98719 Bus Man 2015 - Manual · 98719BusMan2015-Manual.indb 4 13/07/2015 15:04. TableofContents v BusinessManagement CHAPTER6: ... BusinessEthics,CSRandCorporateGovernance ...

Business

Management

Course Text

Professional, Practical, Proven

www.AccountingTechniciansIreland.ie

98719 Bus Man 2015 - Manual.indb 1 13/07/2015 15:04


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Table of Contents

FOREWORD ..........................................................................................................................vii

SYLLABUS: BUSINESS MANAGEMENT ...........................................................................xiii

CHAPTER 1: FUNCTIONAL AREAS OF BUSINESS.............................................................1

1.1 WHAT IS A BUSINESS? .............................................................................................................2

1.2 DIFFERENT TYPES OF BUSINESS ..........................................................................................2

1.3 FUNCTIONALAREAS OF BUSINESS .......................................................................................4

CHAPTER 2: THE HUMAN RESOURCE FUNCTION ..........................................................13

2.1 HUMAN RESOURCE MANAGEMENT DEFINED ....................................................................14

2.2 ACTIVITY AREAS IN HUMAN RESOURCE MANAGEMENT .................................................152.2.1 Human Resource Planning .........................................................................................152.2.2 Recruitment/Downsizing & Selection .........................................................................162.2.3 Employee Induction, training and development ..........................................................212.2.4 Performance Appraisal ...............................................................................................23

2.3 THE ROLE OF TEAMWORK WITHIN THE ORGANISATION..................................................252.3.1 Types of Groups and Teams .......................................................................................272.3.2 Belbin’s Team Roles....................................................................................................28

2.4 MANAGING CHANGE AND INNOVATION...............................................................................292.4.1 Innovation ...................................................................................................................33

CHAPTER 3: INTRODUCTION TO MARKETING.................................................................37

3.1 STAGES IN THE EVOLUTION OF MARKETING.....................................................................38

3.2 MARKETING-ORIENTATED ORGANISATION.........................................................................39


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3.3 MARKETING MANAGEMENT: THE STP PROCESS...............................................................403.3.1 Market Segmentation..................................................................................................403.3.2 Market Targeting .........................................................................................................423.3.3 Market Positioning ......................................................................................................443.3.4 Ansoff’s matrix ............................................................................................................46

CHAPTER 4: MARKETING IN BUSINESS ...........................................................................49

4.1 THE SERVICE ORGANISATION..............................................................................................50

4.2 ELEMENTS OF THE MARKETING MIX...................................................................................50

4.3 PRODUCT.................................................................................................................................514.3.1 The Product Life Cycle................................................................................................51

4.4 BRANDING ..............................................................................................................................524.4.1 Developing New Products...........................................................................................53

4.5 FACTORS AFFECTING PRICING DECISIONS .......................................................................56

4.6 SERVICES MARKETING..........................................................................................................60

4.7 THE SALES FUNCTION...........................................................................................................62

4.8 THE NATURE & ROLE OF SALES MANAGEMENT................................................................63

4.9 FUNCTIONS OF SALES MANAGEMENT ...............................................................................63

4.10 THE ROLE OF MARKETING COMMUNICATIONS..................................................................64

4.11 ADVERTISING..........................................................................................................................64

4.12 THE ADVERTISING AGENCY..................................................................................................67

4.13 SALES PROMOTIONS .............................................................................................................68

4.14 PUBLICITY/PUBLIC RELATIONS ............................................................................................69

4.15 SELLING AND SALES MANAGEMENT ..................................................................................70

4.16 DIRECT MARKETING ..............................................................................................................71

4.17 DIGITAL MARKETING ..............................................................................................................724.17.1 How digital marketing helps business.........................................................................73

CHAPTER 5: THE IT FUNCTION - SECURITY & THE CLOUD...........................................77

5.1 SOME INFORMATION TECHNOLOGY TERMINOLOGY ........................................................78

5.2 E-COMMERCE & E-BUSINESS ...............................................................................................795.2.1 Advantages and Disadvantages of e-Commerce.............................................................81

5.3 ISSUES IN COMPUTER SECURITY........................................................................................815.3.1 Risks & Threats...........................................................................................................825.3.2 Security Controls.........................................................................................................855.3.3 Risk vs Reward ...........................................................................................................865.3.4 Contingency Planning .................................................................................................875.3.5 Back-Ups ....................................................................................................................875.3.6 Some Security “Good Practice” ..................................................................................88

