Business Management

Nature Of Management
1. Explain what the features of effective management are.

The role of effective management is to make sure the joint efforts of employees are directed towards
achieving the goals of the business. This can be achieved through a balance between efficiency and
effectiveness which will provide the business with a competitive advantage. Efficiency is the level of output
produced with a given number of inputs, whereas effectiveness is the measurement of the degree to which a
goal is achieved. Effective management also involves coordinate people to ensure the greatest amount of
goods and services can be produced for the least cost.

2. Briefly describe TWO management skills.

Communication is a key skill a manager is required to have a mastery over to effectively meet business
goals and achieve success. Managers need to be able to exchange the understanding of goals and processes
to increase employee productivity within a more democratic team style environment. This further introduces
the interpersonal skills required to understand each employee and individuals needs and wants. Their
reaction and sensitivity towards others shapes employee relations and increases overall business productivity
maximising full potential of each individual and thus the business.

3. Discuss the significance of having appropriate business goals.

Business goals are desired targets that an individual or business intends to achieve within a certain period.
These goals are crucial in serving as targets and benchmarks to allow for sustainable growth and business
success. The goals further inspire motivation and commitment within the staff and managers as they aim
towards meeting a set task within a given period. Businesses must shape their goals to be SMART i.e.
Specific, measurable, achievable, realistic and timed.

4. Briefly describe TWO business goals.

The goal of profits is important and significant for every business as it allows the business to increase
revenue and business success. Profit maximisation therefore indicates success. This goal is a long-term goal
and thus is more likely to be pursued by large business. The strategies that are used to achieve this goal
include: increasing sales by lowering expenses, marketing at target market, innovating products and
delivering better services. This as a result achieves the goal of market share which is a major goal that refers
to the business’ share of total industry sales for product. These small market gains will then as a result
translate into profits. This can be achieved by developing an extensive product range and many different
brand names. These two business goals are key performance indicators in business growth and success in the
long-term future of the business.

5. Discuss the importance of setting objectives and explain purpose.

Having various levels of objectives further increases the targets and milestones set by the business. This
will, similarly to a goal, translate into business success, growth and revenue. The vision is the main broad
statement that resonates the overall purpose of the business. This revolves around what the business aspires
to become in the future which acts as guidelines and benchmarks for the business. A goal is a more specific
statement of what is to be achieved. A strategic goal is a long-term broad aim that applies to the whole
business. An objective is a very specific statement of how the goal is to be achieved. There are tactical and
operational objectives that focus on mid-term departmental issue and short-term issues respectively. They
both describe the course of action necessary to achieve the business’ objectives.
6. Briefly explain how stakeholders can conflict, then discuss methods on reconciling stakeholder
conflicting interests.

The interests, goals and objectives of stakeholders can easily conflict with different parties having different
purposes. The owners and higher management of a business may desire expenses to be lowered and may
find the action of outsourcing much cheaper for the business and allow production prices to be lowered, with
quality retained. However, this will conflict with the current employees and staff working for the business
upon which their position will become redundant due to the use of outsourcing. Furthermore, owners may
open factories overseas due to cheaper production and this will once again conflict with the interest of the
employee that desires a stable job that will now become a liability to the business.

Stakeholder interests can be reconciled using two main strategies. The identification of the stakeholders is
crucial before implementation of these strategies. Corporate Social Responsibility (CSR) is the obligation on
the business to have a positive social impact on society with practices including employment practices,
responsibilities towards society/community and environmental practices. Good CSR allows the business to
keep all stakeholders reconciled to some extent. Furthermore, stakeholder engagement is the sharing of
information with stakeholders and seeking their input in the decision-making process of a business. Business
anticipate that a positive image will be maintained if stakeholders have their interest heard and partially
satisfied. This can overall reconcile major conflicting interests for stakeholders.

