167-ocr-gcebus-f292qa

167-ocr-gcebus-f292qa - 2010 Edition

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Unformatted text preview: 2010 Edition Marketing.................................................................. 2 Accounting rate of return....................... 27 Marketing and marketing objectives ........ 2 Final accounts....................................................... 28 Marketing and other functions.................... 3 Balance sheet makeup............................. 30 Market analysis.................................................. 2 Customer and product orientation............ 3 Profit and loss account................................. 28 Balance Sheet ................................................... 29 Segmentation...................................................... 4 People in organisations .................................... 32 Marketing mix ......................................................... 7 Motivation in theory ..................................... 33 Market Share and Growth ............................. 5 Marketing strategy ........................................... 6 The four Ps........................................................... 7 Product.................................................................. 8 Product life cycle ............................................... 8 Labour turnover ............................................. 32 Motivation ......................................................... 33 Taylor ............................................................. 33 Mayo................................................................ 34 Maslow........................................................... 34 Product development...................................... 9 Motivation in practice .................................. 36 Price..................................................................... 11 Operations.............................................................. 43 Income Elasticity of Demand..................... 16 Scale of operation........................................... 44 Product portfolio analysis .......................... 10 Product Mapping............................................ 11 Pricing methods.............................................. 12 Elasticity of demand ..................................... 14 Promotion ......................................................... 17 Place: distribution.......................................... 18 Accounting and Finance................................... 20 Budgets............................................................... 20 Cash flow forecasting ................................... 21 Costing................................................................ 23 Contribution..................................................... 24 Break even analysis....................................... 25 Investment decisions.................................... 26 Payback ......................................................... 26 Motivation and Leadership ........................ 38 Organisation structure................................. 40 Operations management............................. 43 Efficiency............................................................ 43 Economies of scale......................................... 44 Capacity.............................................................. 45 Methods of production................................. 47 Quality................................................................. 48 Quality Standards........................................... 49 Supply Chain..................................................... 50 Stock Control.................................................... 50 Lean Production.............................................. 51 AS Business Studies Glossary.................... 53 1st Edition. First published 2010 © Richard Young. All rights reserved. The right of Richard Young to be identified as the author of this Work has been asserted in accordance with the Copyright, Designs and Patents Act 1988. | Marketing and marketing objectives 1 by Market size is the total sales of all the firms in a given market expressed (ie in money terms eg £1bn) or by (ie number of units sold eg 200,000 units). An increase in total market sales - by value volume Market growth can be calculated Change in total market sales over a period eg if 2010 sales of £4m rise to £4.2m in 2011 then market growth is £200,000 Percentage change in sales over a period of time. Market growth % = new value – old value/old value x 100 = 2.4-2.2/2.2 x 100 = 9.1% The market grew in terms of sales value in 2011 by £10m and by £5m in 2012 but sales fell in 2013 by £3m. can be either Note the trend: the rate of growth slowed from 5% in 2011 to 2.38% in 2012 before becoming negative in 2013 The proportion of total market sales held by a firm or one of its brands ie £s, or Market share = one product’s sales/ total market sales. Sales ie the number of units sold If one product in the market has sales of £20m in a market where total sales are £80m, then its market share = £20m/£80m x 100 = 25% There are firms in the market. In terms of sales value, Firm B has the largest market share at 62.5% and so is the market leader. Firm A has a 25% market share. This means that both Firm A and Firm B are monopolies who can exercise market power. Firm C has a small market share and is unlikely to enjoy the same economies of scale opportunities open to its larger rivals. Market share is a measure of relative business performance. Increasing market share suggests the firm is Performing improving outperforming its rivals or the industry average . Market leaders are firms with the largest market share Market leaders are the dominant firm in an industry and so have a competitive advantage over rivals. Market leaders can: Set a price that best meets its objective. Smaller firms are price followers. Enjoy larger economies of scale because their output is higher than competitors There are two main ways organisations grow though investment in extra plant buildings, equipment and hiring more staff to increase the scale of operation offering potential economies of scale through merger or acquisition (takeover) A or occurs when a business gains