BUSS2 Flashcards
1
Q
What are the two main approaches to budgeting?
A
Historical
Zero based
2
Q
What is historical budgeting?
A
Use last years figures as a basis
Realistic as based on actual results
Circumstances may have changed
Does not encourage efficiency
3
Q
What is zero based budgeting?
A
Budgeting costs and revenues are set to zero
Built from the bottom up
Based on new proposals for sales and loss
Makes budgeting more complicated and time consuming
4
Q
What are three times of budgets?
A
Income
Expenditure
Profit
5
Q
What are ways budgets are used in a business?
A
Establish priorities and set targets Provide direction and coordination Assign responsibilities Delegate without loosing control Monitor performance Control revenues and costs
6
Q
What do budgets do?
A
Set out financial targets
Expressed in money
Provide a yardstick against which success/failure can be measured
Motivate staff to make it clear what they must achieve
Ensure there is no under or over spending
7
Q
What are the potential benefits of training?
A
Better productivity Higher quality More flexibility Less supervision Improved motivation Better recruitment
8
Q
What is off the job training?
A
Employee receives training away from the workspace
9
Q
What are benefits of off the job training?
A
Wider range of skills of qualifications can be obtained
Can be learnt from outside specialists
Employees more confident
10
Q
What are the drawbacks of off the job training?
A
More expensive (transport) Lost working time
11
Q
What is on the job training?
A
Receives training whilst remaining in the work place
12
Q
Benefits of on the job training?
A
Most cost effective
Employees are productive
Opportunity to learn whilst doing
13
Q
Drawbacks of on the job training?
A
Quality depends on the ability of the trainer and time available
Bad habits passes on
Potential disruption to production
14
Q
Benefits of external recruitment
A
Outside people give new ideas
Larger pool of workers to find best and suitable candidate
Wide range of experience
15
Q
Drawbacks of external recruitment
A
Longer process
Expensive (advertising, interviews, training)
Selection process may not be effective to someone suitable
16
Q
Benefits of internal recruitment?
A
Cheaper and quicker
People know how business operates
Provides opportunities for promotion
17
Q
Drawbacks of internal recruitment
A
Business already knows strengths and weaknesses of candidate Limited number of applicants No new ideas Demotivate others who weren't chosen Creates another vacancy
18
Q
What is internal recruitment?
A
Jobs given to staff already employed by the business
Promotion and reorganisation
19
Q
What is external recruitment?
A
Job centre Job advertisement Recruitment agencies Headhunting Personal recommendation
20
Q
What are the factors affecting absenteeism?
A
Significant business cost Sickness Bereavement Bullying Stress "Playing the system" Predictable
21
Q
What are possible solutions for absenteeism?
A
Understand causes
Set targets and monitor trends
Have a clear sickness policy
Positive rewards for attendance
22
Q
What are the factors affecting labour productivity?
A
Extent and quality of equipment
Skills, ability and motivation of the workforce
Methods of production organisation
External factors (suppliers)
23
Q
Possible ways to improve labour productivity
A
Measure performance and set targets
Streamline production processes
Invest in capital equipment
Invest in training
24
Q
What are the factors affecting staff turnover?
A
Industry practice Employee loyalty Economic conditions Size and ownership of business Financial rewards Working conditions
25
Possible improvements of staff turnover
Effective recruitment and training
Provide good and competitive pay
Job enrichment
Reward staff loyalty
26
What are the key costs to a business of staff turnover?
Higher recruitment and training costs
Increased pressure on remaining staff
Disruption to production
Harder to maintain required standards of quality and customer service
27
What is staff turnover?
Percentage of staff who leave during a period
28
What is labour productivity?
Output per employee
29
What is absenteeism?
Percentage of staff who are absent from work
30
What is delayering?
Removing layers of management from the hierarchy of the organisation
31
Advantages of delayering?
Low labour costs
| Fast decision making
32
Disadvantages of delayering?
Less opportunity for promotion
| Demotivating effect of disruptions, stress?
33
What are tall hierarchies?
