BUSS 3
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- Created on: 27-11-14 14:02
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- BUSS 3
- Corporate and financial objectives
- Functional Objectives
- Objectives for departments to aim for which contribute to achieving the corporate objectives.
- Corporate objectives
- Objectives for the company to aim for as a whole.
- Examples
- To increase profit by 5% in the next two years
- Survival
- Growth
- Customer Loyalty
- Maximize market growth/share
- Financial Objectives
- Refers to the monetary goals a business sets itself to achieve in a given time period, often a financial years.
- Examples
- Increase market share
- Increase profit
- Reducing costs
- Shareholders return
- Cash flow targets
- ROCE
- Purpose
- Provides strategic focus
- Measures performance of the business as a whole
- Inform decision making
- Allows more detailed functional objectives
- Functional Objectives
- Finance
- Cost minimisation
- The process by which businesses attempt to maximize profit by keeping costs low.
- Benefits
- Higher ROCE
- Lower unit costs
- Higher operating profits
- Improved cash flow
- Higher gross profit margins
- Tactical
- Cheaper Suppliers
- Different approach to stock holding
- Strategic
- Offshoring
- Out sourcing
- Drawbacks
- Insufficient capacity
- Profit Centres
- Is a separately- identifiable part of a business for which it's possible to identify revenue and costs
- Benefits
- Identify most successful centres
- Improve motivation of employees
- Allows comparisons between centres
- Improves decision making
- Finance can be allocated more effectively
- Drawbacks
- Time consuming
- May lead to conflict within a business
- Demotivating if objectives are too tough
- Profitability Ratios
- Sales - costs of sales = GROSS PROFIT
- Gross profit - costs = OPERATING PROFIT
- Gross profit margin
- Gross profit / revenue x 100
- Operating profit
- Operating profit is what is left over once all expenses have been removed
- Net Profit
- How effectively the business turns sales into profit
- How effectively the business is being run
- ROCE
- Operating profit/ capital employed x100
- A higher % is better
- Watch trend over time
- Shareholders ratios
- Measure the return shareholders get from their investment
- Dividend per share
- Total dividends paid / number of share
- Dividend yield
- Dividend per share/ share price
- Investment Appraisal
- NPV
- Calculates the monetary value now of the project's future cash flow
- Benefits
- Takes into account time value of money
- Disadvantages
- Time consuming
- ARR
- Looks at the total accounting return on a project to see if it meets its return
- Total net profit / nu. of years / initial investment x100
- Advantages
- Looks at the whole profitability of the project
- Focuses on profitability
- Disadvantages
- Ignores Cash flow
- Payback
- The period of time that it takes to repay the initial investment
- Advantages
- Easy to calculate
- Emphasis on speed of return
- Enables comparision
- Disadvantages
- Ignores cash flow
- Ignores qualitative aspects of decision
- The process of analysising whether investment projects are worthwhile
- NPV
- Liquidity ratios
- Assesses whether a business has sufficient cash to pay their debts.
- Current ratio
- current assets / current liabilities
- Acid test ration
- Current assets -stocks / current liabilites
- Removes stock therefore more accurate account of being able to repay debts
- Gearing
- Long term liabilities /capital employed x100
- >50% potential finacial problems
- How stable the business is
- How to reduce gearing
- Cost minimisation
- Replay long term debts
- Issue more shares
- Financial efficiency ratios
- Assesses how effectively the business manages it's assets
- Asset Turnover
- Revenue / net assets
- Stock Turnover
- cost of sales/average stock held
- Debtors Days
- trade debtors/revenue x 365
- Creditors days
- Trade payables / cost of sales x365
- Income Statments
- A historical record of the trading of a business over a specific period
- Balance sheet
- Shows the new values of the business
- Cost minimisation
- Operations
- Operational targets
- Cost and Volume
- Lower unit costs
- Be cost effective
- Increase the output
- Quality
- Lower defect rates
- Increase customer satisfaction
- Increase customer loyalty
- Efficiency
- Increase productivity
- Lower unit costs
- Maximize capacity utilisation
- Environmental
- Sustainable resources
- Lower carbon footprint
- Cost and Volume
- Critical path analysis
- Is a project analysis and management tool that allows a completed project to be done in the shortest amount of time possible.
- What is the critical path?
- The sequence of project activities which add up to the longest time possible. The critical path allows the project to be completed in the shortest amount of time possible.
- A delay in the critical path means the whole project is delayed.
- Benefits
- Reduce risk and costs
- Encourages careful assessment
- Better allocation of resources
- Drawbacks
- Largely based on previous experience of cpa
- Does not mean success
- May get complicated if there are too many activities
- Economies of scale and resources mix
- Economies of scale
- Arises when unit costs decrease but output increases
- Diseconimies of scale
- Arise when unit costs start to increase and output is above the optimum output
- Examples
- Poor communication
- More difficult to control
- Loss of management focus
- Resources mix
- Labour intensive
- More manual labour than machines
- Hairdressing
- Farming
- Higher costs
- More personal service
- Capital intensive
- Machines od majority of the work
- Car manufacturing
- Oil extraction
- Higher initial costs
- Maintains quality
- Labour intensive
- Economies of scale
- Innovation
- Is about putting an idea into action. Normally these are marketable products
- Types of innovation
- Product innovation
- Launching new or improved products onto the market
- Process innovation
- Finding a new more efficient way of manufacturing a product
- Product innovation
- Improved qaulity
- Improved productivity and reduced waste
- Added value
- Lean production
- Cutting down on waste but maintaining or improving the quality of a product or service.
- Time based management
- A general approach that recognises the importance of time and seeks to to reduce the level of wasted time
- Benefits
- Quicker response times
- Faster new product development
- Reduction in waste
- Just in time (jit)
- Aims to ensure that input of the production process arrive when they are needed.
- Benefits
- Lower stock holding
- Stock only obtained when needed
- less time psent of checking and re-working production
- Cell production
- Cells working together an individual task contributing to a final end project
- Benefits
- Improved communication
- Multi-skilled workers
- Motivated employees
- Simultaneous engineering
- Helps firms develop and launch new products more quickly
- Benefits
- New products on the market quickly
- Charge premium prices
- Competitive advantage
- Kaizen
- Implementing small changes to constantly improve production
- Location
- Costs
- Labour skills
- Infrastructure
- Level of unemployment
- Exchange rate
- Political stability
- Customer convience
- Quality of life
- Operational targets
- Marketing
- Objectives
- The process of identifying anticipating and satisfying customer needs profitability
- Examples
- Enter a new market
- Maintain or increasing market share
- Marketing plans
- A detailed description of the activities that are required to achieve the marketing objectives
- Main planning stages
- Mission statement
- Corporative objectives
- Marketing audit
- Market analysis
- SWOT Analysis
- Marketing objectives and strategies
- Marketing budget
- Action plan
- Benefits
- Benefits
- Clear sense of direction
- Allocates resources more effectively
- Encourages departments to work together
- Drawbacks
- Time consuming
- Market is always changing
- Ansoff's Matrix
- A marketing model that helps a business determine it's key product and marketing strategy
- Marketing penetration
- Maintain or increase market share
- Exsisting market, exsisting products
- Lower risk
- Product Development
- New products, existing markets
- Market development
- Existing products, new markets
- Diversification
- New market, new products
- Really high risk
- Objectives
- Corporate and financial objectives
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