term 2 y11 Flashcards
management
the process of co-ordinating all resources (physical, human, financial, informational) to achieve business goals
efectiveness
‘good’ decision making – the successful achievement of business goals and objectives
efficiency
maximising output and minimising inputs – the relationship between inputs and outputs
effective management is important because managers (PDMSSEA)
- provide order and purpose in production process
- direct people to do particular jobs or achieve particular goals
- make decisions that affect people and production
- set goals and compromise between conflicting goals
- set financial limits and manage budgets
- establish the structure for business operations
- are responsible to stakeholders
proactive managing
preventing an issue before it happens
reactive managing
minimising the damage of an issue after it happens
stakeholder
anyone who has a say in or is affected by a businesses actions or decisions
a goal is:
a desired outcome that an individual or business intends to achieve within a certain time frame
financial goals (PSRMIB)
- profits
- share price
- return on investment
- market share
- increase sales
- business expansion
social goals (CAFAPSFM)
- community service
- assisting with school fundraising
- providing employment
- social justice
- fair treatment of workers
- moral conduct
environmental goals
- providing environmentally safe practices
- ecological sustainability
personal goals (PSPPJC)
- prestiege or status
- satisfaction
- professional recognition
- power and influence
- job security
- contributing to the community
staff involvement
involving employees in the decision making process and giving them the necessary skills and rewards. it is important that businesses create work environments that maximise employee involvement and satisfaction because this results in high levels of output.
management skills (ISVFCER)
- interpersonal (people skills)
- strategic thinking
- vision
- flexibility and adaptibility to change
- complex problem solving and decision making
- ethical and high personal standards
- reconciling conflicts of interest
staff innovation
when a new idea is applied to improving an existing product or idea. with markets and competition becoming more global, can lead to a competitive advantage for a business
motivation
what drives a person to act in a certain way.
how do businesses motivate staff
- money
- regular communication with staff
- delegation of responsibility
-decision making ability
-effective leadership and career pathing
mentoring
the process of developing another individual by offering coaching and modelling acceptable behaviour
training
the process of teaching staff how to perform their job more efficiently and effectively by boosting their knowledge and skills
behavioural approach characteristics
- “open door” management –> democratic communication
- flatter management structure –> shorter chain of command
- autonomous workplace –> employees given independence
- use of teams
- job rotation
- focuses on managing and maintaining a good relationship with human resources
classical scientific approach
- division of labour
- narrow span of control
- long chain of command
- clear lines of communication
- autocratic leadership style
- planning, organising, controlling
contingency approach
- a contingency is something that can happen but is not anticipated
- this approach adapts its structure using a mix of behavioural and classical approaches while also being open to new ideas in order to adapt to the dynamic environment
marketing
all activities that plan, price, promote and distribute products to existing and potential customers. marketing identifies customer wants and aims to satisfy these wants in order to achieve the business goals
market segmentation
subdividing the total market into groups who share one or more common characteristic
the 4 p’s
- product
- price
- promotion
- place
product features include:
- tangible features
- brand name
- packaging
- image
- warranties
product strategies
- extension
- contraction
- rejuvination
extension (product)
adding new or improved products
contraction (product)
remove a product from the range
rejuvenation (product)
redesigning or repackaging an older product
price strategies
- discounted price
- penetration pricing
- market skimming
- meet the competition pricing
- psychological pricing
- cost plus pricing
- market price or demand pricing
- price points
discounted price
an amount/percentage off the list price
penetration pricing
lower price than competitors to make a new product more attractive
market skimming
a high price for a product with no substitutes
meet the competition pricing
prices are set at approx the same level as competitors
psychological pricing
using “odd” prices (eg. $19.99) to give customers the idea that the product is cheaper
cost plus pricing
price is set by the cost of production + profit margin (%)
market price or demand pricing
price varies according to customer demand
price points
similar products are grouped together at a particular price level (eg. $3 for small chips, $4 for medium, $5 for large)
promotion
the variety of activities that inform customers about the product and persuade and remind customers to buy
promotion strategies
- personal selling
- advertising
- sales promotions
- publicity
- opinion leaders
- relationship marketing
- social media
personal selling (promotion)
face to face contact – using sales people to sell products
advertising (promotion)
non personal, wide communication using multi-media
sales promotions
gice aways to encourage sales eg. free samples
publicity (promotion)
free news items in the media about an industry, product or business
opinion leaders (promotion)
involves the use of a well known identity to endorse a business’ products
relationship marketing (promotion)
the use of programs or strategies to maintain customer loyalty to the brand
social media (promotion)
the use of a social media platform to advertise a business and provide customer feedback
place
product distribution – the methods used to move the product to the customer – the location where customers can purchase the product
distribution chalnnels
producer –> customer (eg. vending machine)
producer –> retailer –> customer (eg. woolies)
producer–> wholesaler –> retailer –> customer (eg. officeworks)
accounting
financial management tool that is involved with measuring,
recording, summarising and reporting all the business‟s financial transactions.
