Chapter 8-Management Activities

Question 1

Manager carries out 3 main tasks (activities)

Answer 1

Planning
Organising
Controlling

Question 2

Planning

Answer 2

Planning involves SETTING OBJECTIVES / GOALS to achieve and

How will we achieve those goals STRATEGIES

Question 3

Steps of Planning

Answer 3

-Step 1 SWOT Analysis
Step 2: Set Objectives
Step 3: Devise Strategies

Question 4

Step 3: Devise Strategies

Answer 4

Low Cost Strategy
Differentiation
Niche Strategy

Question 5

Step 2: Set Objectives

Answer 5

Use the results of the SWOT analysis to help set objectives that are realistic.

Question 6

Step 3: Devise Strategies

Answer 6

Low Cost Leadership Strategy: Keep costs as low as possible so we can sell products as cheap as possible and attract price conscious consumers. EG Pennys, Ryanair
Differentiation: Make the product different so it stands out from the competition.People will pay more for something different. The most common form of differentiation is a ‘brand name’ EG Tommy Hilfiger, Rolex
Niche: Spotting a gap in the market and catering to a group of customers with specific needs. EG Ferrari

Question 7

Manpower planning

Answer 7

Manpower planning involves making sure the business has enough workers with the right skills to achieve the business objectives.

Manpower planning avoids being understaffed and overstaffed

Question 8

Manpower planning Steps

Answer 8

Step 1: Forecast future Employee Demand: How many employees and what skills do we need?
Step 2: Calculate existing Employee Supply: Who currently works for the business.
Step 3: If demand exceeds supply then recruit more staff. If supply exceeds demand then make redundancies.

Question 9

Cash Flow Forecast

Answer 9

A Cash flow forecast plans out the cash the business expects to spend and receive in the coming months

Make sure the business has enough cash to pay its bills.
If the business looks like it will not have enough cash it will try increase cash coming in and decrease cash going out

Question 10

The benefits of CFF

Answer 10

The benefits of CFF are spotting deficits in advance and taking corrective action.
Also spot surpluses and plan how to invest this money to gain a return.

Question 11

Mission

Answer 11

Mission is the overall purpose of the business
It gives the business a sense of direction

Mission is the overall fundamental objective of the business and the reason the business exists
What the business does now? In the future?
And the values and beliefs that govern its existence

Question 12

strategic plan

Answer 12

A strategic plan is a long term plan of action
Its written by the most senior managers
They look at the mission statement and they break it up into major strategic plans.

Question 13

Tactical Plan

Answer 13

A short term plan 
Often applies to a particular department
Written by middle managers
Break up the Strategic plan into pieces for each department to fulfil 
Feeds back into the strategic plan

Question 14

Advantages of Planning

Answer 14

Guide the business to success: Set out objectives and strategies to achieve them. Acts like a road map.
Avoid future problems: Anticipate problems and take steps, now, to avoid them. EG Cash flow forecast or manpower planning.
Eliminate the business weaknesses: Analyse the results of SWOT analysis and take steps to eliminate or guard against weaknesses
Secure Capital: Show investors and banks your plans to prove you can repay it.
Motivates managers and staff: Having objectives motivates staff to achieve them and creates a sense of satisfaction when they are achieved

Question 15

Organising

Answer 15

The structuring of the business is called organising

Organising involves arranging all the resources in the most suitable form to achieve the objectives. This means drawing up an Organisational Structure
Splitting the work into departments and putting people in charge to ensure departments achieve their goals

Question 16

Organisational Structures

Answer 16

Functional Organisational Structure

3. Geographical Structure

Product Organisation Structure

4. Matrix Structure

Question 17

1. Functional Organisational Structure

Answer 17

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

Question 18

Functional Organisational Structure Advantages

Answer 18

Specialisation: Each department is expert and can do the job quickly and to a high standard

Clarity: Everyone knows who to report to.

Accountability: Identify and eradicate errors quickly

Question 19

Functional Organisational Structure Disadvantages

Answer 19

Isolation: People do not care what is happening in other departments

Co-ordination: Difficult to get departments to pull together.

Question 20

Product Organisation Structure

Answer 20

Split the organisation up based on products

Question 21

2) Product Organisation Structure Advantages

Answer 21

Focus on Customer: Concentrate on delivering the best product to customers.

Competition: All departments compete against each other and strive to be the best.

Lower Costs: Incentive for departments to keep costs low.

Question 22

2) Product Organisation Structure

Disadvantages

Answer 22

Duplication: Business ends up with multiple Marketing, Finance, HR departments which leads to wasteful costs.

Brand Cannibalisation: Product Directors try steal customers from other products within the company to try be the most successful.

Question 23

Geographical Organisation Structure

Answer 23

Split the business based on geographic location

Question 24

Geographical Organisation Structure Advantages

Answer 24

Serves Local Needs Better: Local Departments know what local customers want.

Competition: Leads to improved performance

Lower Costs: Due to competition to outperform other regions

Question 25

Geographical Organisation Structure Disadvantages

Answer 25

Duplication: Wasted money

Conflict: Between senior and local management on needs of customers

Question 26

4) Matrix Organisation Structure

Answer 26

Combines Functional and Project/Team structure. Use this structure when we require MAJOR TEMPORARY PROJECTs

Employees have a project leader and their functional / department manager. Projects teams formed from expertise of multiple departments.

