Chapter Eight: Management Activities: Planning, Organising and Controlling

1. Chapter Eight: Management Activities: Planning, Organising and Controlling Last ABQ Chapter Ms Marshall

2. Outcome According to the syllabus, by the end of this chapter, you should be able to: • Discuss the nature of management activities and their linkages. Ms Marshall

3. Planning – Key Terms Planning Mission Statement SWOT Analysis Strategic Plan Objectives Tactical Plan Low Cost Leadership Contingency Plan Differentiation SMART Niche Operational Plan Manpower Planning Cash flow forecasting Ms Marshall

4. Planning – What you need to know • Steps Involved in Planning • Types of Planning & their impact • Advantages of Planning Planning involves setting goals and coming up with strategies to achieve these goals. Ms Marshall

5. Conduct a SWOT Analysis Steps involved in Planning Set SMART Objectives Devise Strategies and Plans Note: you could link types of planning in with “devise strategies” if it is a question worth high marks Implement and Review Ms Marshall

6. 2010 Sample Answer • (A) (i) What is meant by the term SWOT analysis? • A management technique/strategic planning method. It is used to assess/evaluate a business in terms of strengths, weaknesses, opportunities and threats. In a SWOT analysis, strengths and weaknesses are internal factors while opportunities and threats are external factors. The aim is to maximise the potential of strengths and opportunities while minimising the impact of weaknesses and threats. • (6 marks) Ms Marshall

7. SWOT Analysis: Guinness • Strengths: Internal factors that give an advantageStrong advertising and marketing department. Wide variety of high quality merchandise. Guinness storehouse the most visited tourist attraction in Dublin. Strongly associated with Ireland (the Harp). Widget. Quality Team. • Weaknesses: internal factors that are a disadvantages. Perceived as a very heavy drink. Perceived as an “acquired” taste. • Opportunities: External factors that may give an advantageCheaper than other drinks – good in a recession. Arthurs Day becoming a major event. Gathering 2013 increase sales and visits to Storehouse. • Threats: External factors that may give a disadvantage. Increased popularity of artisan beers and wine. Increased availability of a variety of products. Have failed to capture the female market despite the fact that women are drinking more. Alcohol advertising may be banned??? Ms Marshall

8. Set SMART Objectives • SMART • Specific: clear and precisely expressed • Measurable: easily measured, quantifiable. • Agreed: by the management team. Input from employees very valuable. • Realistic: capable of being achieved with the resources available. • Timed: timescale set for the achievement of the objective • OBJECTIVE • The goal a business is trying to achieve Ms Marshall

9. Strategies • Low Cost Leadership Strategy: the company keeps its costs to a minimum so that it can sell its products as cheaply as possible, e.g. Ryanair, Aldi. • Differentiation Strategy: the company makes their product stand out so achieve its goals. Many companies will built up a brand associated with high quality so that customers will pay extra for their product compared to a competitor. E.g. Ralph Lauren, Kelloggs. • Niche Strategy: the company is successful because it has a product that serves a particular need or want that the market has not previously catered for, e.g. there was a big increase in organic food during the Celtic Tiger when people were willing to pay more. Ms Marshall

10. Implement and Review • The manager must now put the plan into action. • He must break the plan into manageable parts and communicate it to employees. • Performance needs to be reviewed on a regular basis to change plans if not on target. Ms Marshall

11. Cash flow Forecast Mission Statement Manpower Planning Strategic Plan Types of Planning Contingency Plan Tactical Plan Operational Plan Ms Marshall

12. Types of Planning - Definitions • Manpower Planning: this involves making sure that the business has the right amount of workers with the right skills to do all the jobs needed. E.g. a Principal must make sure there is enough Maths teachers for the upcoming year. Manpower planning involves:- Forecasting Future Demand- Calculating Existing Supply- Recruit employees if there is availability or make unneeded employees redundant. • Cash flow forecasting: where the manager plans out the money the business expects to receive and spend in the future. The main objective is to make sure the business will have enough money to pay its bills as they fall due. If not, this planning gives them the time to take corrective action. E.g. arrange an overdraft. • Contingency Plan: prepared to cope with emergency situations e.g. a disruption in supply of essential raw materials. • Operational Plan: short term plans for daily or weekly issues. Conducted by frontline supervisors. Ms Marshall