Many layers of hierarchy
Narrow spans of control
Allows tighter control and less delegation
Promotion opportunities
Larger communications
More layers means more staff means more costs
34
What are flat hierarchies?
```
Few layers of a hierarchy
Wide span of control
Less direct control, more delegation
Fewer promotion opportunities
Vertical communication improved
Fewer layers meaning fewer staff meaning fewer costs
```
35
What is delegation?
Assignment to others of the authority for particular functions, tasks and decisions
36
Advantages of delegation
Reduces management stress
Subordinates are motivated
Good on the job training
37
Disadvantages of delegation
Depends on the quality or experience of the subordinate
Harder in a smaller firm
May increase work load and stress of subordinates
38
What are the challenges faced for management when changing organisational structure?
Manager and employee resistance
Disruption and de motivation making potential problems
Costs (redundancies)
Negative impact on customer service or quality
39
Why change the organisational structure?
Growth- formal structure is appropriate
Reduce costs and complexity
Employee motivation is boosted
Customer service or quality improvement
40
How does the size of the business determine the organisational structure?
Small businesses tend to have flat hierarchal structures
| Large businesses tend to have complicated structures with more layers of hierarchies
41
How does the type of business influence the organisational structure?
Operate in several locations? Service or manufacturing? Overseas?
How skilled is the workforce?
42
How does the management and leadership style influence the organisational structure?
Autocratic- result in a different structure compared with where leaders delegate responsibility
43
How does the competitive environment influence the organisational structure?
Use of distribution channels, suppliers, competitors actions
44
Problems in setting budgets
Lack experience of knowledge in the main costs
Arrogant boss may impose rather than discuss targets or budgets
Takes time to manage
Needs to be changed as the circumstances do
Results in short term decisions to keep within the budget
45
Features of a narrow span of control
Allows for closer supervision of employees
More layers in the hierarchy may be required
Effective communication
46
Features of wide span of control
Give subordinates chance for more independence
| More appropriate if labour costs are significant which reduces the number of managers
47
What are income budgets?
Target set for amount of revenue to be achieved in a set time period
Split by products, services or departments
Translated into individual sales targets for staff
48
What are expenditure budgets?
Split by department, function or product
Responsibility can be passed onto individual managers
Cash outflow
Monitors under and over spending
49
What are profit budgets?
Target set for the surplus between income and expenditure in a given period of time
Highlight potential and feasibility of the business
50
What are the main causes of cash flow problems?
```
Low profits
Too much production capacity
Too much stock
Allowing customers too much credit
Seasonal demand
```
51
What are the main causes of cash flow problems?
```
Low profits or losses
Too much production capacity
Too much stock
Allowing customers too much credit
Overtrading-growing too fast
Unexpected changes in the business
Seasonal demand
```
52
Short term ways to improve cash flow
Cut costs
Reduce current assets
Increase current inabilities
Sell surplus fixed assets
53
Long term ways to improve cash flow
Improve efficiency and productivity
Increase equity finance
Increase long term liabilities
Reduce spending on fixed assets
54
What is debt factoring?
A firm buys the amounts outstanding from customers
| Factoring firm chances the debts
55
Benefit of factoring
Short term cash inflow
56
Cost of factoring
Usually 10 to 15% of value of debts bought, not all money is gained back
57
What are the sales of assets?
Converting fixed assets
Can be significant depends on the assets held
Can only be done once
Do the assets contribute towards profitable activities?
58
What are variances?
Difference between actual and budget figures
59
What is a favourable variance?
Actual figures are better than budgeted
60
What are adverse variances?
Actual figures are worse than budgeted
61
Why should businesses aim to improve profit?
Earn better return for investors
Stop businesses from suffering losses
Improve internal sources of finances
Provide s better return on investment made in new products of capacity
62
What is motivation?
The will to work
| Comes from enjoyment of work itself and/or from desire to achieve certain goals
63
Methods to motivate employees
Financial
| Non-financial
64
Advantages of a well-motivated workforce
```
Better productivity
Better quality and customer service
Lower levels or absenteeism
Lower levels of staff turnover
Lower training and recruitment costs
```
65
What are the key motivational theorists?
