Chapter 8: Management Activities

Question 1

Define planning briefly.

Answer 1

Planning involves setting objectives/goals to achieve and setting strategies to achieve these goals.

Question 2

Name the four main steps of planning.

Answer 2

1. SWOT Analysis
2. Set Objectives
3. Devise Strategies
4. Implement the Plan

Question 3

Explain SWOT Analysis for planning.

Answer 3

SWOT Analysis-manager analyses, internal strengths (e.g. great staff) and internal weaknesses (e.g. old machines) aswell as external opportunities (e.g. new market to expand to) and external threats (e.g. competitors).

Question 4

Explain devise strategies for planning

Answer 4

1. Low cost leadership strategy-keep costs as low as possible to sell products as cheap as possible. E.g. Pennys.
2. Differentiation-Make the product unqiue so people will pay more. E.g. brand name
3. Niche Strategy-Spotting a gap in the market and catering to specific customers. E.g. Ferrari

Question 5

Name the five steps for implement the plan for planning.

Answer 5

1. Manpower Plannning
2. Cash Flow Forecast
3. Mission Statement
4. Strategic Plan
5. Tactical Plan

Question 6

Explain manpower planning.

Answer 6

Business has enough workers with the right skills to achieve the business objectives.
Step 1: Forecast future Employee Demand.
Step 2: Calculate existing Employee Supply.
Step 3: If demand exceeds supply then recruit more staff. If supply exceeds demand then make redundancies.
Manpower planning avoids being understaffed and overstaffed

Question 7

Explain Cash Flow Forecast.

Answer 7

A Cash flow forecast plans out the cash the business expects to spend and receive.
-Enough cash to pay its bills as if they do not have enough cash can increase cash coming in or decrease cash going out
-Spot deficits in advance and take corrective action.
-Spot surpluses and invest this money to gain a return.

Question 8

Explain Mission Statement

Answer 8

Mission Statement is the overall fundamental objective of the business and the reason the business exists.
Is what the business does now and will do in the future and is the values and beliefs that govern its existence

Question 9

Explain strategic plan and tactical plan.

Answer 9

A strategic plan is written by the most senior managers and breaks the mission statement’s objectives into major strategic plans.

A tactical plan is written by middle managers and often applies to a particular department. Breaks up strategic plan into pieces for each department.

E.g. Mission Statement-Become world’s largest airline. Strategic Plan-Operate 20% of all flights from Europe to USA within five years. Tactical Plan-Launch flights to NYC in the next 6 months.

Question 10

Advantages of Planning.

Answer 10

1. Guide the business to success: set out objectives and strategies to achieve them.
2. Avoid Future Problems: Anticipate problems and take steps, now to avoid them. E.g. CFF
3. Eliminate the business weaknesses: Analyse the results of SWOT analysis and take steps to guard against weaknesses.
4. Secure Capital: Show investors and banks your plans to prove you can repay investment.
5. Motivates managers and staff: Having objectives motivates staff to achieve them and improves moral when they are achieved.

Question 11

Explain organising.

Answer 11

Manager structures the business in the best possible way to achieve its’ goals. Using organisational structure all resources are put in most suitable form to achieve objectives.

Question 12

Define functional organisational structure.

Answer 12

Split the job into functions (departments) with a manager responsible for each.

Question 13

What are the advantages (3) and disadvantages(2) of a functional organisational structure?

Answer 13

Advantages:
1. Specialisation: Each department is expert and can work quickly to a high standard.
2. Accountability: Identify and eradicate errors quickly.
3. Clarity: Everyone knows who to report to.
Disadvantages:
1. Isolation: People don’t care what happens in other departments
2. Difficult to get departments to pull together.

Question 14

Define product organisation structure with an example.

Answer 14

Split the organisation up based on products. E.g. Dairy Milk have a team for Flake bar and another for Wispa bar.

Question 15

What are the advantages (3) and disadvantages (2) of a product organisational structure?

