Business Admin Icm

Business
Management and
Administration
An ICM Study Aid
Contents
Section Page
Learning Log 3
Introduction 5
Section 1: The Background to Business Administration 6
Section 2: Features of Organisations 15
Section 3: The Structure of Business Enterprises 25
Section 4: Production 38
Section 5: Purchasing 50
Section 6: Research and Development 59
Section 7: Marketing 65
Section 8: Information Technology 81
Section 9: The Personnel Department (Human Resources) 89
Section 10: The Accounting Function 107
Section 11: Office Administration 114
Trainer Bubble Ltd. 2010

2
Learning Log
Study Aid Page: Key Learning Point:

3
4
Introduction
The Business Management and Administration Unit covers a range of studies to help you
understand people in the workplace. It examines the concept of management within the
global business environment.
The unit prepares students for likely future roles as managers. It will encourage you to use
knowledge and experience gained in other units by considering competing management
perspectives. You will be considering the contributions you might make as an individual
within the management process and to explore your skills as a potential manager. The unit
touches on practical, moral and ethical dimensions of the management role. It also
examines key problems and dilemmas that arise for stakeholders in modern organisations.
This self-study aid acts as an introduction to the subject and will also help with your
revision. However, we recommend that you also use the ICM study book Business
Management and Administration by Geoffrey Whitehead and Graham Whitehall (ISBN 1-
903260-00-0) as this covers the subject in much more detail.
On pages 3 and 4 of this study aid you will find a learning log. You can use this to note key
learning points or points you would like to study further. This will help you when you revise
the subject for your examination.

5
Section 1
The Organisational Background

to Business Administration

6
Business Administration and
Management
It is important to start by ensuring that we understand what we mean by the terms Business
Administration and Management.
Business Administration forms part of the management of a business. It

Administration is the process of organising people and processes efficiently.
Management The term management can be widely interpreted with many

people in an organisation claiming to be in management roles.
However, for the purposes of this course we will concentrate

on top management. The role of top management includes:
Deciding the objectives of the organisation

Deciding how those objectives can be achieved
Devising and maintaining an organisation to meet those
objectives
Providing funds to run the organisation effectively
Top level management acts at a higher level than Business Administration.
In simple terms, top management operates at a strategic and tactical level whilst business
administration is about the day to day running of the organisation.

7
The Board of Directors
Most large organisations are Limited Companies or Public Corporations. They have similar
structures and are led by a board of directors. Here are some of the most common roles.
Chairman of the Board The chairman is the head of the organisation and will need to
be knowledgeable about the company activities and objectives.
The Chairman is often a part time member of the organisation.
Managing Director This is the most powerful member of the board after the
chairman.
The Managing Director is charged by the board to run the firm.

The role involves making sure that the decisions made by the
board are put into practice.
Directors The other Directors on the board will usually be the heads of
important departments. Examples may include:
Director of Marketing
Factory Director
Director of Operations
Director of Finance
These will normally be full time roles. Additional part time

directors may be appointed because the Company may need
additional expertise (e.g. Legal, Financial, Technical, etc.).
Executive Directors Executive directors are normally full time employees.
Non-Executive directors are not full time members of the

Company and are usually brought in to advise the executive
directors.
Company Secretary This person usually has a legal background and organises,
records and attends board meetings.
The main functions of this role include transfer of shares and

debentures and other legal aspects of the activities of the
company.

8
What does the Board of Directors do? In simple terms, it runs the company. However, it has
a number of functions. These vary according to the organisation but here are some of the
more common functions a board will perform.
Sets company policy and

objectives. Makes plans to
achieve the objectives
Establishes the
organisation and
executive structure.
Appoints qualified
Ensures adequate financial executives.
arrangements:
- Provides or obtains
capital at the start of
the business.
- Pays attention to cash
flow and profitability
- Sets the dividend policy
which decides how Ensures the business
much of the profit is complies with all legal
paid to shareholders requirements. In the
United Kingdom the main
requirements are found
in the Companies Acts.
However, the board must
ensure all other relevant
laws are complied with
Provide effective leadership (e.g. Data Protection,
to help maintain the morale Health and Safety).
of the organisation so that
it is always profitable.

9
Functions Within an Organisation
In the early 20th Century Henri Fayol was one of the first writers about management theory.
He proposed six major groups of functions within organisations. Even today, it is still useful
to think of functions in terms of these groups.
1. Technical
Production or manufacturing
2. Commercial
Buying, selling or exchanging
3. Financial
Making the best use of capital
4. Accounting
Record keeping
5. Security
Protecting property and important staff
6. Management
Planning organising and controlling
Some possible definitions:
Function A group of specific activities within an organisation. The term

also implies the authority to act in respect of these activities
Line Function A group of activities forming a fundamental part of the

organisation set up to help it meet its objectives. Examples
include production, purchasing and marketing. These are often
called the primary group of activities.
Staff Functions A function that affects or influences more than one department
(e.g. the Personnel Function).
Major functions are sub divisions of the organisation and are organised along department
lines in most businesses.

10
Examples of departments
Production Marketing
Produces products from This department often

processes, components, raw includes marketing, sales,
materials, etc. advertising, packaging and
distribution.
Purchasing
Personnel
Purchases raw materials,
Responsible for recruitment
components, equipment,
and training, maintaining
external services, etc. staff records, grievance and
disciplinary, etc.
General Administration
Accounts
Responsibilities may
Responsible for financial
include, ordering of
budgets, book keeping,
equipment, and the
costing, etc.
supervision and security of
the premises.
Possible Structure
Board of
Directors
Managing
Director
Company
Secretary
Production Purchasing Marketing Accounts Admin. Personnel
The structure does not stop with the major departments shown above. Each department also has its
own structure. Below is a possible example of a marketing department structure. Remember that all
organisations are different and that structures vary a lot.
Head of
marketing
Sales -Northern Sales - Southern Sales Support Marketing Advertisiing Packaging

11
The Systems Approach
We have been looking at the traditional type of organisation structure. However, the
modern approach is seeing a shift towards managing the organisation as a system. Even if
the business is structured along traditional lines it is accepted that all departments are
interdependent. This approach means that formal line authority is supported with informal
horizontal arrangements.
There are three main concepts that underpin the systems approach to organisation.
This is the concept that actions taken in one part of the

business affect other parts of it. For example, a sales manager
Chain of effects could not agree a huge deal with a new customer without
involving the production department as it would have to cope
with the increase in work. There is also likely to be a knock-on
effect in all other departments.
Every organisation is in a particular state or condition at any

given moment. Various influences and decisions mean that
State Transition
there will be a chain of effects that constantly affects this.
Going back to our example, a huge influx of new business will
affect the state of the business and this has to be managed
effectively.
Every product and every process within a business has a finite

life cycle. Over time all products become obsolete and have to
Life Cycle
be replaced. So, staff across all departments could be engaged
in a particular product for years. When it becomes obsolete the
change that results from this needs to be managed across the
whole organisation.

12
Planning and Control
Managing the activities of an organisation starts with setting goals and continues until those
goals are reached. In fact, this is a continuous process best shown in the form of a cycle.
Policy and
Long Term
Plans
Planning
Consumers
Activity
Full Scale
Initial Output
Output
Policy and Long term plans - These are set by the board and communicated to the business.
Planning Activity -The activities necessary to meet the plans set by the board are planned at
all appropriate levels of the organisation
Initial Output - This may be in the form of a prototype and some limited marketing to
potential consumers. Control and planning is supported with monitoring and reporting to
the board.
Full Scale Output - The product or service may be modified as a result of the initial output
phase before going into full production. Monitoring and reporting will continue during this
phase.
Consumers - The final proof of a product or service is the reaction of customers. Do they
buy it? Are they satisfied with it? Results of sales, customer satisfaction surveys, market
research etc, are reported back to the board and the planning and feedback cycle starts
again.

13
End of Chapter Test Questions
1. The overall control of a limited company is maintained by the Board of Directors on
behalf of the Shareholders. Explain the directors role as:
a) managers of the company
b) business administrators within the company
2. a) Describe the main functions of an organisation as identified by Henri Fayol.
b) Explain which functions are associated with business administration
c) Identify which functions are associated with business management.
3. a) Define the term business management.
b) Briefly compare the main differences between business management and

business administration.
c) Explain under what circumstances a business owner might also be a business

manager.
4. To be a good manager is NOT the same as being a good administrator. Discuss this
statement, identifying the main features of BOTH.

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Section 2
Features of Organisations

15
Structure and Authority
Every organisation of more than one person needs the right structure to help it meet its
aims and objectives. In large organisations this is shown in an organisational chart, as we
saw earlier.
It is important to understand that all organisations are constantly changing and adapting
and this means that their structures also need to change and adapt. This is necessary if they
are to survive and thrive.
The structure also acts as a framework of authority.
This is the most common type of authority found in organisations. It

works on the basis that authority is held by the person holding a
Legal Authority particular office (e.g. Managing Director). This authority comes from
the rules of the organisation.
Obedience is owed to the office and not the person holding the
position. If the individual acts outside of the scope of his or her
authority then he or she wont be obeyed.
The benefit of legal authority is that offices can be created or

removed to adapt to the needs of the business.
This type of authority is inherited and a good example is a monarchy.

Monarchs are succeeded by their descendants who take over their
Traditional Authority authority when they die.
Many family businesses work along similar lines with the business
being passed through succeeding generations of the family.
Unlike legal authority this type of authority is personal with

obedience being owed to the person occupying the post at the time.
This type of authority arises from the leadership qualities and

personality of the person in authority.
Charismatic Authority
This is a personal authority derived from the loyalty inspired by the
individual concerned.
In modern organisations authority may be given to as many staff as

possible through a process called empowerment. This means that
Empowerment individuals are empowered to make decisions on behalf of the
company without having to seek authority from higher levels.

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Bureaucratic Organisations
All large organisations have some bureaucratic control but they vary in how this works. Here
are some of the key features of bureaucratic control.
Authority lies with defined Each office is established

offices (roles) and and complies with the rules
obedience is owed to those set down by the
offices. This is sometimes organisation.
known as line authority.
Employees owe obedience Office holders perform in

to the office not the person accordance with the rules of
occupying that office. the organisation.
The organisation has a If an office holder applies a

hierarchical structure with rule to a new situation it
management being a top forms a precedent to be
followed in similar future
down process.
situations.
Each layer of the Office holders have no

organisation structure has rights to the role except for
agreed areas of operation, those set out in their
authority and discretion. contracts of employment.
Advantages include:
Professionalism
Formal working environment
Permanence of the organisation
Everyone is treated the same
Disadvantages include:
The approach is impersonal and may conflict with the aims of the organisation
Tends not to be good for client empathy
The rules may lead to a defensive approach and undermine the service to clients

17
Non Bureaucratic
A drawback of bureaucratic organisations is that they are not great for creativity. In the
modern world businesses need to be innovative and agile, and new approaches are needed.
As a result, new types of structures and systems are emerging.
We are in an era of fierce competition where expanding

Organismic Structures existing markets is extremely difficult. New markets have to be
created and this means that businesses have to think creatively.
As a result, new organismic structures are emerging that are
more democratic.
Features of organismic structures:
1. All individuals at all levels know the aims and objectives

of the organisation and work to achieve these.
2. The structure of the organisation looks more like a

network of communication and less like the traditional
top down structure.
3. Information and advice flow in all directions.
4. All employees are expected to be committed to the aims

and objectives of the organisation.
Organismic structures give individuals autonomy. This means

Human Relations that there must be good support systems.
Systems
All organisations have many different types of people in their
workforce. Human relations systems seek to match the needs
of the individual with the needs of the organisation.
For example, there is a place for the worker who wants to work
fixed hours and has no particular ambitions for promotion.
Equally, there is a place for ambitious people.

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Traditional Principles of
Organisation
A business plan which includes clear objectives

Definition of long term If a business needs financial help the people
approached will study the business plan
and short term
In the UK, Limited Companies must have an Objects
objectives clause in the Memorandum of Asscosiation and must
act in accordance with those objectives
The work carried out by the business flows from its

Defining areas of objectives
This work is grouped into areas of responsibility
responsibility
Some areas of work fall together naturally (e.g. sales,
marketing, packaging, etc).
The reponsibilities of each role are clearly defined

The position of each role in the heirarchy is defined,
Designation of posts including reporting lines
and responsibilities Areas of mutual support between team members is
clarified
This is normally set out in job descriptions
Levels of authority are Areas and levels of authority for each post are
established defined - usually within the job descriptions
Statements of policy and codes of conduct are

Statements of policy agreed at board level
and codes of conduct All new employees should be inducted properly and
made aware of these

19
Types of Organisation
All organisations are unique; however most of them fall within five main types
1. Line organisations
2. Line and staff organisations
3. Functional organisations
4. Multi divisional organisations
5. Entrepreneurial organisations
Line Organisation
There is a very clear chain of command. All staff know their Managing Director
immediate superiors and subordinates.
Department Manager
Instructions flow from the top to the bottom of the organisation
through the chain of command. Section Manager
Similarly, responses from the lower levels of the organisation

Workers
follow the chain of command in the opposite direction.
Line and Staff Organisation
This is similar to line organisations with a clear chain of command. However, there is a need
for additional specialist functions within organisations (e.g. Legal, Personnel or Human
Resources, Information Technology, etc.). The relationship between the managers of these
functions and the managing director are known as functional relationships.
Where the relationship is more personal (e.g. the personal assistant to the managing
director) this is known as a staff relationship.
Functional Organisations
The organisation revolves around the various functions of the business (as described in
section 1 of this guide).
The relationship with the Managing Director and the other directors is functional. At lower
levels the relationship between department heads and the people who report to them is
partly functional and partly staff.