```
Taylor
Mayo
Maslow
Herzberg
McGregor
Drucker
Peters
```
66
What are the main financial incentives at work?
Wages- paid per hour worked and received money at the end of the week/month
Salaries-annual salary which is paid at the end of each month
Bonus system- usually only paid when certain targets have been achieved
Commission- pay based accordingly to value or volume of sales
Profit sharing- employees receive a proportion of company's profits
Fringe benefits- company car, private health care, free meals
67
What are key non-financial incentives for employees?
Empowerment- delegate power to employees so they can make their own decisions
Praise
Promotion
Job enrichment - giving more challenging and interesting tasks
68
What is job enrichment?
Giving workers more interesting and challenging tasks
| Seen as more motivating as it gives workers chance to further themselves
69
What is job enlargement?
Giving workers more tasks to do of a similar nature
| Increasing the number of responsibilities that an employee has in order to increase motivation
70
What is the difference between time based pay and merit based pay?
Merit based- quality of work
| Time based- number of hours worked
71
Two advantages of time based pay
Exact amount of work you do even overtime
| Easy to work out pay
72
Two disadvantage of time based pay
If the staff work lots it could cost the business lots of money
Company controls the amount of hours worked
Less incentive to work hard
73
Advantages of piece rate
Motivated staff to make more money
| Lots of finished products for the company
74
Disadvantages of piece rate
Work could be rushed, affecting quality
| Could cause stress to employees
75
What is job rotation?
Varying the tasks that an employee does to reduce boredom and increase the resign or skills the worker has (multi tasking)
76
What is the purpose of an organisational structure?
Design of organisation
Chain of command (reporting system from top to bottom of the hierarchy)
How different functions fit together (marketing, personnel)
Levels of hierarchy
Span of control
Channel of communication with
77
Role of responsibility in the organisational structure?
Different tasks individuals are responsible for
| Carrying the burden of blame even if it were your subordinate that made the mistake
78
Roles of authority in the organisational structure?
Having the power to make a decision or carry out a task
| Manager has to consider carefully who they delegate tasks to
79
Role of accountability in the organisational structure?
The extent to which an individual is held responsible for their decisions/actions
80
Two types of directors?
Executive- appointed to the board and head up important decisions
Nonexecutive- part time directors from outside the business
81
Describe the recruitment process?
Job becomes available-job description-personal spec.-place advert-applicants apply(cv, cover letter, application form)-the business shortlists-interview-testing-appointment-induction training
82
What is a personal specification?
Describes the type of person the business is looking for
83
What is included in a personal spec.?
```
Experience
Qualifications
Job title
Key skills
Personal attitudes
```
84
Advantages and disadvantages of interviews
Advantages- can help identify whether the recruit is the right sort of person
Disadvantages- recruiters can be over influenced by a candidates appearance and social skills
85
Advantages and disadvantages of assessment centres
Advantages-Opportunity to examine skills of team working end leadership
Disadvantages- may allow someone who is quiet to slip through the net
86
Advantages and disadvantages of references
Advantages- important to check degree at success at previous job
Disadvantages-the writer may not be open about the candidates weaknesses
87
Advantages and disadvantages of tests
Advantages- can access attitudes
| Disadvantages- can only show what the individual knows already, not what they learn in the future
88
Ways businesses should aim to improve profits
Earn better return for investors
Stop the business suffering from losses
Improve internal sources of finance
Provide a better return on investment
89
Ways to increase profits
Sales - increase quantity sold or raise prices
Variable costs reduced
Fixed cost reduced
Reduce overheads
90
Why does trying to sale more volume increase profit? Will the strategy work?
Higher volumes mean higher revenues and potentially higher market share
The strategy may work depending on the price elasticity of demand and competitors actions
91
Why try to increase selling prices for a higher profit? Will it work?
Higher prices meaning higher sales (if the quantity sold doesn't fall)
Customers may think the product is a higher quality as that's normally associated with a higher price
No need for extra capacity
The strategy may work depending on the price elasticity and if the customers remain loyal
92
Why would increasing production output lead to a higher profit? Will it work?