7. Discuss the importance of ethical business behaviour and how it can be achieved.

Businesses can achieve ethical business behaviour by satisfying a greater number of stakeholders. The triple
bottom line acts as a benchmark of meeting social, economic and environmental ethical responsibilities
within a business. This acts as a guideline for businesses to pursue ethical business behaviour. Corporate
Social Responsibility further promotes this as it focuses on the people through employment practices,
society through giving back to the community and the environment through environmental sustainability.
These will all help the business achieve ethical business behaviour as a lack of suck will have detrimental
effects on all aspects of the business with dissatisfied stakeholders and slower business growth or possible
business decline.

8. Analyse different ways of coordinating key business functions for an SME

The four key business functions are operations, marketing, finance, and human resources. Operations
focuses on strategies to improve production processes, marketing determines the appropriate markets for the
business’ products, and decide the pricing product features, promotion and channel of distribution, finance is
responsible for the financial requirements, budget allocation and financial record keeping and finally, human
resources are concerned with recruiting, training, employment contracts and separation of the employees
who are required to run the business successfully. The four KBFs are interrelated, directly impacting on
another and the success of the business. The sufficient management of every KBF is key to the overall
success of the business. Outsourcing is also a method of using external sources to satisfy key business
functions.

Operations
9. Explain the purpose of operations within a business and its significance to the business.

Operations refers to the business processes that involve transformation or, more generally, ‘production’.
Operations management consists of all the activities in which managers engage to produce a good or service.
It is concerned with creating, operating and controlling a transformational process that takes inputs from a
variety of resources, and produces outputs of goods and services that are needed by customers. Operations
management establish the level of quality, influence the cost of production and determine whether sufficient
products are available to satisfy consumer demand.

10. Examine the production process and detail all stages with differentiation of transformed and
transforming resources.

The production process directly refers to the inputs that are used in the transformation process to produce
outputs that are sold to the consumer. In more simpler terms, the resources that are used to manufacture or
produce the final good/service provided to the customer. There are two types of resources used within the
production process. Transformed resources refers to the inputs that are changed or converted in the
operations process; they are transformed by the production process. Whereas transforming resources are
inputs that carry out the transformation process such as human resources and facilities. However,
transformation processes adopted by services businesses differ from those in manufacturing businesses
because outputs of the service business cannot be physically held in stock. Furthermore, service businesses
rely heavily on interaction with the customer in determining the output.

11. Explain each quality management strategy the benefits of these practices.

Quality refers to the degree of excellence of goods or services. Quality management is the strategy which a
business uses to make sure that its products meet customer expectations. These include: Quality Control,
total Quality Management and Quality Assurance.

Quality control is the process of ensuring that products have standard or uniform quality. It aims to reduce
any problems before a product reaches the end of the production cycle. All employees have to be committed
to controlling the quality for it be effective.

Total Quality Management is an ongoing business-wide commitment to excellence that is applied to every
aspect of the business’ operations. Features of this strategy include the use of quality circles where workers
meet to discuss issues relating to quality in the business acting as a motivator to employees involved. The
systematic method of ensuring zero defects and making sure that no product leaves the business with
defects. The statistical process control method is describing statistics which are generated to enable the
business to evaluate their quality procedures. Furthermore, Kaizen is a feature of TQM that is the continuous
improvement of products through a constant evaluation. This is the most expensive quality management
strategy and is most difficult in implementing as it affects all aspects of the business.

Quality assurance involves the use of a system so that a business achieves set standards in production. This
looks at guaranteeing all stages in the production process leading to high quality products. Furthermore, in
puts emphasis on preventing mistakes and self-checking to ensure quality products. The International
Standards organisation (ISO) provides guidelines on how businesses should establish quality assurance
systems by adopting specific procedures, controls, and recording and documentation methods.

12.Explain the importance of different type of technology within the business environment.

Technology gives businesses efficiencies, productivity gains, a capacity to improve operations processes,
and helps to create a sustainable competitive advantage. Technology also enhances the efficiency of a
business through advances in communication. There are two types of technology that businesses use:
leading edge technology and established technology. Leading edge technology is the most advanced and
innovating at any point in time and it helps the business to create more products quickly and to higher
standards, reduce waste and operate more efficiently. Established technology is the widely accepted
technology that is used to help establish a basic standard for productivity and speed. This includes IPT
and/or IT for administration, barcoding, logistics, distribution etc.

