Business Two Revision Summary

The main budgets cover income, expenditure and profit Budgets are important to enable a business to plan for the future, establish priorities and improve efficiency. External factors such as high inflation or interest rates can impact upon the ability of the business to stick to the budget Adverse variance results from higher costs or lower sales Favourable variances results from lower costs or higher sales Causes of variances can be either internal - higher costs of raw materials Cash flow can be improved by bank overdrafts, short term loans, debt factoring, sale of assets or sale and leaseback of assets. A positive cash flow is important for a business to survive  sales revenue - (total fixed costs + total variable costs) = profit Return on capital employed is the percentage return on capital invested in the business and could be compared with the rate of interest from a bank to assess it worth. It is measured using the formula (return / capital invested) X 100

The number of levels of hierarchy in an organisation will affect opportunities for specialism, promotion, delegation of tasks and effectiveness of communication Delegation is the handing down of tasks by managers to employees lower down the organisation (subordinates) The span of control is the number of employees for which a manager is directly responsible The span of control will impact on the level of supervision over employees and opportunities for delegation Labour productivity measures the number of units of output per employee and is calculated using the formula: total output per year / number of employees Labour turnover measures the percentage number of employees leaving the organisation over a period of one year and is measured using the formula (number of staff leaving per year / average number of staff employed per year) X 100 Recruitment and selection describes the process from identifying a vacancy in an organisation through the placing of an advertisement, to the selection of a candidate through the interview process Internal recruitment is less costly than external recruitment and provides opportunities for promotion and increased motivation. However, it will limit the number of applicants and does not bring new ideas into the organisation. The training process helps to develop employees' knowledge, skills and attributes. Internal training can be cheaper and more relevant to the actual working environment than external training. However, it depends on the training ability of internal employees and there is a danger that bad habits and short cuts can be passed on Poor morale can increase costs of a business by increasing absenteeism and labour turnover and can gain an organisation a bad name Job enrichment can increase motivation and promotion prospects. However, it can place additional pressure on employees and, if it involves routine or mundane tasks, can lead to demotivation.

Unit costs is the cost of producing one unit of output and is measured by the formula: total cost / units of output Quality measures include customer satisfaction ratings, customer complaint, scrap rate and punctuality of deliveries Capacity utilisation is the percentage of a firm's total production level that is currently being achieved and is measured by the formula: ( actual output per annum / maximum possible output per annum) X 100 Under-utilisation of capacity leads to higher fixed costs per unit, lower profits levels and a possible negative image of the company. However, it can also lead to less stress for employees and the ability to satisfy sudden increases in demand Quality control involves inspection of a product at the end of the production process, whereas quality assurance includes self-checking by employees throughout the production process. Total quality management is based is based on 'right first time' and ensures an organisation has a culture of quality High levels of customer service create a potential USP and a good company image, ensuring that customers are satisfied and return to purchase again Choice of supplier may depend upon the reliability and flexibility of the supplier; the quality and price of raw materials, the length of lead time and the availability of trade credit Use of technology in an organisation can reduce labour costs, improve quality, reduce waste and ease communication. However, it has high initial costs and maintenance cost and can lead to information overload and lower levels of motivation

The purpose of marketing is to anticipate and satisfy customers's needs while at the same time meeting the needs of  the organisation in terms of, for example making a profit Niche marketing aims a product at a particular market segments whereas mass marketing aims a product at the whole market With a niche marketing  there may be fewer competitors and it may be easier to target customers and promote products. However, there is less scope for adding value and products may lack appeal to certain segments Business-to-business marketing usually involves large transactions, with promotions and advertising being informative rather than persuassive The key elements of marketing mix are the relationship between product, price, promotions and place Product is a key element of marketing mix and depends heavily upon design and new product development A unique selling point (USP) adds value as it differentiates a product from others in the market The Boston matrix shoes the relationship between market growth and market share Extension strategies aim to extend the life of a product by modifying it, changing its image, introducing new promotions and prices, attracting new segments or targeting new markets Promotion can be above-the-line advertising by media or below-the-line through other promotions such as competitions The promotional mix elements include public relations, branding, merchandising, sales promotions, direct selling, personal selling and advertising Pricing strategies include skimming, penetration, price leaders and price takers Pricing tactics includes loss leaders and psychological pricing Price elasticity of demand measures how responsive the demand  for a product or service is to change in price. Elastic demand (answers between -1 and -infinity) means that a price change leads to larger percentage change in quality, whereas inelastic demands (answers between 0 and -1) means that a change in price leads to a smaller percentage change in the quantity demanded. The place of element of the marketing mix involves ensuring that products are available in places where customers can buy them A firm's competitiveness depends upon employee skills and motivation, effectiveness of the marketing mix and financial planning and control, efficiency of operations and quality procedures, innovation and investment, and enterprise.

Finance

People in Business

Operations Management

Marketing and the competitive environment