Unit 5 - Business planning

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Strategy

determination of a basic long-term goal and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals

1. determining long-term goals, 2. adopting courses of action, 3. allocating resources

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Mission statements

objectives that embrace all others , objecties are set in order to achieve long-term strategic plans.

they: 1. communicate objectives/values to the whole organisation, 2. influence employee behaviour and attitudes, 3. help in achieveing congruence (harmony etc. ) in organisation

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Strategic Planning

usually involves internal & external audit->overall audit is often around SWOT analysis

also Ansoff matrix/investment appraisal/use of decision trees

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hybrid strategy

vombines elementds of defferentiation with cost- and price-competitivness

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SWOT

internal focus on 1. culture, 2. structure, 3. leadership styles, 4. planning effectiveness

external focus on: 1. competitors and markets, 2. social & demographic factors, 3. economic/political changes, 4. development in technology

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five-forces analysis

analyse the extent of the competetive enviroment, 1. threat of new entrants (->depend on capital investment/brand loyality/econ of scale/amnt of resitance), 2. substitute products, 3. power of consumers/suppliers, 4. Rivalary amongst firms

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benchmarking

seeks out the "best" practive from other oftanisations->compares thesse->leading to firms improvement->based on comparative analysis but often seen as a much wider performance improvement tool

Pros: 1. more meaningful/realistic targets are set, 2. early warning of comp. disadvantage, 3. staff motivation increase through involvement, Cons: 1. diff. selecting performance measures and appropriate benchmark "partner", 2. inability to obtain data

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Contingency planning

1. What if? question, 2. encourages managers to consider alterna. actions in case of emergency/unforseen event. 3. affect. markting/HR/Finance/Production/Buying etc.->each department has to be involved->encr. motivation->although expensive

Normal proceedure: 1. outline/examine all crisis scenarions, 2. plan each one, 3.TEST the plan, i.e. computer simultations, 4. measure expected costs against effectiveness and cost of having no contingency plan!

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Pros Enviromental Management

1. reduced risk of legal action , 2. improved image, 3. improved energy efficiency, 4. better waste management, 5. improved relationships with actual and potential investors

Carrying out: 1. undertake enviromental audit, 2. create enviromental policy, 3. monitor enviromental performance

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Ethical code of practice

outlines how the firms employees are extected to behave in certain situations and is taylored to the nature of the business.

Pros: 1. Marketing benefits, 2. Employee benefit, Cons: 1. lower profits (higher costs), 2. conflicts with existing objectives (profit max./market share)

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Why might people resist to business changes?

1. Personal reasong (fear of unknown/low tolerance/prejudice/dislike methods used to implement), 2. Communication (no real reason/mistrust/misunderstanding), 3. Social (satisfaction with present situation/dislike of new colleagues/equipment/interference)

4. Ecomomic reason ( lack of beleif in ability to aqcuire new skills needed(increase fear of unemployment)

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When planning business changes, managers must ensure that:

1. full/clear info is given out, incl. (reason/implemention methods/likely disruptions/progress), 2. give opportunity to employees for evaluation of changes, 3. establish working parties/quality circles/training routines for all staff affected

5. provide monitoring system for implementation and allow empl. to give feedback, 6. continuous monitoring effect after new system has been implemented.

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Explain the importance of workforce planning

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Workforce plan contains an assessment of :

1. nat/local change in population analysed by no/age/skills/location, 2. analyse current INTERNAL labour supply, 3. consideration of any proposed developments in company's organisation/location and structure

info is used to: 1. effects on turnover, 2. implications of recruitment, 3. training requirments, 4. effects on morale and labour relations//->diff. estimating future labour demand->depend. on firms strategy/competitors

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Problems of improving labour productivity

1. shortages of resources (funds), 2. problems in persuading employees, 3. staff fear that increase in productivity can lead to a loss in jobs, 4. however if not increasing productivity->firm may become uncompetetive->need for job losses and restructuring

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Marketing strategy

->translates marketing objectives into action->medium/long-term approach, strategy selected is influenced by:

1. SWOT, 2. Market research data, 3. past sales statistics, 4. marketing audits, 5. resources available

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PRP

->Performance-related pay->This is a method of giving pay rises on an individual basis, related to the employee achieving a number of targets over the past year.