13. Identify ways that SMEs gain a competitive advantage.

A competitive advantage refers to the strategies used by a business to ensure it has an ‘edge’ over its
competitors. To achieve a competitive advantage a business should focus an capitalist on its main strength
that can differentiate itself from its competitors. The two main strategies that SMEs can use to obtain a
competitive advantage are price/cost strategy and the production differentiation strategy. Price/cost strategy
is when the business leads the way by achieving the lowest production costs, which in-turn allows it to lower
the product price. Product differentiation is when the business offers something to customers that is not
already being offered in the market i.e. high product quality, innovative design, positive brand image, or top-
quality service. There are a few other methods that can also provide a competitive advantage which include
a skilled workforce, superior technology and waste reductions.

14. Explain how to avoid over-extension of resources.

Marketing
15. Define the term ‘marketing’.

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of
ideas, goods and services to create exchanges that satisfy individual and organisational objectives. More
simply, marketing is a total system of interacting activities designed to plan, price, promote and distribute
products to present and potential customers.

16. Define the term ‘target market’, how it can be identified and its significance to SMEs.

A target market is a group of customers with similar characteristics who presently, or who may in the future,
purchase the product. Most businesses must select specific groups of customers on which to concentrate
their marketing efforts: their target markets. There are three approaches that can be adopted when selecting a
target market: mass marketing approach, market segmentation approach or the niche market approach. Once
the market has been segmented, the business selects one of these segments to become the target market. This
approach allows the business to better satisfy the wants and needs of a targeted group, because the business
can use its marketing resources more efficiently, better understand the consumer buying behaviour of the
target market, collect data more effectively and make comparisons within the target market as well as refine
marketing strategies used to influence consumer choice.

17. Explain what ‘product’ is within the marketing mix.

The product of a business is its prime core function that it is providing to its consumers. The business as a
result needs to determine the product’s quality, design, name, warranty and guarantees, packaging, labelling
and exclusive features. Customers will also further buy products that not only satisfy needs but also provide
intangible benefits such as feeling security, prestige, satisfaction, or influence.

18. Explain what ‘price’ is within the marketing mix and provide TWO strategies.

Setting an appropriate price for the product of a business is crucial in maximising potential customers and
overall sales. A price set too high could mean lost sales, whereas a price set too low may give customers the
impression of a ‘cheap and nasty’ product. Cost plus margin pricing is the process of calculating the total
cost of production and adding a percentage/margin for profit. Competition pricing is the pricing strategy
where the product’s prices are set just below that of the competitors thus providing a competitive edge,
however it may lead to a price war between competitors. Psychological pricing refers to setting the product
at an ‘odd’ price to give the impression that the product is cheaper that its competitors. These methods will
allow the business to maximise all sales and translate into business growth and revenue.

19. Explain what ‘place’ is within the marketing mix.

Place refers to actives that make the products available to customers when and where they want to purchase
them. This refers to the movement of the product from producer to wholesaler to retailer to customer. Place
also refers to the distribution network and the types of outlets available for the sale of the product.
Expensive products will usually be selectively or exclusively distributing, whereas cheaper products will be
intensively distributed.

20. Explain what ‘promotion’ is within the marketing mix and provide TWO promotional strategies.

Promotion refers to the methods used by a business to inform, persuade and remind customers about its
products. As a result, the business aims to attract new customers by raising awareness of a product, increase
brand loyalty by reinforcing image of the product and encouraging existing customers to purchase more of
the product. The main promotional strategy that businesses may use is advertising which revolves around the
business paying media outlets to communicate information about the product. This can include TV
advertisements, radio advertisements, billboards, brochures etc. This can be a costly method of promotion;
however, it is one of the best methods in attracting new and/or existing customers. Sponsorships are another
method where a business will financially support a community event. In return, the business gets the
exposure of their product or brand name at the venue.

Finance
21. Discuss the two sources of finance providing TWO advantages and disadvantages for each.