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Multi divisional Companies
During the 20th century multi divisional organisations were the most common formats for
large organisations. They were at their height from the 1920s to the 1980s.
The concept is that each division of the company is a self contained business unit. In many
cases the divisions have their own premises and will certainly have their own staff.
The entire organisation is led from the top by a group of executives who are responsible for
long term planning and monitoring the returns from the divisions.
One of the challenges of multi divisional corporations is ensuring that the various divisions
work together. This is achieved through the formation of inter divisional committees. These
committees are usually made up from the management layer just below the executive level.
The size of these organisations led to good career opportunities for employees. This meant
that many people were able to spend their entire career working for one organisation.
Entrepreneurial Corporations
Since the 1980s the multi divisional approach did not always work well and a new approach
was called for. This was because of the emergence of Newly Industrialised Countries (NICs)
and changes in customer demands
Emergence of newly
industrialised countrys
(NIC's) led to greater
competition
NIC's were better

NICs were better at
able to respond to
innovating than
greater variety of
multi-divisional
demand from
organisations
customers

21
One emerging and developing solution is the growth of entrepreneurial corporations. This
new and innovative approach follows the principles shown below.
Everyone contributes their The emphasis is on Authority is delegated to

own unique talents no creativity as growth can each member of staff who is
employee is more important only come through responsible for his or her
than any other. innovation. own quality performance.
Entrepreneurial drive can Entrepreneurial drive is best The mission statement and
come from anyone in the contained in a new limited the long term strategy of
organisation and even from company that is part of the the organisation is the focus
outside of it. group and makes use of of all decision making.
shared assets and services.
New initiatives must not be Empowerment of all staff is There are fewer layers in
developed in isolation. They the key to success. This the chain of command. This
must be integrated into the must be supported by enables problems and
group so that they use excellent training and opportunities to be
facilities that already exist. communication and a clear detected and handled much
mission statement. quicker.

22
Systems and Subsystems
Systems and sub systems are the procedures organisations use to help them to achieve their
objectives.
Requirements when designing new systems and sub systems:
Knowledge of the objective Break down of the

to be achieved. procedure into individual
tasks. In theory, this leads
to specialisation and
increased productivity.
Decisions are made about Decisions are made about

the roles required to fulfill the equipment needed.
each part of the work and
the people to fill those
roles.
Appropriate forms and The principle of

procedures are produced. management by exception
is applied. Reports to
management are made
when agreed tolerances are
breached .
The system is designed on

the basis of the lowest cost
possible to achieve its
objectives.
Open and Closed Loop Controls
Problems can and do occur so systems must have controls built into them. These control
procedures are called loops and are aimed at dealing with problems (e.g. materials are not
delivered on time). In many cases these problems are dealt with automatically.
Where automatic correction procedures are built in, these are known as closed loop
controls. Where automatic correction is not possible and decisions need to be made by
people this is known as an open loop control.

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1. With the aid of organisation charts, explain the types of authority most suitable for
the following:
a) The senior management of a large multinational company
b) An accountants partnership
c) A small IT company
d) A local newsagents
2. a) Distinguish between charismatic, traditional and legal types of authority.
b) With the aid of examples, draw appropriate organisation charts for EACH type of
authority.
3. a) Briefly describe Line, Functional and Staff types of Authority.
b) With the aid of example diagrams, show how these types of authority are
applied in an organisation.
4. a) Identify the traditional principles of organisations. [10]
b) Briefly describe TWO of these principles.

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Section 3
The Structure of Business

Enterprises

25
Types of Business
This is the simplest type of organisation. An individual sets up a

business and is entitled to its profits.
Advantages Disadvantages
Long working hours.
No formal procedures necessary. Illness and holidays cause problems running

the business
Sole traders can put plans into action
quickly without having to consult others. Sole traders have unlimited liability
meaning that all of their business and
Personal control means direct management personal assets are at risk if the business
and reduces communication problems. fails.
Self employed people are entitled to the Growth is difficult unless the owner returns
full profits of the business. profits to the business or borrows money.
The owner decides how the business is The business is part of the estate of the
administered. owner and is subject to inheritance tax.
The business is likely to be small.
Two or more people combine to set up a business with the intention of

working together for profit. There is no legal need for a formal
agreement between the partners but it is wise for the participants to
draw up a deed of partnership.
Compared to sole traders, partners may The business needs to generate enough
generate more capital to allow the business income to provide a living for all partners.
to expand more rapidly.
Liability is unlimited as with sole traders.
Holidays are easier to take because However, all partners are liable for business
responsibility for the business is shared . debts run up by other partners.
Wider experience is brought to the Decisions may be slower because all

business. partners need to be consulted.
The affairs of the business are private in the The death of one partner may cause major

26
same way as sole trader businesses. problems for the business.
The limited Partnership Act 1907 changed the law to allow people with
Capital to put it into a partnership business without incurring unlimited
liability.
A person investing in this way is not allowed to take any part in running the business. Also,
the law makes it clear that at least one partner has to have unlimited liability for the
business.
The next type of organisation we will look at is the Limited Liability

Company. We will be covering this in more detail because this is an
important subject. Well start by looking at the three types of limited
company found in the United Kingdom.
These companies are set up by Royal Charter

New chartered companies are rare these days
Chartered Companies The British Broadcasting Corporation is an example
of a chartered company
These are set up by Act of Parliament but are also

rare nowadays
Statutory Companies
This was used a lot in the 19th Century for setting
up the railway and canal companies
Most new limited companies are set up in this way

because it is simpler to do
Registered Companies
The new company must be registered with the
Registrar of Companies

27
Forming a Limited Liability
Company
The correct procedure must be followed to start a Limited Company. The person promoting
the company needs at least one other person to join in signing the Memorandum of
Association. This formal document contains seven clauses through which the signatories
state that they wish to be associated with each other in a specified type of business.
Memorandum of Association
Clause 1: Company Name

The last word in the name is limited to show that the shareholders in
the company have limited liability.
Clause 2: Address
This is the registered address of the company.
Clause 3: Objects
This clause sets out what the company will do and is the legal basis for
its activities. If it tries to act outside of these activities it will be acting
outside of its powers (the legal term for this is ultra vires).
Clause 4: Liability
This is a statement that the liability of the members (shareholders) of
the company is limited.
Clause 5: Share Capital

This sets out the amount of share capital and types of shares to be
issued.
Clause 6: Signature
The signatories are undertaking that they want to form the company
under the Companies Acts and they agree to purchase the number of
shares against their names.
Clause 7: Directors
The names and addresses of the first directors and the company
secretary are set out in a prescribed format. This statement must be
signed by the all members. The directors and company secretary must
also sign to agree to their appointments.
Another important document is the Articles of Association which sets out the rules for
running the internal affairs of the company. For example, they will set out the procedures to
be followed at formal meetings.

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Registration of the Company
The promoters of the Company present these documents to the Registrar of Companies.
Articles of
Association
Memorandum of A statement of the

Association nominal capital
A list of directors A statutory

and their written declaration that
consents to their the Companies
appointments Acts have been
complied with
If all of these documents are in order the Registrar of Companies issues these certificates.
Certificate of Trading
incorporation Certificate
This sets up the A public company

company as a cant start trading
separate legal until this has been
entity. issued

29
To be able to trade the company needs capital to conduct its business. How this is obtained
depends on the type of company it is.
Private Company Public Company
Most of the capital is provided by the Funding is obtained from people who buy
founders and there is no need to issue a shares in the company.
prospectus.
The company issues a prospectus giving
information about the company and invites
member of the public to buy shares.
There are a number of different types of shares. Here is a brief summary of these.
Types of Shares Reward for shareholder Who buys?
The shareholders share Rich individuals

Ordinary Shares equally in the profits of the
Company according to the Institutional investors
number of shares they own. (large companies such
as Banks, Insurance
Companies, etc)
People interested in
making profits when
they sell on their shares
Holders of these shares only These are normally taken by

Deferred Ordinary Shares share in the profits after the owner of a business
ordinary shareholders have when he or she sells it to a
received a share of the company.
profits (e.g. 10%).
The shareholder receives a Investors who are more

Preference Shares definite dividend (e.g. 6%) if interested in the security of
the company makes a profit. their investment rather than
in making a huge profit.

30
These are similar to Investors who are more
Cumulative Preference preference shares. The interested in the security of
Shares difference is that in a year their investment rather than
when there are no profits in making a huge profit.
the dividend for that year is
accumulated and added to
the next years dividend.
The shareholder receives a Investors who are more

Participating Preference fixed rate (e.g. 6 %) as with interested in the security of
Shares preference shares. their investment rather than
However, there is an in making a huge profit.
opportunity to earn more if
the ordinary shares receive
a dividend higher than 6%.
These are really loans to the Investors who want a secure

Debentures company rather than being investment with a
shares in the business in the guaranteed income. These
true sense. A fixed rate of may be individuals or
interest is paid whether or institutional investors.
not the company makes a
profit.
Holding Companies
A holding company is a company that holds shares in another company. It holds a

controlling interest by owning at least 51% of the shares and the voting rights that go with
those shares. Holding Companies are companies with subsidiaries and are often multi-
national because they trade in many countries.

31
Clubs and Societies
Some businesses are non-profit making clubs and societies. The aim is to provide benefits
to its members. For example the members of a tennis club will have exclusive use of club
facilities.
Here are three types of clubs and societies in the business world.
Co-operative retail societies

The original idea was to buy goods at wholesale prices and to
sell these to members at normal retail prices.
The profits were then shared amongst members according to
how much they bought over the course of the year.
Agricultural Co-operatives
The concept is to give small scale farmers the same economies
of scale as their large competitors. There are two types.
Marketing Co-operative - To grade, pack and distribute produce.
Purchasing Co-operative - To buy seed, fertilsers and farm
equipment at lower prices.
Producer Cooperatives
These have similarities to agricultural co-operatives and aim for
economies of scale in marketing, purchasing and training.
A recent trend has been to set these co-operatives up as
companies limited by guarantee. Another approach is to set
them up as friendly societies under the Friendly Societies Act

32
Nationalised Industries
These notes relate to the United Kingdom. However, students should also study public
enterprises in their own country if they live or work outside of the UK.
Until recent times socialist governments preferred public ownership for many industries. As
a result a number of industries were nationalised by Act of Parliament. Although many of
these industries are now back in private ownership it is worth noting that at their height
nationalised industries made up around half of the UK economy.
There were many reasons put forward for this nationalisation programme.
Security
Natural Rights
The only way to guarantee our
Examples include water, oil, coal
security. Includes the police and
and rights of way such as roads .
armed services.
Fundamental Importance
Social Necessity
Some industries are of vital
Many services are considered to
importance to the economy. This
be essential in modern society
includes energy supplies, water,
(e.g. The National Health Service).
etc.
Natural Monopoly
High Capital Cost
Some industries are a natural
Duplication of very high captial
monopoly. For example, it would
expenses does not make sense in
be silly to have 100 competing
some industries. Railways are
railway lines between London and
once again a good example.
Southampton.
Poor Labour Relations

One of the reasons for
nationalising industries was
existing poor labour relations. The
coal industry is a good example of
this.

33
Objectives of Nationalisation Criticisms of Nationalisation
These can be difficult to define because Nationalisation also had many opponents
different members of parliament often had who criticised it on a number of grounds:
different objectives. Some of these
objectives included:
Provide a better service to the public, Nationalised industries were statutory

particularly if the industry was in a bad monopolies leading to a take it or leave
state. it attitude. This often resulted in poor
quality and service for customers.
Improve national security.
The industries were run in the nations
Improve health and safety. interests and this meant they could not
be allowed to fail, whatever the cost.
Safeguard jobs.
Strong trade unions made it difficult to
There was also a general financial objective cut workforces and/or capital
to avoid making losses, but this was often expenditure leading to inefficiencies
hard to achieve. and much unrest.