Finance
how a business funds its activities. It refers to using the information provided in the accounting process to make decisions about how to get money to pay for the business activities. It is necessary for business to consider the costs, risks and benefits of different types of borrowing and choose wisely.
equity finance
Finance from owners/shareholders
debt finance
Finance that is borrowed
Internal equity finance
provided by existing owners eg. capital, retained profits, $ obtained from the sale of unproductive (unused) assets.
External equity finance
provided by new owners to the business eg. by a new partner or when a business becomes a public company and sells shares.
Bank overdraft
The bank allows the business or individual to overdraw their cheque account up to an agreed limit, to help overcome a temporary shortage of cash. A bank overdraft is usually used to pay day to day expenses of a b. (eg. Wages, rent, stock, electricity) and the b. would then pay off the overdraft when they have sufficient cash.
Accounts Payable (Creditors, Trade Credit)
This is when a b. buys goods and services from a supplier on credit. The b. receives the goods/services but pays for them later (usually the b will be given 30 days to pay the supplier). Also referred to as trade credit.
Mortgage
Is a loan for the purchase of property (land, buildings, factory, shop – something immobile). The property is used as security (collateral) and the loan is repaid over many (eg. 25) years.
Leasing
Is when a business rents or hires an asset (machinery, delivery vehicles, land) owned by someone else. Leasing enables a business to use the asset (for an agreed period of time) without a large capital ($) outlay.
Cash Flow Statement
a financial statement that shows cash receipts (cash inflows) and cash payments (cash outflows) over a period of time.
Cash Balance (Closing Balance) =
Opening Balance + Cash Receipts (inflows) – Cash Payments (outflows)
Income Statements (also called Revenue or Profit and Loss Statements)
show the revenue (income) and expenses of the business over the accounting period and whether the business is making a profit or loss.
Gross Profit (GP) =
Sales Revenue (Income) – Cost Of Goods Sold (COGS)
Cost Of Goods Sold (COGS) =
Opening Stock + Purchases – Closing Stock
Opening Stock
the value of stock (inventory) the business has at the start of the accounting period.
Purchases
any additional stock (inventory) that has been bought during the accounting period.
Closing Stock
is the value of stock (inventory) that hasn’t been sold at the end of the accounting period.
Net Profit (NP) =
Gross Profit (GP) + Other Revenue (Income) – Other Expenses
Balance Sheet
shows assets (what the business owns), liabilities (what the business owes) and net worth (what the business is worth) of the business at a specific point in time.
Current Assets
are those assets that can be turned (converted) into cash within 1 year eg. Cash, Accounts Receivable/Debtors (money owed to the business by customers who have purchased goods and services on credit) and Stock (inventory).
Non Current Assets
are those assets that will not be turned (converted) into cash within 1 year eg. Machinery and Equipment, Land, Buildings, Motor Vehicles, Fittings and Fixtures.
Current Liabilities
are debts the business is expected to repay within 1 year (short term debts) eg. Accounts Payable/Creditors (money owed by the business to suppliers it has purchased goods and services from on credit), Credit Card debts and Bank Overdraft.
Non Current Liabilities
are debts that will take longer than 1 year for the business to repay (long term debts) eg. Mortgage, Long Term loans.
Owner(s) Equity
the net worth of the business or the owner(s) claim on the business. It is the difference between the assets and liabilities of the business.
Capital
funds ($) contributed by the owner(s).
Retained Profit (Earnings)
Net Profit ($) put away for future use (eg. to expand the business).
Drawings
money ($) taken out of the business for the owner(s) personal use (eg. to pay for their son/daughter’s education).