13. Types of Planning - Definitions • Mission: the mission of a company is the overall fundamental objective of the business, i.e. their reason for existing. It states who they are, what they do and where they are going. E.g. Google: “To organise the worlds’ information and make it universally accessible and useful.” • Strategic Plan: a major plan for the entire business it breaks up the mission into achievable plans of action. It is drawn up by the senior managers and should be achieved within five years. E.g. an Irish company may plan to expand into the UK market. A strategic plan would be to gain a 10% market share in five years. • Tactical Plan: A short term plan for one section of the business, it is written by the middle managers. It breaks a strategic plan into smaller steps and should be achieved within one year. E.g. The Irish company opening their first outlet in the UK. Ms Marshall

14. 2010 Sample Answer (B) Analyse the contributions that strategic and tactical planning can make to the successful management of a business. Use examples in your answer. (20 marks – 2@10m, 4+3+3) Strategic planning is a major plan, made by top management. They take the mission and break it up into major plans of action to be achieved within 5 years. • A strategic plan clearly defines the purpose of the business and establishes realistic goals that are consistent with that of the mission statement of the business. • Strategic plans help businesses to identify opportunities which may lead to increased market share and new markets. • E.g. AerLingus Mission: To become the biggest airline in the world. Strategic Plan: To control 10% of the US Market in five years time. Ms Marshall

15. 2010 Sample Answer • Tactical planning is short term where the long-term plan is broken down into shorter more manageable short-term objectives. The tactical plan is developed by a management team who deals with getting the work done to carry out the strategic plan. They draw up a tactical plan that will deal with the “now” part of the plan. • Tactical plans outline a set of action items or tactics to help a business achieve a number of key objectives or goals. If these are achieved it helps a business to achieve its long-term goals. • Examples of a tactical plan could be adding a group of new customers in the next year, improving customer service levels through specific tactics, reducing employee turnover, or lowering operational costs. Ms Marshall

16. Requires realistic analysis - Identifies weaknesses Future Orientated Advantages of Planning Motivates employees and management Essential to raise capital Reduces Uncertainty Ms Marshall

17. Advantages of Planning • Future Orientated: the managers anticipate problems and take the necessary steps to deal with those problems. E.g. bt preparing a manpower plan you can avoid be understaffed for a busy time of year. • Requires Realistic Analysis: a SWOT analysis identifies the weaknesses of a business, i.e. the internal factors that are a disadvantage to the business. Once identified these can be improved and overcome. • Motivates Employees and Managers: Plans set out goals for everyone to achieve and deadlines to achieve them by. In many cases there may be a reward for meeting your targets. This motivates all staff. • Reduces Uncertainty: Planning provides clear direction for the business. Those at all levels have a clearer understanding of what is expected by them. • Essential to Raise Capital: the existence of a business plan is essential when applying for loans. Businesses would include a cash flow forecast to prove they could afford the repayments. Ms Marshall

18. Organising • The business needs to get organised to achieve the goals they set out in their plans. This involves organising their resources into the most suitable form by drawing up an organisational structure. • An organisational structure involves splitting all the work to be done and appointing people to be in charge and to achieve the objectives. • The four main types are functional, product, geographic and matrix. Ms Marshall

19. Frequently a short question Functional Staff dept’s provide expert advice to the line dept. e.g. legal team, IT team. Arranged by different jobs Also called a Line Structure CEO Marketing Director Finance Director Production Director Human Resources Director Factory Workers Personnel Assistants Sales Reps Accountants Ms Marshall

20. Functional • Advantages • Clarity: Responsibilities are well defined and so this type of structure is easily understood. • Specialisation: organised by job so each dept becomes an expert. Makes them more efficient. • Accountability: accountability flows upwards. Each director is responsible for each dept. • Disadvantages • Isolation: Each dept operates by itself and may have little interaction with other departments. • Co-ordination: It can be difficult to get all departments working along the same lines. Ms Marshall

21. Product CEO Coke Zero Manager Diet Coke Manager Coke Zero HR Manager Diet Coke HR Manager Diet Coke Production Manager Coke Zero Production Manager Leads to: Duplication Brand Cannibalisation Leads to: Focus on the customer, Intercompany competition (lower costs, improves quality) Based on the product Ms Marshall

