BUSINESS STUDIES – 9.

2
BUSINESS MANAGEMENT

nature of management

features of effective management

o definition of management: process of coordinating a business’s resources to achieve

o effective management is achieving goals and objectives of a business by making the

o an effective manager must be good at planning, motivating staff, controlling business

o features:
- planning: decide on organisational goals and use/allocate resources to
achieve goals. process of setting objectives and deciding on methods to
achieve them
- organising: establishes the rules and reporting relationship that allows to
reach organisational goals
- leading: encourage and coordinate individuals and groups so they work
together
- controlling: evaluate how well the organisation is achieving goals

Characteristics of management
1 having the ability to analyse information, attend meetings and communicate
with a wide range of people both inside and outside the business

2 possessing the skills to manage change effectively

3 having the vision to see how things could be, rather than just accepting things
the way they are

4 providing leadership through the desire to encourage, motivate and guide

5 understanding your roles and responsibilities in order to achieve the goals of the
business.

skills of management

o interpersonal/communication:
- referred to people skills
- needed in order to listen, communicate and understand others
- an effective manager adjusts their manner to suit different types of people
 - motivating employees and allowing them to make decisions provides
maximum labour output
o strategic thinking
- long-term planning
- senior managers determine strategic plans by looking at the overall business
- they must understand marketing functions, operations, finance and human
resources
- managers need to recognise how decisions will affect departments and know
where the business fits in the industry
o vision
- clear, shaped sense of direction that allows to attain a common goal
- without a vision, there is no sense of direction
- it is communicated to employees through leadership
- employees play a part in achieving visions
o problem-solving
- searching for, identifying and implementing a course of action to correct an
unworkable situation
- identify problem and cause, gather relevant information, develop alternate
solutions, analyse alternatives, choose one alternative and implement it,
evaluate situation
o decision-making
- identifying available options and choosing a strategy to solve problem
- involves making decisions in a time frame
- managers need to develop effective decision-making environment
- senior managers make overall business decisions
- middle managers make specific decisions
o flexibility and adaptability to change
- flexibility is being responsive to change and adjusting to situations
- plans must be flexible to keep up with business environment
- business must be proactive by predicting to changes and acting upon them
o reconciling conflicting interest of stakeholders
- community will want to avoid pollution, employees will want more pay,
shareholders will want business to have more profit for more dividend
- management must have a solution to keep up with all stakeholders needs

achieving business goals

S – specific
M – measurable
A – achievable
R – realistic
T – timebound

o profit, market share, growth, share price, social, environmental

maximise profits:
o difference between cost and revenue
 o inconsistent profit  fail in market
o profit maximisation – max difference between total revenue and total costs
(foxed/variable)
o income statement determines profit made
o an exception is non-profit organisations
o Profit = Total revenue – total costs

increase market share:

maximise growth:
o internal growth – employing new people, more sales, purchasing new equipment,
innovation, franchises
o external growth – merging or acquiring other businesses

share price:
o share is part ownership of a company
o share price determines business value
o business can sustain share price by being well-managed, earning consistent profit
etc.

social goals:
o benefit community within which the business operates
o impact quality of life
o include recyclable bags, promoting human rights
o businesses that act socially responsible receive long-term support from society
o social/ecological goals support reputation and lead to increased market share and
sales

environmental goals:
o protecting environment and not wasting natural resources
o sustainable practices can give competitive advantage and good publicity
o there may be conflict with profit as money is required to do these things

MIX OF GOALS: reflects interdependence between business functions

staff involvement
o many businesses achieve goals through staff
o staff make decisions to feel included and give more value to business
o source of innovation that can solve problems/give competitive advantage
o being involved motivates employees and allows them to work efficiently
o less experience  mentored providing individual training and advice, reduces
mistakes
 o training makes employees better at their job showing more efficiency
management approaches

classical approach
o manager has complete control
o employees must follow managers instructions
o harder the employee works, the better the output and result
o appropriate for the assembly line
o henri fayal discovered management functions

planning
o involves direction of business to achieve goals
o establish strategies that help achieve them
o plans must be made for different time frames:
- strategic: long term planning encompassing business vision, determines
where the business wants to be in the future
- tactical: medium-long term planning (1-2 years), devised by middle
management, pathways to achieving long term goals, allocate resources and
managers/employees
- operational: short term planning (yearly/monthly/daily), detailed involving
objectives and marketing
organising
o creating framework for implementing business plans including; what will be done,
who will do it, and how
o transfers plans into reality