Human Resource management
is the effective management of the formal relationship between the employer and the employee. Also known as Employment Relations (ER).
1.ACQUISITION (Recruitment and selection)
planning needs, finding and hiring the right people (skills, knowledge and experience)
- DEVELOPMENT (Performance Appraisal)
improving skills and abilities through training (new jobs, technology etc)
- SEPARATION
Employees leave the business for a variety of voluntary or involuntary reasons
- MAINTENANCE
(Rewards and Motivation)
motivating staff by
offering a variety of rewards and benefits e.g. as per employment contracts
Recruitment
finding, attracting and hiring suitable job applicants – through advertising (newspapers, E-recruitment websites), employment agencies, and word of mouth. The business may choose internal (within the business) or external (finding applicants outside the business) recruitment methods.
job analysis
a systematic study of each employee‟s duties, tasks and work environment. It comprises a job description and job specification.
Training
development of employee skills and abilities
Identify the key qualities that Lily felt were essential for establishing her business.
- Studied business management
- Previous management and restaurant experience
- Determination
- Good communication skills
- Perseverance
- Passion
Describe Lily’s process for identifying this business opportunity (sources of information, business idea etc.)
- Personal research of businesses on Norton Street - Little Italy
- Leichhardt Council - demographic information, development information, plans for Library
- Developers/Architects display models of Norton Plaza and the Italian Forum
Describe which groups Lily identifies as her target market.
Based on the demographics of the suburb –>
- Mostly 25 39 year olds, males and females, earning middle/upper income levels, working professional jobs
- Mothers 30 45 with children
- Generally people who work or live locally, looking for quality sweet treats.
Explain why a “new” business was the best establishment option for Sweet Lily’s as opposed to franchising or
purchasing an existing business.
- Starting from scratch may be risky, but this was a new concept that didn’t exist - less costly than a franchise. Franchising have to pay royalties, no control over product range or marketing
- Buying an existing business - pay for good will, existing set-up not an option for this location
Starting from scratch allows for more control over decisions, recipes, menu range, setup etc.
Identify the major start up costs of Sweet Lily’s Café.
- This store had nothing but 4 walls Ceiling
- Divisional wall for back prep room
- Store front
- Stainless steel benches
- Electricals
- a major fit out was required
- Concreting floor
- Lights
- Display cabinets
- Signage
- Cool room/freezer
- Shelving Stock
- Packaging
Justify the sources of capital used to finance the establishment costs of Sweet Lily’s
Major sources of finance were;
1. Business loan from NAB - a non-current liability, used to purchase equipment which are the non current assets of the business.
2. Accounts payable - current liabilities - delayed payments until the business brought in finance. This type of finance was used with the trades people installing the fit outs.
3. Owner’s equity for all other capital costs
cash flow
describe how each registration of business name (legal consideration) relevant to the establishment of Sweet Lily’s
Register name with the NSW Office of Fair Trading
Submit a form with 3 name preferences, in case the name already exists or something too close to that name exists. You pay $156 for 3 years, and a renewal fee of $117 after that.
describe how health regulations (legal consideration) were relevant to the establishment of Sweet Lily’s
All necessary applications made to the local Leichhardt council during the building process.
A combination of council guidelines, newsletters and previous industry experience ensure that Lily is aware of and is kept aware of all health regulations for the food service industry.
The Leichhardt Council conduct yearly health inspections to check that Lily meets the legislative requirements of The Food Act 2003, Food Regulation 2004 and the Food Standards Code.
describe how zoning (legal requirement) was relevant to the establishment of Sweet Lily’s
All of the initial council zoning regulations were taken care of by the developers of the Italian Forum during the planning stages and beyond the establishment of The Italian Forum. The Ground level was zoned for food services and cafes, the first floor was intended for boutique retailers - other levels were zoned for residential use. The Italian Forum as you now see it is very different to what was planned and what business owners believed they were buying in to. Zoning is an important council concern due to the effects of business on local infrastructure.
Describe the effectiveness of the store layout for the tasks that must be performed at Sweet Lily’s.
The store layout is functional for every day use, but there are lots of things that can be done to improve functionality.
Store front display units, cabinets, refrigerators and shelves.
Back room consists of cool rooms, ovens, sink, shelving and a back office.
