Paper 1 Winter 2014 Flashcards
Diff bw random and stratified sampling
Random sampling is sampling where each member of a target population has an equal chance of being included in a sample
Stratified sampling is the method where a population is divided into smaller,homogeneous sub-groups, known as strata, and random samples are taken from each stratum. More representative
Redundancy vs Dismissal
Redundancy is when a job is no longer required – the employee becomes redundant through
no fault of his/her own – this may occur due to a whole business unit closing, or a section of a business unit closing, or reduction in the need for a particular kind of work to be carried out.
Dismissal is when an employee is removed from an organisation for a cause relating to
performance/non-performance such as gross misconduct.
Mission statement importance in large PLCs
A mission statement is a statement of the core business, purpose and focus of an organisation – designed to resonate with internal and external stakeholders.
+Provides context for worker activity
+Direct and motivate workforce
+Reflect the beliefs and vision of senior management
+ Inspire employees and support distinctive company culture
+ PLCs = large -> need to make their overall aims and values clear
Process innovation
Process innovation is the use of new/improved production methods, or service delivery methods – the way in which an organisation adopts or devises new manufacturing/service methods.
e.g: robots in manufacturing, computer tracking of inventory or sales, internet tracking of parcels although this is not required.
Why business has to hold cash
•Businesses must ensure that they have enough cash to meet all demands in the short
term.
• While it is important in the long term for a business to make profits, in the short term
cash flow and liquidity issues are of vital importance.
• Many profitable businesses fail because of insufficient liquidity.
• Businesses need to keep a constant watch for signs of liquidity problems.
• Holding a sufficient level of cash to ensure that short term liabilities are met and that the
day to day needs of the business can be covered.
• Businesses may over trade: a business may be expanded too rapidly without the necessary finance so that a cash-flow shortage develops.
• Cash flow and liquidity issues are particularly significant for small and new businesses.
Small business improve cash flow
- reduce fixed costs such as rent, building costs, staff expenses…this is probably a difficult option
- seek to lower your variable costs - lower your costs of goods sold
- trim inventory-possibly giving fewer choices to customer
- bill promptly and review credit policy
- recover debts and better manage late payments
- make a more attractive offer to customers
- seek better deal with suppliers
- consolidate loans for better interest rate
- check prices in respect of competition (often customers expect small and regular price increases)
- approach bank for extended overdraft.
- sell assets that’s not being used frequently
Evaluate family owned business
Strengths:
• family dedicated to business – work hard to build and grow the company and re-invest
• there is pride and focus in reputation and quality of product and maintain good relations
Weaknesses (outweigh strengths)
• complexity of different roles played by family members and governance problems – different strategies from different members
• too much informality, not enough clear business practices and procedures
• neglect of strategic management, succession planning, lack of external management, expertise
• may have poor cost control. cash flow, management
• means that the majority of family owned businesses are not sustainable
• discipline difficulties i.e. reluctance to discipline or sack family members
• family arguments might be brought into the work situation.
p
Why businesses experience diseconomies of scale
•Communication is often a major problem leading to diseconomies – excessive use of non-
personal communication – mass of messages – long chains of command – messages distorted – information is delayed – poor decision-making – lack of feedback – management efficiency reduced.
•Impersonal organisations – lose contact with employees – demotivation – danger of staff alienation, especially in flow line manufacturing companies (use team work and job enrichment to address these issues).
•Poor co-ordination – with growth – difficult often to maintain control over the disparate parts
of the organisation – purpose and mission not understood – duplication of effort – bureaucracy – this poor co-ordination can lead to higher production costs.
Corporate responsibilities and why?
Corporate responsibility is a concept involving a business concern, not just for the bottom line but
for the interests of society. Businesses consider the impact of business decisions and activities on customers, employees, communities and the environment.
- Concern for more than the bottom line.
- More awareness of the negative effects of damaging business activities.
- More legislation has developed to constrain business.
- Pressure groups can draw attention to poor business decisions and activities and damage reputations.