34
Government Institutions
Local Government
Many services needed by the community are supplied by local government. This is because
it is not feasible to control these centrally. Examples include:
Consumer Protection
Education
Fire Services
Highways and Traffic
Housing
Police
Town and County Planning
Social Services
Services such as Electricity, Gas and Water were supplied by local authorities at one time.
This is no longer the case.
Central Government
There are about 20 ministries but these do change regularly, particularly as governments
change. This means that it is not possible to give a definitive list of them. However, the main
ministries departments and cabinet offices in the UK in 2010 were:
Asylum and Immigration Department for Transport Office of Communications

Tribunal
Cabinet Office Employment Appeal Tribunal Office of Fair Trading (OFT)

(EAT)
Commission for Social Care Foreign and Commonwealth Office of Gas and Electricity
Inspection Office (FCO) Markets (OFGEM)
Department for Business Her Majesty's Government Office of Rail Regulation

Enterprise & Regulatory Communications Centre
Reform (HMGCC)
Department for Children Her Majesty's Treasury (HMT) Office of the Civil Service
Schools and Families Commissioners (OCSC)
Department for Communities Home Office (HO) Office of the Commissioner for
and Local Government Public Appointments (OCPA)

35
Department for Culture, Marine Science and Technology Office of the Rail Regulator
Media and Sport (DCMS) (IACMST)
Department for Environment Law Officers' Department Office of the Secretary of

Food and Rural Affairs State for Wales
Department for Innovation Ministry of Defence (MoD) Office of Water Services

Universities and Skills (OFWAT)
Department for International National Audit Office (NAO) Parliamentary and Health
Development (DfID) Service Ombudsman
Northern Ireland Office (NIO)
Department for Work and Scotland Office
Pensions Office for Education and
Childrens Services Social Security and Child
Department of Health Support Commissioners
There are also a number of QUANGOS (quasi autonomous non-government organisations)

set up by various Acts of Parliament. At one time there were over 3000 of these although
these have reduced in number a little. In theory, QUANGOS are non-governmental but they
are controversial because they are not fully accountable to the public.

36
1. a) Identify the main types of business enterprise and explain their principal
features.
b) Describe the most appropriate sources of finance available to EACH type of

enterprise when:
i setting up in business
ii expanding the business
2. a) Describe the main features of Private Limited Companies and Public Limited
Companies.
b) Explain the significance of limited liability to sole traders and partnerships.
3. a) Describe which type of business enterprise would be appropriate for the

following:
i A plumber working on their own
ii A solicitors practice
iii A small family brewing business
iv A large restaurant chain
b) Explain the main differences between General Partnerships and Limited

Partnerships

37
Section 4
Production

38
Types of Production
The purpose of any business is to create goods and services required by people.
Production is the term used for the manufacture and supply of goods. Raw materials are
turned into the goods people want through the application of processes and human skills.
These products are known as utilities by economists. The work is done in a factory which is
designed and equipped according to five main factors.
The quantities needed to
meet customer demand
The type of product and its
design, packaging and
distribution
The resources needed to
make the product.
The processes and

techniques needed to make The controls needed.
the product
There are four main types of production.

39
Job Production
Single products are made to the order of the customer
Tailor made suits are a good example
Large engineering contracts also fall within this category (e.g Sports Stadium)
Batch production
This is used in a wide variety of situations. However, it is most common for
producing components for other manufacturers
For example, components supplied to aeroplane manufacturers
Flow Production
This is mass production and is used when there is a steady high demand for
products.
A good example is the car manufacturing industry
Process Production
This is similar to flow production where the product goes through a
succession of processes
This term is often used in respect of chemical rather then mechanical
processes (e.g. beer production)

40
Factory Planning
The first decision is where to locate the factory. There are many factors to consider.
Where are the raw
materials located? What power and facilities
are needed?
What transport facilities
exist?
What is the labour supply
like?
What is the size of the
available site?
What official aid is available
in this area?
How close is the site to the Site Location
market?
Once the site is chosen the next step is to decide the design of the building.
What type of work is Will any ancillary buildings

involved and what be needed (e.g. to separate
machinery and plant will be them from factory noise?
needed?
How will the layout of the How will requirements such

building help the flow of the as transportation, health
production processes? Design of the Building and safety affect the layout?
It is also necessary to consider equipment and plant. These can be expensive items and
some plant can be very large. Often it has to be built on site.
Forward planning is important because some machinery is in high

demand and needs to be ordered well in advance.
Careful shopping is necessary as it is vital to purchase equipment that

is reliable and backed up with appropriate service contracts.
Equipment and Plant.

41
Handling Materials
Ordering of materials is part of the purchasing function. However, the purchasing officer
and production manager work closely together so the topic is worth covering briefly here.
It is important to achieve the right balance between price, quantity and sustainability of
supply. There are also a number of other factors for the production manager to consider.
Handling may be expensive

It is important to be sure and, in some cases,
that there is certainty of dangerous.
supply as and when it is
needed.
Proper equipment (e.g.
forklift trucks), safety
procedures and training are
all essential.
There must be adequate
procedures on delivery to
ensure that quantity and Systems and procedures are
quality are correct. needed to move materials
from storage to the place
where they will be used.
Production Administration
42
Production Administration
There are three areas to consider:
1. Production Engineering
2. Production Planning
3. Production Control
Production Engineering
Production engineering is the design, planning and control of the production techniques
used to produce a specific product.
The production manager needs to consider and constantly review three main factors.
These need to be monitored so that

products and production procedures are
kept up to date.
Trends in customer
demands and the
activities of
competitors
The plant and

equipment
Estimating and
needed in the
quoting
production
process
These need to be well maintained, Many orders start with a quotation.

renewed and updated as necessary. When Where possible, part estimates are put on
new products are being produced, existing file so that these are quicker and easier to
equipment may be adapted or replaced. compile.

43
Production Planning
The purpose of production planning is to make the most effective use of the capacity of the
factory whilst at the same time ensuring that all orders are filled to the satisfaction of
customers.
This involves taking the

forecasted demand and
turning it into a production There must be close liaison
plan aimed at meeting with the marketing
company objectives. department so that filling of
orders is prioritised
Schedules and the order of properly.
carrying out work need to
be arranged so that there
are no bottlenecks in
production.
Production Control
There are three main elements to production control.
Progress Control Materials Control Quality Control
Control the progress of The movement of raw This specialised

an order through the materials through the function is aimed at
correct sequence production process is ensuring the quality of
called 'work in products produced
progress'
Make sure each stage
of production is The usual approach is
completed on time This must go through quality inspection of
the system without randomly chosen
delay as each stage of samples
Ensure all materials the process is
and equipment are completed
delivered on time The results are plotted
on a chart
The supervisor has a If the results are not

vital role to ensure this acceptable a full
happens review of the process
is carried out to
correct any errors

44
Critical Path Analysis
Any major contract involves a large number of activities and these activities must be
planned and managed effectively. There a number of methods that can be used and one
useful tool is a critical path analysis.
What is a critical path Its a tool to help you plan and monitor
analysis? all of the tasks that need to completed.
Why do we Many activities needed to fill a contract

need this depend on each other. Many also have
tool? to be completed in the correct sequence.
This can get complicated.
Yes. It helps us to devise the quickest

Are there any
path to completing the contract. This
other
can save us both money and time.
reasons?
You list all of the activities including how long each one will take
How does it and then convert this into a diagram that shows their relationship
work? to each other.

45
Costing Aspects
The costing aspects of production is a vast area, so we will only cover it briefly here.
It is useful to know the various elements that make up production costs:
Cost of materials Cost of labour
Direct Expenses - costs Selling Costs These include

applying to a particular the cost of packing and
product (e.g. cost of hiring delivering the product
specialist equipment)
Indirect Expenses Profit although this is not

overheads not directly strictly a cost it is
related to a particular considered to be one in
product (e.g. rent on the economic terms because it
building) represents return on capital
When considering costs the production manager needs to decide whether to make the
product or buy it in. This may involve buying the whole product or just some of its
components.
This decision will depend on a number of factors:
Does the factory have the capacity to make it?

How easy would it be to make it?
Does the factory have the skills and facilities to do it?
Are the materials available to make it?
What are the costs of making it as opposed to buying it?

46
Work Study
The purpose of work study is to achieve the best possible output from the least possible
input of effort and resources.
It can be difficult to show employees the benefits of work study. However, the survival of
their firm and therefore their jobs are likely to be dependent upon the efficiencies achieved.
There are two main types of work study.
Method Study
A scientific study of the methods of production
The aim is to achieve the best possible efficiency with a logical layout to
the factory and the right machinery and equipment
If a new method is introduced because of the study it will be closely

monitored so that any unexpected problems are remedied quickly
Work Measurement
Work measurement follows on from the method study which establishes

how the job will be carried out
The aim is to find out what can be achieved by a reasonably competent

and conscientious worker and works best with repetitive jobs
The time to do a job is calculated from the information collected (known

as time allowed) and this in turn allows wages and bonuses to be
calculated

47
Maintenance
The maintenance department is a specialist area under the control of the production
department.
All equipment used in production needs to be adequately maintained to avoid breakdowns.
Loss of contracts
Waste of operator time
Cost of labour
Delays
Injuries
Consequences of breakdowns
Preventative Maintenance
All equipment is serviced according to a maintenance schedule. This maintenance includes

replacing parts before they wear out to prevent or minimise breakdowns.
Aspects of Maintenance

48
Prepare and update inventories of Machinery, Plant, Fixtures, Fittings, etc.
Prepare maintenance schedules to ensure that routine maintenance is carried out as needed
Regularly maintain services such as gas, electricity, fuel, water, etc
Regular maintenance of buidings, paying particular attention to health and safety
Liase with other departments so that they are aware of maintenance work affecting them
Include maintenance in induction training, especially health and safety and how to report problems
Cost and budget for all maintenance activities
Computers
Computers play an important part in production so need to be covered briefly. A detailed

study is beyond the scope of this course but there are three approaches to be aware of.
CAD is the use of computer technology to help with design

Computer Aided work. It is used extensively in the automative, marine and
Design (CAD) aeronautical industries. Architects also find CAD invaluable in
their work. In fact, the use of this technology is now
commonplace in any industry involving design work.
CAM is the use of computers to control machinery and plant

Computer Aided used in the production process. The purpose of using CAM is to
Manufacturing (CAM) increase the speed and efficiency of manufacturing processes.

49
CIM goes further than CAM because the approach is to use
Computer Integrated computers to control entire production processes. Using
Manufacturing (CIM) computers in this way enables manufacturing to be faster and
less prone to errors.

50
1. a) Define:
i method study
ii work measurement
b) With the aid of diagrams, explain the procedure for introducing method study
and work measurement into your organisation.
2. Explain under what circumstances a motor vehicle manufacturer would adopt the
following types of production:
a) Job
b) Batch
c) Mass
d) Process
3. a) Describe the FOUR main types of production.
b) Give examples where EACH of these types may be employed.
4. a) Briefly define the following:
i CAD
ii CAM
iii CIM
b) With the aid of an example, explain under what circumstances a company

would adopt all of these techniques.
5. In a memorandum to your Office Supervisor, explain:
a) how you would introduce work study into your organisation

b) the likely benefits which might result from such action

51
Section 5
Purchasing

52
Purchasing
The role of the purchasing function is to buy everything the company needs to carry out its
activities. This does not include hiring labour which is the role of the Personnel Function.
Capital Assets Consumable Items

These are items that last a long time, such as These are items used by the business and
buildings, machinery, plant, motor vehicles, they include fuel, stationery, cleaning
etc. materials, etc.
Four Types of Purchase
Goods for Resale Raw Materials and Components

These goods are purchased with the aim of These are purchased by manufacturing firms
selling them for profit. The company may or and are worked on to turn them into the final
may not carry out some work on them (e.g. product.
packaging) before selling them.
The Purchasing Department is headed by the Purchasing officer although the term buyer is
still used in some firms.
Investigate and collect data on
all sources of supply
To put together a specification
of requirements for all
departments
Negotiate contracts with
suppliers for the best value,
Evaluate potential suppliers price and terms
and draw up an index of
suppliers
Inspect goods and services
for quality standards
Place orders with approved
suppliers
Supervise handling, storage and
distribution of purchases
Supervise inventory and stock

control Dispose of waste and surplus
materials at the best price

53
The functions of the purchasing officer
Index of Suppliers
The purchasing officer keeps and maintains an index of suppliers which helps with all future
purchases. Before placing a purchaser on the index there will be consultations between the
suppliers, purchasing officer and end user. This involves discussing the type of goods that
can be supplied, the quantities available and their cost.
Contact details - name, Types and quantities of goods

address, telephone, e-mail, supplied
etc
The index is necessary as it

brings organisation to
Any delays or other problems purchasing and prevents the
that may occur problems that may happen if
individual staff made orders
direct to suppliers.
The purchasing officer will have an established index of suppliers. However, approaches will
sometimes be made by new suppliers. He or she investigates these approaches and may
attend meetings with the suppliers, obtain and inspect samples and may place small orders
to test the quality and reliability supply.

