Unit 2 (2.1, 3.2, 4.1) Flashcards
Human Resources Management (HRM)
Strategic approach to the management of people within a business to meet its objectives
What does an HR department do?
- HR planning
- Recruitment
- Training
- Appraisal
- Remuneration
- Dismissal
- Motivations
Why is HR important?
- People are a business’s more important resource
- HR tries to get the best employees and getting them working productively
HR Planning
Predicting how many employees are needed and what skills they need
Internal Factors for HR Planning
Labor turnover
- % of employees leaving in a year as a proportion of the workforce
Change in company objectives
- E.g. expansion, new product
Productivity of employees
- Increased productivity may mean less need to hire more employees
Automation
- Possibly less workers needed, but need to hire a machine specialist
Flexitime
- Homeworking, teleworking
- Can lead to job sharing, access to a larger pool of talent, more equitable
External Factors of HR Planning
Demographic Change
- Increases in retirement age, more woman entering the workforce
Changes in labor mobility
- Willingness to move location for a job
- Willingness to take jobs with a different skill set
Immigration
- People moving from one country to another
- Immigration increases the pool of labor
Economy
- E.g. a recession might decrease demand for the product reducing the new for so many employees
Changes in Laws
- E.g. maximum 40 hours week
- Increase in Retirement age
Gig Economy
- Temporary worker, part-time jobs
Reasons for resistance to change in the workplace
- Fear of change/the unknown
- Self-interest
- Poor communication by the business
- Lack of trust in the management
Capital Expenditure
Purchased of fixed assets:
- Factories
- Machinery
- Vehicles - e.g delivery trucks
- Furniture
Usually, will last more than 1 year
The main purpose is to drive growth in the business
Revenue Expenditure
Spending on the day-to-day costs of running the business:
- Utility bills, e.g. electricity and water
- Employee salaries
- Office supplies
- Rent
- Insurance
Paid daily, weekly or monthly
Not being to pay these is bankruptcy
Internal Sources of Finance
- Personal Funds
- Retained Profit
- Sale of assets
External Sources of Finance (8)
- Loan Capital
- Share Capital
- Trade Credit
- Overdraft
- Crowdfunding
- Business Angel
- Leasing
- Microfinance Providers
Factors to Consider for Short term & long term sources of finance
Time period
- Short term lack of cash – overdraft, trade credit
- Long term investment – loan or shares
Amount needed
- Share capital can raise millions
- Harder to raise a large amount in a short period of time
Cost involved
- Look at interest rate for loans
- IPO can cost millions in legal/consulting fees, etc
Legal structure
- Sole trader and Partnership cannot issue shares
- Size of existing borrowing
- Already high debt limits future borrowing
Attitude to ownership and control
- Equity financing requires giving up some control
Market Orientation
Whereby the needs and wants of customers are identified through market research and then goods and services are produced to satisfy these needs and wants
Product Orientation
- Focusing on research and development and producing high quality products
- Ignore the market to some extent with assumption that consumers will buy their products
Market Share
Measures how much of a market is controlled by one business
Sales revenue of the business/Sales revenue of the maket x 100
Market Growth
(a - b)/b x 100
a = market revenue this year
b = market revenue last year
Personal Funds
Owner(s) put their own savings into the company
Pros
- No interest in payment or loss of control
Cons
- May not have personal funds
Retained Profits
When a company makes profit and use the profit made and put it back into the business to improve
Pros
- Using money the business has earned
Cons
- Shareholders may sell your shares if you don’t pay large enough dividends
Sale of Assets
Selling items that belong to the business
- E.g. Factory, land machines, patents
Pros
- Gain a one off payment
Cons
- Might be future costs involved - e.g. rent
Share Capital
Selling part of the business to an investor in return for finance
- Limited liability company
Pros
- Doesn’t need to be repaid
Cons
- Give up some ownership and control
Business Angels
Wealthy individuals who invest in small business
Pros
- Gain knowledge & experience, connections
- Doesn’t need to be repaid
Cons
- May have short to medium term profit expectations
- Give up some ownership and control
Loan Capital
Borrow money (usually from bank)
Pros
- Do not give up control of the business
Cons
- Have to pay back with interest
Overdraft
Bank allows the business’s account to go to negative
Pros
- Very flexible and short term
Cons
- Can be high rates of interest
Trade credit
When business buy inputs from other businesses
30 - 90 days - “Buy now, pay later”
Cons
- Businesses may give discount for paying early so lose if use credit
Microfinance Provider
- Providing small loans to businesses/entrepreneurs who might not be able to borrow elsewhere
- Often in LDCs to help entrepreneurs
Pros
- Can get access to finance
Cons
- Small accounts are seen by some as unethical
Leasing
Paying for the use of an asset for a period of time - e.g. machinery, car
P: Do not need to pay upfront for the asset
C: Likely to be more expensive in the long run
Crowdfunding
When many people invest small amounts of money into a business
This can take many forms:
- Donations
- Equity
- Peer - to - peer lending
Pros
- Use of large numbers
Cons
- Investors will also expect some sort of reward
