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coooperatr cultire
whne busines expacts to gain retunrs
short terminism
firm makes decisions to increase finical performance over short period of time
limited companies, used to keep shareholders happy
means have little investmentt in new technoogy etc to reduce costs
means firm is unprepared for changes that might happen
choosing short term contracts with customers, suppliers and staff instead of fostering long term relationships
long terminism
firm focuses on reaching long term goals rather then short term finanicla gains
may mean dont make profit till few years
focuses on overall performance of busines rather then acheiving short term finaines
will research into research and development etc
evidence based decision making and subjective decision making
evidence based deciison making-using past data to help make decsions
adv-based on facts that can be verified making it easier to justufy deciison to others
adv-deciison is well structured and there is record of how decsion is reached
subjective-decisions are made based on opinions, gut instinct etc
adv-decisions can be made quickly
dis-may just go with gut feeling not fulling thinking about coensequnecs
corperate culeture
way theings are done in business
if employees agree, the musch less supervision
hoever, if weka then they comply the rules
what are the 4 types of cultures
power
task
person
role
power culture
decision making is limited to small group of people or as little as one person
role culture
decisions made based on roles e.g senior manager most liekly to make decisions
employees do not have opportunity to be part of decision making process
person culture
decisons are made jointly
task culture
getting specific tasks done
stakeholders
internal-people inside buisnes
employyees
managers-most important stakhlders
external-opeole outside of business
customers
local community ‘
suppliers
ethics in business
ethics are principles
trade off between ethics and profits-ised that being highly ethical comes with cotss
whether person is happy to increase their cots to be ethical
people more liekly will want to work for wethically soucred business so reduction costs are reduced
customers are more liekly to want to buy from company which is ethicakky sourced
limtied liability and unlimited liabiltity
limited-reposnibke only fr amount invest in
easier to persuode people to join as onky losing out on amount invest in
unlimoted lability-responsibe for all detbts of business e.g sole trader, partnership
business plan-outlines what business wants to achiev and howw
contrians cash flow foracste, stament of comprevenisive income, statments of finalis postion etc
adv-potential investers as can see have done research
SHOW HOW PROFITBALE BUSINESS EXPECTS TO BE
cash flow forecasts
shows cash inflows and cash outflows
inflows-recived
outflows-paid out
adv-allows managers to see when need to put in overdraft when likely to lose cash
enures dont run out working capital, allows got neough cash to pay meepluess
dis-not good for dymanic makrets as demand costntly changing
needs lots of experince and research so not food fore new busiensses
net cash flow
cash inflows-cash outflows
closing balance=opneing valance plus net cash flow
sales forecasts-predict future sales volume and sales reveue based on past sales data
sales volume-amount of units sold
sales reveue-value of sales
sellign price times sales volume
CEE
economic variables-changes in empolyment leves sales can fall
consumer trends-sales to fall
competiros-if sell simialr product or launch new product then sales are leikly to fall
fiex costs-stay same with output
e.g rent, basic salaries
variable-change with output e.g packaging costs
profit-difference between revenue and cists
ttoal rebeue-tita costs
break even anlayis-level of sales needed to cover costs
break even anlaysis-level of sales needed to break even
adv-easy to do
can quickly go into action and reduce cot s
dis-doesnt take into account wastage
if data is incarrate, redulst are wring
margin of satgey-diferfence between actual ouput ad break even ouput
actual output-break even ouput
budget-finial plan
profit beuget-income budget-expnsive budget
income busget-amount of money comes into business as reveue
exepnisure budget-predduc=tion of totla cots in period of tiem
adv of budgets
motivating for staff
controls income adn expendurtre budgets
dis-changes in inflation are har to predict
time consuming
historical-uodating each year using past data
zero based-starts from scratch each year
fixed nand flexibel -fixed stick to same buget all year even if makreft conditons change
flexible-chanign
variabnces-can be adverse or favourable
if revenue 9income) favourbale if acutal is bigge then bigte
adverse for expensdure if actual is bigger tehna budget
changes in profit #
current yeasr profit-previous yeasr profit divided by previous years profut times 100
gross profit=total revenue -cost of sales
operating profit=gross profit-other operating expenses
net profiit=operating pofit-interest
statment of comprehensive inome=shouws how much money coming into busienss and hiw much is coming out
profit margins
gross profit margin=gross profit divided by revenue times 100
operating profit is operating profit divided by revenue tiemes 100
net profit is net profit divided by 1reveue times 100