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Time-based payment system

This payment method involves the employee receiving a basic rate of pay per time period that he works (e.g. £5 per hour, £50 per day, £400 per week). The pay is not related to output or productivity.

Any time that the employee works above the agreed number of hours per week may make him eligible for overtime payments, often at ‘time and a half’ (e.g. £7.50 per hour instead of £5 per hour).

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When a poor level of motivation exists in a workforce, then the management should:

a) Develop a strong corporate culture and team-spirit., b) Ensure that pay levels are fair, c) Design more challenging jobs, d) Introduce decision-making at lower levels in the organisation,

e) Give praise and recognition to employees for their efforts and achievements, f) Ensure that communication flows are effective and that the relevant messages get to the relevant personnel.

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productivity bonus

a financial incentive to encourage workforce to work hard, 1. employees receive basic wage supplemented by bonus related to outpur, 2. can be calculated by group/indivicual basis

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appraisal

assessing the effectiveness of process/employee by comparing goals with outcome, 1. coducted through questionnaire/one-to.one discussion which focus on employees performance, perhaps in relation to pre-set indicators such as time-keeping/customers sales

level/contribution to team work, 4. usually ends with discussion of career prospects and training needs

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Budgetary control

progress throughut an accounting period ->can be checked by regular comparison with budgeted figures for revenues/expenses, 2. Variances can be investigated, 3. regular monitoring can correct divergenges allowing changes within

the budget to cope with unexpected

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Business plan

report detailing marketing strategy/production costing/and financial implications for start-ups, 2. help entrepreneurs to think idea through & persuade investors to inject money

main sections are: 1. marketing plan(market gap/product positioning/competition), 2. account of entrepreneur experience/finance, 3. cashflow-forecast, 4. forecast P&L account &balance sheet, 5. details of finance needed, 6. forecast on likely return, 7.

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Cash flow forecast

detailed estimate of firms future cash inflow/outflow, monthly cash flow and cumulative cash flow can be derived, as long as negative cash flow is predicted

precauciary actions can be taken

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Equity capital

= shares->share capital->

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External financing

i.e. 1. debt-> short&long-term, i.e. bank overdraft, trade credit & credit factoring, longterm: bank loans, mortages, debentures->, 2.share capital, 3. grants:->

cld come form EU, goverment regional policies/local entreprise board->however they only provide tiny fractions of capital needs

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HR planning

->forecasting the workforce requirements of the business for future years->involves 1.no of employees needed, 2.type (graduate, unskilled), 3. righ empl->right job, ensuring max efficiency, 3. requires estimate of no of workers needed, done by

1. past data, 2. expected cust demand, 3. est. labour turnover, 4. views of management, 5. exp. changes in work practices//can be found internal/external

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Internal financing

generation of cash from within companies resources/accounts: 1. retained profit, 2. working capital (cutting stocks/debtors), 3. sale of fixed assets or underperforming divisions

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Job (person) specification

statement/listing of characteristics required to do a job successfully, specifies the PERSON->one of the first stages in recruitment, provides yardstick against which

job applicants are measured, typical elements:1. educational qualification, 2. experience, 3. impact on others, 4. special aptitudes

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Job description

describes JOB->statement of the nature of the job->identifying precise tasks and responsibilities involved

likely to form part of employment contract

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Labour market

supply/demand of labour->which together determine wage rates->made up of a vast no of small markets which have quite different characteristics

i.e. road repairers, brain surgeons, pop starts for instance

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Loan capital

medium to long-term finance, either form banks/debenture holders->loan capital + shareholders funds=capital employed, when raising extra loan capital gearing needs to be considered

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Manpower planning

deciding on type/No of staff required in future->considering sales forecasts/plans/objectives. When decided on No/skills HRM can plan by:

1. carrying out manpower audit (checking skills of present workforce), 2. ident. future leavers (retirment) & exclude them form calc. 3. consl & decide No of existing staff which wld like to retrain, 4. prep. recr. plan stating No of new staff/set about

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Marketing audit

unoffical/internal audit of firms position in rel. with customers/competitors. Identifies market shares of prod. (incl. rising/falling), demographic profile of cust. (age rising->indic. of falling sales)

Purpose of audit is to provide info upon which techniques such as Boston Matrix/SWOT analysis can be carried out

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Marketing plan

report on marketing objective//strategy incl.: costing/forecast results/contingency plan. There are 3 main stages

1. do marketing audit of firms mark. assets(ie. SWOT), 2. set object for future yr (based on goals 3-5yrs)incl. sales targes/mark share/distr. lev/brand im. rating, 3. devise strategy (defined budget): NPD/NPlaunches/brands/above-below line req.