54
Acquiring and Inspecting
Every order is a separate contract with the supplier but it not usual to negotiate separately
on every occasion. The usual approach is to agree a set of Standard Terms and Conditions
with the supplier. Whilst some particular points may need to be negotiated on some orders
this does mean it is not necessary to negotiate every single point every single time.
Standard Terms and Conditions are renewable (usually annually) at which time they may be
re-negotiated.
These contracts are negotiated centrally by the purchasing officer who is also responsible
for making purchases centrally.
Ensures that only authorised buyers It is easier to place bulk orders with
can place orders on behalf of the suppliers and to take advantage of
company . bulk discounts.
Advantages of
central purchasing
Goods are placed into stock and stored

The purchasing officer can make sure
properly with stock contol and
that there is an effective system for
ordering systems in place. Physical
inspecting goods on delivery. This
distribution is not the responsibility of
includes ensuring that any faults,
the purchasing officer but he/she has
breakages and shortages are noted on
an interest in this because of possible
the delivery note .
thefts and shortages.

55
Purchasing Department
Requisitions from Stock
The department requiring stock items must put in a requisition for them. The purchasing
department then arranges delivery to the department making the requisition.
This formal procedure enables the purchasing department to monitor stock levels and
ensure that shortages do not occur.
Ordering Procedure
Checks made by the purchasing department for orders that are placed.
Is the requisition being When the order is sent, the

made by an authorised purchasing department keeps
person? a copy for its records.
Is the requisition similar to

previous requests and The order is monitored by the
within the usual purchasing department to
arrangements for this type ensure it arrives as agreed.
of order?
If it is a new order, have

prior arrangements been If no proper arrangements
made and has an were made this is
authorised supplier been investigated to minimise
used? problems with this and future
orders.

56
Goods Received Notes
The purchasing department lays down the procedure for receiving goods.
Drivers must not be given signatures on delivery until the goods have been examined
for damage. This does not require everything to be opened but the packages must
be examined for signs of possible damage.
The goods must be checked without delay and they must be compared with the
advice note accompanying them.
A goods received note should be completed detailing the goods received, any
shortages and any signs of damage.

57
Inventory Control
Stores and depots are normally managed by the factory manager so they are not in the
direct control of the Purchasing Officer. However the Purchasing Officer sets down the
stock control principles. This includes setting minimum and maximum stock levels. The aim
is to ensure that requisitions are met as they are needed but that capital is not wasted by
holding too much stock.
Purpose of stock taking
To discover the value of

stock at year end - used
in the trading account to
help find the gross profit of
the businss
Indirectly Helps to
To detect any bad detect theft - stock
buying - helps to shortages may
discover slow moving indicate theft by staff
items or shoplifting, and
must be investigated
Stock Taking Arrangements

Annual Stock Taking
Perpetual Inentory
Spot Check or Audit
Annual Stock Taking Spot Check or Audit Perpetual Inventory

To value stock for end of To detect losses through A stock bin card or stock
year accounts pilfering or waste ledger card is updated
every time stock is issued
or received
Physically count the stock
This is usually done In theory, levels of stock

Value each type of stock without warning are known at all times
Multiply this value by the Audits may still be used

number of items, then to find discrepencies.
produce a total

58
Stores Control
The Purchasing Officer has a vested interest in stores control because most purchases will
need to be stored before they are used.
There are three key aspects to consider.
Storage System
Once a system is implemented it can't be changed easily
When designing the system there are many factors to consider
Considerations inlude: location, access to the stores, layout,
staffing, equipment, stock control, documentation, etc
Classification of Stores
All stores must be classified
They should be stored according to their classification - this makes
them easier to find
Link Between Costings and Requisitions

This is helped if clearly deigned forms are used
Every requisition should be charged to a particular job, contract
or order (this includes any charges for use of equipment)
Computerised stock systems help to simplify this

59
1. a) With the aid of a diagram, briefly describe the main features of a procedure for
ordering goods.
b) Describe THREE of the main documents used in such a procedure.
2. a) Explain the relationship between the Purchasing Department and ONE other
department of a business.
b) Give brief descriptions of the following aspects of Purchasing:
i approved suppliers
ii economic order quantities
3. There are many sources that a Purchasing Officer can use to identify potential
suppliers.
a) List the main sources.
b) Explain the benefits of EACH source.
c) Explain, with reasons, which source would be most appropriate when

considering a new supplier of steel for a producer of refrigerators.
4. a) With the aid of a diagram, identify the main features of a procedure for the
control of stock.
b) Describe THREE of the main documents used in such a procedure
5. a) Describe, in detail, at least THREE possible methods of charging stock out to

jobs or contracts.
b) With the aid of a diagram, explain briefly how Economic Order Quantity
contributes to the control of stock.

60
Section 6
Research and Development

61
Research and Development
(R&D)
Most organisations have a R&D function although this may be very small. However, this may
be a department in its own right in large firms. Even in these cases the department is likely
to come under the overall control of the Marketing Director or the Factory Manager.
Basic Research Problem Based Research

Aimed at improving knowledge and Aimed at solving problems that
techniques within current fields of arise during the course of business
operation operations
Four Main Areas to

Consider
Applied Research Development Work

The aim is to turn an idea into a This is aimed at planning and
marketable product or to improve developing the methods necessary
existing products and services to bring a product into operation
Basic Research
There are a number of options for conducting basic research and these include:
Can be conducted in house by the company for its own purposes

and/or
An external supplier can be commissioned to carry out the research on behalf of the
company
and/or
May be conducted as co-operative research perhaps on behalf of a trade association

basic research can be very expensive so this can make economic sense
and/or
If the research is of national importance it may be sponsored on behalf of a

government agency

62
Problem Based Research
Methodical research is carried out to solve identified problems.
Define the nature of the problem
Decide how to tackle the problem

Options include: appoint a knowledgeable person to lead an
internal research project ; appoint external suppliers to conduct
the research or a part of it
Provide necessary resources for the research

This includes the budget, people to conduct the research,
equipment and somewhere to carry out the research
Generating Ideas
All research and development is based on ideas so it is important for the organisation to be
alert to new ideas. There are many possible sources of ideas.
Inventors who submit ideas to Customers who tell the business

the business about defects
Ideas submitted by staff Customers who tell the business

about improvements they want
Staff suggestion schemes and Customers who tell the business

suggestion boxes about new products they want
Ideas generated at staff Ideas generated at

meetings brainstorming meetings *
*Brainstorming is a technique where people are brought together to generate ideas on a

defined topic. The people in the meeting call out their ideas and these are all recorded. The
theory is that people build on each others ideas. No idea is dismissed or considered to be
silly.
Once all possible ideas are generated they are then examined and evaluated. If this is led
properly it can be a very effective technique for generating ideas.

63
Applied Research and Development
The aim of applied research and development is to produce a marketable product or service
or to improve internal processes.
It is worth remembering that all products have a life cycle. They all have to be kept under
constant review to help the business remain competitive. This means that all products have
to be reviewed regularly so that they are updated, renewed, improved and replaced before
they become obsolete.
As with other types of research, ideas have to be researched and developed methodically.
Intitial Idea
Evaluation of the idea (possible feasibility study)
Economic justification of the idea (a cost benefit analysis)
Development of a prototye (including testing and test marketing it)
Full production and launch (including marketing)
Patents and Trade Marks

Patents and Trade Marks are necessary to protect the results of research and development.
The Government grants exclusive rights to making and selling new

Patents inventions. Once the patent is granted it becomes the property of the
person (organisation) it is granted to. This gives that person the sole right
to manufacture, sell, market, assign or mortgage it without competition.
These rights apply for a period of time. In the UK this is 20 years (Patents
Act 1957).
The patent belongs to the organisation, not the person who invented it.
A trade mark is a unique mark that identifies a business, individual,

Trade Marks product, etc. This could be a brand, a heading, a label, a signature, etc.
These may be registered under the Trade Marks Act 1983 in the UK. Once
registered, the trade mark cannot be used by anybody else.

64
Business Context of R & D
Research and Development is a specialist department and is staffed by experts in their own
field. These will be people who can contribute a lot in both theory and practical application.
They also need to be fully aware of what is the state of the art in their industry.
This means that the head of the department does need to be a senior person. However, he
or she is unlikely to represent the department at board level. Nevertheless, they may be
invited to board meetings on an ad hoc basis.
An annual review of the Research and Development function is likely to take place.
A report on the work for the last year Evaluation of future programmes
- main advances made - some work may be stopped
- projects undertaken - new areas of research may be
- products resulting from the work suggested
- lessons learned
Annual review of
research and
development
Reports on individual projects Evaluation on funding

- costs involved - what returns have been achieved?
- results achieved - what returns are anticipated?

65
1. Small and medium-sized enterprises find it difficult to support research and

development of their products.
a) Explain the main disadvantages that a small enterprise faces in this area.
b) Identify and describe how the government might help small and medium-sized
enterprises with research and development.
2. For a product of your own choice, describe:
a) the main areas of market research
b) their most appropriate application
3. a) Explain the ways in which new ideas can be generated for updating existing
products and developing new ones.
b) Describe the procedures that could be adopted for screening and evaluating
such ideas.

66
Section 7
Marketing

67
The Role of Marketing
Marketing is an important function for any business and is represented at board level by a
senior director.
The role of marketing is to ensure that the whole company is working together to:
1. Produce what customers really want

2. Package their products and services attractively
3. Sell at a price that makes a profit
4. Bridge the gap between customers and producers there are two types of gaps to
bridge
Time Gap Geography Gap
Involves protecting and Involves effective

preserving products so they arrangements for distributing
are in good condition when products to the places where
they reach customers. they are needed.
Marketing Philosophy
The general tone of an effective marketing philosophy is that the company is customer
orientated and not production orientated. It is a key role of the marketing function to
ensure that this is the case.
The right public image - e.g. Help to achieve company

does the company want to objectives - e.g. turnover,
be seen as being public growth, profit, etc.
spirited?
Sell in a way that maximises Aim for profit to be made

goodwill with customers - uniformly -across the whole
the relationship with company
customers is seen as key

68
Market Analysis and Research
The marketing manager needs to know everything possible about the market in which the
business operates. This means that good market analysis and research is vital.
Consumer Research
Sample survey is conducted
May be conducted by a team conducting interviews
May be done by questionaire (postal or online)
Desk Research
Carried out in house or even at a local library
Uses secondary research such as results from industry wide surveys
Marketing Intelligence
Research and analyse market data collected by own industry
associations or through external agencies
Intelligence can also be gathered from own staff who deal with
customers
Assessment of the market must be conducted continuously. It should also be conducted

objectively. This means looking at the situation from the viewpoint of somebody outside of
the company.
Are there any

What are the Who may be
other products
criticisms of our interested in
for us to look
products? this product?
Are any changes How affluent

in the market are they and is
expected? this likely to
Is the market Are we

static, forgetting to do
expanding or anything
Are we What motivates
monitoring the people to buy
trade press? this product?

69
Public Relations (PR)
Public relations (PR) is concerned with establishing and maintaining the right public image
for the organisation. Even small companies should appoint somebody who is authorised to
handle public relations on their behalf. Large organisations are likely to have a PR
department or may use external public relations consultants.
Clarify the impact the board wants to

Clarify the impression of the firm the
make and which parts of the market it
board of directors wants to convey
wants to influence
Free
advertising
Essentials of PR Policy
Correct any wrong or adverse Ensure that good news stories about
impressions about the company, the organisation are picked up by the
especially with customers and trading press (e.g. awards, large orders,
partners employment of new staff, etc)
Customer Relations Management
This is concerned with building and maintaining the database of customers. It is a significant
but narrow part of the PR role. Activities may include:
Monitoring all different types of publicity and advertising used and the responses they
produce.
Maintaining a system to follow up on people who dont respond to campaigns directed

to them.
Paying particular attention to customers who are not satisfied.
Profiling of customers this can help to identify people who may be interested in other
products supplied by the business.
Possible use of loyalty schemes or systems so that customers are rewarded for repeat
business.

70
Main Duties of the publicity manager
Produce and agree a publicity

Produce a programme of Build and maintain a team of budget with the board. This
publicity. This needs to staff with appropriate skills and should be broken down so that
balance the various media that expertise. This includes co- there is a budget allocation for
could be used and the budget ordinating and managing their each planned activity. Control
available activities of this budget also falls within
this role
Types of Advertising
Informative Advertising Persuasive Advertising
This tells people about the This is aimed at persuading people

product. For example: to buy the product.
How to use it
Technical information It is considered to be necessary but
Why it is a useful product it is the type of advertising that does
not always have a good reputation
Advertising Standards
The Advertising Standards Authority was set up in the UK to investigate complaints about
advertising. This has led to an improvement in the standard of advertising. In many cases
advertisers have agreed to change or withdraw advertisements because they did not realise
they might be offending some people until this was brought to their attention by the
agency.
Advertising Agencies
These act as intermediaries between the advertising company and the company that
provides the advertising media.
Payment is made for the work Commission is paid to the

Payments are made
done on behalf of the to advertising agency by the medium being
advertiser. agencies in 2 ways used for the advertisement
(e.g. the television company).

