1. Planning - Establishing organizational goals and deciding how to accomplish them

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1 1 : Understanding the Management Process Basic Management Functions 1. Planning - Establishing organizational goals and deciding how to accomplish them SWOT analysis - The identification and evaluation of a firm s Strengths / Weaknesses /Opportunities / Threats Strengths and Weaknesses - Financial, management, location, department - Cost advantages from know-how - Creativity - Valuable intangible assets - Competitive capabilities - Effective recruitment of talented individuals Opportunities and Threats - Expansion - Market trends - Economic conditions - Government / law - Public expectation - Changes in markets Types of plans - Strategic plan - Tactical plan - Operational plan - Contingency 2. Organizing

2 The grouping of resources and activities to accomplish some end result in an efficient and effective manner 3. Leading and motivating - Leading - Motivating - Directing 4. Controlling Evaluating and regulating ongoing activities to ensure that goals are achieved Levels of management - Top manager - Middle manager - First-line manager Styles of Leadership - Autocratic leadership - Participative leadership - Entrepreneurial leadership Total Quality Management customer supplier partnerships 2 : Producing Quality Goods and Services Operation manager

3 Operation manager Operations managers must appreciate the manufacturing process 1. Mass production 2. Analytical process 3. Synthetic process The conversion Process Utility - ability of good or service to satisfy human need Form Utility - utility created by people converting raw materials, finances, and information into finished products Service Economy - Services are consumed immediately and cannot be stored - Services are provided when and where customer desires - Services are usually labor intensive - Services are intangible, market it difficult to evaluate customer satisfaction Planning for Production 1. Research and Development - Basic research - Applied research - Development and implementation Product Extension and Refinement - Product life style - Product refinement - Product extension 2. Design planning- the development of a plan for converting an idea into an actual product or services

4 - Product line - Product design - Capacity - Use of technology 3. Facilities planning the process of determining where products or services are to be produced - Factors influencing the location decision for a production facility - Human resources - Plant layout 4. Operational Planning Step 1: Selecting a planning horizon Step 2: Estimating market demand Step 3: Comparing market demand with capacity Step 4: Adjusting products or services to meet demand Operations Control - Purchasing All the activities involved in obtaining required materials, components, supplies, and parts from other firms - Inventory control The process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stockout costs - Scheduling The process of ensuring that the materials and other resources are at the right place at the right time - Quality control The process of ensuring that goods and services are produced in accordance with specifications

5 3 : Using accounting Information Different types of Accounting - Managerial Accounting - Financial Accounting The Accounting Process - Assets - Liabilities - Owners equity The Balance Sheet - Current assets - Fixed assets - Intangible assets Liabilities - Current liabilities - Long-term liabilities Owners or stockholders equity - Equity - Retained earnings 2. The Income - Gross sales - Net of goods sold

6 Operating expenses - Selling expenses - General expenses Evaluating Financial Statement Using accounting information to evaluate a potential investment Investors often use a firm s financial statement for evaluating potential investment Comparing data with other firm data Financial ratio : number that shows the relationship between two elements of the firm financial statement 1 ) Profitability ratio - Return on sales : indicate how effectively the firm is transforming sales into profit Return on sale = net income (after tax) /net sales - Return on Owner Equity : indicate how much income is generated by each dollar of equity Return on Owner s Equity = net income (after tax) / Owner s Equity - Earning per share : the average income per share for stockholders Earning per share = net income / common stock share outstanding 2) Short term financial ratios - Working Capital : indicate how much would remain if a firm paid off all current liabilities with cash and other current assets Working Capital = Current Assets Current Liabilities

7 - Current Ratio : indicate the ability of the firm to pay short term obligation Current Ratio = Current Assets / Current Liabilities - Acid-Test Ratio : measure of the firm s ability to pay current liability quickly Acid- test ratio = cash + marketable securities + receivable / current liabilities 3) Activity ratio - Account receivable turnover : the number of times the firm collects its account receivable in one year Accounting receivable turnover = net sales / account receivable - Inventory Turnover : the number of time the firm sells its merchandise inventory in one year Inventory Turnover = Cost of goods sold / average inventory - Debt-to-Equity ratio : determine whether the firm has too much debt or not by each of equity Debt-to-equity = total liabilities / total owner s equity Statement of cash flow Statement of the firm s cash receipt and cash payment information on its source and use of cash - Operating Activities - Investing Activities - Finance Activities Topic 4 : Mastering Financial Management Financial Management : all activities concerned with obtaining money and using it effectively

