Chapter 1: Business Environments Flashcards
Micro environment analysis tools
- Resource-based analysis- Considering how tangible and intangible resources are utilised in the business and how they can create competitve advantage
- Value Chain Analysis- Evaluating how much value was/was not added within a chain of activities in the business
Different business functions: Purchasing
Roles of purchasing function
- Buys goods to be used for the business’s own use
- Buys goods that are to be sold(trading stock)
- Buys raw materials/semi-finished that will be processed into sellable goods
- They find the most suitable supplier
- Keep costs as low as possible to maintain ROI
- Ensure delivered goods are right quality, quantity, and have no damage
- Supply chain management
Supply chain management
- Control the flow of raw materials from the supplier to the final customer
- All activities performed to deliver the correct product at the right time, place, correct quantity and quality
- If done correctly it will reduce amount of capital invested into stock.
- In order to be done correctly, information must be communicated within the network of businesses that buy/sell from one another
- Ensure that supply chain is ethical
Production Function
- The combination of the factors of production to produce the correct product at correct time, place, etc
- Turning raw materials into profitable products
- Keeping production costs as low as possible while still producing good quality
- Work closely with Marketing to create product that attracts buyers
Quality control
- Important because quality of raw materials will influence the quality of products
- Sampling: a few batches of a product are tested
- Inspection: products are tested and compared to quality control standards
- The more thorough the control the more expensive it is
Quality control pros
- Save production costs by elimanating sub-standard products
- Encourages workers to delivery high quality
- The better the quality means higher remuneration
- Retailers have confidence in the stock they put out and will thus result in better stock turnover
Risks for production
- Insufficient materials/poor quality
- Expensive changes in technology
- Poor quality control
- External factors
Financial Function
- Capital is the first thing needed, either borrowed or own
- Statement of comprehensive income: Income and expenses
- Statement of financial position: Assets and liabilities
Four main objectives of Financial Function
- Maximise profit: by keeping costs as low as possible and selling price high
- Increase profitability: Ensuring a ROI
- Ensure liquidity: ensure business can pay for all expenses
- Ensure solvency:ensure business has more assets than liabilities
Credit pros and cons
Pros:
* Stock turnover increases
* Gains customer loyalty and good faith
* Business can increase selling price to accomodate for bad debt
* Credit stimulates the economy
Cons:
* Creates a delay in paying debtors
* No cash flow
* Risk of bad debt
* Credit facilities create greater demand and lead to demand pull-inflation
Marketing Function
- 4 Ps of marketing
- Promotion: Publicity, Personal Sales, Sales promotion, Advertising
- Market research must be done to effectively identify/execute 4 Ps of Marketing
Risks in Marketing
- Poor/insufficient market research
- Money spent on promotion does not generate ROI
- Design of product does not satisfy needs
- Price of product is too low/high
Duties of Human Capital
- Must have good relationship with trade unions
- Hire staff to fill up vacancies
- Train staff accordingly to maximise productivity
- Recognise and reward hard work
- Staff retention via motivation
- Ensure job security and satisfaction
- Ensure business is aligned with labour legislation
Labour Legislation
- Labour relations act(LRA)
- Occupational Health and Safety Act (OHS)
- Basic Conditions of Employment act( BCEA)
- Compensation of Occupational Injuries and Disease Act(COIDA)
- Unemployment Insurance Act
Risks in Human Capital
- Lack of speficied skills
- Changed in legislation
- Unrealistic demands from trade unions
- Conflict
- Unmotivated staff
Public relations
- All activities that influence the perception of the public
- Managing the continuous and long term relationship between the business and stakeholders
- Can only be successful if conducted with integrity and honesty
- Create and maintain favourable image of business
- Respond to issues that may influence business’s image or brand (either good or bad)
Risks in Public Relations
- Bad publicity
- Managing social media
- Failing to create and maintain relationship with stakeholders
- Inappropriate response
Administration Function
- Collects all data in the business
- Data will be processed into information
- Info is stored fro availability of manager
- Handles all paperwork
- Data collection must align with legislation
Risks in Admin
- Not keeping documents by the prescribed time by legislation
- Incorrect, outdated or inaccurate records will lead to poor decision making
- Poor safekeeping of customer details (POPI)
General management
- Plan
- Lead
- Organise
- Control
- Coordinate
- Communicate
- Delegate
- Discipline
- Decision making
- Motivating
- Formulate vision. mission, objectives
Leadership styles
- Laissez-Faire
- Autocratic
- Democratic
- Transactional
- Situational