bus mgt gc revision booklet

8/7/2019 Bus Mgt GC Revision Booklet

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KNOX ACADEMY

STANDARD GRADE

BUSINESS

MANAGEMENT

SUMMARY NOTES

KEY WORDS


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Contents

Unit 1.1 What do businesses do? ................................................................... 3Unit 1.2 Why do businesses exist? ................................................................. 4Unit 1.3 How are businesses organised? ........................................................ 5Unit 2 Starting up in business/business plans............................................ 6Unit 3 Location of businesses...................................................................... 7

Unit 4 Finance.......................................................................................... 18Unit 5 Marketing ........................................................................................ 9Unit 6 Operations ..................................................................................... 12Unit 7 Human Resources .......................................................................... 15Unit 8 Business Growth............................................................................ 18Unit 9 Business Information and Communications.................................... 22Unit 10 Management and Decision Making ................................................. 25Unit 11 Business Challenges ...................................................................... 26Unit 12 Business Success and Failure ........................................................ 27


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Unit 1.1 What do businesses do?

Key Word Definition

Needs

Wants

Goods

Services

Durable

Non-durable

Size of business

Small

Medium

Large

Sector of Economy

Private

Public

Voluntary

Sector of Industry

Primary Secondary Tertiary

What people must have in order to

survive

Items people would like to have justbecause they are available

Tangible: can be seen/touched

Intangible: cannot be seen/touched

Long-lasting

Used up quite quickly (perishable)

Owned by one or 2 people, local, less

than 50 people

Owned by group of people, national, 50-

250 people

Owned by large number of people, multi-

national, over 250 people

Sole traders, partnerships, private

limited companies (Ltd), public limited

companies (plc)

Nationalised industries, local

authorities, schools and hospitals

Charities, youth clubs, golf clubs

Raw materials eg oil, fishing

Manufactured goods eg cars

Service eg insurance, banking


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Unit 1.2 Why do businesses exist?

Key Word Definition

Types of business organisation

Sole Trader

Partnership

Private Limited Company Public Limited Company

Aims of organisations

Private sector

Public sector

Voluntary sector

Stakeholders

Owned by one person

Financed by capital invested by owner,and bank loans

Owned by 2-20 people

Financed by capital invested by each

partner, and bank loans

Have to be invited to purchase shares

Financed by share capital and loans

Ordinary shares more risky

Preference share less riskyDebentures form of loan

Dividend

Learn advantages and disadvantagesof each type

Maximising profit, growth, survival,

increasing market share, efficiency,

improving quality of products

To provide essential product/service, to

provide a consistent level of service

Charities fund-raising to support

causes, raising awareness, providing

information on how money is spent

People who have an interest in the

business eg employees, management,

shareholders, customers, suppliers

Varies depending on sector learnpossible interests/conflicts

Social costs

Social benefits

Economic costs

Economic benefits

eg noise, traffic, health

eg improved roads, housing, schools

eg increased taxation, money spent on

infrastructure

eg more jobs, increased spending locally,

increased standard of living


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Unit 1.3 How are businesses organised?

Key Word Definition

Organisation charts

Line relationships

Lateral relationships

Tall structure Flat structure

Exist between managers and the staff

below them

Employees on the same level of

authority

Many layers of management

Fewer layers of management

Learn advantages and disadvantagesof each and use diagrams to illustrateanswers

Span of control Number of people you are responsiblefor, can be wide or narrow

Chain of command

Functional areas

Downsizing

Delayering

Outsourcing

How instructions are passed through

the organisation

Marketing, Finance, Operations, Human

Resources

Reducing number of employees

Removing layers of management

Using external companies to provide

certain services eg canteen, cleaning, IT

Responsibility

Authority

Being answerable for actions and

decisions taken

The power to take a certain action andto delegate to others


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Unit 2 Starting up in business/business plans

Key Word Definition

Enterprise

Risk

Factors of Production

Land

Labour

Capital

Enterprise

External advice

Business Plan

Idea for a product/service Develop idea Taking risks No-one buys the product/service Lose all money invested Unable to pay expenses

Natural resources and the things

produced from them

Workers who are paid wages

includes money, buildings and

machinery

The development of ideas and the drive

to put them into action. Brings the allthe Factors of Production together.