8 The need for Financing - Short term financing : money that will be used for one year or less Cash flow the movement of money into and out of an organization Inventory - speculative production - Long term financing : money that will be used for longer than one year Often involves large amounts of money The need for Financial management Financial management during the economic crisis - Ensure that funds are available when needs and are obtained at lowest possible cost Financial reform after the economic crisis - Hold the firms accountable for their actions The Risk-Return ratio - Based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative often generate lesser returns Financial Planning Financial plan : a plan for obtaning and using the money needed to implement an organization s goals Developing the financial plan : after a financial plan has been developed, it must be monitored continually to ensure that it actually fulfills the firm s goal and objective 1) Establishing organizational goals Goal : an end result that an organization expects to achieve over a one to ten year period 2) Budgeting for financial needs Budget : a financial statement that project income and expenditures over a spescified period

9 Cash budget : projects cash receipt and expenditures over a specified period Capital budget : estimates a firm s expenditures for major assets and its long-term financing need 3) Identifying sources of funds Sales revenue - provide the greatest part of the firm s financing Euquity capital money received from the owners or from the sale pf shares of ownership in the business Debt capital borrowed money obtained through loans Sale of assets if absolutely necessary or when no longer need Source of Short-term debt financing Unsecured financing financing not backed by collateral Trade credit : financing extended by a seller who does not require immediate payment after the delivery of the merchandise Promissory notes : a written pledge by a borrower to pay a certain sum of money to a creditior at a specified future datw Unsecured bank loans - Interest rates vary with each borrowe s credit rating - Prime interest rate = The lowest rate charged by a bank for a short-term loan Commercial paper : Short term promissory note issued by a large corporation Source of secured loans - Loans secured by inventory : inventory is pledged as collateral Control of the inventory passes to the lender until the loan is repaid - Loans secured by receivabies : amount owed to a firm byits customers are pledged as collateral Factoring Accounts Receivable - Factor : A firm that specializes in buying other firm s accounts receivable. The factor buys accounrs receivable for less than their face value

10 Sources of Equity Financing For sole proprietorship or partnerships - Owner or owner invest money in the business For corporations - Sale of stocky - Use of profits not distributed to owners - Venture capital Selling stock - Initial public offering = when a corporation sells common stock to the general public for the first time. - The secondary market = a market for existing financial securities that are traded between investors. Retained earning = the portion of a corporation s profits not distributed to stockholders. Venture capital = money invested in small firms that have the potential to become very successful and extremely profitable. Private placement = stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors. Sources of long-term debt financing Financial leverage = the use of borrowed funds to increase the return on owners equity. Long-term loans = for loans longer than 1 year Corporate bonds = a corporation s written pledge that it will repay a specified amount of money with interest. Maturity date = the date on which a corporation is to repay borrowed money.

11 Topic 5 business in a global setting The basis for international business International business = all business activities that involve exchanges across national boundaries Absolute vs comparative advantage Absolute advantage - The ability to produce a specific product more efficiently than any other nation. - The country maintain only source of particular product. Comparative advantage - The ability of the country to produce a specific product more efficiently than any other product Exporting = selling and shipping raw materials or products to other nations. Importing = purchasing raw materials or products in other nations and bring them into one s own country. Balance of trade = the total value of a nation s exports minus the total value of its imports over some period of time. Trade deficit = a negative balance of trade. Trade surplus = a positive balance of trade. Restrictions to International business

12 - Nations are generally eager to export their products to provide markets for their industries and develop a favorable balance of trade. - Most trade restrictions are applied to import trade restrictions are applied to imports from other nations. Types of trade restrictions Tariff barrier = a tax levied on a particular foreign product entering a country - Revenue tariffs = are imposed to generate income for the government. - Protective tariffs = are imposed to protect a domestic industry from competition by keeping the prices of imports at or above the price of domestic dumping = the exportation of large quantities of a product at a price lower than that of the same product in the home market. Nontariff barriers = nontax measures imposed by a government to favor domestic over foreign suppliers. - Import quota = a limit on the amount of a particular good that may be imported during a given time. - Embargo = a complete halt to trading with a particular nation or in a particular product. - Foreign exchange control = restriction on amount of foreign currency that can be purchased or sold - Currency devaluation = the reduction of the value of a nation s currency relative to the currencies of other countries. - Bureaucratic red tape = subtly imposes unnecessarily burdensome and complex standards and requirements for imported goods. Method of entering international business - Licensing = a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation.

13 - Exporting = selling and shipping raw materials or products to other nations. - Joint ventures = a partnership formed to achieve a specific goal or to operate for a specific period of time. - Totally owned facilities = the company develop and own production marketing facilities in one or more foreign nations. - Strategic alliances = partnerships formed to create competitive advantstrategic alliances = partnerships formed to create competitive advantage on a worldwide basis. - Trading companies = firms that provide a link between buyers and sellers in different countries - Multinational enterprise = a firm that operates on a worldwide scale without ties to any specific nation or region. Members 1. Wannuwat K Pimpika M Ornicha

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