Answer 15

Advantages:
1. Focus on Customer: Concentrate on delivering the best product to customers.
2. Competition: All departments compete against each other to be the best.
3. Lower Costs: Incentive for departments to keep costs low.
Disadvantages:
1. Duplication: Business ends up with multiple marketing, finance and HR departments which wastes costs.
2. Brand Cannibalisation: Product Directors try steal customers from other products within the company to try be the most successful.

Question 16

Define geographical organisational structure.

Answer 16

Split the business based on geographic location.

Question 17

What are the advantages (3) and disadvantages(2) of a geographical organisational structure?

Answer 17

Advantages:
1. Serves Local Needs Better: Local departments know what local customers want.
2. Competition: Leads to improved performance.
3. Lower Costs: Due to competition to outperform other regions.
Disadvantages:
Duplication: Wasted Money
Conflict: Between Senior and Local management on needs of customers.

Question 18

Define matrix organisation structure.

Answer 18

Combines functional and product structure. Used for Major Temporary Projects. E.g. Google Car.

Employees have a project leader and a departmental manager. Project teams formed from expertise of multiple departments.

Question 19

What are the advantages (2) and disadvantages(2) of a matrix organisational structure?

Answer 19

Advantages:
1. Motivation Improves: Feel special being part of a project/team. Esteem needs.
2. Better Coordination: Develop an understanding of the work other departments do.
Disadvantages:
1. Two Bosses: Could lead to conflicting orders and stress for employee.
2. Increased Costs: Extra admin costs, extra training costs to train up project managers as well as department managers.

Question 20

Explain the chain of command.

Answer 20

1. Unbroken line of authority that links individuals in the company.
2. Higher up in the chain the more command you have.
3. Authority over people lower than you but not same level.
4. Each employee held accountable.
5. Channel through which feedback is communicated

Question 21

Define span of control. Explain the five features that affect a manager’s span of control.

Answer 21

The number of employees you have direct control over.

1. Managers Experience-Lack of experience, more narrow span of control.
2. Employee Experience-Poor employees need closer attention, more narrow span of control.
3. Type of Work-Complicated work needs closer attention, more narrow span of control.
4. Location-If employees are spread out over different locations a manager will need a narrow span to manage them.
5. Personal Life-Manager stressed at home, more narrow span of control.

Question 22

What is the difference between line organisation and staff organisation structures?

Answer 22

Line organisation refers to employees who are directly responsible for making the products.
Staff organisation refers to employees who provide services. E.g. Accounting

Question 23

Explain the four advantages of organising.

Answer 23

1 Solves problems quickly as employees know exactly who to go to with a problem.
2. Improves efficiency, employees specialise in one department and do the job really well.
3. Helps the business cope with change. Project teams can be set up quickly to deal with any problems or opportunities that arise.
4. Proper organisation avoids duplication and waste of resources.

Question 24

Define controlling.

Answer 24

Controlling involves the manager keeping the business on target to achieve the objectives that were set during planning. The manager checks up periodically on the business performance to see whether it is off target or on target.

Question 25

What are the four steps to controlling?

Answer 25

1. Set goals for the business to achieve e.g. manager sets goal of 10% increase in sales over next 12 months
2. Measure the businesses actual performance regularly e.g. after first month sales have fallen by 2%
3. Measure any changes and investigate them e.g.the manager now realises the business is off target
4. Take corrective action to ensure the business stays on target e.g. the manager needs to advertise more and reduce price

Question 26

What is the aim of stock control? Disadvantages of bad stock control.

Answer 26

To make sure that the business has exactly the right amount of stock at all times.
Too much stock-Money wasted, gone off, obsolete technology.
Too little stock-Sales missed, unhappy customers.

Question 27

What four strategies can be used by a business to prevent too much stock and too little stock?

Answer 27

Too much stock:
1. Maximum Stock Level: The business should not have more than this amount.
2. Re-order Quantity: This is the correct amount of stock you should buy each time

Too Little Stock:
1. Minimum Stock Level: The business should never have less than this amount.
2. Re-order Point: When the stock falls to this level, it is time to put in a new order.