5.4 THE IMPACT OF CLOUD COMPUTING .................................................................................885.4.1 What is ‘the Cloud’? ....................................................................................................885.4.2 Common Cloud Usage................................................................................................895.4.3 Advantages of Cloud Computing ................................................................................905.4.4 Disadvantages of Cloud Computing ...........................................................................90


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CHAPTER 6: INTRODUCTION TO MANAGEMENT THEORY ............................................93

6.1 MANAGEMENT DEFINED........................................................................................................94

6.2 THE EVOLUTION OF MANAGEMENT THEORIES .................................................................966.2.1 Classical School..........................................................................................................976.2.2 Human Relations School ..........................................................................................1006.2.3 Systems Models........................................................................................................1026.2.4 Modern Management Theories.................................................................................102

6.3 CONTEMPORARY MODELS OF MANAGEMENT THEORY AND ROLE OFMANAGEMENT.......................................................................................................................103

6.4 MANAGEMENT ROLE AND THE SKILLS REQUIRED TO BE ANEFFECTIVE MANAGER ........................................................................................................104

6.5 DYNAMIC BUSINESS ENVIRONMENT.................................................................................1056.5.1 The Micro-Environment.............................................................................................106

6.6 THE SWOT ANALYSIS ...........................................................................................................107

6.7 FRAMEWORK FOR MANAGING THE DYNAMIC ENVIRONMENT......................................109

6.8 ENVIRONMENTAL SCANNING..............................................................................................109

6.9 MODERN BUSINESS CHALLENGES.................................................................................... 1116.9.1 Corporate Social Responsibility (CSR) .................................................................... 1116.9.2 Environmental Concerns........................................................................................... 1126.9.3 Volatile Markets......................................................................................................... 112

CHAPTER 7: PLANNING, ORGANISING & CONTROL..................................................... 115

7.1 PLANNING DEFINED .............................................................................................................116

7.2 BENEFITS AND LIMITATIONS OF THE PLANNING PROCESS ........................................... 116

7.3 HIERARCHY OF PLANS ........................................................................................................117

7.4 STRATEGIC PLANNING DEFINED........................................................................................ 118

7.5 THE PLANNING PROCESS ...................................................................................................118

7.6 ORGANISATIONAL STRUCTURE DEFINED.........................................................................124

7.7 ORGANISATIONAL STRUCTURE .........................................................................................124

7.8 CENTRALISED STRUCTURES ............................................................................................126

7.9 DECENTRALISED STRUCTURES ........................................................................................126

7.10 FORMS OF DEPARTMENTALISATION..................................................................................127

7.11 NEW FORMS OF ORGANISATIONAL DESIGN.....................................................................1307.11.1 Network organisation ................................................................................................1307.11.2 High performance organisation.................................................................................131

7.12 ORGANISATIONAL CONTROL DEFINED .............................................................................1317.12.1 Approaches & Types of Control ................................................................................1327.12.2 The Control Process .................................................................................................133

7.13 QUALITIES OF AN EFFECTIVE CONTROL SYSTEM...........................................................134

CHAPTER 8: LEADERSHIP & MOTIVATION .....................................................................139

8.1 LEADERSHIP DEFINED.........................................................................................................140

8.2 ORGANISATIONAL LEADERSHIP.........................................................................................140


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8.3 SKILLS OF EFFECTIVE LEADERS .......................................................................................141

8.4 DIFFERENT TYPES OF LEADERSHIP APPROACHES........................................................1418.4.1 The Trait Approach....................................................................................................1428.4.2 The Behavioural Approach........................................................................................1438.4.3 The Contingency Approach.......................................................................................1448.4.4 The Charismatic Approach........................................................................................1458.4.5 The Situational Approach..........................................................................................146

8.5 LEADERSHIP AND THE USE OF POWER............................................................................147

8.6 MOTIVATION THEORIES .......................................................................................................1488.6.1 Content Theories ......................................................................................................1488.6.2 Process Theories ......................................................................................................152

8.7 HOW TO MANAGE COMMUNICATIONS...............................................................................1568.7.1 How Does the Communication Process Work? ........................................................1568.7.2 What Barriers Keep Communication from Being Effective? ...................................1588.7.3 How Can Managers Overcome Communication Barriers? .......................................159