Finance is the money necessary to satisfy the needs of the business. Finance is required to manage the
business’ short-term liquidity (or liabilities), long-term solvency, look after business investments and
monitor cash flows of business. Businesses can either source equity or debt finance. Debt finance refers to
borrowing funds from a credit provider to pay for projects. Advantages include the ability to easily obtain it
if gearing is below or consistent with industry averages, that allows for the business to possess instant funds.
As a result, it is cheaper than equity as payments are made in instalments over a long period. However,
disadvantages would include a larger overall payment due to high interest rates. Furthermore, there is an
obligation to repay which may cause a business to become insolvent if the business cannot repay its debts.
Equity finance refers to the funds that come from the business itself via retained profits, increased capital
injections from current and/or new owners/partners, share issue and/or venture capital. Equity finance is
cheap and much lower risk with equity holders not having ability to foreclose a business. However, this puts
pressure on management to perform and the cost of raising equity capital is high and difficult in being
successful if substantial amounts are required.

22. Describe the importance of financial statements and define the purpose of each.

Financial statements are reports that summarise business performance financially and transactions over a
period. Business owners will need to be aware of whether the cash flow through the business is sufficient to
allow the business to pay its debts on time, whether the business is trading profitably, and the financial status
of the business. The main kinds of financial statements are cash flow statements, income statements and
balance sheets.

Cash flow statements show the movement of cash receipts (inflows) and cash payments. These are vital for
the business to assess whether money inflows can match money outflows. Liquidity is often used to describe
whether a business has a good or adequate cash flow. Cash flow statements are closely related to budgets,
which are estimates of anticipated future cash flows. However, they are broader than budgets as they are
also used to summarise past information. They are vital for the information they give on the timing of
payments and receipt of income.

The income statement is a summary of the income earned and the expenses incurred over a period of
trading. It helps users of information see exactly how much money has come into the business as revenue,
how much has gone out as expenditure and how much has been derived as profit.

The balance sheet is used to help owners keep a watch on their debt and equity levels, compare their overall
financial position with that of previous periods, and assist with the process of financial decision making. It is
a report that shows the overall financial stability of the business. Within a balance sheet the assets are equal
to the liabilities and owners’ equity.

23. Define the term ‘forecasting’

Forecasting is defined as trying to predict what will happen in the future to facilitate forward planning.
Forecasting is needed to enable effective planning. An SME may need to forecast the availability of labour,
raw materials, finance, and building requirements.

24. Define and differentiate between monitoring and evaluating.

Monitoring is measuring actual performance against planned performance, whereas evaluating is comparing
and making a judgement of the performance of the business to planned goals to determine if the goals have
been achieved or not. Monitoring and evaluating involves the setting of sales performance targets,
monitoring sales by looking at sales volumes, market share, industry position, and profitability, drawing up
budgets, and completing financial statements.

25. Explain how businesses can avoid overextending finance and other resources.

Overextension of finance and other resources refers to the excess expenditure and purchase of too much
resources resulting in excess stock. A business can overextend by using hire purchase and/or leasing
commitments, purchasing excess stock and employing too many staff for the business’ current needs. These
expenditures are all fixed and can be detrimental towards a business if economic conditions weaken where a
business is highly geared and can come under financial pressure and are more prone to bankruptcy.
Overborrowing and overdependence on debt finance can also be a problem for all businesses. Strategies that
avoid overextension include business planning, through the completion of cash flow projections, preliminary
establishment costs, personal financial budgets, and other financial statements, avoiding an overdependence
on debt financing, long-term financial planning, not investing too much money into goods or raw materials,
and finally too many staff can be caused by over-optimism about sales levels or poor job allocations.

Human Resources
26. Explain the purpose of Human Resources within a business and its significance.

Human resource management is defined as the effective management of the formal relationship between the
employer and the employee. The role of HR is to manage people within an organisation so that they can be
the most productive resource that they can possibly me. It involves all aspects of an employee’s relationship
with the business which includes the selection process, pay & working conditions, staff development and
following the legal obligations. The functions of employment relations allow a business to gain a
competitive advantage over its rivals in the market place. Businesses can math their rivals in technology,
capital, marketing and administration; it is in staff that businesses differ.
27. Analyse the importance of having skilled employees.

