business topic 3 (chap 12-13) Flashcards
1
Q
role of business plan
A
set out the desired goals and direction of the business
-essential to long-term success **
- necessary for all businesses, regardless of size/function.
-neglect**, business failure because no clear understanding of the business’s future.
-fundamental to constantly refer back to plan
-sticking too rigidly/not adopting to internal and external changes to bus environment detrimental
-identiies strengths and weakness, opp and threats, probability of success
-without, impossible make projections and evaluate performance
2
Q
why sould business plan be professionally presented
A
-may be read by bank managers, accountants, financial advisers, company directors, potential purchasers or interested partner
- poorly presented plan will convey the impression that little thought has been given to the planning process.
-reflect poorly on owner and capabilities
transnational corp
- comprehensive, hundreds of pages, time, effort, money to prepare
-highly professional distributed to large no. company’s senior management
SME
-10-15 pages
-processed at home
-circulated to few ppl
3
Q
main reasons why business owners fail to plan
A
- want to start business straight away
-impulsive actions and mistakes
-working hard doesn’t guarantee success
4
Q
9 common elements of business plan 9
A
!1. EXECUTIVE SUMMARY(brief overveiw)
- GOALS
- STRATEGIES
-how to achieve goals - BUSINESS DESCRIPTION AND OUTLOOK
-overveiw of industry where bus operate
-situational analysis -
MANAGEMENT AND OWNERSHIP
-nature and type of organisational structure
!6. OPERATIONAL PLANS
-PP, staff
!7. MARKETING PLANS
-product
-price
-promotion
-ditribution details
!8. FINANCIAL PLANS
-financial needs
-methods to evaluate performance
!9. HUMAN RESOURE PLANS
-present and future staff requirements
5
Q
benefits of a business plan 4
A
plan = direction –> saves money, time, effort, increases likelihood of success
1.** tests viability** of business
2. proactive > reactive
3. maintain operation, focusing on goals and objectives
4. identifies strengths and weaknesses
6
Q
4 sources of planning
A
diff lvls of management/employees
R&D
external enviro (political, social, eco, tech, geo, legal)
specialists (accountants, finance brokers, consultants) provide knowledge
7
Q
situational analysis
A
colection of methods managers can use to analyse bus’ internal and external enviro
8
Q
SWOT analysis
1 method of situational analysis
A
identification and analysis of internal strengths and weaknesses of bus
-opportunities, threats of external enviro
-all stages of planning process
-only small part process
-doesnt provide solutions/help owner choose best options
Strengths (INTERNAL analysis)
Weaknesses (INTERNAL analysis)
Opportunities (EXTERNAL
Threats (EXTERNAL)
9
Q
strengths examples for SWOT analysis
A
-popularity
-loyal customers
-skilled, motivated workforce
-solid financial position
10
Q
weakness examples of SWOT analysis
A
-outdated tech
-poor customer service
-weak brand reputation
11
Q
opportunities examples SWOT analysis
A
-tech
-strong national eco
-low interest rates
-possible new markets
-acquire other bus to expand organisa
12
Q
threats example SWOT analysis
A
-trends in markets
-new regulation
-new competitors (taking market share)
13
Q
business planning process
A
vision
business goals
long term growth
14
Q
vision statement
A
provides you and your employees with direction, purpose, motivation and inspiration to achieve the desired outcome for your business.