Government agencies, development

agencies eg Local Enterprise Company,

business partners, consultants, banks

General details about thebusiness

Human resources Product or service Market Premises and equipment Finance eg cash flow, profit

estimates

Capital


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Unit 3 Location of businesses

Key Word Definition

Possible plus points

Possible negative points

Infrastructure

Sources of finance

Nearness to markets Away from the competition Reasonable costs Near to good infrastructure Car parking Skilled labour Remote areas Very near competition Expensive Far from good infrastructure

Roads, railways, air travel facilities,

schools and colleges, hospitals

Owner/s Loans (inc Mortgage) EU funding Grants from government/local

authority

Bank overdraft Finance companies Shares Debentures Hire Purchase Trade Credit Leasing Factoring

Government assistance

Local government assistance

In areas of high unemployment:

Grants Low rents Lower taxes and reduced

regulations Providing training

Encourage businesses to set up in their

area by:

Advertising Grants Advice on location and funding Reduced Council Rates


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European Union

Advantages

Disadvantages

Globalisation

Global market

Features of globalisation

Globalisation of jobs

Disadvantages of globalisation

a large consumer market, no custom duties no restrictive practices free movement of workers large choice of suppliers language barriers distance problems time zones

When multinational companies have

businesses in several different areas of

the world.

Because of the big improvement in links

between countries, the world is

becoming one vast market.

Improvements include transportation eg

containerisation and e-commerce

using the same brand name in allcountries

using the same advertising in allcountries

using the same procedures andpractices in all countries

This enables manufacturers to produce

their goods in a country offering more

economies of scale eg

word-processors in India textile manufacture in China telephone help-lines in N Ireland

as EU and also

culture, tax-laws currency differences


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Unit 4 Marketing

Key Word Definition

Market Research

Types of Market Research

Desk

Field

The Marketing Mix The 4Ps

Product

In todays competitive market, research

is very important. It gives managers a

better idea of what customers want and

the price they will pay. Will they do itthemselves or employ an outside

agency?

Information has been previously

collected for one purpose and is used by

you for another secondary information

eg Government statistics or Annual

Company Reports

Information is gathered either by

yourself or a market research company

primary information

Product, Price, Promotion, Place

The name, how it is packaged and what

will be the products life-cycle

The product life-cycle(diagram a must!) Measures the stages of a product fromdevelopment to replacement orwithdrawal from sale


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Price Strategies

Low Price; Market Price; HighPrice

Price Tactics

Introductory pricing Loss leader

Penetration pricing

Competitive Pricing Cost plus/mark-up Skimming Destroyer Discriminatory

Promotion

Why should a product be promoted?

Types of advertising

Branding

low price when product first launched

price is lower than cost to attract

customers

initially set low and then raised as

loyalty increases

based on other sellers

adds a percentage for profit

price set high and then lowered

low price aimed at destroying the

competition

charging different prices to different

people eg holidays cost more in the

summer

This includes advertising money off,

discount vouchers, free gifts,competitions and tastings

Reasons include

making customer aware give information about the

product

try to persuade customers to buyit

to tell them why it is better than acompetitors products

A business has to decide whether to do

the advertising themselves or use an

outside agency. The choices also

include TV, radio, cinema, magazines,

newspapers, posters and the internet

Certain brands are very well known and

the logo, colours, packaging design, have

an image, which attracts the customer.

Brand names can cover a wide variety of

products eg Virgin


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Place

Channel of Distribution

The method will depend on the

product, type and size of the

market and the competition

Three considerations are

how to get the product to theright place at the right time

what is the best distributionmethod?

what is the right place?

From retailer to customer To wholesaler to retailer to

customer

Manufacturer to customer Manufacturer to wholesaler to

customer


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Unit 5 Operations

Key Word Definition

Input

Process

Output

Production Processes

Job production

Batch production

Flow production

Mechanisation

Automation

Capital Intensive

Labour Intensive

This includes the raw materials,

equipment, and labour which are

directly put into production of a product

or provision of a service

This involves using the raw materials,

equipment and labour to make the

product or provide the service

This is the final product or service

Involves a one-off project eg film, uniquehouse, designer dress

Is the process of making several

identical products at once eg casks of

whisky, trays of seedlings

This describes forms of production such

as assembly lines; often aided by CAD

and CAM eg car manufacturing

It is more of a non-stop process andinvolves larger numbers than batch

processing

Learn advantages and disadvantagesof each method

This means workers are replaced by

machines

This is a step further than

mechanisation and involves replacing

workers fully by machines, often robots.