71
Advertising Media
Television is probably the most well know advertising media but it is very expensive and
there are many other media used by advertisers. In fact, television advertising is only a small
part of the advertising that takes place. Here are some other advertising media used by
businesses.
The Business Press

Trade journals are particularly useful for business to business advertising
In addition to paying for advertising it may also be possible to provide press
releases and own articles which act as free advertising
Brochures
These are an important form of advertising for many businesses
The main advantage is that they concentrate on your own products and in
more detail than any other form of advertising
They are expensive to produce
Direct Mail
This can be effective but can also have a bad reputation
The main problem is addressing mail to people interested in your products
This approach works best with existing customers and subscribers but it is
possible to buy address lists
E Commerce
Advertising through the internet is now well established
The two main approaches are 'business to business' and 'business to final
customer' advertising
Requires an engaging website with ways to attract and keep visitors
Exhibitions
This is seen to be an inexpensive way of advertising although prime sites are
not cheap
Exhibitors need to comply with health and safety and fire safety
requirements
Point of sale advertising

Posters, stickers, brochures pricelists and displays all help to draw the
attention of existing customers to other products on sale
This is low cost advertising designed to encourage customers to return in
the future or to make further purchases during this visit

72
Pricing
The marketing director has a key role in pricing policy. The aim is to make a profit. To
achieve this, the price to the customer must include all of the costs the business will incur.
These costs fall into two categories.
Variable Costs Fixed Costs
These costs vary according to the These stay the same whatever the
output of the business. For output of the business. For
example, in a manufacturing example, the rent on a building
business the cost of raw materials does not change because more
vary according to the number of production is taking place.
orders.
It is important to take account of variable and fixed costs when setting selling prices. This
also means making enough sales to make a profit.
Other Pricing Factors
Competitors
Price Lining
There is little point in
Monopoly Conditions This is common practice and
reducing prices to increase
is seen a lot in supermarkets
It is usually possible to get a market share if your
where standard, down
better price if there are few competitors do the same.
market and up market
or no competitors. This can result in prices
versions of a product are
spiralling downwards and
offered at different prices.
lead to losses.
Market Separation Distribution Methods

It may be possible to offer The method of distribution
products at different prices can affect pricing. For
to different parts of the example, it may be possible
market. For example, to offer lower prices when
members of a club may be selling direct to the
offered better prices than customer rather than
the general public. through a retailer.

73
Credit Control
This does not strictly belong in the pricing section but it is an important part of sales policy.
This is because there is no point in having sound pricing if customers do not pay up.
New Customers Regular Customers

It is common practice to Credit may be allowed for
require cash with the order or regular customers. This works
cash on delivery with the first on the basis that payment
orders made by new must be made within an
customers. agreed period of time (e.g. 30
days).
Credit Limit Failure to Pay

There should be an agreed There must be a procedure to
limit on the amount of credit deal with late payers. This
allowed. If that limit is usually involves a formal
exceeded then payment will request for payment by letter,
need to be made up front, followed by a solicitors letter
unless a higher limit is agreed. and possible court action if
payment is still not made.

74
Sales Administration
The main functions of the sales manager include:
1. Setting up and controlling the sales office
2. Appointing, inducting, motivating and supervising the sales team
3. Setting up and maintaining an effective system of documentation in co-operation

with other departments. This is to ensure efficient operations and is also used to
generate valuable management information.
4. Work with any marketing, promotions or advertising departments to ensure there

are suitable promotional materials for the sales team.
The Sales Team
To be successful, members of the sales team will need to be fully trained in the following:
Sales skills
Detailed product knowledge
Company systems, procedures and documentation
They also need to be highly motivated and interested in the products sold by the company.
Payment only by results does provide

Payment of a flat salary regardless of
incentive but causes problems for
performance may not provide sales
employees because there are likely to
people with the incentive to increase
be flat periods when they receive
the sales they make
little or no payment
Remumeration of the
sales team - key
considerations
Inexperienced people who are new Commission or other incentives such

to sales work will generally need a as prizes for meeting minimum
basic salary that may be targets can increase sales but may
supplemented by an incentive also lead to aggressive selling and
scheme bad publicity
Every business is different. This means that the approach for rewarding sales staff varies
according to the nature of the business. It is important that incentives to increase sales do
not lead to bad publicity through aggressive, or other selling techniques, that are not in the
interests of customers.

75
Territory Allocation
Sales staff are often allocated Sales representatives will

an area to operate in. normally live in their area
because:
To be effective their area of
operation will need to have an Local knowledge and
adequate number of potential contacts can be vital
customers.
It optimises travelling
time
Sales Stationery
The right stationery is a big help to sales staff. This must not only convey the right image of
the company but any documentation needs to be portable and easy to complete.
Business Cards Price Lists
Compliment Slips Leaflets
Pre Paid Envelopes Brochures
Order Forms Draft Estimates
In addition to these examples of stationery it is also important for sales representatives to

be kept up to date. They need to know about any changes to products being sold, new
products being included and products being withdrawn. This includes any changes to
pricing and to any processes and procedures that may affect them or their customers.
All stationery must be kept up to date. It is also important to keep regular contact with sales
representatives as it is easy for them to feel out of touch and for their information to
become out of date.
Sales Conferences
One way of keeping sales staff in touch is through annual sales conferences. These also have
the effect of generating new enthusiasm as targets for the next year are set. In some
organisations these are large three day events in exotic locations and partners are
encouraged to attend.
These conferences usually have a theme. This could be a product theme or a publicity
theme. Alternatively, it could be a theme relating to something topical (e.g. the credit
crunch).

76
Distribution and Transport
Distribution and Transportation will often come under the control of the marketing director.
The Distribution Process
Clear the production lines

This is an important first step as it is important to make sure that
there are no bottlenecks to hold up production.
Temprary Storage
Finished goods may need to go into temporary storage.
However this means they have to be handled at least twice. This
increases costs and the risk of damage during handling.
Loading
The finished items are loaded on to lorries or whatever other
method of transport is being used. The unit load concept is
important here as it makes loading more efficient.
Unit Loading
Single items are

consolidated into a larger Unit loads can be picked up
unit. by machines such as fork lift
trucks making loading and
For example, 10 boxes may unloading easier and
be batched together and quicker.
loaded as a single package.

77
Channels of Distribution
Channels used for distribution vary a lot and are mainly determined
by the types of goods.
For example, perishable goods must be distributed in a way that is

simple fast and direct. This is necessary because it must get to the
consumer as fresh as possible. Perishable goods
Food and Household items are mainly distributed by wholesalers although large chains such
as supermarkets will usually act as their own wholesalers.
Distributing goods via wholesalers
Advantages for manufacturers Advantages for retailers
Sales of large quantities of goods helps Wholesalers can deliver everything the
keep production lines clear retailer needs in a single delivery
Problems with transport and Cash flow problems may be helped by

warehousing are minimised the wholesaler agreeing credit terms
with the retailer
Marketing is taken on by the
wholesalers who may develop their Goods are often packed, graded and
own brand image priced by the wholesaler
Wholesalers pay promptly Point of sale advertising materials are

often provided by the wholesaler
Wholesalers bridge geographic and
time gaps between manufacturers and It is often possible for retailers to
consumers inspect goods or samples before buying
them, especially if the wholesaler has
showroom facilities
Durable consumer goods1 often require after sales servicing and maintenance. This means
that retailers either need to have their own trained people to do this or will need to have
arrangements in place with external contractors.
These goods are often distributed to retailers through an agency system. These agents have
similarities to wholesalers because they can buy goods in bulk from the manufacturer.
1
Durable goods include cookers, washing machines, refrigerators, televisions, etc

78
Transport
The main methods are road, rail, sea and air but we will look at
road transport here because it used most in the UK.
The Three Main Approaches to Road Transport
Own Account Operations Contract Hire Public Hauliers

The company owns and The company hires the fleet Public hauliers are used to
manages its own vehicles of vehicles transport goods so the
company can shop around
If the company uses its Maintenance and servicing for the best price
own livery this is good are not their problem but
advertising they still have control of The company can hire the
the vehicles best type of vehicle for
The company has to bear the job
its own maintenance and This is likely to be more
servicing costs expensive than own The haulier owes you no
account operations but the loyalty and may give
There are hidden costs costs are known in advance priority to other
(e.g. tax and insurance) customers at busy times
There is still a problem with
Vehicles have to return vehicles returning from The company has no
empty and this is not good deliveries empty control over the vehicle or
value for money the driver
Dispatch Sequence
Packaging
Main aim is to protect the goods in transit Can also be used for advertising purposes
Packing
This reinforces protection of the goods Must be appropriate packing for the goods
Documentation
The invoice triggers the dispatch process Copies are needed for the customer and for the
sales, dispatch and accounts departments
Marks and Identification

Eases identification and ensures everything is
Invoices are normally accompanied by labels
delivered
The transport schedule

This is effectively a list of journeys to be made Schedules deliveries, recipients and the load

79
Export Marketing
Exporting and importing of good are essential for most countries. This means that many
businesses are involved in exporting their products. However, export marketing does come
with some problems. The most obvious of these may be language. For example, instruction
manuals may not translate well.
It can be difficult to enforce contracts when There can be problems with the product itself.
foreign laws are involved. This can be eased by For example, road vehicles may have to be
adopting international trading conventions, adapted for left hand or right hand drive
where these apply. according to the country of sale.
Possible problems with

export marketing
Special documentation may be necessary. For

example, consular invoices may be necessary as
If the product needs after sales servicing, repair
well as ordinay invoices. These are certified
or maintenance this will cause difficulties if
copies of invoices authorising purchase of the
there are no local facilities available.
goods because they benefit the country of
import.
Exporting Methods
There are five main exporting methods:

Through an Export merchants operate abroad. They purchase the products and sell them
export merchant abroad at a profit which means that the company selling the product has no
direct involvement in the export arrangements.
Through a A confirming house obtains orders from foreign buyers and places orders with
confirming suppliers. This is another arrangement where the company selling the product
house does not get directly involved in the exporting arrangements.
Direct sales to In certain areas it is possible to sell direct to foreign customers (for example
overseas some vineyards sell wine direct). There has been some growth in this as a
customers result of the growth of the internet. Trading is usually on the basis that
payment is made at the time of the order.
Through an The agent acts on behalf of the seller in finding customers for their products. It
overseas agent is also their job to obtain payment from the customer. The agent is usually
paid by the seller in the form of a fee known as commission.
Through an If the operation is large enough there may be benefits in setting up an
overseas branch overseas office. This is often welcomed by the host country as it provides local
office employment. However, there can be problems. For example, there will need
to be some formal arrangements for returning any profits to the UK.

80
Payment for Exports
There are two issues that need to be resolved.
1. The exporter will not want to proceed with the export unless payment is guaranteed.
2. The importer wont want to pay in advance unless delivery is guaranteed.
There are five main ways to deal with this.
Cash With Order Letter of Credit

The importer makes payment at the The importer places money or arranges
time of making the order. The exporter credit with a bank. The bank then
starts work on the order straight away. notifies the exporter that payment is
This approach is suitable for small guaranteed when the order is filled.
orders where there is limited risk
involved.
Documents Against Payment Documents Against Acceptance

Payment is secured with an invoice, Agreement is made that payment is
certificate of insuarnce and bill of based on a bill of exchange and is made
exchange (signed by the master of a at some time in the future (e.g. 60
ship being used to transport the goods). days). This effectively gives the
If the goods are lost or damaged at sea importer a period of credit.
then the importer claims on the
insurance.
'Open Account' Terms

If both parties trust each other then an
open account can be set up to operate
in exactly the same way as a home
account. This usually means that
payment is made on the basis of a
monthly statement.

81
1. You work for a company which produces MP3 players and the Marketing Department
has asked you to assist them in deciding the most appropriate media for advertising
a new generation of MP3 players. In a memorandum to the Marketing Manager,
provide this information, giving reasons for your choice.
2. For a product of your own choice, describe:
a) the main areas of market research

b) their most appropriate application
3. a) Describe the factors which influence the size of the market for a particular good
or service.
b) What media outlets are most suitable for the following:
i A DVD player manufacturer

ii A fashion clothing retailer
iii An importer of cars
6. a) Define the marketing mix.
b) Explain the significance of the marketing mix to a company which is about to

launch a new range of leisure clothing.
6. a) Describe the FIVE main elements in the sequence of dispatch activities when
transporting and distributing goods for sale.
b) List the main advantages of owning your own transport fleet for distribution.