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Factors affecting availability of external labour

1. The rate of unemployment, 2. The extent of the infrastructure(e.g. price/availability of housing/public transp).3. Government incentives and subsidies(paying the training costs for the business). 4. The availability of workers with the necessary skills

5. The number of competitors in the area.

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problems associated with Human Resource Planning

1. Will the ‘new’ employees mix effectively with the existing workforce? 2. Changes in the external environment (e.g. a recession) could lead to the business having to make redundant several of the recently-appointed employees.

It will always be difficult for a business to accurately forecast the number of new employees that it will require, because both the business-world and the internal requirements of the organisation are very dynamic.

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HRM covers

1. Human Resource Planning (H.R.P), 2. Recruitment and selection of new employees.3. Training and development.4. Performance appraisal.5. Remuneration packages.6. Disciplinary procedures.

7. Grievance procedures.8. Health and Safety issues9. Looking after the employees’ welfare.10. Dealing with the termination of contracts of employment.

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reasons for the extensive use of training across the workforce of a business

1. improve employee productivity, 2.create a multi-skilled, flexible workforce, 3. create a multi-skilled, flexible workforce, 4. increases the chances of their promotion.

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Operational objectives

targets that must be achieved by part. dpmnts/divisions so that strategic obj. are achieved. i.e. mark. dept. set obj. of developing new prod. with overseas sales of £10 mill a year in order to help a firm to meet

strategic objective of reducing its dependence on its home market

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PEST analysis

(->Political, Economic, Social and Technological analysis)->systematic means of analyisng external factors that may present opportunities or threats to a business

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Profit & Loss Account

statement rec. all firms revenues/costs within past trading period

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Situational Audit

check upon a firms financial, marketing and strategic position->attempting answering q. " where do we stand?"->si firm can decide where it aims in future, situational audits usually includes:

1. analysis of market growth/share within the product categories firm operates in, 2. anal. firms financial position compared with rivals, 3. consideration of degree of success at achieving current objectives

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Sources of finance

ind. where firm obtains finances needed (internal/external), 1st it has to be established: 1. purpose (short-term/seasonal/replacemnt of assets?), 2. size/type of firm ( multinationals will not use family/friends as a source)

for more info see other questions

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Strategic objectives

wide-ranging-long-term goals of significance to operations of a whole organisation. i.e. 1. to diversify, 2. to focus ("stick to the knitting), 3. achive a dominant market position, 4. develop technological advantage over rivals

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SWOT analysis

Strenghts: expertise, low cost production, 2. Weaknesses: short-term approach due to take-over threat, poor educ.,/training of workforce, capacity cutbacks,

3. Opportunities, i.e. gain market share, develop new market, build new EU wide brand, enjoying large encon. of scale, 4. Threats, i.e. competitors taking rising market shares, future EU laws restricting business decisions

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Some useful key terminolygi which should be used in Unit 5

break even, price / income elasticity, economies of scale, Boston Box, Ansoff’’s Matrix, Porter’s Strategy, Product / sales orientation, motivation theory, leadership style, target markets, product positioning, gearing, critical path analysis,

, capacity utilisation, product life cycles etc..

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What has to be included in a U5 report, how is it marked?

1. Knowledge and critical understanding , 2. Application of Knowledge, 3. Analyse problems, issues and situations , 4. Evaluation->Evaluates and distinguishes between fact and opinion and offers a valid recommendation based on the synthesis of available

Interpretation: Make sure you present a conclusion - recommendation. Bring in your level 4 themes. ie comment on the realism of an option . significance of factors / impact in the short / long term etc

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PEST-> E - Economic

demand, interest rates, inflation rates or value of the sterling currency on the foreign exchange market no doubt exert some degree of influence ->level of unemployment

income elasticity of demand , economic fluctuations could also influence firms’ willingness to invest, ->high sterling exporting firms have been struggling->increasing penetration of cheaper EU products