When manufacturers rely heavily on

machinery eg when labour supply is

scarce or consistency is required

When manufacturers rely heavily on

their workforce eg when craftsmanship

is required or labour supply is cheap


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Technology in Production

Advantages

Disadvantages

increases output 24hrs 7days workers can retrain for more skilled

work

increases quality may be redundancies initial outlay is expensive cost of retraining workers involved in repetitive tasks

in mechanisation, often become de-

motivated

Stock control

Quality

Quality Assurance

Quality Circles

Benchmarking

Total Quality Management (TQM)

Just-in-time techniques

Customer service

This must be very accurate and closely

monitored:

security & record keeping accounting/cost length of storing period

This includes quality of products and

quality of customer service. Targets

should be set and monitored.

This is where workers are organised in

teams to ensure quality during and after

the production process

Management meet with workers todiscuss how improvements can be made

to the production process

The process by which a company

compares its own performance with

those of other organisations that are

recognised as the best in a particular

category. The product or service that is

determined to be the industry standard

is known as a benchmark.

It is the newest form of Quality Control

and involves customers and workers: all

workers are involved in the process at

every stage of production

This ensures that suppliers always

supply undamaged goods, and that

production at each stage must be

perfect.

How customers are treated when

buying, telephoning or sending a writtencomplaint. It involves after-sales service.


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Unit 6 Human Resources

Key Word Definition

Why work?

Job description

Person specification

Induction training

On-the- job training

Off-the-job training

Learn advantages and disadvantagesof each method

Apprenticeship

Hours worked

Full-time

Part-time

Permanent

Temporary

Flexitime

Home-working/tele-working

Make money Job satisfaction & security

Company friendship Achieve potentialGives details about a job eg hours

worked, pay, holidays, duties involved

List of attributes expected by the person

who will fill the vacancy (essential and

desirable)

Training which is given to every new

employee

Takes place in the workplace

Takes place outside the workplace:

maybe at a local college or training

centre

Can include re-training or upgrading

training

Can be internal or external and is for afixed time, is certificated at the end of

the time

means working every weekday: usually

from 9 am 5 pm

means working for only part of the

week.

where the job lasts as long as thecompany remains in business. If it

ceases, then redundancy money must be

paid

lasts for a limited time and can be full or

part-time

when a person works core hours and

then selects when the remaining hours

will be worked

when a person works part of the time athome/away from the office

Selection and recruitment


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External advertising

Internal advertising

Job advertisement

Applications Shortlists Final candidate is chosen

Contract of Employment

post advertised on Internet websites,

newspapers, trade journals, Job Centre,

Employment Agencies

post advertised in memos, staff

bulletins, notice boards, e-mail and staff

announcements

usually tells applicants what to do to

apply for the job eg send a CV and/or a

letter of application, completion and

return dates etc

are checked and considered

invitations for interviews

successful candidate offered the job;

may/may not be accepted

must be given within 13 weeks of

starting work (must know what it should

include)

Appraisal

Advantages

Disadvantages

Legislation

An evaluation of an employees

performance

Positive feedback increasesmotivation

Encourages employees to upgradetraining

May cause job specification to bealtered and workload increase

Negative feedback could de-motivateand also cause stress and possibly

absenteeism

This affects the relationship betweenemployers and employees

Equal Pay Act 1970 Health & Safety at Work Act 1974 Sex Discrimination Act 1985 Race Relations Act 1976 Disability Discrimination Act 1995 Minimum Wage Act 2006


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Industrial Action

To avoid poor relations

Team working

Quality Circles

Changing Employment Patterns

Why?

If relations between employers and

employees break down, employees may

decide to take part in industrial action.

It can take the form of

go-slow work-to-rule overtime ban strike team working quality circlesEmployees are involved in setting

targets; therefore they are being involved

in the decision-making process

Employees pool their experience and

specialist knowledge to study problems

and suggest solutions.

