ENTR 5 Review 5-1 How to Manage a Business Define the five functions of management; Describe the three types of plans used in business management; Identify some of the management styles commonly found in businesses. Management is defined as getting work done through others. Four Roles of Management: Planning, Organizing, Directing, Controlling. Planning (setting goals and making plans) Strategic Plan Tactical Plan Operational Plan Organizing (assembling the right resources and staffing) Staffing the Business Assignment of Tasks Grouping of Tasks into Departments Organizational Structure Allocation of Resources Across the Organization Directing (leading, influencing, and motivating employees) Authoritarian Management Style Democratic Management Style Delegating Management Style Controlling (setting standards and measuring results) Performance standards: production, expenses, customer service, employee actions, equipment, finances, inventory levels, product quality, profits, and sales. Quality Control Program 5-2 Managing Employees Explain how to implement your staffing plans; Discuss ways to motivate your employees; Describe the control function of management as it applies to human resources. Levels Of Management Supervisory Level (lower) Department Level (middle) Executive Level (top) Leadership Styles Theory X Managers (assume employees are lazy and cannot be trusted; they use authoritarian management style) Theory Y Managers (trust and respect employees; they use both the democratic and delegating management styles) Theory Z Managers (motivate workers through group decision making and teams) Motivating Employees Pay employees well Treat employees fairly Recognize employees for the work they do Give employees adequate responsibility Human Resources Hiring Employees Training Employees Evaluating, Promoting, and Dismissing (Firing) Employees
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ENTR 5 Review 5-1 How to Manage a Business Define the five functions of management; Describe the three types of plans used in business management; Identify some of the management styles commonly found in businesses. Management is defined as getting work done through others. Four Roles of Management: Planning, Organizing, Directing, Controlling. Planning (setting goals and making plans) Strategic Plan Tactical Plan Operational Plan Organizing (assembling the right resources and staffing) Staffing the Business Assignment of Tasks Grouping of Tasks into Departments Organizational Structure Allocation of Resources Across the Organization Directing (leading, influencing, and motivating employees) Authoritarian Management Style Democratic Management Style Delegating Management Style Controlling (setting standards and measuring results) Performance standards: production, expenses, customer service, employee actions, equipment,
finances, inventory levels, product quality, profits, and sales. Quality Control Program 5-2 Managing Employees Explain how to implement your staffing plans; Discuss ways to motivate your employees; Describe the control function of management as it applies to human resources. Levels Of Management Supervisory Level (lower) Department Level (middle) Executive Level (top) Leadership Styles Theory X Managers (assume employees are lazy and cannot be trusted; they use authoritarian
management style) Theory Y Managers (trust and respect employees; they use both the democratic and delegating
management styles) Theory Z Managers (motivate workers through group decision making and teams) Motivating Employees Pay employees well Treat employees fairly Recognize employees for the work they do Give employees adequate responsibility Human Resources Hiring Employees Training Employees Evaluating, Promoting, and Dismissing (Firing) Employees
5-3 Managing Expenses, Credit, and Cash Flow Describe strategies for managing cash flow; Evaluate a business’s performance through financial statement analysis.
Manage Your Cash Flow Create A Cash Budget Improve Your Cash Flow (Increase Cash Receipts, Decrease Cash Disbursements)
Analyze Financial Statements Analyze Sales (Gross Sales, Net Sales, Sales By Product) Analyze Net Profit On Sales Set and Meet Profit Goals (Perform Break-Even Analysis) Analyze Debt and Equity 5-4 Managing Production Examine the tasks and tools of production management; Learn about scheduling, productivity, and quality control.
Production management is management of the processes that produce goods and services. Production managers typically focus on three issues: Scheduling, Productivity, and Quality.
Scheduling Gantt Chart: A Gantt chart shows the schedule of goals for a list of tasks. PERT Chart: A PERT chart shows tasks as steps in a sequence and illustrates how they are dependent on
each other.
Gantt Chart
Productivity Productivity is a measure of business output compared to business input (ex: output per employee,
output per unit of time, output per dollar of cost) 5-5 Managing Distribution Explore activities within distribution management; Examine the distribution chain.
Distribution management is the management of materials and processes associated with incoming and outgoing products. The goal of distribution management is to ensure that products are handled, stored, and transported in an organized, safe, and cost-effective way.
Managing Distribution Distribution Chain Or Channel Transportation Shipping And Receiving Storage And Warehousing Materials Handling Delivery Terms
PERT Chart
5-6 Managing Operations Define operations; Study general operating procedures.