15
Q
senior managemnt goals
A
set STRATEGIC GOALS (long term, holistic (yrs) broad aims apply bus as whole)
-4 key bus functions (OMFH)
16
Q
MIDDLE MANAGEMET GOALS
A
TACTICAL OBJECTIVES
-mid term(months), departmental issues
-describe course of action to achieve strategic goals
eg. increase market share –> research consumer tastes and preferences
17
Q
front line managers/supervisors goals
A
OPERATIONAL OBJECTIVES
short term (days/weeks) issues describe action to achieve bus’ tactical objectives
-market share –> arrange 20 customers to attend focus group
18
Q
relationship betw vision, goal, objective
A
VISION: BROAD STATEMENT of OVERALL PURPOSE
GOAL: SPECIFIC statement of INTENDED to ACHIEVE
OBJECTIVE: VERY SPECIFIC statement HOW goal ACHIEVED
19
Q
LONG TERM GROWTH
A
ability for bus to continually expand
-depends on bus ability to develop and use asset structure to increase sales, profits, market share
-requires comprehensive, strategic planning
-sustainable competitive advantage to survive comp and grow
20
Q
6
strategies to achieve long term growth
A
-
UNIQUE G/S
consistence marketing plan, relationship marketing philosophy to encourage CUSTOEMR LOYALTY -
CUSTOMER FEEDACK
-use internet to listen to customers -
SUPPLIER & CUSTOMER PARTNERSHIPS
-opp to develop products consultation with bus designers -
COST
-produce affordable products
-cost-effective production to maintain low prices - SIX SIGMA
-business management approach
-improve bus performance by improving quality, reducing costs and creating new opp -
STAFF MOTIVATION
-align with bus objectives to inspire harder work and achieve bus goals
21
Q
how can SMEs enter global market for LONG TERM growth
A
-extensive research for gap in market
-sell product with affordable price
-social media to generate brand awareness and penetrate domestic market
-expand product range
22
Q
organising resources for business planning OMFH
A
- form vision, goals, objectives
- determine activities using resources (labour, time, money, equip, materials)
- determine gr (objectives) oup activities **employees perform
O: machining, designing, quality
M: sales, ads, price
F: accs, loans, debt control
H: recruit, train, compensate - assign tasks & delegate authority
- design hierarchy of relationships
create ORGANISATIONAL STRUCTURE : framework how tasks divided, resources used, departments coordinated
23
Q
benefits of properly implemented organising process 4
A
- establishes chain of command –> orderly communication
- creates coordinated work enviro –> outlines guidelines for tasks
- common purpose –> all employees work towards common vision/goal/obj
-
organise resources efficiently, employees perform tasks
-requires RESOURCE ALLOCATION (work performed by who/machine under ? conditions)
-materials ordered
-tasks distributed to diff departments
24
Q
organising resources revision from chapter 8
OPERATIONS
A
transform inputs (raw material, labour, equip) to semi/finished g/s
-type of equip & resources needed
-suppliers to purchase stuff
-money allocation to purchase
-storage, warehouse,delivery systems
-technical expertise employees need for max production
enables owner clarify changes made to structure of bus/PP
-arrange finance to purchase machine, revise bus plan
25
organising resources
MARKETING
marketing plan only succeeds if **all sections of bus involved in satisfying customer needs and wants while achieving goals**
-marketing plan integrated into all aspects
-adequate **resources** devoted to marketing plan
-**training** needed to lvl up **employee expertise/skill**
-more funds to accomplish all marketing objectives to specific **department**
-adequate resourcing to coordinate employees in marketing department must provide **info, financial, physical resources** for marketing staff
26
organising resources
FINANCE
revise chap 8 & 11
nrew business **ventures require funds to operate**
-most **appropriate source** of financing **(venture capital [private equity investors provide to start ups & small bus lack access to loans], banks for SME)**
-amt **equity (ownership of bus) **and potential to control owner hands over for necessary financing
if funds business using equity capital, investor given part ownership
**SMEs** want relatively **moderate growth use debt capital with owners retaining most/all equity**
explore range of fed and state gvt GRANTS (monetary/financial assistance doesn't have to be repaid)
-usually no grants for starting
-provided for expanding, R&D, innovation, exporting
27
ogranising resources chap 8
HUMAN RESOURCES
business ventures require **employees** contribution, **msot important resource**
consider
-**how many** workers needed, **what skills
-how to attrac**t and **recruit suitable** employees
-how to **motivate and retain**
-**training** offer to grow bus
-**fair pay and safe working conditions**
-**legal responsibilities** to employees
-**resolve disputes**
-
28
FORECASTING in planning process TBC
1.**total revenue & cost
2. break-even analysis
3. cash flow projections**
forecasts/projections are predictions of bus future
-enable effective planning
-forecast **availability of labour, raw materials, finance**, building requirements
-rely on **internal and external info sources**