82
Section 8
Information Technology

83
Computers in Business
The term Information Technology (IT) has many definitions and most refer to the use of
computers and telecommunications to process, store retrieve and transmit information.
This means that the IT function is a key part of any modern business.
Computers play an important part in virtually every business in the modern world. This is
because they have the ability to carry out simple functions much more quickly and
accurately than humans. This in turn means that certain jobs are simplified by the use of
computers. For example, book keeping and accounting is rarely done manually these days.
Before looking at the subject in any detail there are two terms we first need to understand.
Hardware The computer itself and its accessories (sometimes known as

peripherals).
Software The programmes that tell the computer what to do.
Three Main Types of Computer
Main Frames
These are still used in very large organisations
A large central computer is served to individual staff through
terminals at their own work stations
The main advantage is the ability to save time by updating software
and backing up files centrally
Mini Computers
These are similar to mainframes but are on a smaller scale
Like mainframes they have the advantage that software can be
updated centrally without having to do this at individual PC's
Personal Computers
Most organisations use desktop or laptop PC's these days
They will certainly be able to carry out most of the work needed in
small to medium sized companies
They can be linked through a Local Area Network (LAN)

84
Input Devices
There are a number of different ways of inputting information into a computer system.
Advances in technology mean that these have developed a lot since the early days of
computers.
Punched Cards These were used to input data into the earliest computers. Although
and Paper now rare you may occasionally encounter these where older mainframe
Tape computers are still in use. This was a slow method for inputting
information and has been superseded by more modern technology.
Magnetic Tape These were the next generation after punched cards and paper tape.
and They are much more convenient and quicker and are able to contain a
FloppyDiscs lot more data.
These, in turn, have been superseded by compact discs and memory

sticks which are capable of storing even more information.
Terminals A terminal is made up of a display screen (monitor), a keyboard and

mouse. It may also include a webcam, microphone, speakers or
headphones.
Terminals may be connected to a mainframe enabling all users to

connect to the same system at the same time. For example, claims
handlers in an insurance company will be able to connect to the same
claims system simultaneously.
Specialised There are now a wide variety of ways of inputting data. These include:
Input Devices
Bar Codes - Each bar code is a unique pattern of lines which can be read
by a light pen. These are in common use at supermarket check outs.
Magnetic Ink Character Recognition (MICR) These are usually number

codes that can be found in cheques, pay slips, etc.
Optical Mark Recognition (OMR) / Optical Character Recognition

(OCR) This is used to read documents manually. Perhaps the best
example of this is examination papers made up of multiple choice
questions. The computer is able to recognise the position of a cross, tick
or other mark and to scores the paper automatically.

85
Output Devices
Just as there are a number of ways of inputting information so there are different ways of
viewing it once it has been processed.
Display Screen This allows information to be viewed instantly but does not present it in
(Monitor) a permanent form. This is the quickest way of viewing information and
is ideal when it does not need to be in a paper format. Indeed, many
organisations actively discourage printing information unless it is
absolutely necessary.
Speakers and Sound plays an important part in many programmes and in these cases
Headphones a speaker or headphones is essential. For example much computer
based learning (e learning) relies on sound and/or video.
Printers Printers are useful when it is necessary to produce information in a

permanent paper format. There are many different types with old
fashioned line printers being the slowest and modern laser printers
being the fastest.
Technology is advancing all of the time with many more input and output devices finding
their way into business use. For example, advances in mobile phone technology mean that
many managers can easily link to their computer system even when travelling.

86
Networks
There are four main types of network used by businesses.
A LAN is a computer network An intranet is an internally

covering a small area, usually controlled network for internal
within a single building. For company use only, and works
example, the computers in an well with large (often global)
accounts department may be businesses.
linked to each other and use
common programmes and data Password control allows and
that all users can access. restricts access by individuals.
Password control ensures that Full internet access is not

only authorised users can usually available but can be
access the system, or parts of opened up to individuals where
it. there is a business need.
Local Area
Network Intranet
(LAN)
Extranet Internet
An extranet is similar to an Access to the internet is

intranet. However, it is becoming more and more
available to a community of important. For example, most
companies. These companies companies need good websites
may be part of the same group to help then to grow their
or business partners who need businesses and keep them in
to share the same computer the public eye.
systems.
The ability to communicate by
e mail is also essential in the
modern world.

87
I.T. Security
There are a number of security problems associated with Information Technology and there
are many potential threats.
Loss of data Theft of hardware
Corruption of data Theft of software
Computer viruses Theft of data
Corruption of systems Computer Hacking
Malicious Damage Industrial Espionage
These and other threats are minimised by a number of preventative measures including:
Regular back up of data
Blocking access to systems by redundant or disgruntled employees
Security procedures, including password control and limiting access to those parts of
the system individual employs need to do their jobs
Anti virus programmes
Monitoring and auditing of computer usage
Physical security to prevent theft or malicious damage
Training to ensure that employees are aware of the threats and make full and proper
use of essential security procedures

88
The Telephone System
Modern telephone systems used by businesses fall within the control of the IT function.
These systems are controlled with microprocessors which are programmed to make
connections and to control a number of facilities. Each business will programme their
system according to their needs but some of the most commonly found facilities are found
below.
Call Queuing Call Storing

Incoming calls are Regular numbers are
queued in the order they stored in the system
arrive. No charge is made memory and can be
until the call is answered. recalled at the touch of a
button.
Last Number Redial Call Barring

The telephone stores the This can be used to bar
last number dialed and a certain extensions from
simple code allows the making international
user to redial it. calls.
Conference Calls Call Diversion

Allows a number of users A user on one extension
to hold a telephone can programme it so that
conference or video it automatically diverts to
conference if all users another person.
have video phones.
Executive Intrusion Voicemail

This allows certain users Allows pre recorded
to break into a call, messages to say when a
perhaps to warn that a person on an extension is
higher priority call has not available and what to
been received. do in his/her absence.

89
1. Email is now considered to be one of the most important means of communicating

easily and quickly.
a) Briefly describe how email works.

b) Explain the advantages of email.
c) Identify the main pieces of IT equipment necessary to operate an email facility.
2. Explain, giving examples, under what circumstances you would use the following:
a) Intranet
b) Internet
c) Extranet
d) Email
3. a) Briefly compare the differences between:
i the internet
ii the intranet
b) Define the term e-commerce.
c) Describe what action can be taken to ensure that internet transactions are
made secure.
4. The organisation you work for is moving into new offices and is proposing to install
up-to-date IT equipment. The Office Supervisor has asked you to identify
the hardware and equipment that would be suitable for a modern office.

90
Section 9
The Personnel Department

(Human Resources)

91
Personnel Department
Recruitment
and selection
Training,
monitoring Induction of
and recording new staff
staff progress
Compliance Personnel Negotiate

with
employment
Department terms of
Functions employment
law
Disciplinary Retirement,
and grievance redundancy,
procedures etc.
Staff welfare
(e.g illness,
bereavement.
etc)
The Personnel or Human Resources department is involved in all aspects of staff

employment. The key role of the department is the administration and management of the
people employed by the business.
Although there is some involvement in employee welfare this is not the main function of
this area of the business. It exists to ensure that the human resources of the organisation
are used effectively and efficiently.

92
Personnel Policy
The personnel department is responsible for developing and maintaining personnel policy
which should contain the following features.
Remuneration
The aim is to employ people with required skills and abilities as economically
as possible
The policy should ensure that employees are paid the 'going rate' for the job
Employers do not want to be seen as ruthless exploiters of their staff
Security of Employment
Securityof employment is important to most employees and a good
personnel policy aims to achieve this
The policy should include fair treatment of employees as unfair behaviour
leads to staff unrest
Advancement and Self Realisation

Self esteem and self realisation are important to people
The policy should provide for learning and development opportunities
A policy of promotion from within and succession planning is adopted where
possible
Freedom from Discrimination

It is essential that the policy deals with the approach of the organisation to
equality and that it complies with equality law.
In the UK this is contained in the Equality Act 2010
Fair Treatment
The policy needs to deal with the approach to fair treatment of employees
and should include disciplinary and grievance procedures
The principle of natural justice should apply meaning that everyone has a
right to a hearing and nobody should be allowed to be a judge in their own
case
Industrial Relations
Good industrial relations are essential
The personnel policy should comply with the various codes of practice
relating to industrial relations (e.g Code of Practice: Industrial Action Ballots
and Notice to Employers)

93
Human Resource Management
One of the key aims is to ensure the harmonious growth or contraction of the workforce
dependent upon the requirements of the organisation.
This needs to be done with the minimum disruption to the business and the people
who work for it
It is also important to achieve the best fit between the staff available and staffing
requirements
Mergers and acquisitions can be particularly challenging and the integration of staff from
two or more businesses needs to be managed carefully. It is particularly important to
identify potential problem areas, such as possible redundancies and to plan and manage
these. This includes managing the expectations of staff with appropriate communication.
Human Resource Planning
Organisations are constantly changing. This means that the number of staff they need and
the skills and abilities they require also change. Effective human resource planning
anticipates and takes account of these changes.
Review Existing Situation Assess Future Requirements

Are the current needs of the organisation being Will the present system and approach to human
met? resourcing meet future objectives?
Are all jobs clearly defined and graded Identify the gaps between the current situation
correctly? and future requirments.
Do all employees receive regular performance Can this be solved through training of staff and
appraisals? is there time to do this?
Human
Resource
Planning
Plan staff training
Draw up future staffing plans This raises morale as it encourages staff to think
Produce detailed staffing plans. about their future and helps identify people for
future promotions
Decide who wll occupy key posts and key
supporting roles. It there are no suitable people with the
potential to fill roles required in the future then
a recruitment and resourcing plan will be
needed.

94
Employee Records
One of the key tasks of the personnel department is to maintain confidential and
comprehensive records for each and every employee.
Recruitment Employment
Appropriate records are needed to This should include contracts of

show that the organisation is employment, appraisal and training
complying with the law. records.
Absence and Attendance Discipline and Grievance
All planned and unplanned absence Detailed records are necessary to

should be recorded. Sickness show that proper procedure has
absence is subject to statutory sick been followed.
pay in the UK and must be carefully
recorded.
Statutory Maternity Pay Statutory Sick Pay
Records should include details of Detailed records of statutory sick

entitlements and dates of maternity pay should include dates of absence,
absence and return to work. reasons for absence and amounts
paid.
Redundancy Termination of Employment
Good records are essential to This is another area where it is

demonstrate fair treatment of important to be able to demonstrate
employees. These should include the fair treatment, so accurate and
redundancy procedure, records of detailed records are essential.
any consultations and records of the
decisions made.

95
Recruitment
The personnel department works closely with the business to recruit the right staff at the
right cost. This works most effectively if there is a proper system in place.
Personnel Requisition
A personnel requisition is a formal request to the personnel department to recruit staff.
Minimum information included in the Other information the requisition may

requisition include
Type of post/job Days and hours of work required

Whether the post is permanent or Possible overtime requirements
temporary Place of work
Whether the post is a short term Experience and qualifications required
secondment during a leave of absence Any special inducements (e.g. company
Whether the post is full time or part car)
time
Summary of the job description
Sources of Recruitment
Internal Recruitment Family and Friends

Jobs are advertised internally Existing staff may encourage
and existing staff are family and friends to apply.
encouraged to apply. Some firms offer incentives to
staff recommending people in
this way.
Employment Agencies Advertising

These take some of the more Jobs may be advertised in the
laborious work out of local press, job centre or
recruiting and may specialise radio. Many businesses also
in particular industries. advertise posts in the trade
Specialist agencies are also press. The national press may
used to head hunt senior also be used to advertise
staff. some senior positions.

96
Application Forms
The usual procedure is to invite applicants to complete an application form. These are
designed to collect as much information as possible to help shortlist applicants for
interview. The role of the personnel department is to:
Acknowledge all application forms

Sift through the applications
Work with the department that is recruiting to draw up a shortlist for interview
Selection Interviewing
It is vital to conduct interviews in a correct and proper manner. This is because it is

important to select the right person for the job. Even when a candidate is unsuccessful there
may be problems if there is any allegation of unfair treatment.
Remember that interviews are a two way process.
Employer Candidate
Will need to check the information on Wants to know the terms of

the application form employment
Compare the candidate with the job Needs to know the nature of the work
specification. The aim is to appoint and the scope for advancement
someone who meets the specification.
If none of the candidates is suitable the Needs to decide whether this is the
role will need to be re-advertised. right job for me.
A proper interview record should be kept. Ideally, everyone on the interview panel should
make their own notes. At the end of the interview a short summary should be written. This
is particularly important if the decision is unfavourable to the candidate.
Use open questions to Use closed questions when

encourage the candidate to questioning specific
speak. information.
Questioning Candidates
Appointing a new employee is a formal process. Job offers must be made in writing and
written acceptances must be obtained. This is necessary even if the job has already been
offered and accepted verbally. This is because candidates may change their minds and a
formal process helps to prevent misunderstandings.