CHAPTER 9: MANAGEMENT ENVIRONMENT; INTEGRATIVE MANAGERIAL ISSUES 163

9.1 THE IMPORTANCE OF THE EXTERNAL ENVIRONMENT...................................................164

9.2 THE IMPACT OF THE EXTERNAL ENVIRONMENT ON MANAGEMENT ............................165

9.3 FACTORS THAT ARE RESHAPING AND REDEFINING MANAGEMENT.............................168

9.4 IMPACT OF GLOBALISATION ON ORGANISATIONS ..........................................................169

9.5 SOCIETY’S EXPECTATIONS OF BUSINESS .......................................................................171

9.6 THE CHANGING WORKFORCE............................................................................................172

CHAPTER 10: SOCIAL RESPONSIBILITY & MANAGERIAL ETHICS .............................177

10.1 SHOULD ORGANISATIONS BE SOCIALLY INVOLVED? .....................................................178

10.2 GREEN MANAGEMENT AND SUSTAINABILITY...................................................................179

10.3 MANAGERS AND ETHICAL BEHAVIOUR .............................................................................180

10.4 ENCOURAGING ETHICAL BEHAVIOUR ...............................................................................183

10.5 SOCIAL RESPONSIBILITY AND ETHICS ISSUES IN TODAY’S WORLD.............................185

CHAPTER 11: CORPORATE GOVERNANCE....................................................................189

11.1 THE GROWING IMPORTANCE OF CORPORATE GOVERNANCE .....................................190

11.2 THE GOVERNANCE CHAIN ..................................................................................................190

11.3 ISSUES IN GOVERNANCE....................................................................................................191

INDEX...................................................................................................................................197


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FOREWORD

Foreword

This text has been developed byAccounting Technicians Ireland for use by students participating inour programme of study and preparing for our examinations based on the new syllabus publishedfor the Academic Year 2015-2016.

While every effort is made to ensure that the information outlined in this text is accurate, AccountingTechnicians Ireland cannot accept the responsibility for lack of, or perceived lack of, informationcontained herein.

The text is intended to be a sufficiently detailed synopsis of the 2015-2016 syllabus material (andknowledge level required thereof) in relation to this module.

Students should take particular note of the weighting attaching to this module, as clearly outlined in thesyllabus. It is on the basis of this weighting that students should prepare their own timetable for study.

This text also includes questions related to the topics for this module. These questions are part of alarger database of questions that students (and also Lecturers) can access online for this subject. Thesequestions (and suggested solutions) are available through your “TouchPoint” portal in the MyRevisionarea.

We recommend that students refer to MyRevision having completed each chapter or a section of thismodule. This resource allows students to study and revise online through ‘self-test’ questions. Examstandard questions are also available here.

We also recommend students refer to the past exam papers for this module. These papers are publishedon our website (www.AccountingTechniciansIreland.ie) along with suggested solutions and commentsfrom the Examiner. Attempting these “under exam conditions” will help students to prepare for theexamination and plan their study time appropriately.


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Referencing

For the purposes of consistency, all references to “he” or “she” will be referred to as “he” in thispublication. No other implication whatsoever is implied from this policy.

For the purposes of presentation, all references to “euro” or “sterling” will be referred to as “euro” isthis publication. No other implication whatsoever is implied from this policy.

Acknowledgement

This text was reviewed and edited by Ms. Ann Masterson. Ann is a Senior Lecturer at Dublin BusinessSchool.

Copyright

This text is issued by Accounting Technicians Ireland to students taking its examinations. It may notbe used in whole, or in part, for any course of study and/or examination of any other body whatsoeverwithout prior permission in writing from Accounting Technicians Ireland. This publication, or any partthereof, may not be made available in any library, and it may not be reproduced, in whole or in part,stored in a retrieval system or transmitted in any form or by any means – photocopying, electronic,electrostatic, magnetic, pdf, mechanical, recording or otherwise, without prior permission in writingfrom Accounting Technicians Ireland, 47-49 Pearse Street, Dublin 2.


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SYLLABUS: BUSINESS MANAGEMENT

Module: Business ManagementMandatory Module

SYLLABUS 2015-2016


Syllabus 2015-2016 : Mandatory Module

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Business Management

Business Management

Subject Status Mandatory

Terminal Exam 100%

Module Pass Mark 50%

Learning Modes Direct Lectures, Workshops, Online Tutorials, Self-Directed Learning

Pre-requisite: None.

Key Learning Outcome

The key outcome of this module is to provide learners with knowledge and understanding of thecore business functions, the roles and practices of the modern manager (including the essentials ofMarketing and Information Technology) as well as an appreciation of the key managerial concerns incorporate governance, ethics and corporate social responsibility.