Provides more quantity of the sold product
Spreads fixed costs over more units
The strategy would work depending if the extra output can be sold and if it has spare capacity
However, fixed costs may actually rise
93
Why would reducing fixed costs and overheads lead to and increase in profits? Will it work?
Drop in fixed costs leads to higher profits
Reduces the breakeven output
It will work depending on if the fixed costs cut do not affect quality, customer service or output
94
Ways to measure production efficiency
Productivity
| Unit costs
95
How does productivity help measure production efficiency
Measures the relationship between the inputs into the production process and the outputs
96
How do unit costs help measure production efficiency
Divide total costs by the amount of units produced, a fall in ratio would indicate that efficiency was improving
97
What is capacity?
The maximum output that a business can produce in a given period with the available resources
98
What is capacity utilisation?
The percentage of the total capacity that is actually used or achieved in a given period
99
Why don't firms operate at full capacity?
Low demand - loss of market share, seasonal
New technology introduced
Inefficiency - poor maintenance, quality
100
Ways to improve productivity
```
More training
Improved motivation
Better capital equipment
Better quality raw materials
Improved organisation of production e.g. less wastage
```
101
How to add capacity in the short term
Increase hours by extra shifts, encourage overtime, temporary staff
Reduce time spent maintaining production equipment
102
Problems of working at full capacity
```
Negative effect on quality
-Production is rushed
-Less time for quality management
Employees suffer
- Added stress
Loss of sales
- Less able to meet sudden or unexpected increases in demand
```
103
What is operations management?
Managing the process involved in producing goods or providing services
104
What is the ideal level of capacity?
90%
105
How do you work towards full capacity?
Increase demand- marketing, extra promotion, cutting prices, new products or new markets
Cut capacity- cut down shifts, sell machinery, make staff redundant
106
What is a long term effect of utilisation?
Economic recession
107
How can you deal with non standard orders?
Risky if order is temporary
Initial sub-contract production to another factory
See if extra demand is permanent
Extra costs to produce involving overtime
108
What is quality?
Meeting the needs and expectations of customers
109
What is quality control and how is it done?
The inspection of products as a part of a SAMPLING process to ensure the right quality standards have been achieved
- Traditional way
- Concerned with checking and reviewing production
- Mainly about detecting problems rather than preventing them
110
What are some common problems with quality control?
More wastage
Costly
Often at the end so too late
Not compatible with modern production systems
111
What is quality assurance and how is it done?
Organising every process to get the product 'right the first time' and prevent mistakes ever happening by checking the product throughout the process
- well controlled as quality is built in
- reliable
- less wastage
- reassurance from customers
112
What is the ISO9000?
```
International standard for quality
Companies document their business procedures
Benefits:
- Less waste
- Cost savings
- Fewer mistakes
- Increased efficiency
- Improved competitiveness
- Increased profits
```
113
What is TQM?
```
Total quality management where there is commitment from the whole organisation and draws in closely with 'Kaizen' (Japanese quality- continuous improvement)
Deeply rooted
Shows in after sales service
Lacks clear, concrete programme
Expensive - training
```
114
Comparisons between quality control and quality assurance
```
QA- focuses on processes
QC- focuses on outputs
QA- achieved by improving production processes
QC-achieved by sampling
QA- targeted at the whole organisation
QC-targeted at production activities
QA-quality is built into the product
QC-defect products are inspected out
```
115
What is customer service?
The way businesses look after their customers
116
Benefits of satisfied customers
Repeat purchase
Recommend businesses to friends
Respond to promotional campaigns
Loyalty
117
Why customer service is important in a business
Part of the package of benefits that a customer buys
Provides a way to differentiate a product
Help keep customers and win new ones
Make customers feel valued
Important source of customer feedback
Helps attract good quality employyes
118
Ways a business can deliver good customer service
Listen to complaints and compliments as they highlight areas for improvement
Build trust by keeping promises, deliver when they say they will
Take complaints seriously and have a friendly system of dealing with complaints
Get it right the first time which saves money and time if customers are handled well
Make the most of staff by investing in training and valuing them, empower them to deal quickly with complaints
Go the extra mile
119
Factors that affect customer expectations
Price - expect more for a premium price product
Previous experience - what happened the last time?