Question 27

Matrix Organisation Structure Advantages

Answer 27

Motivation Improves: Feel special being part of a project / team. Esteem needs

Better Coordination: Develop an understanding of the work other departments do.

Question 28

Matrix Organisation Structure Disadvantages

Answer 28

Two Bosses: Could lead to conflicting orders and stress for employee.

Increased Costs: Extra admin costs, extra training costs to train up project managers as well as department managers.

Question 29

Span of Control:

Answer 29

The number of employees you have direct control over.

Question 30

Span of Control[why wide vs narrow

Answer 30

Managers Experience-Managers who lack experience will have a narrow span of control
Employees experience / ability-Poor employees will need closer attention therefore manager will require narrow span
Type of work-Complicated work will mean manager needs to pay closer attention which results in a narrow span
Location of employees-If employees are spread out over different locations managers will have narrow span
Personal Life-If manager is under a lot of pressure he might be struggling to cope and need a narrow span

Question 31

Line Organisation Vs Staff Organisation

Answer 31

Line organisation refers to employees who are directly responsible for making the products
Staff Organisation refers to employees who provide services EG Accounting

Question 32

Advantages of Organising

Answer 32

Organising helps solve problems quickly as employees know exactly who to go to with a problem.
Organising improves efficiency, employees specialise in one department and do the job really well.
Organising helps the business cope with change. Matrix structure means project teams can be set up quickly to deal with any problems or opportunities that arise.
Proper organisation avoids duplication and waste of resources.

Question 33

Controlling

Answer 33

Controlling involves the manager making sure that the business stays 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 34

Steps to Controlling

Answer 34

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

Question 35

Types of Control

Answer 35

Stock Control

Quality Control

Credit Control

Financial Control

Question 36

Stock Control

Answer 36

Aim: to make sure that the business has exactly the right amount of stock in the shop factory at all times.

Too much Stock = money wasted, gone off,
going out of date (obsolete)
Too little Stock = sales missed, unhappy customers

Question 37

Stock Control Strategies

Answer 37

To Prevent too much Stock
Maximum Stock Level: The business should not have more than this amount.
Re-order Quantity: This is the correct amount of stock you should buy each time
To Prevent too little Stock
Minimum Stock Level: The business should never have less than this amount.
Re-order Point: When the stock falls to this level, it is time to put in a new order.

Question 38

Just In Time (JIT)

Answer 38

Aim: keep the minimum amount of stock as possible 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 and products are shipped immediately to the customer.
This means the business does not hold stock

Question 39

Advantages of Stock Control

Answer 39

Lower Insurance Premium: Holding less stock means less of a risk
Reduced Risk of Theft: Holding less stock means less of a risk burglary
Customer Satisfaction: the business will always have enough stock to meet customer demand
Reduced Costs: Holding less stock means less of a risk of obsolete stock and high storage costs

Question 40

2. Quality Control

Answer 40

Aim: to make sure that the quality of the businesses products meets very high standard set by the business. This is to ensure the products surpass the expectations of customers.

Question 41

Quality Control Strategies

Answer 41

Inspections

Quality Circles

ISO9000

Question 42

Quality Inspections

Answer 42

Inspections: This involves a trained 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 by hand to ensure high quality.

sampling: this means making a batch of products and the inspector picks out a sample (at random) to see if they meet the standard. If the sample passes the whole batch passes. If the sample fails, the whole batch fails

Question 43

Quality Circles

Answer 43

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.
How it works:
Employees meets to discuss quality problems identified
Employees recommend a solution to the manager
If the manager approves, the Quality Circle will help implement the change

Question 44

ISO 9000

Answer 44

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 45

Advantages of Quality Control

Answer 45

Customer Satisfaction: high quality products means customers are happy. This leads to increased sales for the business.
Lower Costs: high quality products means money is not wasted on repairing and/or refunds on 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 46

Credit Control

Answer 46

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
Keyword: Bad Debts: customers who go bankrupt and don’t pay their bills

Question 47

Steps to Credit Controlling

Answer 47

Set Maximum Credit Limit to be offered
This ensures that it never loses more than this amount
Conduct Credit Check of Customers
This can be done by asking for trade and bank references
Offer discounts to pay early
This encourages customers to pay quickly
Create collection procedure for non-paying customers
This involves ringing and calling customers who have not paid and taking them to court if necessary.

Question 48

Advantages of Credit Control

Answer 48

Reduced Risk of Bankruptcy: credit control ensures that the business receives cash from its customers on time.

Reduced Risk Bad Debts: credit control ensures that customer’s credit worthiness is checked in advance. This reduces the risk of non payment by customers.

Question 49

Financial Control

Answer 49

to make sure the business is profitable and always has enough money available to pay its bills. If a business cannot pay its bills it will go bankrupt.
Budget
Cash Flow Forecast
Ratio Analysis

Question 50

Advantages of Controlling

Answer 50

Make sure the business achieves its objectives. Periodically check on the business progress to ensure its meeting targets set out at the planning stage.
Reduce Business Costs. ISO 9000 type of quality within a business reduces repairs to stock and refunds to customers.
Improve Cash Flow. Effective credit control can reduce bad debts and speed up being paid.
Increase Sales and Profits. Quality control can increase the price we charge and amount of sales and stock control means we have the right amount of stock to sell at all times.