29
total REVENUE and cost to forecast
REV
-total received from ***sales*** of g/s
-**PRICE X QUANTITY = TOTAL REVENUE**
-expect **how much** sold
-use **demand for g/s and amt competition in marketplace**
-use **market research** techniques **(customer surveys)**
-more p**recise if bus more previous sales** history to guide
30
total revenue and COST to forecast
**fixed/variable costs**
**fixed** dont vary **regardless no. units produced**
**variable** depend on **no. g/s produced**
-increase if more g/s produced
-decrease when fewer produced
-**FIXED COSTS + VARIABLE COSTS + TOTAL COSTS**
-**estimate change in variable costs** at diff **lvls production**
-makes possible to use **break-even analysis**
31
break even analysis to forecast
-determines **lvl sales (total rev) needs to be generated to cover total prod costs** (fixed + variable costs)
-**sales ABOVE break even point PROFIT** / then loss
-imp cause **management determine lvl sales required to obtain proit**
-determine **effect on profit if sales inc/decrease**
-**revenue = total costs --> break even pt**
-usedi n **STRATEGIC PLANNING stage BEFORE BUDGETS prepared**
**TOTAL FIXED COSTS
\ = QUANTITY
UNIT PRICE - VARIABLE COSTS PER UNIT**
32
examples of fixed costs
rent
**insurance
salaries** of staff
rates
depreciation
interest on loans & office expenses
33
examples of variable costs
direct labour & materials
**commission on sales
delivery**
packaging
34
cash flow projections to forecast
shows **changes** to **cash position** brought by **operating, investing and financial activities** of business
-provides info of bus **expectedcash receipts (cash inflos) and cash payments (cash outlows) over 12 months (accounting period)**
-owner **estimate bus' bank balance monthly & identify extent & duration of possible cash shortfalls**
-point periods when **expenses too high/short term investment possible during cash surplus**
offers
-**SME** owner indication **how much capital investment** bus requires
-bank loans officer evidence bus is good **credit risk**
35
cash flow plans from cash flow projections
**month-to-month projection of money flow into bus**iness
-**cash transactions record**ed: cash **sales, collect debts, expected payments**
36
cash flow projection vs cash flow statement
cash flow **statement** indicates **how much cash flowed into and out** of business in **PAST PIT**
cash flow **projection shows cash EXPECTED made/spent over PIT into FUTURE**
37
3 areas that need MONITORING and EVALUATIONS in business planning process
SBP
**SALES BUDGETS PROFITS**
-monitor and evaluate **environment and take corrective action** - **adjust plan to avoid problems**
-**constant** to make accuracy **modifications** necessary
38
monitoring and evaluating process 4
GMEA
1. ESTABLISH GOALS AND OBJECTIVES
-what u wanna achieve
2. **MONITOR PERFORMANCE**
-**what is happening**
3. **EVALUATE** PERFORMANCE
-is **whats happening good/bad, why** is it happening
4. TAKE CORRECTIVE ACTION
39
monitoring
**measuring actual against planned performance**
-constantly ask what bus **wants** to achieve, are goals being achieved
-true achievements than generalisations
**-asked every stage** of developing **plan**
1. establish **forecast performance standards**
-bus outline aims to accomplish (performance standard)
-performance standard is **forecast lvl performance against actual** eg. 5% increase in monthly sales
2. **compare actual against forecasted performance**
-use budgets, sales statistics, cost analyses
40
evaluating
assess **whether bus achieved goals**
-ask profit performance, as **planned? improved? to other businesses?**
-SME owner ask if **operations achieved desired results and why failed**
-if successful, examine what starts and reuse
-**identiy weaknesses and improve, modify plan**
41
monitoring and evaluating sales
**no sales = no g/s sold**
-**evaluate** performance esp **marketing strats**
-**regularly** perform sales management control function **(compare budget vs actual sales, changes necessary)**
-above/below ***forecast*** success/**corrective action**
DIFFERENCE = **DIFFERENCE/FORECAST SALES X100**
42
MONITORING and evaluting BUDGETS
budget: **estimatio**n of bus **financial performance for period in future**
-cash flow budgets, budgeted income statements, budgeted balance sheets prepared monthly, quarterly, yrly
-c**onstant monitoring of goals, whether achieved**
-basis for administrative control, production planning, stocks control, **control of expenses, production costs**
-used in planning and monitoring aspects of business (owner can **measure planned vs actual performance)**
43
budget perparation must account for:
**estimation** of **revenue and expenses** that's made **for** a specified **future PIT.**
-review past figures, **trends, estimates from departments**
-potential markets/**market share**
-trends & **seasonal fluctuations in market (external enviro)**
44
why should budget regularly compared with actual revenue and expense amts
detect discrepancies
-can ask **why certain targets not reached**/better anticipated
-**establish standards to compare** actual
45
how will a profit budget establish viability of business
predicting how much **profit** made **from expected sales**