control over another organisation by buying 50% or more of its share capital. A is when two firms combine to create one new and larger business. | Market Share and Growth 5 Market research identifies market opportunities for new products; monitors and evaluates customer responses to test marketing allowing improvements and predicts sales at different price points. The process of research and development (R&D) test marketing, and promotion can be very expensive. Many new products fail. Innovative firms with high profit margins can generate the internal finance needed for new product development Lead time is the time taken to develop and test new products. Reducing lead times is a source of competitive advantage: new products launch sooner than rivals It takes time and resources to get a product established. Most products fail during launch, never reach the growth stage of the product life cycle because overestimates demand and revenue. means the product no longer meets evolving customer requirements mean consumers cannot buy the product and the product cannot be sold at price that allows a profit or means the item fails to fulfil function. The product is a ‘me-too’ product no different form established market leaders react by launching their own new product or enter into a price cutting war. Sometimes called the A product portfolio is the set of products marketed by a firm. ie the total range of products sold by an organisation Product portfolio management involves Assessing the current performance and position of each products and, if necessary, adjusting its marketing mix Ensuring a within the portfolio with new products developed to replace mature and declining ones The implies, mature, profitable products fund the development of new products to replace those in decline and so enable the long-term survival of the firm. analysis suggests firms need a balanced product mix eg cash cows that generate profits to transform problem child. Too many cows and dogs indicate an ageing portfolio. How can the business replace tired products and enable long term survival? Product portfolio analysis helps a firm audit its current position and identify an appropriate product strategy to meet objectives. Eg does the firm need to develop new or improved products or drop items from the portfolio? . The Boston Matrix is a tool used to analyse the product portfolio of a business against market share and market growth. Each circle in the diagram represents one product. The size of the circle indicates size of turnover. There are four categories of product in the Boston Matrix. are products with a high market share in a high growth market. are products with high market share in low growth markets. items have a low market share in high growth markets. products with low market share in low growth markets. 10 Product portfolio analysis | Promotion is the process of business communicating with customers Potential promotion objectives include: ie raise consumer awareness of a product, its functions and benefitsparticularly important for new products convince consumers and the trade that a product is superior to rivals to create product differentiation in the mind of the consumer Businesses use a mix of advertising, direct response mailing, sales promotion, public relations or direct selling to promote products Excellent products with the right features, price and distribution fail if customers are unaware of the good or service. is the use of non-targeted mass media advertising to reach a mass audience. The aim is to raise product awareness and reinforce brand identity. promotion is the use of targeted non-advertising methods to reach potential customers. The aim is to secure sales. The promotional mix is the combination of promotion methods used by a firm to communicate with stakeholders - a key element of overall marketing strategy. : purchased, non-personal communication using mass media : short term schemes which encourage customers to buy now rather than later eg time limited 2-for-1 offers is promotion through a sales force. Staff work directly with a customer until a sale is made. Specialist advice can be given. Customers receive personal face-to-face attention and can ask questions about complex product offerings. : a firm passes information to the press hoping for free favourable coverage in newspapers, television etc – ‘free’ advertising : when firms make contact with individuals eg junk mail, and email lists. Direct mail may not be read. a business pays for association with a celebrity or event A business selects a combination of promotional methods most likely to meet marketing objectives with a set budget. | Promotion 17 At the end of an accounting period, usually one year, accountants draw up the final accounts for a business which include: a summary of revenue and costs from trading activities for a previous trading period eg the last financial year a statement of the estimated value of the business at the end of the year where cash came from and what it was spent on over the year A profit and loss account is a summary of a firm’s revenue and costs from trading over a previous trading period eg last financial year : the total value of sales in the last trading period : the direct costs of making or acquiring products for sale : turnover minus cost of sales : indirect costs ie overheads eg rent marketing and depreciation : corporation tax on profits paid to the government : profit distributed to shareholders. : profits kept back by the company for future use Cost of sales = opening stock + purchases - closing stock where = value of raw material components etc owned by the firm at the start of the accounting period refers to the money spent on new stock = value of raw material components etc owned by the firm at the end of the accounting period shows There are three sections: made on trading (buying and selling) activities shows overall shows how profits are used: to pay tax, dividends or retain Stakeholders use profit and loss accounts to assess business performance over a period of time eg one year. Accounts are used to assess: Business decisions eg is there sufficient net profit to fund growth Business performance and in the industry Gross profit shows mark-up and how well the