A business owner should always remember that the overriding objective of recruiting is to attract a pool of
qualified applicants – period with the most suitable skills – from which to choose the most appropriate
person for a job. Skilled employees are more productive and create wealth for the business. The skill base of
existing employees should also be detailed so that training needs can be identified. If the skill level of
employees is not adequate for them to fulfil their jobs effectively, then the business owner has two options:
provide training to improve the skill level of existing employees and/or recruit people who have the required
skills.

28. Differentiate between the costs and on costs (wage and non-wage).

A wage is the main and most obvious cost involved in HR which is monetary remuneration. This can be
either a wage or salary. This is paid to the employee for working for a business by the employer. Non-wage
also known as on-costs, are the other benefits that are provided to employees in addition to their wage e.g.
sick leave, superannuation, long service leave, holiday pay, study leave, maternity/paternity leave etc.

29. Analyse the process of recruitment within the Human Resources Cycle.

Recruitment is the process of attracting qualified job applicants from which to select the most appropriate
person for a specific job. This is also known as the process of acquisition. Recruitment can either be internal
or external. Internal refers to filling job vacancies with present employees whereas external refers to filling
job vacancies with people from outside the business. External recruitment has a process of job specification
which is a list of key qualifications needed to perform a particular job in terms of education, skills and
experience. A Job description which is a written statement describing the employee’s duties, tasks, and
responsibilities associated with the job. Job analysis which is a systematic study of each employee’s duties,
tasks, and work environment.

30. Discuss and differentiate between training and development of staff.

Training and development are aimed at improving employee’s skills and abilities in order to improve work
performance in the business. Training revolves around improving set current skills. Development focuses
more on long-term skills that will allow for more potential from the employee with the future in mind. The
benefits of such include more productivity, self-improvement, higher job satisfaction, adaptability, job
security, better job performance results, business goals are more likely to be met, lower absenteeism, errors,
defects and turnover resulting lower costs and a more capable and adaptable work force. There are two types
of training: on-the-job and off-the-job.

31. Discuss the three levels of employment contracts.

An employment contract is a legally binding, formal agreement between an employer and employee. There
are three distinct types of employer and employee contracts: award, enterprise agreement and common law
contract. The award contract outlines the minimum conditions on such issues such as pay rates, holidays,
sick, long-service and maternity leave, overtime rates, allowances, and hours of work. An enterprise
agreement is a negotiated arrangement between an employer and a union or a group of employees. The
agreement deals with the pay and conditions of people employed in that workplace. They can replace or act
as an add on agree to an award, it must comply with all NSW laws, must be in writing and signed by each
party, are usually for a fixed term. Common law (employment) contacts cover those employees who are not
under any award or enterprise agreement. They exist when employers and employees have the right to sue
for compensation if either party does not fulfil their part of the contract.
32. Describe the different processes of separation.

Separation is the ending of the employment relationship. It can either be voluntary or involuntary. There are
five types of separation which include retirement, resignation, retrenchment, dismissal and redundancy.
Retirement is the voluntary separation that occurs when an employee chooses to give up full-time or part-
time work. Resignation is the voluntary ending of the employment contract. Retrenchment is involuntary
and is when economic conditions are too weak. Redundancy can either be voluntary or involuntary, however
it is when jobs must be terminated and no longer are needed. They can be randomly selected or can
volunteer. Dismissal is involuntary and occurs when an employee’s behaviour is unacceptable. There are
three types of dismissal. Summary dismissal is the most serious and is when the employee is dismissed on
the spot. Dismissal on notice occurs when an employee is not performing their job satisfactorily and must be
given warning and opportunities to rectify their performance. Unfair dismissal occurs when an employer
dismisses an employee due to discriminative reasons.

33. Compare and contrast the different approaches to management.

The classical approach to management stresses how best to manage and organise workers to improve
productivity (output). Scientific management is an approach that studies a job in great detail to discover the
best way to perform it. The classical-scientific management approach focuses on management as planning,
organising and controlling. It has an emphasis on efficiency in production and task performance (time and
motion studies). It also selects employees on a scientific basis to perform certain tasks. There is a strong
vertical hierarchical autocratic organisational structure. There are clear lines of communication and
responsibility; chain of command. Finally, there are establish clear rules, procedure and regulations.

