Business ManagementBusiness Management

Outcomes The student: The focus of this topic is the nature and responsibilities of management in the business environment. - P2 explains the internal and external influences on businesses P4 assesses the processes and interdependence of key business functions P5 examines the application of management theories and strategies P6 analyses the responsibilities of business to internal and external stakeholders P7 plans and conducts investigations into contemporary business issues P8 evaluates information for actual and hypothetical business situations P9 communicates business information and issues in appropriate formats P10 applies mathematical concepts appropriately in business situations

Students learn about:Nature of management Features of effective management Skills of management Interpersonal, communication, strategic thinking, vision, problem-solving, decision-making, flexibility, adaptability to change, reconciling the interests of stakeholders Achieving business goals Profits, market share, growth, share price, social, environmental Achieving a mix of the above goals Staff involvement innovation, motivation, mentoring, training

Nature of management Management is a process of coordinating the businesss resources to achieve its goals Business resources means human, physical and financial A manager is a person who coordinates the businesses limited resources in order to achieve specific goals.Contemporary definition: Management is a process of working with other people to achieve business goals in a changing environment. Management requires Working with and through others Achieving the goals of the business Getting the most form limited resources Balancing efficiency and effectiveness Coping with rapidly changing environmentEfficiency Each resource is allocated optimally to each person to minimise waste and inefficiency. Basic functions of management Planning Decides on organizational goals and allocate and use resources to achieve those goals. Organising Establishing the rules and reporting relationships that allow people to achieve organizational goals. Leading Encourage and coordinate individuals and groups so that the work lead forward organizational goals Controlling Evaluate how well the organization is achieving its goals and take action to maintain and improve performance or take corrective actionFeatures of Effective ManagementEffective Management Effectiveness in management is about achieving goals. Efficiency is the relationship between inputs and outputs. The goal is to minimise the use of resources which would minimise the cost. Effective management is important for the Australian economy because it will lead to employment growth and high standard of living.Getting better leaders and managers Upgrade vocational education and training and business support to improve peoples employment prospects Ensure equal opportunities for all people attaining senior corporate management positions. Larger companies to develop their managers to best practice standards and with skills to support their particular business strategies. Reform management education institutions to focus on developing skills for the future.Effective management in business Provide vision and direction for the business. Are the people the people who implement change. Are decision makers. Coordinate the activities within the business. Are legally responsible for what the business does.Effective management makes business succeed Role of effective managers is to make the joint effort of employees directed towards achieving the goals of the business.Effective management is important because Good managers are key to competitive economy and higher performing enterprises. Job creation depends on better management skills. To improve Australian management to meet the worlds best practices and to meet the challenges of Asia-Pacific century.Skills of managementThe main skills of management are interpersonal, communication, strategic thinking, vision, problem-solving, decision-making, flexibility, adaptability to change, reconciling the conflicting interests of stakeholdersInterpersonal Interpersonal skills is the ability to communicate, lead, delegate, motivate and negotiate. Every manager needs to develop these skills. Interpersonal (people) skills are those skills needed to work and communicate with other people and understand their needs. People skills include the ability to communicate, motivate, lead and inspire. A manager who lacks empathy is arrogant and opinionated, unable to communicate or has difficulty relating to people will not be able to develop positive relationships with employeesCommunication Communication is the exchange of information between people; the sending and receiving of messages. Without effective communication, the most carefully detailed plans and brilliant strategies will most probably fail. Well-written letters, an inviting telephone manner, pleasant conversation, concise emails, and friendly smiles and gestures reinforce carefully planned business strategies and client networking.Strategic Thinking Is thinking about the future of the business. This means finding, choosing and implementing the business to grow stronger and better in the future. Strategic thinking allows a manager to see the business as a whole and to take the broad long term view.Vision* The vision statement explains the idea that the business will strive towards as it fulfils its mission statement. The vision is generally directed at the stakeholders. Examples of vision statement are cost effectiveness, environmental responsibility, motivated, innovative and competent employees and value to customers.Problem-solving Problem solving is a broad set of activities involved in searching for, identifying and then implementing a course of action to correct an unworkable situation. Complex problem solving is a key manager skill. The business are best trying to improve things to increase productivity. The best approach to problem solving is a systematic approach. Steps to follow to solve a