Reputation - what do other customers say?
Competitors - how do they compare?
Promotion - what has been promised by advertisement?
120
What is a supplier?
A supplier is a business or an individual that provides goods and services to another business
121
Why are suppliers important?
Business to meet the needs and wants of the customers
Suppliers determine many of the costs of the business
Closely linked to product quality
Important source of finance (trade credit)
122
Characteristics of an effective supplier
```
Price
Quality and reliability
Flexibility
Communication
Financially secure
Capacity - able to handle increased volumes of supply
```
123
How to find a good supplier
Word of mouth
Trade associations
Exhibitions
Direct marketing and advertising
124
How a good supplier can improve business competitiveness
Lower purchase costs- better prices from a supplier lower the costs of a business
Better quality- crucial for a business to satisfy customers
Improved customer service- fewer later deliveries
Increased productivity- fewer production delays, less wastage
More flexible capacity- ability of a business to work with suppliers to meet a sudden increase in demand
125
What are the main businesses technology?
```
Robots
Stock control programs
Automation
Design software systems
Communications
```
126
Advantages and disadvantages of robots
```
Advantages;
- Speed, accuracy and efficiency
- Reliable quality, less waste
- Handle boring, repetitive or hazardous tasks
- Reduce unit costs
Disadvantages;
- Up-front investment
- De-motivating for displaced staff
```
127
What is CAD?
Computer aided design
| Designing ideas on computer rather by hand, can see designs in 3D
128
What is CAM?
```
Computer aided manufacturing
Integrated, high accurate production
Pros;
allows designs to be saved and altered
easy to send designs to other countries
risks of errors reduced
cons;
need initial investment to buy equipment
training required
```
129
What is marketing?
The process of identifying, anticipating and satisfying customer needs profitably
130
What is the purpose of marketing?
To use market research and other methods to understand customers (identify)
Analyse data and use marketing skills to judge marketing opportunities (anticipating)
Do everything possible to provide develop products that meet customer needs and provide great customer service (satisfying)
131
What is a niche market?
Business targets a smaller segment of a larger market, where customers have specific needs and wants
132
Advantages of niche markets
```
Less competitions
Clear focus - target particular customers
Builds up specialist skill and knowledge
Can often charge a higher price
Profit margins are higher
Loyal customers
```
133
Disadvantages of niche markets
Likely to attract competition
| Vulnerable to market changes
134
What is mass marketing?
Where a business sells into the largest part of the market, where there are similar products offered by competitors
135
What are the key features of a mass market?
Customers form majority in the market
Customer needs and wants are less specific
Associated with higher production output
Successfully usually associated with low cost operations
136
What is the importance of product in the marketing mix?
Products are at the heart of marketing, the product needs to exist in order for the other elements to happen
137
What are the key stages of the product life cycle?
Development- often complex, may not be successful
Introduction- usually a low level of sales and low capacity utilisation
Growth- expanding market but arrival of competitors, cash flow may become positive
Maturity- slower sales growth as rivals enter the market, intense competition, high level of capacity utilisation
Decline- product loses popularity, falling sales, more competitiors leave the market
138
Which part of the boston matrix has high growth and high market share?
Stars
139
Which part of the boston matrix has high growth and low market share?
Problem Child
140
Which part of the boston matrix has low growth and high market share?
Cash Cow
141
Which part of the boston matrix has low growth and low market share?
Dogs
142
What is a USP?
A characteristic of a product which makes it highly differentiated from other products
143
What are physical benefits of a product?
Looks good, tastes good if edible
144
What are psychological benefits of a product?
Whether the brand image is what the consumers want
145
What are influences on new products?
Technology
Competitors actions
Entrepreneurial skills of managers and owners
146
What is market share?
The proportion or percentage of the market owned by each competitor or product
147
What is promotion?