Question 28

Explain just in time (JIT)

Answer 28

Aim: Keep the minimum amount of stock in the factory while at the same time never running out of stock.

This involves buying from a supplier who delivers exactly the right amount, exactly at the time that it will be used so products can be shipped immediately to customers. So business does not hold stock.

Question 29

Explain four advantages of stock control.

Answer 29

1. Lower Insurance Premium-Holding less stock means less of a risk.
2. Reduced Risk of Theft-Holding less stock means less burglary risk.
3. Customer Satisfaction-The business will always have enough to meet customer demand.
4. Reduced Costs-Holding less reduces risks of obsolete stock and high storage costs.

Question 30

What is the aim of quality control?

Answer 30

To make sure that the quantity the business produces meets very high standards set by the business. This ensures products surpass customer expectations.

Question 31

Explain the three quality control strategies.

Answer 31

Inspections: An inspector physically examining the products before they leave the factory. Products that meet the standards are shipped out to shops. Those that do not are sent back to factory to be fixed/scrapped.
Example: Butlers inspects its chocolates to ensure high quality.

Quality Circle is a way to control quality in a business that uses the employees to spot quality problems in the factory and come up with suggestions to solve these problems.

ISO 9000 is an internationally recognised award that is only given to businesses that can consistently prove to independent inspectors that their products are the highest quality.

Question 32

Explain sampling.

Answer 32

An inspector picks a sample from a batch at random. If the sample passes the whole batch passes, otherwise the whole batch fails.

Question 33

Explain how a quality circle works.

Answer 33

-Employees meet to discuss quality problems identified.
-Employees recommend a solution to manager.
-If manager approves, quality circle helps to implement the change.

Question 34

How do you apply for the ISO 9000 award?

Answer 34

Complete a detailed questionnaire about quality.
ISO sends back changes to make.
Once changes are implemented the business is inspected to ensure these high standards of quality are met and receive award.

Question 35

What are the three advantages of quality control?

Answer 35

Customer Satisfaction: high quality products means customers are happy-increased sales.
Lower Costs: high quality products means money is not wasted on redress for faulty products.
Marketing: if a business has the ISO 9000 quality award it will stand out from competitors and catch the interest of customers

Question 36

What is the aim of credit control? What is a ‘bad debt’?

Answer 36

Aim: to make sure that all of the business’s customers pay their bills on time. It is to ensure that bad debts are eliminated and late-paying customers pay their bills now

Bad debts are customers who go bankrupt and can’t pay their bills.

Question 37

Explain the four steps of credit controlling.

Answer 37

1. Set Maximum Credit Limit-never lose more than this amount.
2. Conduct Credit Check of Customers-Ask for trade and bank references
3. Offer discounts to pay early-This encourages customers to pay quickly
4. Create collection procedure for non-paying customers-This involves contacting customers who have not paid and taking them to court if necessary.

Question 38

Explain the two advantages of credit control.

Answer 38

Reduced Risk of Bankruptcy: credit control ensures that the business receives cash from its customers on time.
Reduced Risk from Bad Debts: credit control ensures that customer’s credit worthiness is checked in advance. This reduces the risk of non payment by customers.

Question 39

What is the aim of financial control? Give three examples.

Answer 39

Aim: to make sure the business is profitable and always has enough cash available to pay its bills. If a business cannot pay its bills it will go bankrupt.

E.g. Budget, CFF, Ratio Analysis

Question 40

Explain the four advantages of controlling.

Answer 40

1. Objective Focussed-Checking the business will meet its targets set out in the planning stage.
2. Reduce Business Costs. ISO 9000 type of quality within a business reduces redress to customers
3. Improve Cash Flow. Effective credit control can reduce bad debts and speed up being paid.
4. Increase Sales and Profits. Quality control can increase price/sales and stock control reduces cost.

Question 41

Define contingency plan.

Answer 41

Is a back-up plan to take account of a possible future event to prevent the closure of the business or disruption to supply. E.g. Ryanair has pilots on stand-by for when others are ill.