business is managing its direct costs Net profit shows how well the firm manages its costs especially overheads Staff can use profit information in wage negotiations. Shareholder assess profitability and how profits are used eg distributed or retained Creditors and customers can assess the risk of trading with the business By law UK companies act must file their financial accounts annually with Companies House allowing stakeholders access to financial data. 28 Profit and loss account | For Maslow there are five types or Working satisfies those needs in stages. Managers can motivate workers by offering an opportunity to move up and meet a higher order need once lower level ones are met. Eg : improve pay : offer long term employment contract : arrange social and team building events : use appraisal for positive feedback and offer promotion opportunities : use annual appraisals to negotiate and agree set new challenging stimulating tasks . Managers need to identify the specific needs of each worker – what is their current level of need? Motivation involves offering workers the chance to move to the next level of need. Used as part of an annual review of performance and target setting The Maslow model suggest workers move up through five stages satisfying wants consecutively, one after the other. Critics argue that needs exist concurrently ie workers seek good pay and job security and esteem at the same time. Some workers attach a low priority to work and do not want to move up levels. ? Herzberg suggests two factors influence motivation. are work issues that can cause dissatisfaction working conditions, staff and relationships, the style of management and supervision and job security are factors that cause satisfaction hence motivation and include personal growth, recognition, responsibility, promotion prospects and the work itself Hygiene factors do not in themselves lead to higher levels of motivation but help avoid dissatisfaction. Eg a pay increase does not necessarily motivate but poor pay can demotivate. The factors causing dissatisfaction are quite different from those generating satisfaction. The manager's role is to remove dissatisfiers eg poor working relationships and use motivators eg job enrichment. In summary: leaders motivate staff by communicating the wow factor and by setting up the structures that empower enable staff to develop their talent. Staff share and celebrate the values and cultures of a high achieving organisation. According to Tom Peters: Inter related factors affect excellence. Motivation is not a stand-alone factor, but an aspect of management, closely linked to other issue such a strategy and structure. “There’s no use inventing a great new strategy if you don’t have the skills or the staff to implement it.” Handy. It is important that all staff understand and share the values and culture of the organisation a tall, organisation, with many levels of hierarchy, and in particular, middle managers hinder an organisation in achieving its objectives. in fast moving times, successful organisations “empowers talent”. The office slave is dead and the age of the Free Agent is now. Leaders motivate staff by communicating the wow factor. “Discover passion, persistence, and imagination to get results.” | Motivation in theory 35 Decentralisation sees authority delegated down the hierarchy which empowers and so motivates subordinates. Junior managers are often closer to customers or suppliers and can adjust to specific conditions and differences rather than follow a one-size-fits all centrally issued directive. There is less communication and bureaucracy – the organisation becomes more flexible and responsive Decisions are taken by experienced and well qualified senior staff. A corporate image is retained as all areas of the business act similarly. There is the potential for administrative economies of scale eg duplication of administrative tasks are eliminated . maintain tight control over roles and responsibilities; subordinates report to line managers. Formal groups can be slow to respond to change. give staff broad roles but allow employees and work groups to work out what is to be done when and by whom. Informal groupings can be source of dynamism or subversive ie in conflict with the objectives of the organisation There are three main types: : the traditional way of organising firms eg by function or area : the individual founder/owner is at the centre of decision making : team based where staff from different departments work together The organisation is arranged by departments based on specialist functions eg marketing. In large firms, this can result in a tall structure with associated difficulties in terms of bureaucracy, delayed decision making and poor communication which can cause diseconomies of scale. The organisation is arranged around the entrepreneur. Span of control is wide and the organisation structure is also flat and informal. Entrepreneurial structures work in small organisations employing up to, say, 70 staff. Thereafter the entrepreneur finds it almost impossible to maintain communication with all staff Entrepreneurial structures avoid hierarchies and formal structures. Decisions are taken in the centre by a few key workers or the owner. Best suited to highly competitive fast moving industries where rapid decision making is essential. Matrix structures are a way of organising a business that is task orientated and used by firms which manage a large number of projects eg advertising agency. Teams of specialists from various departments, led by a project manager, are brought together to carry out one task eg develop a new product, open a new factory. Project teams make firms task orientated, flexible and motivate and motivate employees by providing varied challenging tasks. However, roles and responsibilities become blurred and there may be tension between project and department managers. Senior managers may resent receiving advice from junior staff on highly specialist activities – they feel their status is threatened. Workers contributing to too many projects may experience role conflict. Which project should I prioritise? 