22. Geographic CEO UK Manager Germany Manager UK HR Manager UK Finance Manager Germany HR Manager Germany UK Manager Leads to: Better local knowledge, competition between regions (Leading to lower costs) Leads to: Duplication, Conflict between local manager and senior management) Organised by area Ms Marshall

23. Used for temporary inter departmental projects Matrix Frequently a short question CEO Production Dept Sales Dept Finance Dept Production Staff Sales Staff Finance Staff PROJECT TEAM Divided Roles: Employee reports to their team leader for the project and to their normal manager for anything outside the project. Increases costs as people need to be trained to be project leaders Improves employee motivation and relationships between departments Ms Marshall

24. Span of Control • Span of Control: This refers to the number of employees that report directly to a manager. i.e. how many they can effectively supervise. • This can be: • Wide (supervise many employees) • Narrow (only a few) • It depends on: • Managers experience and ability • Employees experience and ability • The type of work • Location of the employees Ms Marshall

25. Chain of Command • Chain of Command: the path on which orders/instructions/decisions are passed down from the top to the bottom of the hierarchy and feedback is passed back up. It also illustrates how many levels of management are involved. • Delayering: the process of stripping away layers of management. It is often an attempt to improve the speed at which information is communicated throughout the business. Ms Marshall

26. 2010 Sample Answer • (C) Discuss the benefits of a functional organisational structure in a business. Refer to the “Chain of command” and “Span of Control” in your answer. (Benefits 2@5, definitions 2@5) • A functional organisational structure organises departments by the type of job to be done. This leads to: • 1) Specialisation: each department concentrates on the same job and so become experts at it. The Span of control refers to the number of employees that report directly to a manager. A wide span of control means they supervise a lot of employee, whereas a narrow span of control means they only supervise a few. Several factors effect this including the experience and ability of the both the managers and employees. Functional organisation allow for specialisation, therefore a wider span of control may be feasible as both manager and employees are experts in their area. • 2) Accountability: the director of each department is responsible for everything that goes on it. The chain of command is the path on which orders/instructions/decisions are passed down from the top to the bottom and feedback is passed back up. In a functional organisation accountability flows upwards and instructions flow downward. Ms Marshall

27. Controlling: Key terms • Controlling Quality Control • Stock Control Physical Inspection • Optimum Level Quality Circles • Buffer Stock ISO 9000 Award • Maximum stock level Sampling • Minimum stock level Credit Control • Re-order point Debtor • Re-order quantity Creditor • Just-in-time Ms Marshall

28. Controlling Stock Control Quality Control Types of Control Credit Control Controlling involves measuring performance by comparing actual outcomes to plans, and taking corrective action if necessary. Ms Marshall

29. Stock Control: Key Terms • Stock Control: the aim of stock control is to make sure that the business has the optimum level of stock in the shop at all times. It is bad for the business if it has too much or too little stock. Too much stock could go out of date before it is sold, too little will lead to a loss in sales and customers. • Maximum Stock Level: the business should never have more than this amount of stock. • Minimum Stock Level: the business should never have less than this amount in stock. • Re-order Level: the point at which the stock has to be re-ordered. This should take into account time for delivery, i.e. the lead time. • Re-order Quantity: the correct amount of stock you should buy each time. • Buffer Stock: a small level of safety stock. Ms Marshall

30. Stock Control: Key Terms • Just-in-Time: the aim of this system is to keep the minimum amount of stock possible in the factory while at the same time never running out of stock. In involves buying from a supplier who delivers exactly the right amount of perfectly made stock at exactly the time when it is going to be used by the business. Materials come into the factory just before they are needed. Use of EDI makes this possible. E.g. Dell use JIT Ms Marshall

31. 2011: Sample Answer • Describe how stock control achieves efficiencies in a business (10 marks: 2+4+4) • Stock Control is concerned with keeping optimum stock levels so that it doesn’t have too much stock or too little stock. Effective stock control means that you have the optimum level of stock in your business. • Optimum stock levels lead to efficiencies because you have the right stock, in the right place, at the right time to meet production requirements and satisfy consumer demand. • Efficiencies (specific examples): • An ISDN (Integrated Services Digital Network) can help you achieve efficiencies by eliminating the costs associated with having too much stock i.e. Obsolescence, Storage costs (Light & Heat, Security, Warehouse space, insurance etc.), Deterioration, Pilferage. • Stock control can achieve efficiencies by eliminating the costs associated with carrying too little stock i.e. production stoppages due to a lack of raw materials and components for production, and lost sales orders because of a lack of finished goods for sale. Ms Marshall