The behavioural management approach stresses that people should be the focus of the way in which the
business is organised. It is management as leading, communicating and motivating. The motivation of
employees is the focus of management. There is a greater focus on teamwork and efforts that value
everyone. It is a flatter organisational structure with a democratic consensus where employees are
departmentalised and work collaboratively. Employees are encouraged to become multi-skilled to raise
productivity, job satisfaction, and maintain motivation and interest.

The contingency management approach stresses the need for flexibility and adaptation of management
practices and ideas to suit changing circumstances. It focuses on individual leadership behaviours and
decision-making practices. It acknowledges that there is no single best way to manage an organisation
because external factors (contingencies) are always influencing the business’ activities and/or outcomes.
Contingencies such as technology, suppliers/distributors, customers and competitors, government legislation
and regulation, trade unions etc effect companies. It provides flexibility. However, it must account for all
contingencies to work, and management need strong power base and support.
Business Planning
Influences in Establishing a SME
34. Discuss the importance of a business plan.

A business plan is a detailed, well-considered guide for running a business. It contains the goals and
objectives of the business, instructions to follow to achieve them and ways of measuring the business’
success or failure. It is highly important as it assists in dealing with stakeholders, ensures owners and
managers analyse strengths and weaknesses, identifies competitive advantage and methods in sustaining it,
forces owners and managers to plan for possible changes in environment, and effective and efficient
resources allocation.

35. Discuss the different establishment options and provide TWO advantages and disadvantages.

There are three main establishment options that a person can choose. Setting up a new business is high risk
and high reward. It allows the owner to retain all creative control over the business and make the main
decisions within the business in terms of its prime function. It is self-employment with very little
restrictions. However all these factors have down sides, where stress and substantial costs may deter many
away from this option. There’s a high risk of failure for SMEs especially within the first five years.
Purchasing an existing business provides many benefits that starting a new one, does not. The retainment of
the company’s goodwill and existing customer base allow for everything to be included within the purchase.
It is easier to obtain finance, and there is already an existing income flow. However, a business may be
suffering, and have ‘badwill’. This business may also have debt attached to the business with expensive
operations. Furthermore the owner does not have much control over the products nor the main core
operations of the business. Franchising is defined as a business where a franchisee pays for the rights to use
an established business trad name and formula. The franchisor is the seller of the business concept. A
franchise is already set up and all the buyer must do is follow the business formula. However, owners may
experience a lack of control and majority of profit and revenue are delivered to the head office. Franchises
must follow set guidelines and have little creative control in how the business runs. This may mean that
franchising is the easiest option, but has the least reward. Low risk, low reward.

36. Briefly explain the market considerations a business must take in the planning process.

Business owners must acknowledge the goods and services that will be sold, the consumers that will
purchase such products, the price of products and the location of the business within the planning process. A
market analysis allows the business to collect, summarise and analyse information about the state of the
market, customers, the threats and opportunities that the market presents, and any advantages or
disadvantages that the business is likely to have over its competitors. The pricing of the products is crucial in
maximising sales as high prices will lose sales, and low prices will reduce profit. Methods such as
percentage mark-ups and competition pricing will allow the business to achieve the perfect price. The
location of the business is also key and various factors must be considered. The general prosperity of the
area, population patterns and trends, purchasing power, and existing competition are economic factors.
Furthermore, site history, occupancy costs, location complementarity, traffic flow, transport availability,
parking facilities, visibility, aspect of the shop etc are all factors that are required when choosing the specific
location of a business.
37. Discuss legal responsibilities that will have to be considered when establishing a business.