The preparation area is a little tight, and the back office has meant there is wasted space that could have been used in other ways. LAYOUT IS PRESENTATION FOCUSSED (Marketing concept)
Describe how inventory is controlled at Sweet Lily’s to ensure quality management.
Stock control methods vary slightly for each product in the range offered at Sweet Lily’s - but overall, the Just In Time method of stock control is used because it allows for freshness and better quality, it also means better cash flow and planning.
For the JIT method to work in a way that doesn’t leave you with out stock when you need it, you need to have a good relationship with your suppliers.
More frequently placed but smaller orders is preferable for cash flow and freshness…than bigger orders on a monthly basis.
Coffee is purchased weekly, freshly roasted. Chocolates are bought weekly. Cakes are baked throughout the week, but cakes with shorter life span are baked at the end of the week for the weekend.
Organising resources - Marketing
Identify the items included in Lily’s product range.
Lily’s range includes hand made chocolates, quality cakes, gelato, hot and cold beverages and confectionery.
Cakes: Tiramisu, pavlova, meringue, panecotta, Belgian mousse, choc lava, mudcake, cheesecakes -
Describe the importance of Lily’s product range in establishing a competitive advantage.
The freshly baked cakes give Lily a competitive advantage because the other cafes buy their cakes from external suppliers. The taste, freshness and quality ingredients, added with Lily’s famous coffee presentation means that customers know coffee and cake at Sweet Lily’s will not be like any other café, or like any Gloria Jean or Starbucks.
Describe how the pricing strategies used at Sweet Lily’s support the product mix, especially positioning strategies.
Essentially, Lily uses a cost plus margin strategy - but because the cost of the ingredients is high her product pricing appears to be a price skimming strategy.
In a flooded market of $5 cake and coffee, Lily’s prices reflect the quality of her product, which positions her at the higher end of the market.
Lily is effectively skimming the market with products that have a higher quality and price than the competitors. The customers know they are getting a high quality, fresh and unique product for their money.
Describe how Sweet Lily attempts to manage cash flow/working capital.
Managing working capital on a day-to-day basis is probably the most important task. Working capital is calculated by subtracting current liabilities from current assets.
Current assets are things like cash, inventory and accounts receivables. Current liabilities are accounts payable and bank overdrafts.
If you do not have enough current assets to cover current liabilities, this means you are not meeting your short term liabilities.
With the retail food industry, it is difficult to forecast how much cash you can generate on a regular basis. So Lily has to focus on managing her inventory/stock levels and payables.
Discuss the challenges of hiring and retaining good staff in a retail business. How has Lily managed this function?
Your business is really only as good as your staff, and it is a challenge to find good staff that have all the qualities you are looking for:
Qualities keen, trustworthy, reliable, fast learner, good customer service skills
Availabilities weeknights and weekend nights
= Difficult to find this combination
The business has transitioned from employing family “trust worthy” aspect to seeking people with the qualities and availabilities required. Cake and pastry handling skills now also considered an advantage.
Training costs money and time and these are both resources you don’t have enough of in a retail business where you are baking your own products.
Identify the internal strengths that may contribute to the success of sweet lily’s
- quality and freshness of products
- experienced and committed owner
- creativity and passion of owner
- unique concept
Identify the internal weaknesses that may contribute to the failure of sweet lily’s
- poor managing of accounts
- location
Identify the external opportunities that may contribute to the success of sweet lily’s
- diversification
- renewal of italian cultural centre
identify the external threats that may contribute to the failure of sweet lily’s
- hostile, competitive environment of the forum
- the decline of the forum
Explain how and why Sweet Lily’s must identify and sustain a competitive advantage.
Lily has ensured “quality” is her distinguishing feature because there is “cheap” - This is the factor that is important to her repeat customers.
To keep customers coming back, Lily continues to master the making of new quality Italian sweets and continues to pursue quality by sourcing top brand ingredients, hand made chocolates and coffees and learning from the best pastry chefs/cake makers.
Employment contract
a legally binding, formal agreement between an employer and an employee.
3 different types of employment contracts
- modern award
- enterprise agreement (EA)
- common law (employment)
modern award (employment contract)
the minimum terms and conditions for a particular job in an industry or occupation.
Enterprise Agreement (EA) (employment contract)
a negotiated arrangement between an employer and a union (an organisation that exists to protect workers‟ rights) or a group of employees. Employees receive above Modern Award wages and working conditions.