cash=used fto psy bills
profit=can get moneths latter
so business high in profit can still run out of cash
statment of finalical porsiton-lists of assets and liabilties
showed snapshot of firms finacinaes at fixed point i tiem
current assres-exahcngesd for cash within accounting year
non-curernt assets-kept for longer than accoutnign year
current laibiltit-detbs paid off withing year
non-current laibltiye-non needed to pay back within accounting year
bad bets-when people dont pay
liquidy-how easily asset can turn into cash and used for buying theinsg
curernt ratio=curent laibility divided by cirrent assets
acid teat ratio=current laibilties-inventry divided by current assets
qoeking capital-amount for day to day spednig
current assets-current liability
wroki cpaital cyctle-length oof time it takes between buying off supplier to getting money back agfter finish good
internal finaical resasons for business failure-bad management of working capital
poor efficent-not bein as low cots as can ve
taking care of finaces well e.g reliying too much on overdrafts etc
internal non-finaica factors l-inadequate market research and analysis
poor communication, arent working welel togeterh
extanl finaical factors-finaical factors
ecnomic reseecion
change in exchange rates
extenral non-finaial factors-communcaiton with suppliers
actiosn of competiosn
cahnges in consumer tredns
job rpdoction-making one off items made by skilled workers
adv-people more liekly to pay for highe prices for something unique
adv-USP
dis-high wages for skilled workers
dis-cannot achieve EOS
flow prodcution-making identifical products along an assembly line
adv-reach eos
can operate 24/7
dis-if machine stops, stops whole production process
boring for workers
changes in consumer trends
bacth prodcution-small batches are prodcuted with iddentical procuts within each bacth
tehn cleaned and new batch made
dis-delays due to cleanrig in beterrn
dis-inconveneinee of storing lots of goods
adv-reach EOS
cell procutiob-dividing flow into set taks
adv-can take pridein work as reposnibke for large chunk
dis-delays in prdcution
labour intensive firms-more workers then machines
adv-multiskilled so cany change in alter prodcution, then can easily just switch what doing
machines needd to be fully reprogrammed
dis-unrelaible #
need rest days
have emoitons
may go on materinity leave etc
capital intevsive-more machines then wrkers
adv-can perate 24/7
easier to manage
high quaity
dis-inital high price
dis-reprogrammed
capaicty utlsiation=current ouptut divided by max posttivbel output
under utilation-working below capiatay e.g not using all reosuces
dis-demotiveing for staff/bpring have little to do
highter uit cots so have to charge higher prices
bad repuation e.g empy shelevs
ways to dela with it=
downsixing rationlisaiton
making soem staff reducnyi
selling mahcinery not being sued
promotion to attract more customers
over utliation-workers are stressed
no time for ewuipment maintence so machines dont last as long
turning away potential suctomers
ways to deal with it=
relocate
increase prices to ireduce demand
increase amount of staff
buy new machinery
OUTSOURCE
magign stock=stock=materials needed to make product
want as little stockas posttie
adv-have EOS
mass market whne demand is high
dis-wastage and storeage socts s
lean production-foucies on waste minimiasatin
using as little reosurecs as possible
jit production-type of leasn prodcution methdod
where use as little stock as psoibble
increases cash flow as lress stock is tired up
redcues storage costs
dis-need good relaitonship with supppliers
if dont come in time, bas repuation on business
quality control-checki g goods at end by inspectore
adv-doesnt delay prodction
adv-experienced
dis-have to ay high wages
-ewastes
quality assurance-checking throghout by workers
adv-feel more valued
less wqaster
dis-not much wepeinerc e
total quality managemtn-qulity is the centre of eething
adv-boosts brand image
can change high prices
motivating for staff
dis-can sem like a lot of effort
epnsive to introduce-need training
qulity circles-worers come togetehr to discuss quality issues
adv-valued
adv-can gac good input as know lot about their edpartment
dis-as inexperinced may bing in unrelaiitc ideas, floor workers may b ignored
kaizen approch-imporving work a little each time
adv-workers feel more involved oin quality assurance
dis-not good if busienss needs to urgently imporve their quality
interst rates-cost of borrwing or retunr on savings
if high, hen cots more to bowwor and higher intest needs to be paid, have less dsposbale income to spend, reducing demand on business
can affect busiensses who based on bowrrwin
inflation-increase in price of goods and services within an aeocnomy
demand push inflation
cost puths inflation
can be meaured using consumer price index
business cycle-boom-GDP is high, icnomes are high, confidence is high
recession-conficne is reduced, incomes go down
slump-gdp is at a low, high ratses oof unemployment
recovery-incomes risse again, employment increases
busienss legisaltion-laws placed on businesses
employment legislation-laws placed on employees
empolyee cpntract
REcuritment
pay
promotions and branding
perfect comeption-lots of busiensses compete on an equal basis e.g sell simialr products at simailr prices
