National Year 12 Business
Chapters: 6
1. 3.1 What is business?
3.1.1 Nature and purpose of business · 3.1.2 Business forms · 3.1.3 Business environment
- Business Aims and Objectives – An aim is a general goal; an objective is a clear, measurable target with a deadline. The mission says why the business exists. Common objectives are survival, profit, growth and market share. New firms usually aim to survive; settled firms push for profit and growth. Objectives change with the firm's size, the economy, competition and the owners' wishes. Success can also be judged by customer satisfaction, staff well-being and ethical or green goals, not only profit.
- Sole Proprietorship, Partnership and Hindu Undivided Family Business – A sole proprietorship is owned and run by one person who takes all profit and bears unlimited liability. A partnership is run by two or more people who share profit under an agreement; its partners are of many kinds and a written deed and registration protect them. A Hindu Undivided Family business is run by the eldest member, the karta, for all family members, who become members by birth.
- Business Environment: Meaning, Dimensions and Demonetisation – Business environment is the total of all outside forces, people and institutions that can affect a firm but that it cannot control. It is dynamic, uncertain, complex, relative and made of linked specific and general forces. Studying it helps firms spot opportunities, see threats, plan and cope with change. It has five dimensions: economic, social, technological, political and legal. Demonetisation of old ₹500 and ₹1000 notes in November 2016 is a big example of an environment change.
2. 3.2 Managers, leadership and decision making
3.2.1 Management and leadership · 3.2.2 Management decision making · 3.2.3 Stakeholders
- Directing: Guiding People to Do Their Best – Directing is the management job of guiding, telling, motivating and leading people at work. It has four elements: supervision, motivation, leadership and communication. Maslow shows that needs come in five levels. Incentives can be financial or non-financial. Leaders can be autocratic, democratic or free-rein. Communication can be formal or informal, and barriers can be removed with simple remedies.
- Decision Making: How to Choose Well, Step by Step – Decision making means choosing the best option from two or more choices. A good decision follows steps: spot the problem, list options, set criteria, give each criterion a weight, score the options, choose, act and then review. A decision matrix turns this into simple numbers.
- Stakeholders in Business – A stakeholder is any person or group affected by a business or able to affect it. Internal stakeholders (owners, managers, employees) are inside the firm; external ones (customers, suppliers, the local community, government, lenders) are outside. Each wants something different, so one decision can please some and upset others: this is stakeholder conflict. Firms use stakeholder mapping (power and interest) to decide whom to involve most, and manage relationships by communicating and consulting.
3. 3.3 Improving marketing performance
3.3.1 Marketing objectives · 3.3.2 Markets and customers · 3.3.3 Segmentation, targeting, positioning · 3.3.4 Marketing mix
- Marketing Management – Marketing means finding out what buyers need and meeting that need in exchange for value, at a profit. It has many functions (research, planning, branding, labelling, packaging, pricing, promotion, distribution, service) and five philosophies (production, product, selling, marketing, societal). The marketing mix is the 4Ps: product (with branding, labelling, packaging), price (shaped by cost, demand, competition, government rules, objectives and marketing methods), place (channels and physical distribution) and promotion (advertising, personal selling, sales promotion, public relations).
- Market Research: Finding Out What Customers Want – Market research means collecting and analysing information about customers, competitors and the market so a business can make better decisions and reduce risk. Primary (field) research collects new, first-hand data through surveys, interviews, observation, focus groups and test marketing. Secondary (desk) research uses data that already exists, like government statistics, reports and websites. Because you cannot ask everyone, you choose a sample: random, stratified, quota or convenience. Data can be quantitative (numbers) or qualitative (opinions and reasons). Results help with market segmentation, market mapping, finding gaps and building a value proposition. Research has costs and limits: bias, small samples and out-of-date data.
- Market Segmentation: Dividing, Choosing and Positioning – Market segmentation means dividing a whole market into smaller groups (segments) of customers with similar needs and buying habits. The main bases are geographic (where they live), demographic (age, gender, income, family, occupation), psychographic (lifestyle, values, personality) and behavioural (usage rate, loyalty, benefit wanted, occasion). Segmentation helps a business understand customers, design the right product and price, spend promotion money wisely and find gaps. Then the business chooses its target market (targeting): undifferentiated (mass), differentiated (several segments) or concentrated (niche). Finally it positions the brand: decides the clear place it should hold in customers' minds versus rivals, often shown on a positioning (perceptual) map, and supports it with the marketing mix.
4. 3.4 Improving operational performance
3.4.1 Operational objectives · 3.4.2 Analysing operational performance · 3.4.3 Efficiency and productivity · 3.4.4 Improving quality · 3.4.5 Inventory and supply chains
- Operations Management: How Businesses Make Goods and Services – Operations management is how a business turns inputs (materials, workers, machines, money) into outputs (goods and services) as well as possible. Production can be job (one-off, made to order), batch (groups of the same item) or flow (non-stop mass production). Operations set objectives: low cost, high quality, speed, flexibility and care for the environment. Performance is measured with capacity (the most it can make), capacity utilisation (output ÷ capacity × 100), labour productivity (output ÷ workers) and unit cost (total cost ÷ output). The supply chain links suppliers, factory, shops and customers; push flow makes goods first, pull flow (just-in-time) makes them when ordered. Quality control checks finished goods; quality assurance and continuous improvement (kaizen) prevent faults at every stage.