97
Induction and Training
Training (or Learning and Development) is usually the function of a specialist team working
within the Personnel department.
The personnel department deals with the initial induction of new staff before handing them
to the area of the business where they will be working. An induction checklist is likely to be
used to ensure that all important topics are covered. This may be signed and counter signed
by employee and employer. This helps to show that everything is being done to comply with
any regulations and laws that apply.
Induction by
Personnel
Department
Welcome to Major
new Aspects of
employees employment
Background Tour of the

Rules,
to the Benefits and Health and building - fire
regulations,
company and facilities safety exits, toilets,
compliance
values canteen, etc
Examples of topics covered during induction
Learning and development does not stop at the end of the induction. The chart below gives
examples of other activities carried out within businesses.
Job Training Apprentice Training

The most important requirement after induction, This is similar to job training but usually includes a
where employees learn their jobs. formal qualification.
A mix of approaches is likely to be used (e.g. Apprentices will usually learn a combination of
formal classroom training, on job training, theory and practice.
coaching, e learning, etc.). Apprenticeships may include allowing time to
attend a local college.
Management Training Learning and Development

It is essential that managers receive all necessary All employees should be encouraged to develope
training to be effective in their roles. new knowledge and skills.
New and and aspiring managers will normally learn This aids succession planning and helps to develope
minor supervisory duties before the more complex the business.
and strategic elements of management roles.

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Performance Appraisals
Performance appraisals are linked to job descriptions which set out the requirements of the
role in terms of:
Work to be carried out

The training, skills and knowledge required to carry out the job
The objectives or accountabilities of the job (these may be set out in a separate
document and updated regularly)
The appraisal compares the performance of the individual against the requirements of the
job.
Purpose of performance appraisals
To compare the job holders To set out the reasons for any
actual performance with the shortfall in performance and
job set out in the job to agree the action needed to
description remedy the situation
To set out the range of To provide the basis for merit

performance of the jobholder pay increases, but experience
(for example: reliability, tells us it is better to hold
productivity, accuracy, appraisal meetings at a
customer service, team work, different time to the annual
etc) pay round
For appraisals to be effective they should be documented. They should also have clear
conclusions and set out future objectives which should form the basis of the next appraisal.
Although formal appraisals may only take place once or twice a year they need to be
supported by regular one to one informal meetings.
Consistency issues
Appraisals are conducted locally within departments. This means that there is a risk of
inconsistency. For this reason it is usual for all completed appraisal forms to be seen by the
Personnel Department to ensure fairness and consistency.

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Promotion and Transfer
It is important that the Merit, ability and suitability

personnel policy on for the job must be the basis
promotions and internal job of internal appointments. If
opportunities is fair. It must this is not the case there is
also be seem to be fair. potential for discontent and
even legal action.
Even when the selection It helps to reassure

process is seen to be fair unsuccessful candidates that
unsuccessful candidates may they are valued, especially if
leave if they do not get the they are offered development
job they were hoping for. opportunities within their
current role.
Transfers between departments may happen for many reasons and examples include:
Requirement of the business Employee requests a transfer
There may be a shortage of staff in one Reasons may include looking for more
area of the business and a surplus in interesting work or because there are
another. In these circumstances volunteers better promotion prospects in another
will normally be sought. However, it may be department. On other occasions staff may
necessary to insist on individuals moving if ask for a transfer because they are not
there are not enough volunteers. compatible with their colleagues.

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Termination and Dismissal
There are a number of ways in which employment may be terminated
Summary Dismissal
Dismissal
Giving Notice
Redundancy
It is vital that the legal rights of employees are respected. In the UK the primary piece of
legislation to consider is the Employment Rights Act 1996. A code of conduct has since been
produced that provides a practical approach.
Code of Conduct
All employers should have written rules and disciplinary procedures to include:
o The objectives of the disciplinary procedure

o The types of conduct regarded as being unsatisfactory
o The types of conduct regarded as being serious misconduct and gross
misconduct
Copies of these rules and procedures should be made available to all staff
It is important to follow the code of conduct and all formal procedures for investigations
and enquiries. This is because of potential claims for unfair dismissal and it is important to
be able to show that correct and proper processes were followed.

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Gross Misconduct
Gross misconduct is extremely serious and means instant dismissal. However, senior
management do have some discretion and may give a written warning with summary
dismissal for any future incidents. Examples of gross misconduct may include:
Theft
Fraud
Violent behaviour whilst at work
Accepting bribes
Falsifying timesheets or time clocks
Willful damage of company property, equipment, stock, etc
Indecent or immoral behavior
Extreme cases of insulting behaviour
Redundancy
In the UK Redundancy is governed by the employment rights act 1996. It is the dismissal of
employees for one of three main reasons:
The employer no longer carries out the work for which the employee was taken on
The amount of available work has reduced
Relocation of the business
Must consult with the recognised trade union as soon as possible

Trade Union This must be done at least 9 days before the first dismissals, if
Consultation more than 99 people will be affected
Must give reasons for the redundancies, numbers of people
involved and how they will be selected
If these selection criteria are not followed the union may pursue
claims for unfair dismissal
This is a legal requirement in the UK if redundancy affects more

Notify Secretary than 10 people
of State This must be done at least 30 days before the redundancies take
effect
In the UK the people being made redundant are entitled to

Redundancy redundancy payment
payment This is based on length of service with minimum payments being
subject to a scale which changes from time to time.

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Industrial Relations Practice
The Personnel Officer plays a key role in industrial relations negotiations. There are three
main aspects to consider.
1. Legislation and codes of practice relating to industrial relations

2. The regulations of any recognised trade unions
3. Company policy on industrial relations
Legislation and Codes of Practice
It is important for the Personnel Officer to keep up to date with legislation and the political
background affecting industrial relations. In the UK an important piece of legislation is the
Employment Act 1988 (as amended).
The Personnel Officer has a difficult balancing act to perform.
The needs of the firm: Rights of employees:
For example, people with the required skills Must not be denied the rights they are
need to be employed at the right price. entitled to by law. This includes the right to
be represented by a trade union (and the
right not to join a trade union).

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The Equality Act 2010
This important piece of legislation came into effect in the UK on 1 October 2010.
It replaced nine major pieces of legislation and many smaller pieces of law. It draws
together all the important UK anti-discrimination laws. The Act sets out a number of
protected characteristics.
Age Disability Pregnancy and

Employers are prevented The Act says that a person Maternity
from saying, without any is disabled if they have a The Act gives protection
justification, that an physical or mental against discrimination to
applicant is too old or too impairment which has a women who are pregnant
young for a job. substantial and long term or on maternity leave
adverse effect on their during the period of
ability to carry out normal pregnancy and during
Marriage and Civil
day-to-day activities. statutory maternity leave.
Partnership
The 2010 Act makes it
unlawful to discriminate
directly or indirectly against Sex
people who are married or It is not lawful to treat
in a civil partnership. someone less favourably on
Protected
the basis of their sex.
Gender Reassignment Characteristics Protection applies against
Here employers must all types of discriminatory
consider people who are actions set out in the 2010
proposing to, are starting or Act.
have completed a process
to gender change.
Race Religion or Belief Sexual Orientation

Within the Act, race An employer must be People are protected
includes colour, nationality aware that people are against all types of
and ethnic or national protected against all types discrimination on the
origins. of discrimination on the grounds of their sexual
grounds of their religion or orientation. This means
It is unlawful for employers beliefs (or the absence of those who are bisexual,
to discriminate on the gay, heterosexual and
these).
grounds of a persons race.
lesbian.

104
The Equality Act also sets out various Types of Discrimination
Direct This occurs when someone is treated less favourably than another
Discrimination person because of a protected characteristic.
Associative This is discrimination against a person because they have an

Discrimination association with someone with a protected characteristic.
This is discrimination against a person because the discriminator

Perceptive
thinks the person possesses a protected characteristic, even if they
Discrimination
do not in actually do so.
Indirect This occurs where a policy, rule or procedure applies to everyone but
Discrimination has a disproportionate impact on people with a protected
characteristic.
Harassment The Act defines harassment as unwanted conduct related to a

relevant protected characteristic, which has the purpose or effect of
violating an individuals dignity or creating an intimidating, hostile,
degrading, humiliating or offensive environment for that individual'.
It applies to all the protected characteristics except for pregnancy and

maternity and marriage and civil partnership. Employees can
complain of behaviour they find offensive even if it is not directed at
them.
Third Party The Act makes employers potentially liable for harassment of their
Harassment employees by people they do not employ. An employer will only be
liable if the harassment has occurred on at least two previous
occasions, and if it knows that it has taken place and has not taken
reasonable steps to prevent it from repeating.
Third party harassment applies to all the protected characteristics

except for pregnancy and maternity and marriage and civil
partnership.
Victimisation This occurs when an employee is treated badly because they have
made or supported a complaint or raised a grievance under the
Equality Act; or because they are suspected of doing so.

105
Remuneration of Staff
Remuneration of staff is a key part of the work of the personnel department who must liaise
closely with the payroll department.
Information provided by personnel to payroll Information provided by payroll to personnel
Inform payroll department of Inform payroll department

appointments, dismissals, about absenteeism, notices of
promotions, retirements, etc sickness, compensation claims
Inform about changes in rates of from employees, etc
pay, annual pay rises, etc
All have to be actioned by payroll department May require action by personnel department

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Staff Turnover
High rates of staff turnover are costly for the business and potential costs may include:
Recruitment costs
Training costs
Spoilt work
Damage to machinery and equipment
Compensation claims
Loss of customers
Calculating staff turnover
The formula most commonly used is:
Percentage rate of staff turnover = Number of leavers in the year x 100

Average number of employees in the year
Imagine a business that employs 1000 people with 225 moving during the year. The
calculation would like this.
Percentage rate of staff turnover = 225 x 100 = 22.5%

1000
Whilst some turnover of staff may be considered healthy this should always be monitored.
In our example a turnover of 22.5% is excessive and requires investigation. The personnel
department will try to discover the root causes of so many people leaving and will address
these if possible.

107
1. You have been asked by your line manager to draw up a pre-interview checklist for
the procedures to be used in handling applications for a job in your department.
a) Produce a checklist that could be used by your manager to process the

applications for this position.
b) Explain the importance of the items you included in the checklist.
2. a) With the aid of a diagram, explain how the Five Point Plan can be used in the
design of a Person Specification.
b) Describe the main benefits of a formal Induction Training programme to new

employees.
3. a) Briefly describe the main functions of a personnel department.
b) Explain the main purposes and benefits of performance appraisal.

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Section 10
10
The Accounting Function

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Definition of Accounting
The systematic recording, reporting and analysis of the financial
transactions of a business.
The accounting function is essential to every business and affects every aspect and every
department in the business. This ranges from top level financial management (e.g. mergers
and takeovers) to more trivial financial matters (e.g. petty cash).
This means that some understanding of accounting is essential in any business studies. The
purpose of this section is to provide a brief introduction to the topic for the benefit of those
students who do not already have sound knowledge in this area.
Double Entry Book Keeping
All businesses are legally required to keep a record of their business transactions. The
purpose of double entry book-keeping is to ensure that these records are kept in a way that
can be universally understood. It is therefore used by most businesses
The concept behind this is that whenever a normal transaction takes place, two things
happen: something is gained and something is lost, and they are equal and opposite in
value.
Consider the simple example of a car dealer who sells a car. He gains the price of the car
but loses the car to the buyer. Two book keeping records are made to show this.
In thisWhen
example the acash
making saleaccount
a dealerbalance
loses thewould begains
car but increased to show
the money the
from theinflow
sale. resulting
from the sale and the stock account would be reduced to show that the vehicle has been
sold and the value of stock has gone down.
All transactions are recorded in the book keeping system. In modern times this is done
through specialised computer systems and the days of manual hand written entries in
physical ledgers have largely disappeared.

110
Functions of Financial Managers
There are a number of basic functions that are carried out by the people responsible for the
financial management of a business.
Raise the money to provide Financial decisions on the

the original capital for the allocation of resources for
business. the business.
Manage routine accounting Budgetary control - there is

trough the double entry a need to ensure that
book keeping system. department managers do
not over spend.
Control of internal audit Management accounting

procedures audits apply costing activities related to
to any department which production, pricing and
have control of cash, stock profitability.
or capital assets.
Producing annual accounts: Provide advice to managers

Trading account about all aspects of the
Profit and loss business. Financial
account managers are well placed
Balance sheet to spot good and bad
trends in the business.