42 Organisation structure | the traditional elements of the marketing mix: product, price, promotion and place the use of non-targeted mass media advertising to reach a mass audience. The aim is to raise product awareness and reinforce brand identity. staff missing work without good reason the process of holding individuals or institutions answerable for their responsibilities, actions and decisions. an investment appraisal method that estimates annual profit from a project as a percentage of the initial investment one business buys ownership and control of another firm. A takeover paid for non-personal communication using mass media that aims to persuade and inform an annual General meeting where shareholders received reports and elect directors a framework for identifying four strategic options for growth in terms of markets and products an evaluation of staff performance over a given period of time usually against stated objectives items of value owned by a business eg cash, equipment and stock a leadership style with the leader retains control and makes major decisions were minimum consultation a production technique that uses machines to replace or enhance human labour the cost of making one item ie unit cost a statement showing the assets and liabilities of an organisation on a particular date a production process where groups of products (batches) move through every stage of production together eg bread the use of targeted nonadvertising methods to reach potential customers. The aim is to secure sales. assessing the performance of a business against those achieved by rivals eg comparing productivity levels or labour turnover the value of total assets less the value of total liabilities on the date given in the balance sheet. a tool used to analyse the product portfolio of a business against market share and market growth any factor that causes normal business activity to be delayed or stopped a named product customers distinguish from other products eg McDonalds the process of creating a distinctive image for a product that sets is apart from its rivals the minimum level of units sold for revenue to cover all costs - the business is making neither a profit or loss an agreed plan forecasting future income and expenditures or other quantifiable targets the individual responsible for a particular budget and accountable for explaining adverse and favourable variance to their line manager The process of monitoring actual and forecasted performance over time to identify variance the minimum amount of stock a firm opts holds at any given moment in time the use of established rules and regulations as a way of running an organisation, the process of turning inputs such as raw materials into outputs ie goods and services fluctuations in the level of economic activity over time causing booms and slumps. Also called the economic cycle. the way in which staff roles and responsibilities are arranged within a firm BRP is a fundamental redesign of business procedures usually requiring substantial investment in new capital describes activities between businesses, eg manufacturer to wholesaler; wholesaler to retailer. non monetary payments such as a company car or free medical insurance when a business organises itself into departments eg marketing and operations no business is yet providing a product with a combination of features customers may need eg medium quality low priced fashion clothing sales revenue less cost of sales (direct costs or variable costs) the proportion of a product's selling price that is gross profit. Overheads are ignored. an increase in production levels. Expansion staff performance improves when managers or teams take an interest in their work Maslow's theory that staff are motivated by moving up a series of needs starting with survival and culminating in self actualisation setting the current budget on the basis of the previous budget staff who work for an organisation, both employees and managers. issues that can cause staff dissatisfaction with working conditions eg management style and job security training given to new staff on working practices in the business to help them perform their role finance from within the business an increase in the size of a firm from increasing its scale of operation and sales purchase of fixed assets by a business techniques used to assess the financial implications of potential projects eg the purchase of new buildings or equipment a document setting tasks and responsibilities for a given post redesigning a job to give staff additional tasks of similar complexity 56 AS 292 Glossary | redesigning a job to give staff more challenging and complex tasks and responsibility moving workers from one task to another requiring a similar skill levels a method of stock control where an organisation stores components or completed items to fulfil unexpected orders a method of stock control where materials components and products are delivered only when required. No stocks are held a philosophy that aims for continuous improvements in all areas of business operations resulting in higher productivity a reorder card system signals the need for more components. Used to pull components into the production process as needed the proportion of staff leaving an organisation each year a ‘hands off’ leadership style that typically allows subordinates to organise their own work the interval between placing an order and its arrival the process of influencing and inspiring others to achieve corporate objectives a set of techniques that aim to reduce waste, hence unit costs, at all stages of production. Can lead to improved quality. hiring fixed assets for a set period of time. Leasing gives firms access to equipment without using up capital. (1) the ability of a business to pay its short term debts (2) the ease with which assets can be turned into cash business funds borrowed from external sources eg loans and debentures business debts the firm expects to repay in more than 12 months time products sold at a price that does not cover unit cost to encourage the purchase of other profitable items eg printers and printer ink ...
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This note was uploaded on 02/08/2012 for the course FIN FIN4345 taught by Professor Koij during the Spring '10 term at FIU.

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