-estimates need to be realistic
-include **sales, gross profit, net profit**
46
what can owner do once budget ocmpleted
owner can determine **extent and timing of financial requirements
-reviewed at least once monthly**
-compare **projected to actual**, implement **modifications** for discrepancies
47
monitoring and evaluating PROFIT 5 reasons
1. profit as REWARD
2. profit **MAXIMISATION
-long term**
3. profit as **SOURCE of FINANCE**
4. profit as **PERFORMANCE INDICATOR**
-main indicator
-changes to profit guides how succeed/failing
5. profit as **DIVIDEND** payment
-**incorp bus a prop of profit** allocated to **shareholders** as dividends
48
what will evaluating profit levels reveal
info of bus **costs and revenues**
-owners need to identify source and quantity
-challenging for small businesses, recommend calculating **financial ratios**
-**comparing financial ratios to competitors and industry average** help managers **evaluate profitability** of business
49
3 financial ratios to evaluate profit
**net profit ratio
gross** profit ratio
**return on equity** ratio
50
taking corrective action by modifying
**modifying: changing existing plans and using updated info to shape future plans**
-change **materials, output**, **costs** of production, **management** practices, delivery to market
-change **human resources** bc ind's **performance as important as product**
51
critical issues leading to bus success/failure
1. bus **plan**
2. managing **employees**
3. analysing **trends**
4. identifying and **sustaining competitive advantage**
5. wondering **eco conditions**
52
business plan should contain 3 things
1. clear, concise statement of **goals**
2. **plans to achieve** goals
3. reliable control standards for **measuring performance**
-if goals achieved, if not, **corrective action**
53
business plan presentation and preparation
**professional** for bank managers, accountants, company directors, potential purchases/partners
-reflect skills and abilities f owner
-**advised** to get help from accountant, solicitor, marketing consultant to **plan projected proit and loss statements, break even analysis and market research**
-reflects amt **time, effort, research for high performance**
54
management (staffing and teams) for bus success/failure
management must make **best use of limited resources** and is responsible for business ***achieving goals***
-skill most critical determining success/failure, if all equip outstanding if cannot make efficient use of resources, fail
55
2 areas HR manager must pay special attention
STAFFING(competitive advantage esp offers service with direct contact with customers)
-recruitment
-employee skills databases
-skills audit
-skills inventory
TEAMWORK
56
mistake SME owners often make when recruiting
not providing **enough time/financial resources** to satisfactorily carry recruitment **process**
-**hasty selection** ends in **increased costs** and **lower productivity**
-**outsource** and use external **recruitment agency**
57
# use of recruitment agencies
recruitment
**time consuming** to **advertise** and **interview **use **recruitment agencies** to decrease time searching
-**pay agency to interview candidates** and **recommend potential employee/s suitable for position**
-**outsourcing popular** with **small businesses** as skill shortage worsens and owners adv using expert to ensure hiring best
58
employee skills databases when recruiting
once employed, need to achieve right mix and lvl of employees skills
-use skills audit and skills inventory for best results
59
skills audit when recruiting
process establishes **current skill lvls** of employees and **future skills requirement**s
-**identify skill gaps of staff, assess current skillbase**,
aim to identify
-skills give **competitive adv**
-weaknesses in skills base unless **overcome by training**/recruit,ent, threaten survival
60
skills inventory for recruitment
**database tracks skills, abilities and qualifications** of **existing staff**
-**regularly update** as new ppl **join and** existing **leave**
-to **search appropriate candidates to fill positions**
61
managers using teams for superior performance
due to **flatter organisational structure**s
-feel safe, promote dependability, provide structure, communicate
-make **informed, creative decisions**
-greater **lvls employee cooperation**
-improved **customer service/production output**
-need have **positive culture and strong leadership** and not become complacent
62
why do SMEs struggle with teams
time/expertise to develop high functioning teams
-professional help from training/coaoching
-invest time and money to develop and train team, rewarded with improved productivity
63
**trend analysis** adv & disadv, other stuff to do on top
investigate** changes over time, finding pattern** to accurately **forecast**
-assist SME owners forecast
-**potential sales, total rev, total operating costs, gross & net profits,**
advantage
**past performance** often **good indicator of future performance**
disadvantage
** factors** in the **internal/external** business environment may cause **changes** in the **level of sales**,
eg. industry is in decline/bus loses/gains experienced employees.