Key Syllabus Elements and Weightings

1. Business Functions & Context ................................................................................................35%

2. Management ...........................................................................................................................30%

3. Business ethics, CSR and Corporate Governance .................................................................35%



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Learning Outcomes linked to Syllabus Elements

Business Functions & Context ............................................................................................... (35%)

On completion of this aspect of the module, students will have acquired the following knowledge,competencies and know-how:-

(a) An basic understanding of the concerns and contribution of each of the principal function areasof business

(b) An understanding of managing Human resources and team dynamics,

(c) An understanding of the management of change and innovation.

(d) An understanding of introductory marketing concepts which are central to the function ofmarketing.

(e) An appreciation of the key elements in planning, managing and executing the services marketingmix

(f) An understanding of the importance of thorough security measures to protect InformationSystems and the data that they store.

(g) An appreciation of the benefits and challenges associated with using Cloud technologies in abusiness environment.

Management.............................................................................................................................. (30%)


(a) An understanding of the fundamental principles and theories upon which management is based.

(b) An understanding of the role of planning, control and organization within business.

(c) An understanding of leadership and motivation techniques and their application in businesssituations.

(d) An understanding of managing communications

(e) A knowledge of the impact that the external environment has on business

(f) An ability to utilise common business analysis techniques (e.g. SWOT; PEST)

Business Ethics, CSR and Corporate Governance............................................................... (35%)


(a) An appreciation of the modern environment in which managers work today.

(b) An understanding of business ethics and corporate social responsibility.

(c) An understanding of the importance of corporate governance.



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Business Management

MODULE: Business Management

Specific Functional Knowledge andCompetencies

Understanding Application Analysis

BUSINESS FUNCTIONS & CONTEXT (35%)

Functional Areas of Business

Finance l

Operations l

Human Resources l

Marketing l

Information Technology (IT) l

The Human Resource Function

Recruitment & Selection l l

Employee Induction, Training & Development l l

Performance Appraisal l l

The role of Groups & Teams in the workplace l l

Managing Change and Innovation l l

Introduction to Marketing

The concept and evolution of marketing l l

The marketing concept l l

Marketing in Business

The Service Organisation l

The product/services marketing mix l l

The sales function l

The role of Marketing Communications l

IT Security issues

Intentional and Unintentional Threats l

Types of Security Controls l l

Contingency Planning l l



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Business and the Cloud

Cloud Technologies (Benefits & Challenges) l

MANAGEMENT (30%)

Introduction to Management Theory

Who managers are and where they work l

Definitions of Management l

The evolution of management theory l l

Contemporary models of management theory l l

The dynamic business environment l

The role of the manager l l

Skills affecting managerial effectiveness l l

Business Analysis Tools - SWOT and PESTLEanalysis

l l

The interrelated functions of management:planning, organising, staffing, leading andcontrolling.

l l

Planning, Control & Organising

The process & role of planning l l

The role of MBOs l

Components of Organisational Structures l l

Types of Organisational Design l l

Leadership

Leaders & Managers l

Theories of Motivation l l

Key skills of effective leaders l l

Types of leadership behaviour l l l

Leadership and power l l

Managing Communications l l



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BUSINESS ETHICS, CSR & CORPORATE GOVERNANCE (35%)

Management Environment; Integrative Managerial Issues

Factors that are reshaping and redefiningmanagement

l l

Impact of Globalisation on organisations l l

Society’s expectation of Business l l

The changing workforce l l

Social responsibility & Business Ethics

Should Organisations be socially involved? l

Green management l l

Factors that determine ethical/unethicalbehaviour

l

Encouraging Ethical Behaviour l l

Social Responsibility and Ethics Issuesin Today’s World

l l

Corporate Governance

The importance of Corporate Governance inmodern business

l

The Governance chain l

Key issues in Governance today l



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Business Management

Assessment Criteria

AssessmentTechniques

100% Assessment based on the final examination.

Format ofExamination Paper

The Paper Consists of Questions which will examine all key syllabuselements to ensure that learning outcomes are achieved

The exam paper will contain three sections with two questions ineach section (i.e. 6 questions in total). Candidates must answer FOURquestions in total.

Section A will contain TWO questions covering the ‘Business Functions inContext’ section. Candidates must answer at least one question from thissection.

Section B will contain TWO questions covering the ‘Management’ section.Candidates must answer at least one question from this section

Section C will contain TWO questions covering the ‘Business Ethics, CSR& Corporate Governance’ section. Candidates must answer at least onequestion from this section.

In addition, candidates must answer one other question, which can be fromany section.