Common Law (employment) (employment contract)
exists when employees are not under any award or enterprise agreement. Employers and employees have the right to sue for compensation if either party does not fulfil their part of the contract. These contracts are for high income earners such as executives, doctors, lawyers, celebrities and professional sportspeople.
Corporate Social Responsibility (CSR)
a business going above and beyond what is required by law eg. paying their workers above the minimum wage, using environmentally friendly packaging or phasing out single use bags.
Ethically business behaviour include:
∙ Fair and honest business practices
∙ Decent workplace relations
∙ No conflict of interest situations
∙ Accurate financial management
∙ Truthful communication
Outsourcing (change)
is the contracting of some organisational operations to outside suppliers. Many businesses have rearranged their workforces to employ a minimum full-time staff and use as many people from outside the business as possible – on a contract, casual or part time rate. This keeps costs to the lowest possible level.
flatter organisational structures (change)
middle – management positions have been abolished and greater levels of responsibility have been transferred to frontline staff.
Work teams (change)
teamwork allows businesses to be more flexible and responsive to changes in the business environment. Teams also motivate employees to be more creative, to develop a broader view of goals, and to contribute across the entire organisation.
Managing change effectively involves:
- Identifying the need for change
- A Business Information System (BIS)
- Setting achievable goals
There is resistance to change due to:
- financial costs
- inertia of managers
- cultural incompatibility
- staffing
- social costs
financial costs (resistance to change)
- Purchasing new equipment
- Redundancy – payments to workers who lose jobs as a result of change
- Retraining
- Reorganisation of plant layout
Inertia of Managers/Owners (resistance to change)
Inertia = inactivity or lack of motivation to change.
- Owners - may resist change if their lifestyle is more important than profit maximisation.
- Managers - may resist change during trouble free economic conditions or in an environment with few threats + other considerations are more important than business change.
Cultural Incompatibility (resistance to change)
Mergers and takeovers - result in different business cultures coming together. In this situation there is a need to develop a new business culture from 2 separate and possibly incompatible business structures 🡪 slow change to a single structure.
Staffing (resistance to change)
- Globalisation and IT has affected staffing – more telecommuting, job sharing, part time and casual workers, contract employment, flexible work conditions etc.
- Deskilling – decrease in level of skill needed by some workers
- New skills - are needed to perform some jobs (and results in higher training costs).
- Loss of opportunities (career/promotion) - as businesses flatten structures or combine through a merger or takeover.
Social Costs (resistance to change)
- Poor leadership, communication and management of change - may result in loss of worker morale (uncertainty about jobs and the future) and resistance to change.
- Customers may resist changes to products – sales may be lost if product changes are not communicated effectively.
Management consultants
Businesses seek advice from management consultants who have specialised knowledge and skills within an area of business eg. recruitment, marketing, risk management, brand protection. Management consultants also have a wide range of business experience, an objective (external) viewpoint, access to the latest research and an awareness of industry best practices (practices that are regarded as the best or of the highest standard in the industry). Consultants can also provide change management advice.
the four key business functions
- operations
- marketing
- finance
- human resources
what does operations incorporate
- manufacturing
- provision of services
- other value adding
- may be domestic or global
what does marketing incorporate
- sales and advertising
- product design
- marketing strategies
what does finance incorporate
- administration
- financial management
- financial planning
- management and change
what does human resources incorporate
- industrial relations (IR)
- recruiting
- training
- employment contracts
quality management
he strategy (an action plan to achieve specific goals) that a business uses to make sure that its products meet customer expectations.
Quality refers to the degree of excellence of goods or services and its fitness for a stated purpose.
Quality control
involves the use of inspections at various points in the
production process to check for problems and defects. Employee performance is measured in relation to set standards or benchmarks (a standard to which something can be measured or judged). Reactive measure taken by the business.
Quality assurance
involves the use of a system where a business achieves set standard in production. This process assures customers that the products of a business are fit for purpose by achieving set standards throughout the production process, thereby preventing defects or problems before they occur. Proactive measure taken by the business (precautionary).
Total Quality Management (TQM)
an ongoing, business-wide commitment
(of all employee) to excellence that is applied to every aspect of the business’s
operation. E.g. empowering employee to be involved in ideas to improve business performance; continuous improvement; improving customer focus.