Other factors should consider,
-general **eco conditions**
-**changes** to the following:
* level of **competition**
* in store/**pricing policies
* employee motivation
* legislation**
* the **demographics** of the l**ocal area**
* **marketing strat**egies.
64
identifying and sustaining competitive advantage 3 strats
strats used by bus to ensure edge over competitors
1. **price/cost** strategy
**lowest production costs** to **reduce** product **price**
2. **differentiation** strategy
**offer customers** something **not already offered** by business **rivals**.
3. **sustains its competitive edge long term** by **limiting **the ***advances of comp***etitors (**quality, innovate, customer service**)
65
price/cost competitive advantage strategy 2 ways
how to reduce costs
reducing price
-**lower than competitors**
-reduce potential profit
more effective to reduce costs
-reduce product price while maintaining **healthy profit margin**
-**ensure quality not compromised against competitors**
-improve efficiency of **operations (streamline)
-technology (automation,** service: computerisation of client info, advanced communication mediums eg email)
-**buying inputs in bulk
-outsourcing**
-achieve **economies of scale**
66
how can economies of scale be achieved
**reduce cost of inputs** (more **machinery,** buy **bulk**, increase **specialisation of labour)** to increase lvl outputs
67
SMEs diferentiation competitive advantage strategy
**SMEs diff to compete on cost** due to **large budgets of bigger companies and ecos of scale** achieved
-**differentiation value, quality, brand image, service, flexibility**
-must **sustain competitive advantage** while competitors attempt to match strat
68
ensuring long term success for competitive advantage
-resist actions of competitors that introduce new strats while **tracking changes within industry esp tech, maintain competitive for long time**
-**manager**/owner must be **constantly aware of issues may affect operation, market share, profit**
-manager must **predict trends and act** on predictions
69
how can SMEs **limit advances of competitors** and **reduce opps available to competitors (long term** success for **competitive adv)**
1. **R&D**
helps develop **innovative products**
2. **copyrights protect** against **copied inventions**
3. **exclusive contracts with suppliers** gives supplier preference to bus
4. **lobbying gvt to limit foreign comp to restrict imported products**
70
# more debt than can repay (1/3)
avoiding overextension of finance
-**start small and graduall expand, most careful in establishment/takeover** stage --> **excess expenditure financed primarily by external sources (banks)**
-**fixed expenditures** (bus has **lease contract** valid for certain period/1-2yrs
-creates **higher deg of risk, if eco conditions weaken higher debt-to-equity ratio under greater financial pressure**, more susceptible to **bankruptcy**
or if **owner purchases business premises (lease instead**) bc of overborrowing
-cannot meet **capital & interest payments, working capital(current assets - current liabilities**) affected
71
how do businesses overextend financially
1. using **hire purchase**/leasing commitments on e**quip, machinery**
2. **purchasing excess stock**
3. **employing too many staff then current needs**
72
tips for businesses ANY SIZE AND TYPE to avoid overextending financially 4
1. BUSINESS **PLANNING**
-complete **cash flow projections, preliminary establishment costs,** personal financial budgets, set bus goals/objectives
2. **AVOID OVERDEPENDENCE ON DEBT FINANCING**
-avoid problems during **weak eco periods** where **lenders/creditors unwilling** wait for bus to overcome difficulties
3. **LONG TERM FINANCIAL PLANNING**
-concerns **current and future** financial aspects of business
+**planning bus direction (growth, expansion)**
-determine ***if can obtain funding to maintain/expand bus***
-determine **what resources to operate** bus
4. **START SMALL**
-start **slow and allow market to determine right times for growth & expansion**
73
expansion as cause of bus failure
OVEREXPANSION
owners **confuse success with how fast they can expand bus**
-foxus **slow steady growth** best
-many **bankruptcies**
-**expansion requires large funds, (overextension of financing)**