32. Quality Control: Key terms • Definition: involves making sure that the quality of a business’s products meets the expectations of legal requirements and consumers. This can be done through physical inspection, quality circles and ISO 9000 Awards. • Physical Inspection: items are literally examined before being passed as fit to be sold. For specialised products such as Waterford Crystal each piece would have to be examined. For mass produced products like chocolate the inspector uses a method called sampling, examining a percentage of the products. • Quality Circles: this involves the employees spotting quality problems in the factory and coming up with solutions to the problem. A small group volunteer and help to implement solutions that the management agree to. • ISO 9000: this is an internationally recognised award that is given only to businesses that can consistently prove to an independent team of inspectors that their products meet the highest quality standards. Ms Marshall

33. 2011: Sample Answer • Describe how quality control achieves efficiencies in a business (10 marks: 2+4+4) • Definition:involves making sure that the quality of a business’s products meets the expectations of legal requirements and consumers. This can be done through physical inspection, quality circles and ISO 9000 Awards. • The ISO 9000 symbol is recognised worldwide and would be of huge benefit to the business in marketing its products internationally. • Efficiencies: • Effective Quality control leads to efficiencies in business because it minimises the costs associated with selling faulty goods to consumers e.g. Administrative costs associated with the return of goods. Loss of reputation and the ensuing lost sales. Lost productivity due to time spent dealing with complaints. • Effective Quality control leads to efficiencies in business because consistently high quality products are being sold, resulting in repeat purchasing, consumer loyalty and the ability to charge higher prices, as the business may become the market leader. Ms Marshall

34. Credit Control • Credit Control: the aim of credit control is to make sure that all customers pay their bills in full and on time. It seeks to eliminate bad debts and to make late paying customers pay their bills now. The business should have an established procedure for dealing with customers who wont pay. • For effective credit control a business should • 1) Set a limit for overall credit given • 2) Vet each customer. Do a credit check and ask for a bank reference and a trade reference. The Irish Credit Bureau would have information on loan repayments. • 3) Send out bills immediately. Offer discounts to those who pay early. • 4) Have an established procedure for dealing with customers who wont pay. Ms Marshall

35. 2008: Sample Answer • Evaluate the contributions that credit control makes to the successful management of a business. Use examples in your answer. 10 marks: 5+5 (2+3) • The aim of credit control is to make sure that all customers pay their bills in full and on time. It seeks to eliminate bad debts and to make late paying customers pay their bills now. The business should have an established procedure for dealing with customers who wont pay. • Therefore the contributions it makes include: • Improved cash flow: credit control ensures that the business receives its money in time to pay its own bills. This will ensure they do not go bankrupt or become over-dependent on bank overdrafts. It will also allow them to avail of trade discounts offered to them by their own suppliers. • Reduces costs: Expenses are reduced as bad debts decrease, this increases the profit of the business. Ms Marshall

36. Test Preparation Question • You will be asked one of the two following exam questions next Thursday: • 1) A) What is meant by the term SWOT Analysis? (ii) Conduct a SWOT analysis on a business of your choice. (20 marks) B) (i) Explain the term ‘span of control’ (6 marks) and outline two factors that affect the width of the span of control (4 marks)(ii) Draft and label a matrix organisation structure (10 marks)C) Describe how quality control and stock control achieve efficiencies in business (20 marks). Ms Marshall

37. Test Preparation Question • 2) A) Analyse the contributions that strategic and tactical planning can make to the successful management of a business. Use examples in your answer. (20 marks) • B) Discuss the benefits of a functional organisational structure in a business. Refer to chain of command and span of control in your answer (20 marks). • C) Evaluate the contributions that credit control makes to the successful management of a business. Use examples in your answer (10 marks). • (ii) Draft and label a functional organisation structure. (10 marks). Ms Marshall