problem1. Define a problem2. Generate alternative solutions3. Evaluate and select an alternative4. Implement and follow up on the solutionDecision making Decision making is the process of identifying the options available and then choosing a specific course of action to solve a specific problem People always have to make a decision. Top-level managers make decisions about the direction the business will go in the future and set goals for the business.Flexibility All businesses operate in environmental uncertainty. The development of computers and the world wide web, email has changed the ways the businesses operate. So to succeed in a business environment, the businesses have to be flexible through flexible managers.Adaptability to Change Businesses today are recruiting and selecting managers who can cope with unfamiliar and unexpected circumstances. Regardless of their level of management, successful managers are those who anticipate and adjust to changing circumstances. They must be flexible, adaptive and proactive. Those who are unprepared of passive in the face of change will not succeed.Reconciling the conflicting interests of stakeholders Stakeholders are groups of individuals who interact with the business and thus have a vested interest in its activities. Most businesses are now extremely sensitive to public opinion and strive to be recognised as good corporate citizens. Society increasingly expects businesses to accept responsibility and accountability toward all stakeholders for the promotion and management of change.Achieving business goalsThe key business goals are profits, market share, growth, share price, social and environmental.Goal A goal is a desired outcome (target) that an individual or business intends to achieve within a certain timeframe. Success in achieving your goals is often determined by the amount of planning you undertake. Detailed planning increases the likelihood of successfully achieving your goals.SMART Goal Specific Goals should be straightforward and emphasise what the business wants to happen. Measurable Decide on goals whose progress can be measured so the business owner can see the change occur. This helps the business stay on track. Achievable Goals needed to be challenging but not be too far out of the businesss reach, otherwise the business owner and employees will become unmotivated due to the lack of success. Realistic Goals must represent something that the business owner and employees are both willing and able to work towards. Time bound The goals must have deadlines and sub-deadlines attached to them, otherwise the commitment is too vague.Carefully prepared goals benefit managers by Serving as targets Measuring Sticks Motivation CommitmentsProfits Profit is the most important goal because it relates to the success of the business. Profit = Revenue Cost Payment of profit to shareholders is called a dividend. The share of profit kept by the business to finance things further for growth is called retained profit.Market share Market share is the percentage of the market a particular businesss product or services have.Growth Growth refers to an increase in revenue from year to year. Growth is achieved by doing things better than competing businesses. Growth is the aim of long-term investors and managers.Share Price Share price is the price at which the shares of the business is sold in the ASX.Social Businesses have a number of social goals such as providing employment, increasing the standards of living in people.Environmental Environmental goal is to reduce the businesses carbon footprint, reducing waste in packaging and reducing packaging requirements.Achieving a mix of above goals Businesses have a range of goals because they have a range of different stockholders who have different needs.Staff involvement In a modern successful business, managers involve staff in Share the vision concept. Successful businesses motivate employees and provide effective mentoring and training.Innovation Innovation relates to the idea of developing new products. Managers have to come with ideas to involve staff in business so that they have a personal stake in the business.Motivation Motivation is the reason a person gets involved with a business. Recognition is the key strategy in motivating employees.Mentoring Mentoring is where an experienced person in the business trains and counsels another employee in the early stages of development.Training Is about giving employees the skills they need to do their current job really well. Training begins with induction. Induction is a structured program designed to introduce a new employee to both the business and job.Management approaches Classical approach Management as planning, organising and controlling Hierarchical organisational structure Autocratic leadership style Behavioural approach Management as leading, motivating, communicating Teams Participative/democratic leadership style Contingency approach Adapting to changing circumstances

Management approaches1. Classical Approach (order comes from the top)2. Behavioural Approach (teamwork to take decision and problems)3. Contingency Approach (Backup plan as things come)4. Management TheoryClassical TheoryBehavioural TheoryContingency Theory

Major ConceptReduce costs, improve efficiency and increased profits.Leading, Motivating and Communicating to bring success to the business.Adapting to changing circumstances in aspects of the business.

Organisational StructuresStructure is like a pyramid. There are managers that are at the top, middle and employees at the bottom.Fewer manager and workers have a greater degree of accountability.Employees remain on their designated job roles until there are organisational changes by the management.

Levels of managementThere is a strict line of authority from the top managers to the bottom employees.There are higher level employees such as managers which lead and have more power and control but the gap is lower than the classical approach. Managers make the most decisions while employees are responsible for their designated area.