Operations are the everyday activities that keep a business running. So operations management is the management of the everyday activities that keep a business running.
General Business Policies (Operations Manual) Hours Of Operation, Returns and Rework Requests, Delivery Policies Extending Credit To Customers (Character, Capacity, Collateral) Customer Service Policies (Courtesy, Respect, Prompt Attention, Knowledgeable Employees, Credibility) Hiring Policies, Safety Policies
5-7 Managing Purchasing and the Supply Chain Define purchasing and learn about the process of purchasing; Explore factors in purchasing management.
Purchasing is the buying of materials, products, services. Procurement is the act of purchasing.
Goals of Procurement Management Right quality, Right amount, Right time, Right vendors, Right cost, Right terms
The Process Of Purchasing Product Specification, Purchase Order, Invoice, Packing Slip
5-8 Managing Inventory Learn why managing inventory is important; Investigate ways to plan inventory levels and investments; Research methods for controlling inventory levels.
Inventory is the amount of merchandise a business has available for sale at a given time. Inventory management is concerned with the physical condition of inventory and the amount of space it takes up. The goal of inventory management: not too little and not too much.
Planning Inventory Level and Investment Maintaining a wide assortment of stock, but keeping adequate quantities of fast-moving items Increasing inventory turnover, but maintaining a high level of service Keeping stock levels as low as possible without sacrificing service or performance as a result of stock outs Obtaining lower prices by making bulk purchases, but not ending up with slow-moving inventory Having adequate inventory on hand, but not ending up with out-of-date items
Purchasing Plan The most important aspect of inventory management is having items in stock when they are needed.
The amount of inventory you need to purchase can be calculated from the sales forecast.
Controlling Inventory Level Inventory shrinkage Reconciling Recorded Inventory Level vs. Actual Inventory Level
Inventory Systems Visual Inventory System Perpetual Inventory System Periodic Inventory System Partial Inventory System (combines elements of perpetual periodic inventory systems) Just-In-Time Inventory System
Point of Sale (POS) Software System
Costs Of Carrying Inventory Obsolescence, Deterioration, Interest fees, Insurance, Storage
Costs Of Being Out Of Stock Lost Sales, Lost Customer Loyalty
ENTR 6 Review 6-1 Planning for Business Growth Examine business growth; Learn when to grow a business; Explore product life cycles. To grow a business means to make changes that result in greater sales. A business grows, or expands, in two ways: internally and externally. Organic growth is growth achieved by expanding a business internally-for example, adding new products
or services for sale. External growth is achieved by buying other businesses or merging with them. Most small businesses
experience organic growth rather than acquiring other companies.
Deciding When To Grow Condition of the Business Economic Climate Life Goals of the Business Owner
Control Your Growth Attaining measurable objectives and goals Hiring managers and supervisors Financing expansion Obtaining resources for expansion (capital, equipment, inventory, materials, and supplies)
Product Life Cycle A product life cycle is a series of stages-introduction, growth, maturity, and decline-that a product may pass through while it is on the market. This concept can be applied to a product type or industry (for example, automobiles), to a specific brand (for example, Ford), and to a particular product (like the Ford Explorer).
Product development involves the following steps: idea development idea screening strategy development financial analysis product development and testing product marketing.
BCG Matrix The BCG matrix aims to identify high-growth prospects by categorizing the company's products according to growth rate and market share. By optimizing positive cash flows in high-potential products, a company can capitalize on market-share growth opportunities. STARS: high market share and generate the most
cash. Monopolies and first-to-market products are frequently termed stars. However, stars also consume large amounts of cash.
CASH COWS: leaders in the marketplace and generate more cash than they consume; high market share, but low growth prospects.
DOGS (also known as pets): low market share and a low growth rate. These business units are prime candidates for divestiture.
QUESTION MARKS (also known as problem children): high growth prospects but a low market share. They are consuming a lot of cash but are bringing little in return. However, since these business units are growing rapidly, they do have the potential to turn into stars.
6-2 Growth Strategies Investigate business growth strategies; Explain the importance of planning for growth.