Sample paper Each of the 3 sample papers will examine appropriate parts of this syllabus.

Essential Reading Business Management (Republic of Ireland)

Author: Accounting Technicians Ireland

RecommendedReading

Web Resources www.AccountingTechniciansIreland.ie

Other Resources Business and Finance

Irish Times Business Section (Fridays)

Sunday Business Post


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CHAPTER 1: FUNCTIONALAREAS OF BUSINESS

CHAPTER 1

Functional Areas of Business

LEARNING OUTCOMES

Upon completion of this chapter, you should be able to:

1. Understand what constitutes a business.

2. Identify the core functions of business.

3. Understand the principle roles each of the core functions of business play including; Finance,Operations, HR, Marketing & IT.

REVISION RESOURCES

EXAM QUESTIONS: Sample and Past Papers are available from the website of AccountingTechnicians Ireland and are essential aids when studying Business Management topics.


Chapter 1 : Functional Areas of Business

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1.1 WHAT IS A BUSINESS?

A business is a profit-seeking activity that provides products and services to satisfy the needs, wantsand demands of consumers. It is defined as:

“…any activity that provides goods or services to consumers for the purpose of makinga profit.” (Capon, 2004)

While the driving force behind most businesses is the opportunity to earn a profit, society also benefits interms of the generation of wealth and the provision of goods and services to consumers. Not all businessoperates for profit; non-profit and voluntary organisations play an important role in society today.

1.2 DIFFERENT TYPES OF BUSINESS

Businesses can be classified in a variety of ways, including:

• Profit and Non-Profit Organisations

• Manufacturing and Service Organisations.

Profit and Non-Profit Organisations

As noted, private businesses are usually established to earn profits for their owners. In seeking profits,private businesses provide valuable employment as well as generate wealth. Most private businessesare small; it is estimated that approximately four out of five industrial enterprises employ less than 50people. These firms employ about 50,000 people, just over one fifth of total industrial employment. Thevast majority of small industrial firms are Irish-owned (95%) compared to almost 42% of larger firmswhich are foreign-owned. Larger enterprises (50 or more persons) employ the majority of workers andgenerate over 90% of the total turnover in Industry.

Regardless of size, business generates important wealth in Ireland. While in the past agriculture wasthe main driver of the economy, today it is overseas investment in Ireland that provides employment.There are over 1,000 multinational companies (MNC) operating in Ireland directly employing over130,000 people, many of which are involved in manufacturing. Attracted to Ireland initially due to thelow corporate tax, the pro-business environment and highly educated workforce, MNC have expandedoperations here. Aside from employment, their contribution is immense to the Irish economy. ForeignMNC account for 50 per cent of all manufacturing employment in Ireland, roughly two thirds of net outputand 80 percent of Irish manufacturing exports. Over 50 per cent of total tax revenue is generated byMNC. The US is the largest sources of foreign direct investment in Ireland with US MNCs accountingfor about 70 per cent of total industrial exports. For US MNC in particular Ireland is the most profitablelocation in the world.

Non-profit and voluntary organisations engage in public or private interest without any (or at leastminimal) commercial or monetary gain. The public sector in Ireland, employing close to 300,000 people(and declining), has an important remit to provide services and goods to the community at large; equally,many voluntary organisations, as for example sports bodies, make an immense contribution to the fabricof social life in Ireland, as well providing a source of much needed employment. There are an estimated12,000 voluntary organisations in Ireland, with a combined income of close to e6bn, and employingover 100,000 people. The largest voluntary organisation in Ireland—the Rehab Group—employs more



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than 3,500 people (see http://www.rehab.ie). While 98 other non-profit organisations employ over 100people, the majority of non profit organisations employ fewer than five people.

Manufacturing and Services Organisations

Asnoted, asecondclassificationof businesses isbetweenmanufacturingandservices.Thedistinguishingfeature of manufacturing is the produce of tangible items such as an automobile, television or computer,and, relative to services, they are more likely to be capital intensive. They operate in such sectors inIreland as themedical devices, software and electronics sectors, and provide important employment. Themanufacturing sector is of huge importance to Ireland; total full-time employment in the manufacturingsector, while decreasing in recent years, is about 170,000 jobs.

Services organisations, in contrast, provide intangible services. Examples of such sectors includefinance, insurance, tourism, hospitality, education and health. Services is the fastest growing sector inIreland. Full-time employment in the services sectors (excluding the public sector) is about 95,000. Theshare of employment in the service sector of the economy, relative to manufacturing, has increased inrecent years. Employment in manufacturing by contrast has declined in recent years owning in manyways to developments in labour savings technology, as well as in outsourcing. In Ireland employmentin the health and education sectors has grown (both public and private); similarly the hospitality sector(incorporating tourism as well as elements of the bar and restaurant sectors) is a growth sector providingmuch needed employment in areas which lack industry.