-put emphasis on **earning profit, controlling debt, managing cash flow**
-**diff** for owners to **judge right amt growth needed** but if **too quick insolvency/bankruptcy**
-grow too quickly to try **catch up to competitors, needs time between growth to assess position**
-**limits to how fast** bus can grow, compress effort and growth short period **not as effective as spreading over longer**
-growth & expansion need careful planning, decisions made through **extensive planning**
74
# stock and staff
overextension of other resources NEED TO BE MONITORED BY MANAGEMENT
STOCK
**stock is unrealised sales**, too much ties up own cash but **loses revenue potentially**
-invested too much money in **raw materials**
-bus **anticipates customer demand incorrectly w/o establishing if saleable among customers**
-**avoid stockpiling**, keep **limited supplies and order regularly**
STAFF
-**overoptimism of sales lvls/poor job allocations & hiring**
reduce dependence by **outsourcing**, and using more **equip/machinery**
75
using tech for success/failure
-reduced communication time
-**improved** distance **communication betw** staff, **suppliers, customers**
-**higher productivity, greater flexibility --> reduce costs**
-**need** prepare use some form of tech **for success**
76
tech available to all businesses
1. **CUSTOMER TRANSACTIONS
-mobile payments**
-digital currencies Paypal
2. **COMMUNICATION** EQUIP
-**mobile phones, email,** video conferencing
3. **SOCIAL MEDIA**
4. MACHINERY and EQUIPMENT**
-machines 3D printing
5. LOGISTICS
drones, automation
77
internet applications (e-business and e-commerce) for bus success/failure
competitive, must **adopt** appropriate **tech**, competitors strive to **capture greater market share** and develop **sustainable competitive advantage**
-need to **actively develop online presence**
-quick access to search **info 24/7** for support, legal requirements, work health and safety
78
e-buasiness vs e-commerce
using internet to conduct business
**customer service, risk management, internal & ext interactions eg. employees & stakeholders,**
**e-commerce part of e-business, buy & sell g&S via internet** (only transactions)
79
E-BUSINESS COMPETITIVE advantages to SME owner
-**reach large no. customers (domestic and global)**
-**more opp** with **online presence**
-**customer satisfaction online access 24/7**
-easy access for **customers, suppliers, employees**
-**save time and money** through internet banking
-additional **marking** tool
80
disadvantages of electronic info services through internet and e-business/e-commerce
**expense of hardware, software**, service provider charges
-**virus** corruption
-**unwanted spam**
81
economic conditions that promote business success
STRONG GROWTH:
1. HIGH LVLS **CONSUMER SPENDING**
-bus **greater capacity to sell** g&s bc consumer has **higher lvl disposable income**
-output increase to meet trends, **opp for future ^ sales and profit**
2. FALLING **UNEMPLOYMENT**
-bus can **afford to hire more employees** when **sales & profits steady & growing**
-meet increased demand, bus increase size of workforce
3. **INCREASED PRODUCTION**
-bus output increase to meet buoyant trends provide **opp for future increased sales & profit**
82
eco conditions that lead to bus failure
WEAK ECO ACTIVITY
1. **LOWER** LVLS **CONSUMER SPENDING
-bus reduced capacity to sell** g&s --> **profits decline**
-bus sell necessities and (cheap stuff) will benefit
-consumers become **cost conscious, seek g&s consider value for money**
2. **RISING UNEMPLOYMEN**T
-bus **cannot support current employee nos when sales & profits decreasing**
-cutting back production lvls **reduce inventories of g&s potentially unsaleable**
-existing employees may be made **REDUNDANT**
3. **DECREASED PRODUCTION**
-bus output decrease as **consumer spending falls**
-profits decrease
83
adv & disadv of dynamic nature of tech for aus bus'
adv
-**functions easier, quicker**
-less labour-intensive
-**computerise processes --> higher productivity, flexibility --> reduce costs --> increase profits
-open 24/7**
disadv
-increase working hrs of employees --> QOL
-**job redundancies, bus downsizing --> structural unemployment, retrain skills, job security**