The ways in which a business communicated with existing and potential customers to encourage demand
148
What is the promotional mix and what are the elements of it?
```
Stages in the product life cycle
- Advertising and PR in launch stage
Nature of the product
Competition
Market budget
Market strategy
Target market
```
149
What is advertising?
Paid for promotion
150
Advantages of advertising
Wide coverage
Control of message
Repetition - stuck in peoples heads
Used to build brand loyalty
151
Disadvantages of advertising
```
Often expensive
Impersonal
One way communication
Lacks flexibility
Limited ability to close a sale
```
152
What are the uses of promotion?
Increase sales, attract new customers
153
What is branding?
Best form of promotion
Distinctive and lasting identity
Considerable time and marketing effort
154
Advantages of branding
```
Reduces amount spent on promotion
Loyalty
Repeat purchase
Easier to persuade retailers
Charge premium prices
```
155
What is sales promotion?
Tactical, point of sale material or other incentives designed to stimulate purchases
- Coupons
- Money off
- Loyalty points
- Free samples
156
Advantages of sales promotion
Effective at achieving quick boosts of sales
| Encourage customers to trail a product or switch brands
157
Disadvantages of sales promotion
Sales effect may only be short term
Customers may come to expect or anticipate further promotion
May damage brand image
158
What is personal selling?
Promotion on a person to person basis
Two way communication
Meeting with potential customers to close a sale
Telephone, meetings, knocking on doors
159
Adv of personal selling
High customer attention
| Message is customised
160
Disadv of personal selling
High cost
161
What is public relation?
Activities that create good will towards an individual, business, cause or product
Aims to publise the business
Build image and reputation
162
What is price?
The money charged for a product or service
163
What are the factors that affect what price is charged?
```
Cost of production
Competitors
Customers perception
The firm's objectives
Target market
Stages in the product life cycle
Likely reaction from customers
State of the economy
```
164
Why is price an important element of the marketing mix?
Price cannot be set in isolation from other elements of the mix
The choice of price directly affects the revenue and profit earned by a product and firm
The way in which a product is perceived by potential customers is directly affected by price
165
What is price skimming?
Setting high price to maximise profit
Product is sold to different market segments at different times
Best used in introduction or early growth state of product life cycle
Electronic items is an example
166
What is penetration pricing?
Introduce a new product at a lower price than competitors
Aim is to gain market share quickly
Build customer loyalty
Opposed to price skimming
Price is raised once target market share is reached
167
What is prestige pricing?
High price to enhance or reinforce a products high quality, luxury image
High price is maintained throughout the life of the product
Chanel
168
What is a price war?
Competitive price reductions by firms in a competitive industry
169
What is place and why does it matter?
Place refers to the way in which a product or service is distributed from the producer to the final consumer
170
What is a distribution channel?
Moves a product from production to consumption
171
What is each party in a distribution channel called?
Intermediary
172
What are the main types of intermediaries in distribution channels?
Retailer
Wholesaler
Distributor
Agent
173
Why use intermediaries instead of selling directly to customers?
Customers may live too far away
Better use of resources elsewhere
Lack of retailing experience
Segmentation - different segments of the markets can be best reached by different distribution channels
174
What does selling direct do?
Retains more profit margin
QVC
Direct mailing
Telemarketing
175
What factors influence the choice of distribution?
The market- nature and extent of competition
The business- size, nature
Nature of the product- fragile, customised, complex?
176
What is competitiveness?
The ability of a business to deliver better value to customers than competitors
177
What are the key benefits of USPs?
A way to differentiate
Doesn't have to compete on price
Higher profitability
178
What is Porter's five forces model into measuring market attractiveness?
```
Power of customers
Power of suppliers
Threat of market entry
Threat from substitutes
Intensity of Rivarly
```
179
What are barriers to entry of a market?
Product differentiation
| Access to raw materials and distribution channels
180
What is oligopoly?
Competition between a small number of suppliers
181
What can a business do to protect against market forces?
Customer reliance - focus market on profitable customers
Supplier reliance - build relationships
Barriers to entry to the market - build a strong brand