Despite such categorisations, it is important to understand that the distinction between the serviceand manufacturing sectors has blurred over recent years. For example, manufacturing firms areincreasingly providing services, as services organisations utilize the practices of manufacturing suchas lean manufacturing. There is also a growing number of workers in the manufacturing sector that areengaged in ‘service-related’ activities; according to a recent Forfas report over 30 percent of workers inthe manufacturing sector are already engaged in services-related activities.

Similarly, the distinction between profit and non-profit organisations is not that clear-cut. State agenciescan engage in profit seeking activities, particularly as they begin to charge more and more for publicservices. Rather than continuously seeking profits, private firms can engage in important philanthropicaland charitable work. As we will learn later, many organisations, among them Dell and Microsoft haveimportant philantrophical divisions that make important contributions to society. The advent of corporatesocial responsibility (dealt later in this chapter) has meant that organisations consider more than profitin dealing with a variety of issues, from ethical to environmental concerns.



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1.3 FUNCTIONAL AREAS OF BUSINESS

As depicted in the following diagram, a senior management team, headed by the Chief Executive Officer,oversees middle management managers in functional areas. Senior management report directly to theBoard of Directors.

Senior Management

MarketingHuman

ResourcesOperations IT Finance

Middle management can be divided into a number of functions, from design to marketing. The mostcommon include:

• Finance

• Human Resources

• Marketing

• Information Technology

Each of these is explained next in more detail.

Finance

The management of finance has emerged as increasingly important to any organisation today,particularly those involved in international trade. Currency fluctuations, among other things, have hugefinancial implications in both the short term and the long term. Decisions made and activities plannedare meaningless without the necessary finance to carry them through. The finance function is concernedwith not only ensuring the adequate supply of funds for organisational activities but also reporting theresults and putting in place procedures to evaluate and examine performance over selected periods.

Cash-flow plays a vital role in any organisation. Managed well, a company remains healthy and strong.Managed poorly, a company will experience problems. It is important therefore for any organisation topay considerable attention to financial management.

Financial Management is themanagement of finance in order for an organisation to achieve its objectives.The objectives of a company are many but typically for a private sector organisation would include profit,growth and increased sales. In terms of the financial function, the objectives are usually to generatecash and thus create wealth for the organisation, as well as provide a return on shareholder investment.Financial management deals with planning and control, as well as decision-making. Good financialmanagement ensures organisation has an adequate supply of money, and that the organisation spendsits money appropriately and wisely, as well as ensuring that financial resources are in place for thefuture.



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Business Management

Financial management is mistakenly confused with accounting. Financial management is amanagementactivity whereas accounting is a service activity. As a service activity, accounting processes andinterprets information either to those inside an organisation (management accounting) or outside anorganisation (financial accounting). In contrast, financial management, as its name suggests, deals withthe management of an organisation’s finances.

Financial management refers to how businesses raise, use and monitor funds. It involves the processesof planning, organising and controlling the business’s financial position and performance. In today’svolatile economic environment, effective management of the financial position of an organisationbecomes even more critical. The finance function can facilitate the formation of an overall view of anorganisation and can assist management in dealing with organisational problems as well as preparingfor the future.

Financial Management is themanagement of finance in order for an organisation to achieve its objectives.The objectives of a company are many but typically for a private sector organisation would include profit,growth and increased sales. In terms of the financial function, the objectives are usually to generatecash and thus create wealth for the organisation, as well as provide a return on shareholder investment.Financial management deals with planning and control, as well as decision-making. Good financialmanagement ensures organisation has an adequate supply of money, and that the organisation spendsits money appropriately and wisely, as well as ensuring that financial resources are in place for thefuture.

The key tasks that are undertaken by the finance function are:

1. Raising capital by means of equity, long-term debt and short-term debt project evaluation. Theorganisation will evaluate the various sources of finance that are available to it.

2. Preparation of reports and internal management accounts. Examples of these would be cash-flowstatements, profit and loss accounts, balance sheets. The finance function will then interpret thereports to evaluate the financial position of the company.

3. Preparation of realistic budgets for the organisation and development of an effective costing strategy.

4. Monitoring and controlling finances of the organisation. Once the financial plans are in place, thefinance department must ensure that they remain on course. Finance staff should provide informationon profitability and cash-flows to the other departments of the organisation.