Many jobs are now on specificcontracts for limited periods

Jobs have moved frommanufacturing to service industries

ICT has enabled more flexible worklocations

Balance between female and maleworkers have changed

New forms of working eg tele-working, hot desking etc


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Unit 7 Finance

Key word Definition

Need to plan

Results of good planning

Covering costs

Fixed Costs

Variable Costs

Break Even Point

Budgeting/Cash flow

Final accounts

Trading Account

Gross Profit

Profit & Loss Account

It is important to know what

product/service is to be supplied and

also

design, price and packaging costs of development method/s of covering costs product well made/service well

provided

competitively priced suit the customers needs/wants avoidance of cash-flow problems

in the long-term

the product/service will be indemand for as long as possible

A new business needs to forecast costs

and income for 6-12 months to help

them decide if they need to cover costs

Expenses that the business has to pay

that do not change according to output

eg rent, council tax, rates

Expenses that the business has to pay

that change according to output eg costof materials, cost of labour, electricity,

gas by extra funding

The point at which total sales revenue

and total costs are equal. At this point

the business is not making a profit or a

loss.

A forecast of income and expenditure

Accounts produced at the end of a

trading period: usually every 6/12

months. The main final accounts are

Trading and Profit and Loss Accounts

and the Balance Sheet

Shows the Gross profit/loss from the

buying and selling of goods/services

Sales Cost of Goods Sold

Overall profit made by the firm during

an accounting period


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Overheads (expenses)

Net Profit

Balance Sheet

Fixed assets

Current assets

Liabilities

Working capital

Capital employed

Ratios

Gross profit-to-sales ratioNet profit-to-sales ratio

Return on capital employed

Working capital ratio

Acid test ratio

Rate of stock turnover ratio

These include wages, rent, rates and

utility charges

Gross Profit Expenses

This is a snapshot of a business

financial position at a certain point in

time

Are owned by the business for longer

than one year

Items owned by the business for a short

term eg cash, stock and debtors

Are amounts owed by a business and

include short term loans and creditors

Current Assets Current Liabilities

This is the total capital invested in the

business once liabilities have been

deducted

These are used to make a mathematical

comparison between two sets of figures

Profitability Liquidity Efficiency

These help a business to know if a

business has improved its profitability

Is a profitability ratio which tells us how

much profit we make for every 100 we

invest in the business

This is a liquidity ratio and tells us if

there is a cash-flow crisis

This is a liquidity ratio and tells us if we

can pay off our debts with existingcurrent assets (ignoring stock)

This is an efficiency ratio and tells us

how much stock we have sold(shifted) in

a given time

See your Leckie and Leckie book forratio formulae


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Unit 8 Business Growth

Key Word Definition

Internal expansion

External expansion

Merger/amalgamation

Takeover

Integration

Horizontal integration

Vertical Integration

Forward vertical integration

Backward vertical integration

Diversification

Innovation

This is when a business grows within

itself

When a business grows as a result of

external influences. eg mergers and

takeovers

When two or more businesses, usually

of the same size, join together to form a

larger business

This is when one business buys another

eg House of Fraser bought Jenners

This involves the creation of one

business out of two or more previously

separate businesses

This integration involves businesses at

the same stage of production, making

similar products/services

These businesses are in the same

industry, but at different stages of

production

This is when the business at the

beginning of the chain, takes over a

business which is later in the

production chain

This is when a business in the later

stages of production, take over a

business in an earlier stage of

production

This is when a business begins to

produce or sell different goods and

services eg in the 1990s garages began

to diversify when they started to sell

newspapers, milk, etc as well as petrol

This involves developing and creating a

new product or service. It may alsoinclude creating new solutions for old

problems.


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Product research

Reasons for growth

Involves experiments with materials, size

and prototypes.

To increase profit Gain market control Control raw materials Gain economies of scale To diversify

Economies of scale

Internal economies

External economies

The benefits gained as a business grows.

They may be external or internal

economies

When the economies come from within

the business eg technical economies

when a large business can afford

automation and computerised

technology. This allows them to produce

a greater quantity of goods in a giventime, therefore reducing unit costs

These come from or affect the world

outside the business eg obtaining

competitive terms from your suppliers

because they will transport in bulk


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Unit 9 Business Information and Communications

Key Word Definition

How is information given?