controlling
o comparing results with plans
o business performance is compared to goals and short-term objectives
o if results are different to plans the issue must be fixed

hierarchical organisational structure

autocratic leadership

behavioural approach
o leading, motivating, communicating
o emphasises teamwork
o recognise social, economic and non-economic needs
o hierarchal structure is flatter, easier communication (better control)

leading
o motivating employees
o effective leaders understand the workplace, listen to employees
motivating
o monetary and non-monetary needs should be recognised
o praise should be unique to an individual
o rewards

communicating
o requires listening and informing people
teams:
- adv: accuracy, efficiency, faster work, flexibility, enthusiasms
- disadv: conflict of interest, low individual recognition, free riders
democratic leadership style
- decentralised power/authority
- employee empowerment
- self-directed and motivated people
- adapted by professional organisations
- employee input is considered whilst making decisions
- collaborative nature

contingency approach
o adapting to changing circumstances
- need of flexibility and adaptation of management practices
- no two situations are identical, unique solutions

management process

operations
o business processes that involve transformation or production – applies to
manufacturing and services sector
o inputs into outputs
o establishes level of quality and determines whether there is sufficient products
o goods and services: goods (tangible, little to no control for consumers)
services (intangible, control)
o production process: steps used to transform inputs into outputs
1. job: adapting and customising products to customer liking
2. batch: outputs are made in groups or small amounts
3. flow: continuous flow of inputs that are transformed into outputs
o quality management: concerned with goods, services and operations. quality can
change in any stage of production and steps are quality control and total quality
management
o quality control involves establishing standards and measuring outputs against them.
Can be reached by planning production
o total quality management focuses on continuous improvement in all areas and not
only products
marketing
o process of advertising the business product and developing the product to suit the
needs and wants of a customer by deciding on product, price, place and promotion
identification of target market
o market segmentation is the division of total market into smaller segments based on
small factors (geographic, demographic, personality, lifestyle, behaviour)
o target market is focus of the firms marketing strategy
o market research gathers information from target group to gain information on
whether customers will like the product or not. they also investigate existing
competitors, researches changes in government, regulations, researches
advancements in technology, identifies trends and determines customer buying
patterns
o mass marketing: large demand for a standard product
o niche market: small segment of total market
marketing mix
o process of developing a product that meets the needs of consumers, and
implementing promotional, pricing and distributing strategies that encourage
consumers to purchase the product
o PRODUCT: good or service that can be exchanged, positioning, brand, trademark,
packaging
o PRICE: balance of what the customer is willing to pay and what the business is willing
to take. price should generate revenue for business.
- cost-of-production – profit added to cost of production
- demand pricing – based on what customer wants to pay
- competition based – competitors’ prices are used as a guide
- prestige pricing – products image
- loss leader pricing – product is sold for less than its production cost
o PROMOTION: process of creating and maintaining consumer awareness and interest,
influences consumers to buy certain products.
- sales promotion – special offers
- advertising
- direct selling – email, phone and text
- publicity
- product placement – used by actors
o PLACE: how the product is distributed to target market
- transport methods
- storage of goods
- locations which will sell product

- tracking how well your advertisements/marketing is performing

finance
o organising financial resources of business to pay for all aspects
- management accounting: internal accounting process (management uses
information reports to make business decisions)
- financial accounting: products reports about overall position of business for
external stakeholders to use
cash flow statement:
- keep account of cash receipts and cash payments for a business, usually on a
month by month basis

income statement:
 revenue from sales – net sales are amount of revenue a business has earned once
discounts allowed to customers and returns of sold items are deducted
 COGS – expense to a business that on-sells items they have purchased. The mark-up
on the cost of goods sold determines level of overall income
 COGS = opening stock (value of stock start of financial year) + purchases – closing
stock (value of stock on hand at eofy)
 Gross profit = sales - COGS

balance sheet:

human resources
o effective management of formal relationship between employer and employees
o acquisition: recruitment/selection
o develop: growth
o maintain: monetary and non-monetary benefits
o separation: voluntary or involuntary

recruitment
 process of attracting qualified applicants for a specific job; most suitable is selected

training

employment contracts

separation – voluntary and involuntary