- Consumers tend to react positively to businesses that act in a socially responsible way.
- Corporate responsibility can produce competitive advantage – a U.S.P.
Workforce planning
The activity of analysing and forecasting the
- numbers
- skills of workers that are required if the organisation is to succeed.
Marketing coordination w/ others
As a business activity, marketing has important links with other functional departments, e.g. finance and H.R.M.
In order to achieve marketing objectives such as increased sales and profits, a marketing department will have a significant influence on the work of other departments.
Market research data may have a key role in new product development and sales forecasts will impact on operations department as it plans for capacity and inventory levels.
H.R. departments will have to ensure appropriate levels of staff are in post in production and sales to meet the marketing forecasts.
Finance departments will need to support a planned marketing budget and use marketing data to devise operational budgets and cash flow forecasts.
Ads/disads of niche marketing for small brand
ADS:
•For smaller businesses mass marketing is not an option – too expensive.
• The best niche marketing is based on designing goods or services specifically tailored to the needs of customers
• Lower initial costs, especially for advertising.
• Focus on company strengths and their niche targeted activity.
• Competition may ignore the niche – too small – or unaware.
• Businesses can develop expert knowledge in the niche giving a real advantage over potential customers
DISADS:
•Market niches can disappear as a result of changes in economic conditions, fashion, taste
• Mass market businesses may target the niche if it grows in value or size – small firms find competition too strong.
• Niche marketing vulnerable to big and/or frequent swings in consumer spending.
• Economies of scale are limited.
Accounting ratios to managers
- Accounting ratios (such as profitability and liquidity ratios) assist managers to analyse the current financial position of a business.
- Ratios simplify understanding of financial statements and identify changes in the financial condition of a business.
- Ratios facilitate inter-business comparisons. Ratios highlight the factors associated with successful and unsuccessful businesses.
- Ratios assist in financial planning, forecasting, and control – basic management functions.
- Ratios indicate level of suggested management efficiency – if resources are being employed efficiently, if sales revenue is being converted into net profit, if the company is managing working capital effectively.
- HOWEVER, accounting ratios have limitations – even though they are simple to calculate and easy to understand.
- Financial statements (from which ratios are calculated) may be affected by accounting conventions and concepts.
- Forecasts based on ratio analysis may be substantially affected by factors such as market conditions and management policies.
- Non-financial issues/charges not reflected in the ratios may be more important than financial indicators.
- Competitor companies may use different accounting principles and procedures so making comparison difficult.
Aims of social enterprise organisation
A business with mainly social objectives that reinvests profits into benefiting society, rather than maximising profits to owners…
- Have distinctive aims and objectives – while sharing some characteristics of other types of organisation – they rely on the market and sales for income – but they have a sense of social mission and have social ownership structures.
- They seek to use business solutions to achieve public good – and operate in a wide range of areas, e.g. health and social care, transport, childcare in U.K.
- So they have social and business aims (often referred to as “double bottom line”, or some add environmental aims and are referred to as “triple bottom line”.
- They have economic objectives – profit to reinvest.
- They have social objectives – provide jobs and support communities, often disadvantaged sections of communities.
Business benefits to the country
• Business enterprise defined as initiatives concerned with taking risks and setting up businesses making things happen – business opportunities are identified and calculated risks are taken.
• Those who take risks and show enterprise called entrepreneurs – they make a major contribution to the development of business enterprise in a country – seize initiatives –add value, create jobs – make profits – contribute to social investment via taxation.
• Business enterprise(s) considered to be important in that:
• Jobs are created.
• Economic growth – increased living standards – tax revenues for governments to spend on infrastructure.
• Businesses grow, expand, diversify and support a more developed economy.
• Adds dynamism to an economy – increased use of I.T. and new technology.
• Helps improve international competitiveness – exports.
• Helps achieve social cohesion in a country and supply important social goods.
• Economic development comes from economic growth which is significantly supported by business enterprise – countries become industrialised and modernised through
sustained business enterprise activity.