The business name, zoning regulations, health regulations and other regulations such as the competition and
consumer act 2010 are all legal responsibilities that a business must undertake. The business name is
registered through ASIC unless the name of the business is the name of the owner. Any change to the
business name will require registration, however registration does not establish specific rights to the name,
as it does not trademark the name. The zoning regulations restrict where certain businesses can locate,
implanted by the local government. Health regulation is under the Public Health Act 2010 and is usually for
businesses providing food. Licences are required to operate. Requirements such as temperature of food
storage, kitchen layout, employee clothing, and correct food handling. Health inspectors assess premises
regularly and often without warning, ensuring businesses maintain standards. The competition and consumer
act 2010 protects both consumers and businesses in Australia. It is designed to protect customers from
deceptive practices such as misleading packaging or misrepresentation of the place of production. It also
deals with product safety and the conditions and warranties associated with products. All these regulations
act in the greater interest of all businesses and consumer in ensuring products are of high quality and both
parties within the business transaction are satisfied.

38. Describe the importance of a situational analysis.

A situational analysis is an excellent technique for gathering information for use in the business plan. SWOT
is a technique within a situational analysis that is an acronym for strengths, weaknesses, opportunities and
threats. It is a powerful tool that can be used at all stages of the planning process. Analysis of the business’s
strengths and weaknesses is an internal analysis. Given that the business has a degree of control over its
internal environment, the analysis will provide information that can help place the business in a stronger
financial position. From this position, the business can set new goals. Analysis of the business’ opportunities
and threats is an external analysis. Particularly important to the business plan is the identification of unmet
or unsatisfied demand that the business can perhaps satisfy. At the same time, the business owner should
attempt to convert threats into opportunities.

39. The importance of objectives (vision, goals etc) Look up question 5.

40. Discuss and analyse the process and importance of organising resources

Organising the key business functions is important in the business planning stage as it allows the business to
understand the resources and funds that will be required to achieve a desired result and/or object/goal.
Organising operations resource includes organising the equipment, raw materials, the suppliers that will be
used, the fund allocation for resources, storage, warehouse, delivery and the level of technical expertise. The
organisation of marketing resources must be allocated to satisfy the customer’s needs and wants while
achieving business goals. The marketing plan needs to become integrated into all aspects of the business and
therefore adequate resources must be devoted to this aspect. The source of financing and the organisation of
the amount and type must be planned within the planning process. Finally, the use of good recruitment and
selection processes to find employees will be invaluable assets as the business grows and expands. The
organisation of all these aspects is crucial in preparing the business and minimising risk of failure and
business decline.

41. The importance of forecasting. Look up question 23.

42. Differentiate between monitoring and evaluating. Look up question 24.

A budget is the business’ financial plan for the future. It outlines how the business will use its resources to
meets its goals. The budget contains projections of incomes and expenses over a set period. Budgets enable
constant monitoring of goals and whether they are being achieved. Budgets assist in emphasising the goals
of the business and provide a basis for administrative control, direction of sales effort, production planning,
control of stock, price setting, financial requirements, control of expenses, and production cost control.

44. Explain the effectivity of using ‘modifying’ as a strategy of taking corrective action.

Modifying is the process of changing existing plans, using updated information to shape future plans.
Corrective action may involve changes to the materials, products that are the firm’s output, the cost of
turning raw materials into products, management practices, delivery of products to the market and so on. It
may also involve changes to the organisation’s human resources, because each individual’s performance in
the organisation is as important as the finished product.

45. Define the term ‘trend analysis’ and its criticality towards business success and failure.

Trend analysis is the process of investigating changes over time and looking for a pattern (trend) to predict
the future. Trend analysis is based on the idea that what happened in the past provides an idea of what will
happen in the future. Trend analysis will help forecast factors such as potential sales, total revenue, total
operating costs, gross and net profits and availability of labour.

46. Avoid over-extending finance and other resources. Look up Question 25

47. Explain the significance of technology for businesses. Look up Question 12.

48. Explain what economic conditions refers to in its criticality towards business success and failure.

The economic conditions are major contributors and influences in business success and failure. The
economic cycle will highly affect how a business performs in a particular period. The boom and recession
periods have features that will have repercussions on all businesses. During strong economic activity, the
economy will experience high levels of consumer spending, falling unemployment and increased
production. During periods of weak economic activity, the economy will experience low levels of consumer
spending, rising unemployment and decreased production. Weak economic conditions can lead successful
businesses into decline due to the change in the economic environment, thus it is important within the
planning process to consider these changes and be prepared to take corrective action and modify the process
of the KBFs during the different economic periods.