CommunicationCommunication is direct in tasks required to performCommunication is key with managers and employees interacting with one another. Teamwork is encouraged in this approach.Depends on situation but communication is usually limited.

Leadership StyleThe managers decide on the decisions that are made and employees have little to no say in the decision making.Managers have the most say in the decision making but employees are encouraged to provide suggestions and ideas.Managers have the most decision making and any failures are put onto blame towards the manager.

Classical Approach Developed in the 1900s by theorists Tries to reduce costs, improve efficiency and profits Frederick Taylor believed that the best way to do things were predetermined and with the right type of worker who is trained and given specific tools, productivity would increase Other classical theorists include Henri Fayol, Max Weber, Frank and Henry GranttManagement as planning, organising and controlling Planning is concerned with setting the goals and working out ways to achieve them Organising is concerned with designing a framework for the business. What tasks need to be done? Which workers will do those tasks? Controlling is concerned with measuring actual performance and comparing it with the planned performance.Hierarchical organisational structure Hierarchical organisational structure is pyramid like. The structure consists of a few managers at the top, a few middle management to supervise and lots of workers at the bottom The classical theorists advocated a strict line of authority from the top to the bottom Small Span of control means a manager should control between four to fourteen workersAutocratic Leadership Style Is where the managers use a high degree of direction and permit little or no participation in decision making by subordinatesBehavioural Approach Studied how people behaved in the work environment Motivation, leadership and teamwork are the major outcomes of this theory People are important factors in success of failure of the business Management is leading, motivating and communicatingThe leading function Involves managers in directing, motivating and communicating to people and resolving conflict It involves encouraging people to enthusiastically achieve goals of the business It involves the workers in decision making process that affects their workIdeas to motivate people are: Ensuring fair and reasonable reward Giving employees challenging work Ensuring that they have a say in decision affecting their work Making reports available to the worker and supervisor Developing multiskilling in employees Providing recognition for achievementFlat Organisational Structure and Teams Fewer manager and workers had greater degree of accountability and responsibility for their work Removing the middle management is called flattening the organisational structure Teamwork is encouraged in big businesses to achieve the goalsParticipate/Democratic leadership Employee participation in decision making Open communication channels subordinates input encourage in decision makingContingency Approach Contingency theory advocates adapting to changing circumstances in every aspect to the business According to this theory, there is no best way to manage the business Organisational structure and management style should depend on the type of tasks that the business is doingAdapting to changing circumstances The economic, technological, political and social changes affect the ability of a business to be competitive Business which react quickly to change can get a higher portion of market share.Management process Coordinating key business functions and resources Operations Goods and/or services The production process Quality Management Marketing Identification of the target market Marketing mix Finance Cash flow statement Income statement Balance sheet Human resources Recruitment Training Employment contracts Separation voluntary/involuntary Ethical business behaviourManagement ProcessCoordinating key business functions and resources Coordination involves making sure the different parts in a business work together efficiently Coordination is about making sure all the functions are working towards common goalsOperations Operations has the tasks of making a product that meets customer expectations It is concerned with activities that transform inputs into finished goods and services An effective operation is important for the profitability and competitive position of a businessGoods and Services Businesses provide goods and services to meet the needs of customers more effectively than competitors Goods are tangible things designed to meet customer need cars, iPod and clothes Services are intangible products such as doctor, accountant and banking The goods and services must be provided with the level of consistency, quality and efficiencyThe production processINPUT sugar, water, cola essence, chemicals, carbon dioxideTRANFORMERSOUTPUT Can of cokeQuality management Quality is manufacturing products or providing services that are as consistently similar as possible Quality is about manufacturing products or delivering services that meet the standards or specification that were set for that product Quality management is all about minimising the variations to defined limits and then building system and procedures to ensure those limits are never exceeded Quality assurance involves putting into place systems and procedures that makes sure an error or fault would not happen Quality management has to be proactive workers. Workers need to be trained to assess the quality of their own work Quality assurance is important because it provides managers with the confidence that they can produce quality products all the time Certification is important where an independent specialist