BUSS2

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Budgets

Benefits

Control finances

Improve staff performance

Drawbacks

Conflict arises

Motivating impact of budgets fail to be achieved

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Improving Cash Flow

Causes of Cash Flow problems

  • Lack of planning
  • Poor credit rating
  • Allowing customers too long to pay
  • Overtrading
  • Unexpected events
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Methods to decrease cash output

Delay payment to creditors- buy on buy now pay later- can only be used to buy certain goods

Delay spending on capital equipment- put off spending on machines- efficiency may be affected

Lease capital equipment- business rents from owner- may be more expensive than buying asset

Improve stock control- only purchase when needed- any delays in delivery affect business

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Methods to increase cash inflows

Discount prices- means a lower amount of income per product

Overdraft- interest often charged

Chase debtors- time consuming to arrange

Reduce credit terms to customers- company may offer better payback terms

Selling assets- may sell something they later need

Sale and leaseback- dont own the asset

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Measuring profitability

Gross profit- Total revenue- Variable costs

Net profit- Total revenue- Total Costs

Gross profit margin (%)- Gross profit/Sales revenue x100

Net profit margin(%)- Net profit/Sales revenue x100

Return on Capital- Net profit/Capital invested x100

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Capacity

The maximum possible output that can be produced over a period of time

Capacity Utilisation= Current Output/Max Possible Output x100

Problems of over utilisation:

- Customer service may suffer

- product quality may suffer

- A strain on resources

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Marketing

Effective marketing- Achieving the firm's sales and profit targets by convinving customers to buy the firms products.

- as consumer tastes vary over time, the ability to respond to changes in taste is very important

- Firms must be prepared to adapt their business model with this in mind

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Quality

Quality pruduct- worth its value

Implications of poor product or service quality:

- Loss of sales

- IMpact on other products in range

- Retailers unwilling to stock goods

-Loss of reputation

-Reduce price

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Quality inspection

a system that uses inspection as a way to find faults.

Benefits:

-quality improved

- stops faulty products being sold

- can increase productivity

Problems:

-can be a waste of time

- can be de-motivating

- can end up wasting resources

- lack of consistency

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Quality assurance

a syetm that aims to achieve quality by organising every process to get the product 'right first time'.

Benefits:

- stops mistakes occuring at the start and carrying out throughout process

-workers feel trusted

- productivity increases

Problems:

- Lowering standards can lead to less consistency

- Lowering productivity as time is spent checking products

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customer service

range of actions taken when interacting with customers

measuring customer service:

- Mystery shopper

- benchmarking

-feedback forms

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choosing suppliers

factors:

- cost

-quality

-reliability

- payment terms

-flexibility

benefits of good customer suppliers:

-better customer service

- Lower costs

-more consistant quality

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use of technology

Robotics:

Benefits:

-increased productivity

- standardized product

- no breaks

Problems:

-investment costs

-Inflexible- made for one job

CAD- computer aided design- product can be viewed 3d on cmputer

CAM- computer aided manufactuirng

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benefits of DT:

- Lower unit costs

- better communication and management

Problems:

-staff resistant to change

- training costs

- Maintanence and operating costs

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organisation structure

span of control- number of subordinates for whom a manager is directly responsible

line of authority- e.g. managers are in charge of those below them

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staff performance

labour productivity=output per period/number of employees at work

improving labour productivity:

- having more staff

- motivate current staff

- improve machinery, technology, etc

Benefits:

- productive workers produce more per worker

- easy to calculate measure

- productivity depends on many factors

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-

Labour turnover=Number of staff leaving during the year/average number of staffx100

Absenteeism= number of staff absent on one day/total number of staffx100

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Theorists

Herzberg-split motivation into two catergories called hygiene factors and motivation factors

Taylor- workers mainly motivatd by their pay

Maslow-pyramid that lists needs that workers require to work efficiently

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Recruitment

Internal benefits:

-cheaper

-faster

-motivating

-induction training unecessary

Internal problems:

-skills may not be present

-no new ideas

-leads to a vacancy elsewhere

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-

external benefits:

-allows business to find person with right skills

-wide range of candidates

-new ideas and fresh thinking

external problems:

-more expensive 

-more time consuming

-induction training needed

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training

induction training- makes workers fully productive as soon as possible by familiarising them with the key aspects of the business.

on the job training- employees not required to leave workplace

off the job training- leave workplace in order to receive instruction

Advantages of training:

- increased level of skills available to the business 

- increased the degree of flexibility within a business 

Disadvantages of training:

- can be expensive in terms of providing the training itself and also cost of evaluating its effectiveness 

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influences of market mix

finance- size of budget?, how should it be spent?

technology- changes in technology have altered the way we live

market research- varies with size of firm

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marketing mix- product

stages:

- development- product being created

- launch- ready to come onto market, advertising accompanies it

-growth- when sales increase at fastest rate

-maturity- sales near their highest

-decline- final stage

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the boston matrix

stars:

-successful products

- high market growth and high relative market share

Cash cows:

-low growth in market, strong market share

problem children:

low market share in fast growing market

Dog:

Low market share in a low growth market

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marketing mix-pricing

strategies:

price swimming- put prices high then reduce

penetration pricing- start at a low price and increase

price leaders- decides on a price

price taker- copies price of price leader

pricing tactics:

loss leaders- sold for below cost

psychological pricing- make people think they are getting something for a lot less

special offer pricing- BOGOF, BOGOHP

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price elasticity of demand:

elasticity represents the extent ot which buyers and sellers respond to changes in the market

PED=percentage change in quantity demanded/percentage change in price

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marketing mix-place

ensuring good distribution:

-get to trade buyers

-use direct mail

-make it stand out- point of sale

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marketing mix-promotion

branding- creating as distincting and lasting identity that is recognised by consumers

advantages of branding:

-spend less on promotion

-repeat purchase

-help persuade retailers to stock product

Persuasive advertising- designed to create distinctive image, encourage purchase

public relations- affects consumers image of product without spending on media advertising

sales promotion- on pack comeptitions, in store offers,3 for 2
direct sales- door to door, telesales

Merchandising- free sampels, tasters 

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