49. Discuss how businesses can respond to ONE internal and ONE external influence.

The location is a major internal influence that the management and owners of a business will be impacted by
pre and post business establishment. The consideration of high visibility, costs of rent and lease, distance
from suppliers and location of business support services are all factors that must be considered when
establishing and choosing a business location. This will ultimately affect how the business performs due to
this being a major causation to customer exposure and an increase of recognition. The competitive situation
of a business is a major external influence as it determines the business success short and long-term. Every
business has the goal to achieve sustainable competitive advantage. This is achieved through price/cost
strategy and differentiation strategy. Furthermore, the identification of the competitive situation in either
being a monopoly, oligopoly, monopolistic competition or a perfect competition, is vital in gaining a
competitive edge. This external influence possibly has one of the greatest effects on a business and is crucial
for every business to analyse and aim to master to succeed as a business.
50. Explain how SMEs can manage change effectively.

Effective change management involves management considering the current state of the business, its
processes, organisational structure, business culture, strategies and leadership style to clearly identify the
need for change. The most effecting management will ensure that this process is proactive rather than
reactive. Constructive change needs to be managed in a way that ensures that the process is undertaken at a
pace that is acceptable to staff and thus avoids staff resistance, disruptions to workplace culture, staff
turnover and productivity losses that may prevent it ultimately being able to achieve the original intentions
of creating a better business. The core features that must be acknowledged and managed to effectively
manage change is the identification of the need for change, setting achievable goals, managing resistance to
change and the possible use of management consultants to implement change at a sustainable speed. The use
of a change model such as the ADKAR change model allows the business to manage change effectively
alongside all other strategies to ensure the business is successful.

51. Outline the importance of identifying the need for change.

Key performance indicators such as falling sales per employee, higher labour costs, rising staff turnover and
increased accident rates can be signs of lacklustre business performance. The main questions that will need
to be asked revolve around identifying what needs to change to serve existing customers, what can change to
attract new customers and how employees can be better served to ensure they can better influence the other
two.

52. Analyse what Business Information Systems are.

The use of Business Information Systems (BIS) is an effective way to address change. BIS is rapidly
becoming a major area of knowledge for manager that involves a better understanding of how to make more
effective use of information and communication technologies to ensure improved business performance and
support for the management of the value change – acquisition, production, and delivery of goods and
services globally. An effective use of BIS has been linked to improved business efficiency, decision making
and maintaining competitiveness.

53. Explain the importance of setting achievable goals in managing change effectively.

Whilst the strategic direction and longer-term foals will be the focus of the reasons for change, managers
should also be aware of the need to have short term goals. Change management goals ought to encompass
more broadly the need to establish a culture of innovation, articulate change management principles and
align employee performance with change. Goals must be SMART i.e. specific measurable achievable
realistic and timed. This will ensure businesses are able to manage change effectively as the goals will
reflect the business’ performance and evaluate how effectively change was managed.

54. Explain why there is a resistance to change and how to overcome it.

Leader within a business must acknowledge that change is inevitable and poor implementation can have
strong resistance from staff. This is caused by inertia which is the unwillingness to go outside of comfort
zone, financial cost of change, fear of unknown and uncertainty as well as the need for retraining. One way
of overcoming staff resistance to change is to begin by identifying the changes required, the staff affect and
how it will affect them. Some steps in overcoming resistance to change include getting staff involved,
encouraging feedback, providing a timetable of changes and consultation with staff over what to expect.
Furthermore, management consultants may make it easier for staff to accept and embrace change.
55. Explain the purpose of management consultants.

The use of management consultants to embed change within an organisation is becoming more popular. This
allows for specialists that can effectively manage change, help businesses in the process of change as well as
prepare all staff. Whilst it can be costly to hire management consultants, the long-term benefits are
substantial as change is inevitable and it must be embraced by businesses eventually. Some examples of
benefits management consultants can provide include awareness programmes, staff training, briefing
sessions and empowering staff with set skills.