organisation such as Standards Australia inspect the systems and procedures that certifies that the process will result in quality products every time Total Quality Management (TQM) tries to improve every aspect of the business. It was popular during the 1980s but the current focus is on quality assuranceMarketing The role of marketing is to develop a product that customers want Marketing is not easy because all competitive businesses are trying to develop a product to meet the same customer demand In a successful business, marketing will identify a customer need and develop a product to meet that in need. This process will involve pricing, promoting and distributingIdentification of target market The target market is a group of people the marketing effort or product is focused on Market segmentation is concerned with breaking down the total market into smaller or more manageable bits Differentiated marketing involves focusing the market effort on a number of different segmentsMarketing mixThe marketing mix refers to how the 4Ps are combined to achieve business objectives. These are Product, Price, Place (distribution) and Promotion.Product Product refers to all the benefits a good or service offers to a customer. It includes design and style features, image and brand, after-sales service and warranty. Style and image are important features of a product because they impact on price.Price Price is the payment required to purchase a product. Price is the most important thing customers consider in choosing a product. Penetrating pricing is a strategy where prices are set below the prices charged by competitors. Where there is limited competition, skimming strategy is where prices are set at whatever the market will bearPlace Place refers to the way a product is distributed to customers. The distribution channel links the point of manufacturing to the final customer. Coca-Cola sells through supermarkets, vending machines, service stations and convenience stores.Promotion Promotion is concerned with communicating with its customers. Promotion is done using the promotional mix: Personal selling Advertising Below the line promotions Public RelationsPositioning (Product) Position is the image a product has in the mind of its customers. Reject Shop vs MyerBrand (Product) Brand is a logo, name or symbol that identifies a particular product.Personal Selling (Promotion) Sales representative helping a customer by explaining the benefits of a product to their customers and effectively displaying a product.Advertising (Promotion) Bringing awareness of a product or brand out across through billboards, television, newspaper, the internet etc.Below the line promotions (Promotion) Competitions, free samples and coupons communicate with customers.Public relations (Promotions) Refers to communications with customers without having to pay to get the message across. Sports people or celebrities appear on television wearing a logo associated with the product or using a product.Distribution Channel (Promotion) Intensive distribution is where many outlets as possible are used to distribute the product such as potato chips and drinks. Exclusive distribution is used for luxury items. An exclusive channel is used for products right at the top of the market such as Rolls Royce or Gucci.FinanceFinance is concerned with where the business sources its funding. Accounting is a tool that provides information on financial affairs of a business. There are three major statements, these are the cash flow statement, income statement and the balance sheet.Business Finance TermsFinancial Management Management of finance with sourcing where is the fund coming from? Once a business has secured funding, it then needs to ensure that it is appropriately accurate. Cash flow is sometimes described as the life blood of a business. The management of cash flow involves anticipating cash expenditure and ensuring that enough of the income earned comes in the form of cash.Contingencies Contingencies are unanticipated events that can lead to financial difficulty. For a business to be well managed, it needs to have saved money for such events because they can place the business under unexpected financial pressure.Credit Rating A business that is well managed will have a good credit rating which means that lenders will be prepared to lend the business money because they know it is safe for them to do so. The credit rating is determined by financial organisations that assess the capacity of the business, both to repay debt and manage finances responsibly.Accounting Accounting is a managerial and administrative tool that involves the recording of financial transactions. Accounting records financial transactions from delivery dockets, sales receipts, invoices, cash register records and e-payment transaction.Accounting provides information on: Financial status/position Cash status/position Financing or funding information Cash flows Profitability and return on investment Trends in earnings, borrowings, sales and so on that together indicate the risk the business facesCash Flow for a big business Cash form operating activities these are cash flows related to main trading operations and prime function Cash from investing activities these are cash flows related to the sale and purchases of assets such as land and buildings. Cash from financing these are cash flows related to the acquisition of and repayment of both debts and equity finance.Liquidity Liquidity is used to describe whether a business has a good or adequate cash flow. Cash flow statement

SalesCash Sales $6000Payment from credit sales $3000InflowInterest from bank deposits $250OutflowRent $5000Wages $4000Electricity $750Stock $8500Advertising $500Loan Payments $2000Telephone $300Total Inflow $9,250Total Outflow $21,050Closing Cash Balance -$11,800

