)
Repetitive and boring for workers - lack motivation
Difficult to alter the production process
High cost of machinery
All products have to be very similar or standardised
High storage costs
High maintenance costs
Low retention
Cell production
The flow production line is split into a number of sections.
Each team (or ‘cell’) is responsible for several parts of the finished product (multi-roles).
Specialisation
Focus on one type of product.
Division of labour
Specialisation of labour into separate tasks
This ensures higher productivity per worker
Productivity
The ability to maximise the use of your inputs (workers and machines).
Advantages of specialisation (x7)
Jobs are done more efficiently (fewer mistakes)
Jobs are done to a higher standard
Work is done more quickly
Organised workplace
Higher productivity
People get very skilful
Less waste
Disadvantages of specialisation (x4)
Have to train staff
Boring and repetitive work
Hard to employ and replace staff with a good skill set
Difficult to replace staff on sick days
What is a mission statement?
The overriding goal of the business and the reason for its existence.
Provides a strategic perspective for the business and a vision for the future.
An effective mission statement… (x4)
Differentiates the business from its competitors
Defines the markets or business in which the business wants to operate
Is relevant to all major stakeholders - not just shareholders and managers
Excites, inspires, motivates and guides - particularly important for employees
Why are mission statements criticised? (x5)
Not always supported by actions of the business
Often too vague and general
Viewed as a public relation exercise
Sometimes regarded cynically by employees
Not supported wholeheartedly by senior management
Why innovate (and invent)? (x11)
Grow your business
Adapt to change
Make customers buy again from you
Stay ahead of the competition
Take advantage of new technologies
Achieve more success
Dominate the market
Charge a higher price
Improve / meet customer wants and needs
To be the first with no competitors
Improve brand name
Problems with innovation (and invention) (x6)
Very costly
Time consuming
Can end up wasting resources by developing something that doesn’t sell
Risk of failure
Resistance to change to new ways of thinking
Employees may not be motivated to innovate
Critical path analysis
The sequence of project activities which add up to the longest overall duration.
The critical path determines the shortest time possible to complete the project.
Advantages of critical path analysis (x3)
Reduces the risk and costs
Helps spot which activities have some slack (“float”)
Links well with other aspects of business planning such as cash flow
Disadvantages of critical path analysis (x3)
Reliability is based on accurate estimates
Does not guarantee the success of a project
Resources may not actually be as flexible
Free float
The amount of time that an activity can be delayed without delaying the start of the next task
Free float calculation
Next task’s EST - this task’s EST - duration
Total float
The amount of time that an activity can be delayed without impacting on the completion date of the whole project
Total float calculation
This task’s LFT - this task’s EST - duration
Dummy run
A task that needs completing, but its delay has no impact anywhere (e.g printing off the marketing brochures).
Dummy run = 0 (shown by a broken line).
PERT
Program evaluation review technique
Estimated duration of a project is calculated by:
((optimistic time)+(4 x likely time)+(pessimistic time)) / 6
Disadvantages of a Gantt chart (x5)
Difficult to prepare and manage
Time consuming to update
All tasks are not visible in a single view
They don’t designate priorities
They don’t offer much detail regarding task dependencies
Measuring productivity (output per worker)
Number of products / average number of employees
Measuring productivity (output per machine)
Number of products (output) / capital
Measuring productivity (sales revenue)
Sales revenue / staff
Ways to improve productivity
Motivation techniques
Targets
Monitoring staff
Better machinery
Training
“Marginal gains” (improve everything by a small amount)
Factory layout
Work your staff harder
Capacity utilisation
What percentage of your potential capacity you are currently using
Capacity utilisation calculation
(Actual output / potential output) x 100
Benefits of working at full capacity (x2)
More output
Justifies wages and equipment
Disadvantages of working at full capacity (x2)
Breakages
Staff illness / stress
Outsourcing
A company hires a third-party to perform tasks, handle operations or provide services for the company