opilifoy-smal amount of large firms dominate market
monoply-one firm has full control over market can achnage whatver prices they want
msision stement-precise stament stating purpose of business
adv-staff to feel sharesdpurpose and work towards something
dis-no proff so business cna put what they think cutsomers want to hear, if duscover doesnt reflaect actiosn, dmanage repuation
needs to be precise and claer
copperate obejctive-objectives of business as a whole
departmental objecitves-obejctives in each depatment to reach cooperate obejctive /more precise
SMART
speciifc meaureable agreed realistic timely
streatgies-long term plans of action
tactics-short term plans of action
ansoff matric
makret prenetreiton-increasing markt shre within eisting market
new prodcut development-selling new products to existing market
market development-seling existing products to new market
e.g looking at different segment of market, how to adapt prodyc to meets requiemts
dierrsitifcation-selling new prodict to new makret?most risky
adv-allos manager to think about risk of moving in a certain durection
dis-doesnt take into account what comeptiors are doing
iversimiplifes opetions of growth
porters 3 generic straties
cost leadership
digferentioatn
focus
jas model
ari
archerticute-good relaitonship wth main stakehokder s
reputaiton-customers are satisfied e.g good auality prodcuts, getting good customer service
innovation-USP
boston matrix
quation amkret-low market share, high amket grwoth
cash cow-opposite
starts-both high
dogs-both low, lost cause
capitabiltiy-maintain omeptievadvantge over time
appropriabe-no risk of copyright e.g patents or trademakres
swot analysis-strength
weaknesses
opprtunites
threats
pestile anaylsys
poltical
economcial
social
techological
legal
enviroemental
porters five forces model
barriers to entry-how easily fir can entre makret
patents and tradment scant make simailr poducts
controlling channels of distibution
price
war
predatory pricing-illegal in EU laws
buyer prowe-has more power if littel buyers and oots of sellers
if they buy in larg qunityes then have more power
ways to deal with this-promote to incerease amout of suplliers
difefrentiate prodycts so biyer is less lieky to sty and not chnage to rival
supplier power-supplier wants as high price as possibld
more pwoer when few suppliers and lots of cutsomers buying from eh
2 year contracts
joint venture/so no lomger trying to get profits from us
threats of subetuirs
-how easy it to buy aternaitve
differentiat eporduct
ribarly
customers
big promotionlal cmapigns
organic growth-growing from within business
adv-not risky/doing what know works best
dis-risk pf competiors goring inorganically
adv-easier to manage
dis-long time to grow
inorganic groth-growing form outside busienss e.g as takeover or mergrer
adv-synergy
adv-profits
adv-
investment apprasial-whether investment has high reward ad high risk
oayback period= minus numbers then divied when get toh year
avergae rate of return
add them together minus orignial number divided by amunt of years then divided by orgnial number
net presnt value=times them then add up ow uch then divided that by orgnial number the times that by orgnial number
minus first
then divided
ddecision trees
EMVW-times togetrh tehn adeeed togetrh
net gain-orgina inevstment minus form EMV
cirical pahth anaysis
show shortest time it takes to do completed task
EST
LST
coperate infleunces
short terminis and long terminsi
short terminsim-foucs on havin high finialperfomernce over short period of time
reducing invetsments into machinery etc to reduce costs and be best finaicalaly
long terminsim-focusig on long term goaks rather then short term
evidence based decision making -using daa=ta which has bee gathered and anlysed to help make decision
adv-in documnet so easier to persude people to ikemdecision
adv-facts
well srcyire
dis-tiem consuming
subejctive-using option sor gut firenling
adv-quickly
dis-may gi by gut feeling and nt think well eugh about negative conseqqunecs
coperate culture
way things are done within a busines s
if strong, then busienssses tend to agree with teh values of the business
need little supervision
if weak, then tend to nt agree and instead comply ratherr the a ctialyl agreeing
power-littele amount or one person amkes deceios
task-speicifc tasks done
perosn-all make desicisions jointly
role-done by job title meaning empoloyees dont get chnagceinput in decisons madde
stakeholders-internal-employee, amagers
external-suppliers, customers, clocal community
trade off between pfots and ehtics-cost lot to be thical
CSR-going above adn beyond to jelp society
adv-brand image
brand lotaliyy
dis-cost
gerjg ratiocapital employed=non curent laibilty plus euty
geraing rattio=non current liabiltiyes divided by cpaital employed times 100
highly geargerd above 50% over half of its money is fro long term debts
helps wth expsnaion
dis-not bein able to repay
lowly geard=below 50%
less then 50% comes for long terem dbets e.g overdrafts or loahs
return on capital employed=operatig rpdot divided by capital empliyed labour procutiiy=output perperiod divided by number of employees
labou turnover=amout leaving
numbe of staff leaving divided by number of satff employeed
labour retention-ability to keep employees
number of staff emplyed-number of staff leaving divided by number of staff emplyed