Income statement

Income Statement aka Statement of financial performance aka Revenue Statement aka Profit and Loss Statements Is a summary of income earned and expenses incurred over a period of trading and how much profit has been derived.Revenue Statement for the year ended 30 June 2011 Sales - $10,000 Cost of Goods sold - $4,000 Gross Profit - $6,000 Expenses - $3,000 Net Profit - $3,000Good Profit - Sales - COGS COGS - cost of goods sold - value of stock that the business has sold to the customer. COGS = Opening Stock $2,000+Purchase $23,000 Closing Stock $4,000-> COGS -> $21,000Expenses/CostsSellingAdministrativeFinancial

CommissionSalariesWagesAdvertisingDelivery ExpensesElectricityDepreciation on shop fittingsStationaryOffice SalariesRentRatesTelephoneAudit feesAccountant's feesInterest PaymentsLease paymentsInsurance payments

Balance sheet

Assets = Owners Equity + LiabilitiesBalance Sheets/Statement of financial positionBalance sheets detail the financial stability of the business in terms of what it owns and what it owes.Balance Sheet Equity + Liability A = OE + L

Assets are in two types. Current and non-current.Current is within 1 year. Accounts receivable are money received from other people.Non-current are used and kept for more than one year such as buildings.Liabilities are in two types. Current and non-current.Current is changing in one year. (Short term loans) - accounts payablesNon current is not changing such as long term loans for property.Bank overdraft - Your balance is 5000 but you have to pay 8000 so you get an overdraft which is like a short term loan.Balance Sheets/Statements of financial positionsBalance sheets details the financial stability of the business in terms of what it owns and what it owes.Balance Sheet Equation is Assets = Owner's Equity + Liabilities A = OE + LAssets ae items of value to the organisation that can be given monetary value. Example - buildings, furniture, equipment, goodwill and stock.Current assets are those whose value is expected to be used up or turned over within 12 months. Example - Stocks, Debtors, Accounts ReceivableNoncurrent assets are items that have an expected life for over a year. Building, furniture, car and truck.Intangible items are those of worth that have no physical substance e.g. good will, trademarks, copyright and patens.Liabilities are items of debt owed to outside parties and other organisations and include loans, mortgages etc.Current Liabilities are those in which the debt is expected to be repaid 12 months or less e.g. bank overdraft.Noncurrent liabilities are those long term debts expected to be paid in over 12 months e.g. mortgageOwner's equity is the money given to a business in order for it to acquire resources, known as capital.Use the accounting equation is Assets = Liabilities + Owners Equity to calculate the following:1. Total liabilities = $10,000Total owners equity = $50,000 -> Assets = $60,0001. Total liabilities = $12540Total owners equity = $41,543 -> Assets = $ 54,083

Human ResourcesEffective management of the formal relationship between the employer and employees. The human resource cycle is acquisition, development, maintenance, separation.Employee can make or break the business Successful business recognise that they rely on the quality of their employees to achieve their goals of improved profits, growth and increased market share. Management of the staff has to be the top priority for every business.For a business to make a best use of its employees it should: Take care to hire the best people Develop cooperative and effective working relationships Motive staff to do their best in the workplace Provide employees with opportunities for trading and developmentRecruitment (Acquisition) Hiring New Employees Planning: identifying staffing needs, job analysis. Recruitment: Attracting people to apply for the position, internal and external recruitment. Selection: choosing and hiring the most qualified, testing and interviewing

Training (Development) Improving employees skills and abilities. Induction and training: teaching employees new skills, helping employees learn tasks associated with their jobs and to improve their skills. Skills inventory: compile database of skills and experience of all current employees

Employment contracts Is a legally binding, formal agreement between an employer and an employee. There are three main type of employment contract: Award Enterprise Agreements Common Law contract

Awards Award cover the minimum conditions: pay rates, holidays, sick, long-service and maternity, overtime, allowances for tools or uniform and hours of work. Enterprise agreement Is a negotiated arrangement between an employer and a union or a group of employees. An enterprise agreement can: Replace an award or act as an add-on agreement. Must comply with all NSW laws regarding employments rights and entitlements. Must be in writing and signed by both parties. Are usually for a fixed term.Common Law contract Cover those employees who are not under any award or enterprise agreements. They are common under professional and managerial employees. Such contracts are signed individually and are secret. Both parties have the right to sue if either party do not fulfil their part of contract.