The finance function can be divided into two decision types:

1. Strategic decisions linking the organisation and its environment. These tend to be long term.

2. Operating decisions governing internal resource allocation. These tend to be short-term and range



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Operations

12 Key components of Operations Management

LocationProduct

developmentForecasting

Layout offacilities

Process andsystem

performance

Inventorymanagement

Materialrequirementsplanning

Just in time

Quality Scheduling Purchasing Maintenance

Operations Management ; An overview (Capon, 2004)

1. Location strategies:

Locations strategies can take the form of; product-based location, market-based location or vertically-differentiated location.

2. Product development process

Generation ofideas

Evaluation ofideas

Designdevelopmentand prototype

Commercialevaluation

Productlaunch

Final stagesof product

development

(Capon, 2004)

The first step in the product development process is the Generation of ideas, this stage relies on anumber of sources of ideas for new products or services

The second step isEvaluation.This stage is needed to filter out ideas with deficiencies and weaknesses.It includes a Technical evaluation: asking questions such as;

– can the product be made?

– any patent problems?

– will competitors or technology render feasible ideas obsolete?



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Business Management

You will then develop a prototype and conduct a commercial evaluation; Undertake a market andfinancial evaluation (Will the product make a profit?). Use the information from technical, market andfinancial evaluation to turn the prototype into a final product and finally launch the product on to themarketplace.

3. Forecasting

There are two categories of forecasting; Quantitative and Qualitative;

• Quantitative forecasting requires access to historical data

• Qualitative forecasting can be done by: personal insight, panel consensus, market survey, historicalanalogy, and the Delphi method

4. Layout of facilities

Layout resources to ensure smooth and efficient work flow. There are 4 different types of layouts tochoose from; Process layout, Product layout, Hybrid layout and Fixed position layout.

5. Process and system performance

Performance can be measured by examining: capacity; utilisation and productivity; efficiency andeffectiveness & process flow charts

6. Inventory Management

Inventory/Stock control and management can be a manual or computerised Information system.

7. Materials requirements planning (MRP)

MRP is a dependent inventory system and relies on production plans to determine and manage stocklevels

8. Just in time (JIT)

JIT is a dependent demand system which matches stock available exactly with demand for stock. Thestock arrives just as it is needed

9. Quality

Quality is the ability of a product to meet and, preferably, exceed customer expectations. Total QualityManagement (TQM) involves the whole organisation working towards zero defects

10. Scheduling

Scheduling is used to make sure utilisation of labour and equipment is optimal. It helps to achieve lowcosts and high utilisation. There are different types of schedules that exist: first come, first served; fixedschedule system and appointment system.

11. Purchasing

Purchasing can be: centralised; decentralised or a combination of centralised and decentralised.



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12. Maintenance

Planned maintenance aims to reduce the frequency and impact of failures. Unplanned maintenancedeals with breakdowns as they occur

Human Resources

Boddy (2008) defines HRM simply as ‘the effective use of human resources in order to enhanceorganisational performance.’ Dessler (2013) provides a more comprehensive definition, as follows:

‘The policies and practices involved in carrying out the “people” or human resourceaspects of a management position, including recruiting, screening, training, rewarding,and appraising’.

The quality of an organisation is determined by the quality of people it employs. Staffing and humanresources management decisions and methods are critical to ensuring that the organisation hires andkeeps the right personnel. In many organisations, specialists do human resources management (HRM)activities. In other cases, HRM activities may be outsourced to companies like HR Tech. Many smallbusiness managers must do their own hiring without the assistance of HRM specialists. Managers inlarger organisations are frequently involved in HRM activities (e.g., recruiting candidates, reviewingapplication forms, interviewing applicants, inducting new employees, making decisions about employeetraining, providing career advice to employees, evaluating employees’ performance, etc.).

Figure 1-1 introduces the key components of the human resources management process.

Fig. 1-1 The Human Resource Management Process

Restructuring

Downsizing

Environment

Unions

Legislation

Diversity

WorkPr

ocess

Safetyandhealth

Adapted andcompetent

employees withup-to-date skills,knowledge, and

abilities

Competent and high-performing employeeswho are capable ofsustaining high

performance over thelong term

Identificationand selectionof competentemployeesCompensation

andbenefits

Performancemanagement

Trainingand

development

Orientation

Selection

Recruitmentand

downsizing

Strategichumanresourceplanning

(Robbins et al, 2014)



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Business Management

It represents eight activities, or steps, that if properly executed, will staff an organisation with competent,high-performing employees.