Importance of good information

Internal communication

External communication

verbally on paper (written)

as text and images throughtechnology eg internet, teletext,

fax, spreadsheets, video-

conferencing etc

To enable a customer to contact a

business by letter, telephone or e-mail

needed to ensure the efficiency of the

business: eg

recruitment verbal and electronic information

to and from management

regular meetings memorandums handbooks

Takes place within the business eg

memorandums, e-mail (intranet),

internal telephone systems, pagers,

loudspeaker systems

Takes place between a business and the

outside world eg email, teletext, letters,

etc

Needed by a business to help with

decision making

Evaluating information The information must be accurate,

relevant, cost effective, complete, on

time and easily understood


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What questions to ask!

Purpose of communication

e-commerce

Hardware

Are procedures followed? Are procedures working? What is working well and can it be

continued?

What needs changing? What constraints are there?It is an important part of management

because clear leadership and direction

cannot be given unless informed

decisions have been made AND these

decisions are communicated effectively

The sale and purchase of goods or

services over the Internet.

The physical parts of the computer

eg monitor, keyboard, mouse etc

Software The programs running on the computer

Most of us use off-the-shelf programs.

However particular businesses will have

a program especially written for them:

this is bespoke software

WP - Word Processors A standard office program, which is

needed to produce letters, reports, books

etc, which were formally, produced

using a mechanical typewriter. It allows

on screen editing by inserting, deleting,

moving words, and checking spelling

before printing.

DTP Desk Top Publishing Prior to their use, businesses had to use

specialist design companies to produce

brochures and advertisements. DTP

allows users to design layout of text and

graphics for letter- headed paper,

menus, catalogues etc

SS Spreadsheets The program is designed to display and

process numbers. It is made up of a grid

of cells, each with its own address. The

program contains mathematical,charting, statistical and financial

operations. The use of formulae are

particularly useful in the Wages section


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Unit 10 Management and Decision Making

Key Word Definition

Management styles

Autocratic

Democratic

Laissez-faire

when managers tell people what to do

and expect their orders to be followed.

Workers may feel frustrated, and unable

to use their initiative

managers consult others before making

decisions. This makes the workers feelpart of the decision making, increasing

motivation.

involves the minimum of direction by

management. It is best in creativeindustries where results would be stifled

by strict control.

Good Management

Decision Making Model

Includes:

Controlling Leading Planning Budgeting Identify the problem Identify the objectives Gather relevant information Analyse the information Develop alternative solutions Select the best solution Communicate the decision Implement the decision Evaluate the results


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Unit 11 Business Challenges

Key word Definition

Competition

Scarce Resources

Skilled labour

Land/premises

Specialist equipment

Money

Internal pressures

External pressures

These may be local, national,

international or e-commerce

Often difficult to find workers with the

appropriate skills which leads to a

demand for higher wages

In areas such as city centres, there is

often a shortage which increases rents

and prices

This is increasingly expensive as

technology progresses. eg hospital

equipment

This is a scarce commodity and small

businesses suffer most.

If the working atmosphere is not

pleasant with fair wages, promotion

prospects and good training schemes,

the results may be:

Industrial action Poor production because of

unmotivated staff

Political issues, when there is achange in government policy eg

legislation or tax

Economic issues eg wheneconomy in recession (business

cycle) or interest rates change

Social pressures from actiongroups eg on behalf of Fair Trade

products Technological innovations which

can make production more

efficient or change the method of

contact with customer


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Unit 12 Business Success and Failure

Key word Definition

Reasons for failure

Competition is too fierce

Economy in recession

Cash Flow problems

Not moving with the times

Measuring success

Competition is too fierce Economy in recession Cash flow problems Poor resource management No growth or innovation External factors eg bad weather,

strikes etc

Competitors have a better and cheaper

product and promote their product in

the right segment of the market

If customers cannot afford to buy theproduct, less is demanded, less is

produced, wages fall and unemployment

rises. The economy slows down.

There must always be ready cash

available to pay day-to-day expenses.

This may because

product is obsolete equipment out-of-date marketing not effective lack of security, therefore pilfering

and theft

records not accurate, thereforeunable to make accurate

forecasts

poor management staff not motivated Achieving good sales figures and

profits

Good relationship withstakeholders

Achieving growth and aims oforganisation

Gain customer loyalty with aquality product and service

Innovate. Grow and have a largemarket share

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