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PEST -> S - Social

Many influences must be considered here to generate a picture as to the external circumstances of the firm. Life styles and consumer spending patterns, demographic trends, attitudes to products, education and leisure could all influence the performance of

The aging population in the UK has enabled specialist tour operators to target the so-called grey pound - the older generation and offer dedicated holidays to the over 55’s. Changes in birthrates could affect baby care providers such as Mothercare and pro

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PEST -> T - Technology

can affect not only the processes used by the firm and its rivals but also the products on offer in the market. Competition from innovative products such as alcopops has forced traditional brewers to introduced more refined ( and processed ) smooth flow o

or cream flow beers that are considered more palatable to the younger generation->home entertainment include the DVD - forcing traditional video rental shops to expand their range to include this new format. There is no doubt that technological change pro

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PEST G -> G - Green

Increasingly consumers and governments have become more interested in the environment and green issues generally. Larger firms in particular must pay more attention to the potential adverse impact of their actions - which could force changes to strategies

Instead of disposing of waste, firms may now consider firstly: some recycling or at least processing to reduce the harmful effects of it.Already car manufacturers are designing new cars to increase the proportion that can be recycled

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market environment

investigate the total market size, total market growth, market trends, market share of the firm, new products being launched by the firm and rivals and the market position of the firm’s product(s) in the marke

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competitive environment

needs closely examining where rival firms need investigating: including an assessment of their capabilities, their current and future strategies, their financial strength, their market standing and their ‘position’ in the market.

Also what is happening to the competition itself - are more firms entering the market or leaving ? How close are competitors’ products as substitutes ?

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Benefits of Budgets

Pros: 1. means of controlling income->regulate spending/draw attention to losses/waste/inefficiency, 2. act as a "review"->allowing time for corrective actions, 3. emphasise/clarify responsibilitiew of executives, 4. enable delegation of responsibility

(meeting targets), 5. helps ensuring capital is useful employed, 6. help co-ordination/improve communication, 7. provide clear targets

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Budgets drawbacks

1. cld lead to resentment from personell (esp. if they're not involved in preparation), 2. if too inflexible->firm cld suffer->preventing finalising of deals

3. if business results are differend from budget, budget can loose importance

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Problems of preparing budgets

1. not actual figures->may be inaccurate->inexact, 2. collecting info->req. coordination, 3. Time, 4. Conflict between departments

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Internal Recruitment Pros/Cons

1. worker can develop their career, 2. shorter introduction period, 3. employers know more abt candidate->reduces risk, 4. quicker->less expensive,

Cons: 1. limited No of applicants, 2. external might be better quality, 3. another vacancy is created, 4. if not found internally firm still has to search external

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External Recruitment examples

1. Commercial employment agency, 2. Job centres/prof recruitment agency, 3. Headhunting, 4. Career Service, 5. Governement funded training schemes, 6. Visiting Universities,

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Induction.

This is the training that an employee receives when he joins a business. It is designed to familiarise him with his new job and with the procedures and systems of the business

(e.g. health and safety, and organisational structure), as well as make him aware of the products and services that are provided by the business.

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Corporate Plan

set out goals for entire organisation->rel. mission statement, goal suggesting expanding into a new market cld have sign effect on employees->more required, diff. skills, redeployment?, jobs might be lost

rationalisation

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development appraisal

measures workers performance with the aim of offering training to correct any shortcomings or achieve further improvement

employees are devoted to achieve organisational objective->mutual supportive relationship->improve workers performance->cut costs

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Judgemental appraisal

assess employee performance agains measurable targets, pay increase if targets are met, bonuses may be lost if employee does not reach goal

limit individual creativity->damage motivation->can be expensive bcs it is complicated.. ->cost of appraisal

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Selection methods

1. evaluating CV, 2. Testing (aptitude, personality), 3. Interviews, 4. role plays

Selection involves costs, sending back cv, travelling expenses, time, advertising

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Training Pros/Cons

Pros: 1. more productive, 2. flexible, 3. help introd. of new techn. , 4. increase job satisf. , 5. reduce accidents, 6. improve image, 7. empr. change of promotion

Cons: can be expensive due to, disruption, wasted time, more effort, supervision costs, fees, travell expenses, equipment etc.

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