Intensive Growth Strategies An intensive growth strategy is a growth strategy that focuses on cultivating new products or new markets, and sometimes both. This strategy is best described as "doing more of what you are good at doing." Market Penetration Market Development Product Development
Integrative Growth Strategies An integrative growth strategy is a growth strategy that emphasizes blending businesses together through acquisitions and mergers Integrative growth strategies are typically more expensive than intensive growth strategies and are usually practiced by mature businesses with large cash flows. Vertical Integration (a business acquires another business in its own supply chain, but not at the same
supply chain level) Horizontal Integration (a business acquires another business at the same supply chain level as itself is a
horizontal integration strategy)
Diversification Growth Strategies Every business has a core business, which is the most important focus of the business. A diversification growth strategy is a growth strategy in which a business grows by offering products or services that are different from its core business. Synergistic Diversification (a business adds new products or services that are related to its existing
products or services) Horizontal Diversification (a business adds new products or services that are not related to its existing
products or services) 6-3 Challenges of Growth Examine how personal feelings affect business growth; Study the practical challenges of growing a business; Investigate the chances for business growth.
Personal Feelings About Business Growth Business growth often requires the owner to give up some personal control over the business. Also, business growth increases risk. Business owners must ultimately make the decision about whether to grow or not, based on their life goals.
Practical Challenges Of Growing A Business Growing a business involves six practical challenges. Each should be addressed in the revised business plan you will develop. Space Business Structure Materials and Equipment
Information Technology (IT) People and Skills Money (equity capital vs. debt capital)
6-4 Global Trends and Opportunities Discuss the reasons and methods for participating in the global economy; Determine whether international business is right for you.
Exporting Direct Exporting (find buyers or distributors in foreign markets and ship your products to them) Indirect Exporting (use commissioned agents who act as brokers to find foreign buyers for products) Selling Worldwide Through The Web
Importing Price and quality are usually factors in their decision to import. Consumers like low prices and demand
high quality.
Reasons For Competing Globally There are many risks associated with competing in the global marketplace. There are also many benefits that international business can provide, including increased profits. Increased sales; Reduced costs; Decreased dependence on current markets and suppliers
Analyze The Market Analyzing whether there is an international market for your product will be very similar to how you analyzed your current target market and target customers. You will need to consider political, economic, social, and cultural issues. Additional taxes and regulations are also things to research and consider. Write An International Business Plan An international business plan is an extension of your business plan. It sets forth your goals for international expansion and defines the strategies for achieving those goals. 6-5 Franchising and Licensing Investigate franchising a business; Examine the advantages and disadvantages of being a franchisor; Explore brand licensing.
Franchising A Business A franchise is a business arrangement in which an established company sells others the right to use the company's name and operating plan to sell the products or services in other locations. The franchisor is the owner of the established company. A franchisee is an individual who uses the company's name and operation to run the same business in another location. The franchisee pays the franchisor for this privilege. These payments typically include a Franchise Fee, a Franchise Royalty, and a Franchise Advertising Fee.
Advantages for Franchisors Increased Revenue New Locations without Financial Responsibility Franchisee Investment No Liability Builds Brand Awareness
Disadvantages for Franchisors Regulatory and Legal Requirements Extensive Preparation Substantial Upfront Investment Time-Consuming Requires Certain Types of Businesses
Licensing A Brand Brand licensing is granting permission to some person or company to use your brand. Advantages: Increased Revenue (upfront fees and royalties from licensees); Brand Enhancement
(increase customer awareness and enhance the reputation of the original brand) Disadvantages: Misbranding, Over-Branding, Risk to the Brand, Lack of Marketing, and Expense. 6-6 Exit Strategies When To Leave A Business One of the goals of owning a business is to build personal wealth. In fact, business ownership provides a unique opportunity for doing so. Regular profits earned during the lifetime of a business can provide a very good income and a comfortable living for the owner. But when an entrepreneur leaves his or her business, a much more valuable asset is involved. It's the accumulated and potential worth of the business itself.
Liquidity is the ease of converting a non-cash asset (such as a business) into cash. A successful business is a very valuable asset, but actually selling it is not always an easy process and must be timed carefully.
How To Value A Business Determining the value of a business can be difficult. You need to consider such factors as the business type, the length of time the business has been operating, its sales and profits, its cash flow, its liabilities or debts, its tangible assets (such as buildings, furniture, inventory, and equipment), and its reputation and prospects for growth. Book Value Method (based on the book value of business, also known as the owner's equity) Multiple of Earnings Method (the amount of business earnings over a specific time period is multiplied by
a number, typically 3 to 5, to determine a reasonable sales price for the overall business)
Exit Strategies Planning how to sell a business is just as important as planning how to start a business. The process of exiting a business and gaining the value of the business in cash when you leave is referred to as harvesting the business. It's sometimes called cashing in or cashing out because it involves turning a non-cash asset (the business) into cash. Sale of Business Management Buyout
Employee Stock Ownership Plan (ESOP) Initial Public Offering (IPO)