The first three steps represent employment planning, the addition of staff through recruitment andthe reduction in staff through downsizing, and selection. Executed properly, these steps lead to theidentification and selection of competent employees. They are important to assist organisations inachieving their strategic directions.

Orientation and training and development assist people in adaptation to the organisation and ensurethat their job skills and knowledge are kept current.

Finally, the HRMprocess helps to identify performance goals, correct performance problems if necessary,and help employees sustain a high level of performance (e.g., performance appraisal, compensationand benefits, and safety and health).

Marketing

How organisations sell products is as important as how they produce them. But marketing today is morethan just selling the products or services. Instead it involves managing the entire customer relationshipin an environment increasingly dominated by technology and uncertainty.

Marketing has traditionally been viewed as simply advertising and/or selling—often referred to as “tellingand selling”. An organisation simply placed an advertisement and customers bought products. Morerecently, marketing has achieved a new importance. With increasing competition, along with demandingcustomers, organisations need new ways of reaching out to customers. Technology in the form of theinternet, along with more recently the development of social networking sites such as Facebook, hasfacilitated considerable change in marketing. Finally, as markets reached saturation level, organisationsneed to develop new ways of ‘encouraging’ customers to buy products.

Marketing is now a multi-stage process. In the first instance, marketing is used to identify the customer,then it must satisfy the needs (or perceived needs) of the customer, and finally, it must endeavour to keepthe customer. Hence Kotler (2011) defines marketing as identifying, anticipating and satisfying customerrequirements profitably. From a corporate perspective it is the process of achieving organisational goalsthrough meeting and exceeding customer needs better than the competition. Hence Rogan’s (2011)point that ‘marketing is based on understanding the needs of customers and serving those needs,competitively, at a profit’. He further argues that the new century has presented new opportunities andthreats for organisations and those organisations that maintain close links with customers and marketsare in a better position to take advantage of these opportunities and counteract the threats.

Organisations such as Apple Inc. or Google are examples of this trend; they produce products thatcustomers want, are responsive to their needs, and as a result are very profitable. In Ireland, new start-up companies like DoneDeal have grasped the opportunities that internet shopping offers.

Marketing involves the following key activities:

• Research

• Segmenting customers

• Targeting customers

• Communicating a position that is clearly perceived



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Business Management

• Developing the product

• Pricing the product

• Promoting products to customers

• Distribution/Place

Information Technology

It would be difficult to think of a business role that does not involve the use of computers. Technologyassists in the management of HR, in the finance function, with sales and marketing and just about anyrole in business can be automated to a point. Computers abound in offices and shops, factories andhomes to the point that they are common place today. The government is committed to bringing highspeed broadband to all primary schools in Ireland, and most homes in Ireland are connected to theinternet. In business terms, it is expected that computer technology will become more pervasive andthere is pressure on all organisations to automate more and more processes.

With this is mind, it is critical to have a working knowledge of the uses of both Information Technology (IT)and Information Systems (IS) in a business context. The internet is a growing influence as organisationstoday need both an online and off line presence. Cloud computing and social networking are the latestin a line of technological developments that affect businesses. The financial sector is a clear exampleof change; more and more processes are automated as online banking flourishes, and companies areincreasingly using social networking sites, such as Facebook and Twitter, to reach out to customers.

Information technology provides a valuable source of competitive advantage and allows organisationsto integrate their core functions to create efficiencies and reduce costs. For example, many financialinstitutions use highly complex IT systems to analyse and predict stock market trends and outcomes;similarly the educational sector has moved to embrace online and blended learning.



11

Business Management

PRACTICE QUESTIONS

The following questions will test your knowledge of the material you have just covered in this chapter.

The questions examine the key areas you are expected to know for this particular subject, and will assistyou significantly in your preparation for your examination in May/August. You should also review thequestions available through MyRevision in your TouchPoint portal. In addition, Sample papers for thissubject can be downloaded from www.AccountingTechniciansIreland.ie

Question 1 (ref: 2520)

Define the term ‘Business’ 5 marks

Describe 10 of the 12 components of Operations Management 20 marks

(25 marks)


Outline 4 core functions of a Business 4 marks

Define Human Resource Management (HRM) 5 marks

Decribe the 8 main activites Involved in the HRM process 16 marks

(25 marks)


Outline the 8 key marketing activities in a business 16 marks

Outline the role of the IT function in Business 9 marks

(25 marks)


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