- Productivity: Getting More Output from Each Input – Production is the total amount made. Productivity is output per unit of input, for example boxes per worker per hour. Labour productivity = output ÷ workers (or worker-hours). It rises with training, better machines and technology, motivation, better methods and specialisation. Higher productivity lowers cost per unit, can raise wages and profits, and helps a country grow. Businesses also watch capacity utilisation (actual ÷ maximum output × 100) and choose between labour-intensive and capital-intensive methods.
- Quality Management in Business – Quality means a product or service is fit for purpose and meets what customers expect. Firms manage quality by checking finished goods (quality control), by building checks into every stage (quality assurance), and by making every worker responsible for small, constant improvements (TQM and kaizen). Good quality raises sales and reputation and cuts waste, but it costs money and training.
- Supply Chain and Procurement: Suppliers, Stock Control and JIT – A supply chain is every business and step that moves a product from raw materials to the final customer. Goods move forward; money and information (orders) move back. Procurement means buying the right inputs at the right price, quality and time. Businesses choose suppliers on price, quality, reliability and flexibility. To control stock they either keep a buffer stock (safe but costly) or use just-in-time (cheap to store but risky if a delivery is late). The re-order level = daily usage × lead time + buffer stock. Logistics gets goods to the right place on time; outsourcing hands a task to another firm.
5. 3.5 Improving financial performance
3.5.1 Financial objectives · 3.5.2 Analysing financial performance · 3.5.3 Sources of finance · 3.5.4 Improving cash flow and profit
- Financial Objectives: Revenue, Costs, Profit, Cash Flow, ROCE and Capital Structure – Financial objectives are clear money targets that guide a business: revenue targets (sales value), cost targets (cutting costs), profit targets (gross, operating or net profit), cash-flow targets (keeping enough cash), investment levels, and ROCE targets. ROCE = operating profit ÷ capital employed × 100 shows how well the money invested earns a return. Capital structure is the mix of equity and long-term loans; gearing = non-current liabilities ÷ capital employed × 100, and above about 50% is high.
- Break-Even Analysis – A business breaks even when total revenue equals total cost, so profit is zero. Each unit sold brings a contribution = price − variable cost per unit, which first pays off the fixed costs. Break-even output = fixed costs ÷ contribution per unit. Sales above this make a profit; below it make a loss. Margin of safety = actual sales − break-even sales. To earn a target profit, sell (fixed costs + target profit) ÷ contribution per unit.
- Sources of Business Finance – Every business needs money for long-term assets (fixed capital) and daily running (working capital). This money comes from two big pools: owners' funds (equity shares, preference shares, retained earnings) that need not be paid back, and borrowed funds (debentures, bonds, bank and institution loans, public deposits, trade credit, inter-corporate deposits) that must be repaid with interest.
- Cash Flow – Cash flow is the money moving into and out of a business. Net cash flow = cash inflows − cash outflows, and closing balance = opening balance + net cash flow. A cash flow forecast predicts this month by month so the firm can spot shortfalls early. A business can make a profit and still run out of cash, so managers improve cash flow with overdrafts, faster collection from customers, slower payment to suppliers, lower stock, factoring and sale and leaseback.
6. 3.6 Improving human resource performance
3.6.1 HR objectives · 3.6.2 Analysing HR performance · 3.6.3 Organisational design · 3.6.3 Workforce planning (managing the flow of people) · 3.6.4 Motivation and engagement · 3.6.5 Employer-employee relations
- Human Resource Management (HRM) – Human resource management is planning, finding, developing, rewarding and keeping the people a business needs. HR objectives include employee engagement, talent development, training, diversity, alignment of values and a right-sized, cost-effective workforce. HR performance is measured with labour turnover (leavers ÷ average staff × 100), retention rate, labour productivity (output ÷ workers), labour cost per unit and employee costs as a percentage of revenue. Hard HRM treats staff as a cost; soft HRM treats them as an asset.
- Organising: Process, Structures, Delegation and Decentralisation – Organising means arranging work, people and resources so that plans can be carried out. It has 4 steps: divide the work, group it into departments, assign duties and set reporting lines. The result is an organisation structure, either functional (by type of work) or divisional (by product). Besides the formal structure, an informal one grows from friendships. Delegation passes authority to a junior; decentralisation spreads decision power across all levels.
- Staffing: Recruitment, Selection and Training – Staffing means filling posts with the right people and keeping them skilled. It is a part of Human Resource Management. Its process runs from estimating manpower needs to recruitment, selection, placement, training, appraisal, promotion and pay. Recruitment finds applicants from internal or external sources. Selection picks the best through tests, interviews and checks. Training builds job skills on the job (induction, apprenticeship, internship, coaching) or off the job (vestibule, classroom, case study).
- Directing: Guiding People to Do Their Best – Directing is the management job of guiding, telling, motivating and leading people at work. It has four elements: supervision, motivation, leadership and communication. Maslow shows that needs come in five levels. Incentives can be financial or non-financial. Leaders can be autocratic, democratic or free-rein. Communication can be formal or informal, and barriers can be removed with simple remedies.
- Industrial Relations: How Employers and Workers Get Along – Industrial relations (also called employee or employer-employee relations) is the relationship between a business and its workers. Good relations rest on two-way communication and on giving workers a voice, alone or through unions and works councils. Pay and conditions are often set by collective bargaining. When talks fail, there may be industrial action such as strikes; neutral help through conciliation, mediation or arbitration can end a dispute.