Maintenance Motivating employees to remain with the business. Monetary benefit: rewarding employees efforts through financial, pay rates. Non-monetary benefits: rewards such as conditions, fringe benefits.

Separation voluntary/involuntary Voluntary separation Retirement (Old) Resignation (Choose not to work) Redundancy (Occupation is non existent anymore) Retrenchment (Cutting down workers) Dismissal (Bad work behaviour) Unfair Dismissal Employees leaving business Voluntary: employees leaving on own accord retirement, resignation. Involuntary: employees being asked to leave, retrenchment, dismissal.

Ethical Business Behaviour Production methods should fit with strict environmental regulation. Acting honestly and morally honouring commitment Not engaging in misleading and deceptive behaviour Providing safe work environmentTriple bottom line Refers to the economic, environmental and social performance of a business. This means that the businesses no longer focused on making a profit at all costs but they recognise the environmental and social performance.Ethical Issues Fairness and honesty Respect for people Conflict of Interest - when a person takes advantage of a situation or piece or information for his on her own gain rather than for the employers interest. Financial management - all records should be audited by Internal and External auditor Truthful communicationCorporate code of Conduct Is a set of ethical standards for managers and employees to abide by.Socially Responsible business behaviour Business management of social, environmental, political and human consequences of its actions.Management and Change Responding to internal and external influences Managing change effectively Identifying the need for change Business information systems Setting achievable goals Resistance to change Management consultants If business can manage change effectively they can survive in todays highly unpredictable environment. Nothing is permanent but change. Change is any alteration in business and work environment. Change can be in consumer tastes, production methods, markets or type of products sold, how employees perform tasks.Responding to internal and external influences External and internal influences are discussed before. When businesses change due to external or internal influences they can result in either transformational (major) or incremental (minor). Transformational change is complete restructure throughout the whole organisation. Incremental change results in minor changes, involving only a few employees.Impact of change on organisational structure Outsourcing Flatter organisation structure (Less levels of managers) Work teamsManaging change effectively By using business information system/management information system which gathers data, organises and summaries them and converts them into practical information to be used by managers who use them to make decisions. Manipulation - exertion of influence over someone to gets them to do what you want. Threat - Loss of promotion, transfer, termination.Setting achievable goals A vision statement states the purpose of the business. If management detects changes then businesses vision statement needs to be reassessed. The new goals set should be attainable and realistic and achievable. Resistance to changeChange is resisted becauseIt can be achieved with considerable effortIs emotionally stressfulManagementFear of job lossDisruption to routineFear of unknownInertiaCostManagement consultants Is someone who has specialised knowledge and skills within an area of business. They help businesses adapt: Undertaking change readiness reviews Creating supportive business culture Involving all stakeholders in the change process Gaining and recognising early achievements

Management and change Responding to internal and external influences Managing change effectively Identifying the need for change Business information systems Setting achievable goals Resistance to change Management consultants Management and Change Responding to internal and external influences Managing change effectively (indicated above) If a business can manage change effectively, they can survive in todays highly unpredictable environment Nothing is permanent but change Change in any alternation in business and work environment Change can be in consumer tastes, production methods, markets or type of products sold, how employees perform tasksResponding to internal and external influences When businesses change due to external or internal influences, they can result in either transformational (major) or incremental (minor) Transformational change is complete restructure throughout the whole organisation Incremental change results in minor changes, involving only a few employeesImpact of change on organisational structure Outsourcing Flatter Organisational Structure (Less levels of managers) Work teamsManaging change effectively By using business information system management information system which gathers data, organises and summaries them and converts them into practical information to be used by managers who use them to make decisions Manipulation exertion of influence over someone to get them to do what you want Threat Loss of promotion, transfer, terminationSetting achievable goals A vision statement states the purpose of the business If management detects changes, the business vision statement needs to be readdressed The news goals set should be attainable, realistic and achievableResistance to changeChange is resisted because: It can only be achieved with considerable effort Is emotionally stressful Management change Fear of job loss Disruption in routine Fear of the unknown Inertia (Tendency to remain unchanged) CostManagement consultantsIs someone who has specialised knowledge of skills within an area of business. They help the business adapt by: Undertaking change readiness reviews Creating supportive business culture Involving all stakeholders in the change process Gaining and recognising early achievements

20 Raymond Wang 2015