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Accounting Control
Accountants have a vital role in helping senior management to control the business. There
are four key principles to be aware of:
1. The Accountant sets the standards of financial performance

2. The actual performance of the business is compared against these standards
3. The results are fed back systematically and any deviations from the standards are
corrected
4. Any corrections made are monitored to establish whether they are effective.
Controls must be appropriate for the A system of management by exception

organisation and the type of work it does . For should be used. This means that figures will
example, larger organisations generally need be reported only when they depart from set
more controls than smaller businesses. standards or normal expectations.
System of control
The systems of control must themselves be

Where possible, control should highlight any
subject to continued monitoring . This is so
weaknesses in systems that might be causing
that they can be modified, updated and
the problems shown by exception reporting.
replaced as necessary.
Preparing Accounts
There are three sets of accounts that are produced from the book keeping ledger.
Trading Account
Calculates gross profit.
This is the selling price minus
the cost of the goods sold.
Balance Sheet
Profit and Loss Account The assets and liabilites
Calculates the net of the bussiness are
profit. It takes the gross listed in a prescribed
profit from the trading format at the end of the
account and deducts financial year. This
the business overheads. forms the start point for
the next year.

112
Budgeting
Budgeting is the process of forming plans for a fixed period in the future. The budget will
always be shown in financial terms and other measures of quantity. For example, budgeted
production may be shown as units of output.
The most usual appoach is to appoint a budget committee. The budgets for the individual
functions and/or departments and/or cost centres are normally prepared by the people
heading those areas. They submit their local budget to the budget committee for approval
and to be incorporated into a master budget for the organisation.
It is not unusual for the budget committee to question the individual budgets submitted to
it and to impose cuts. Nevertheless, it is not acceptable for department heads to inflate
their budgets in anticipation of cuts being made.
The process of preparing budgets in this way and then monitoring performance against the
budget is known as budgetary control.
Managers must
think ahead and
set SMART
objectives
Good for morale
Allows objectives because it
to be quantified requires
in financial and consultation
numeric terms across the
business
Benefits of
budgetary
control
It allocates
Provides clear
responsibility,
control and
and every person
authorisation of
knows their role
expenditure
in the process
Managersa are
warned of
budget variances
so they can take
remedial action
The main drawback of budgetary control is the amount of work that is involved in preparing
the budget.

113
Financial Accounts
All businesses have to produce financial accounts. Whilst we will not be covering this in
detail, it is useful to have an understanding of the four stages involved in preparing this
information.
Find the Gross Profit on Trading

Gross profit is the difference between the selling
This is done in the Trading Account
price and the cost of the goods sold
Find the Net Profit

This starts with the Gross profit and the
overhead expenses (e.g. rent, rates, etc) of the This is done in the Profit and Loss Account
business are deducted
Appropriate the Profit

The net prrofit of the business is shared amongst This is done in an appropriation section of the
the owners , although some will be retained for Profit and Loss Account (or separate
use by the business Appropriation Account)
Draw up the Balance Sheet

A Balance Sheet is a list assets and liabilities and it provides a snapshot of the business at the end of
the financial year
These accounts form a part of the Annual Report which is a legal requirement for Public
Limited Companies. The final accounts are a matter of public record and copies must be sent
to all interested parties, such as shareholders. They must also be kept available for
inspection at the companys offices.

114
1. a) Define the term cash flow budget.
b) With the aid of an example, describe how budgeting can assist management
to control expenditure and make financial decisions.
2. a) Identify the SEVEN main functions of financial managers of organisations.
b) Define working capital.

115
Section 11
11
Office Administration

116
Administrative Officer
It is normal for a business to appoint somebody to be responsible for routine

administration. In larger firms this will be a dedicated role with the administrative officer
leading a team of people.
A wide range of functions are carried out by the administrative officer, although these will
vary according to the organisation.
Buildings
Includes the buildings, its facilities and equipment
Health and safety and security also fall under this heading
Clerical Activities
Manages stationery and other supplies needed by the business
Manages services such as filing, archiving and office procedures
Secretarial Activities
Central typing and photocopying functions will be managed by the
administrative officer
Communications
Includes the telephone system, switchboard, handsets, fax machines,
etc
Mobile communications such as pagers and mobile phones
Computer System
A possible role looking after parts of the computer system
Depends upon the systems being used and the responsibilies of the IT
department
Other activities covered by the administrative officer may include managing the reception,
incoming and outgoing mail, the fleet of vehicles, etc.

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Facilities Management
Modern technology has led to widespread changes in office administration. One result is
that it is now known as Facilities Management in many organisations.
The main change that happened in the late 20th century was the
use of computers. Most people working in offices need to use
computers and this means that they need the right facilities.
This is not restricted to the computer equipment itself but also
involves supplying the right kinds of desks and chairs.
Even the type of lighting in the business needs to be carefully considered. For example the
positioning and type of lighting must be chosen to avoid glare on computer screens.
New Techniques and Controls
New technologies have also changed the way in which we work. Routines and procedures
used in offices are different to how they looked just a few years ago.
These changes have brought with them much more focused reporting through the systems
themselves. This means that management is able to supervise work more closely than ever
before.
Counts the work done (including speed and

accuracy)
All of this can be
Set targets (including speed and accuracy) automated
Counts against the targets
The close supervision that is possible with technology does not tend to be popular with
employees. Many people find this to be intrusive and intimidating. This means that a
challenge for managers is to ensure a motivated workforce whilst at the same time
monitoring essential activities.

118
The Office and Its Functions
The administrative officer has a key role in setting up a new office, relocating it and ensuring
it runs smoothly once it is established.
Office Location
The office needs to be in Cost of land or rent may

the most central position affect the choice of
possible so that it can location.
perform its main function
of controlling the business.
Suitability of local transport Official government aid

links are an important may be available to
factor in deciding location. encourage a business to
There will also need to be move to a particular
sufficient staff available at location. This sometimes
the right cost. influences where an office
locates.
Type of building
Tall Buildings
Tall buildings have the advantage of being economical because they

reduce the site cost per person employed. However, they also have
disadvantages. For example, they need lifts and these have to be insured
and maintained regularly. Tall buildings also present more problems from
the health and safety point of view.

119
Open Plan Office
Open plan offices are now very common. This is because they have many
advantages:
Cheaper to construct because light partitions are not as expensive

as solid walls.
Lay outs are simpler and can be changed easily.
Communication and supervision is easier because staff of all
grades can see each other. This is also thought to be more democratic.
There are also disadvantages:
Noisy office equipment, such as printers, can be distracting.

It can be difficult to arrange confidential discussions.
Office Layout
When planning the layout of the office there is lot for the administrative
officer to consider. Most importantly, everyone needs a properly
equipped place from which to work. The minimum requirement will
usually be a desk, telephone and computer terminal. In many
organisations this is known as a work station.
An office is a centre of communication. This means:
o Communication between individual work stations and the rest of the

department should be logical and in keeping with the flow of work
o Communication between departments should also be logical and reflect how
they work together
Health and Safety is a prime concern. For example:
o Gangways and passageways should provide easy access and be clear from
obstruction.
o Plugs should never be overloaded with electrical equipment

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The Clerical Function
In most offices the clerical function is supported through the use of computers because they
help to create efficiency. However, the size of the office will determine the extent to which
computerisation is justified.
Routine Procedures Record Keeping

Procedures are developed All organisations need to
to deal with repetitive work keep a variety of records.
in the most efficient way Examples may include:
possible. For example, new
orders may be collected Orders and sales
into an in tray system. Complaints made
Work is then allocated Purchases made
to staff according to Staff details
their authority, ability Accidents and injuries
and workloads. Records for tax
Individuals then deal purposes
with their work
according to set down
systems and processes.
Archiving
There is a need for long
term storage of records
Filing that are no longer active.
Records must be filed This is essentially a filing
systematically and system for old materials.
accurately so that they can
be retrieved quickly when It is sometimes necessary
needed. This applies to to access old records. For
both manual and computer example, simple contracts
records. could be subject to legal
action for up to six years.

121
Business Correspondence
All businesses need to communicate in writing. In modern times we are witnessing a

reduction in the use of letters as communication by e mail increases. Nevertheless, letters
are still an important part of business communication.
Letters
One of the benefits of letters is that they are a permanent record of what is
being said. This means that they can be used as written evidence in any
dispute, so they must be worded accurately and clearly. Many businesses
lose money because of poorly worded letters, so it is important that staff are
trained to write good letters.
It is estimated that the average cost of producing and sending a letter is 5. This means that
it can be cheaper to make a quick phone call.
Standard letters are used by businesses because they reduce the time and cost involved in
producing them. However, they can only be used for regular routine issues.
Managing Mail
The administrative manager is responsible for ensuring that incoming and outgoing mail are
managed effectively.
Incoming Mail All incoming mail should be dealt with as soon as possible on the
day it is received. This includes opening it and stamping it to show
the date it arrived.
Attachments need to be kept with any letters. Special care must
be taken for official documents, money, cheques, etc.
Outgoing Mail A system is needed for post room staff to collect mail from around the
business throughout the day. This will include:
Designated collection points

A published last collection time that is adhered to
Senders to show the type of service required for each piece of
mail (e.g. 1st Class, 2nd Class, Recorded delivery, etc)
A procedure to keep receipts for recorded delivery or registered
mail deliveries

122
122
E Mail
E Mail has become an important method of business

communication. This is because it has many advantages:
1. It is a low cost method of communication

2. It is very fast because e mails arrive at their destination within minutes of being sent
3. People are inclined to reply to e mails quickly which aids the rapid conclusion of the
business being conducted
4. All parts of the world are easily reached by e mail at no extra cost
5. E mails tend to be less formal then letters making them easier to write
Most executives in an organisation will have their own e mail addresses allocated to them.
Secretarial Support
Modern technology allows employees to type their own letters and e mails using word
processing software. Whilst this requires some training it is common practice in business for
people to do their own typing. However some secretarial support may be available.
Personal Traditional secretaries and personal assistants are not common these
Secretaries days and tend to be used only by the most senior staff. Features of the
secretarial role include:
It is a partnership between the secretary and executive
Good secretaries help to make the best use of the executives
time and are therefore very cost effective
A key role of a secretary is to keep the executive informed
At these high levels secretaries are very competent and
professional people
Audio Typing Support at lower levels may be provided by audio typists working in a
typing pool.
The typing pool supervisor allocates work as it arrives

There is a time lag between dictation and the work being done
The people dictating letters or reports to typists will need to learn
how to:
o Use the dictation equipment
o Dictate clearly and in a way that the typist can understand

123
Meetings
Meetings do not always enjoy a good reputation. However, they can be very effective and
have many benefits if they are managed well.
There are many different types of meetings. Here are a few examples.
Statutory meetings (required by law) Board meetings Department meetings
Standing committees Ad hoc committees
Meet regularly for a Meet to consider a

particular purpose particular problem
(e.g. Health and (e.g. a key supplier
Safety) goes out of business)
All meetings need some formality although this varies according to the
type of meeting. For our purposes we will cover some of the more
important principles of meeting administration. For example, a chair
person will be appointed to take charge of the meeting and all
discussions will be addressed through this person.
Compiling the agenda
The meeting secretary is responsible for setting up the agenda.
Participants are invited to propose topics for the agenda. A

deadline is imposed so that the agenda can be compiled in
plenty of time for the meeting.
The chairperson and meeting secretary work together to

finalise the agenda, including the running order of the
meeting.
The meeting secretary sends the agenda to the meeting

participants. This is accompanied by the minutes of the last
meeting and any supporting information.

124
Structure of the agenda
Apologies for absence - these are read out and recorded

Minutes of the last meeting - these are discussed and agreed by the meeting before being
signed by the chairperson
Start Items Matters Arising - a discussion of any issues arising from the last meeting, unless they are
main agenda items later
Each agenda item is dealt with in turn

It is the role of the chair person to keep the agenda moving so that every item is
discussed properly
Main Items
Any Other Business - This is an opportunity for members of the meeting to raise issues
that were not accepted for the agenda.
The final item on the agenda will usually be the date of the next meeting as it is easier to
Final Items agree this whilst everyone is together.
The Minutes
The minutes are usually written by the secretary. Alternatively, a

member of the meeting may be appointed to complete this task.
This involves taking notes during the meeting and then typing the
minutes as soon as possible afterwards.
Once the minutes have been drafted they are shown to the chairperson to agree the
contents.

125
Meeting Terminology
Quorum The minimum number of people to be present at a meeting for any

decisions made to be valid.
A motion A proposal to be considered at the meeting.
Proposer The person who speaks on behalf of the motion and makes the case for
it.
Seconder A member of the meeting who supports the proposer of the motion
Amendment A suggested change to the motion being proposed at the meeting.
Resolution Once a motion has been passed by a majority vote of the meeting it is
known as a resolution.
Casting Vote If the votes for and against a proposal are equal the chair person usually
has the casting vote, effectively making the final decision.
Lie on the This means that a motion being discussed at a meeting cannot be taken
table any further at the meeting. For example, it may depend on further
information before it can be fully considered. In these circumstances
participants may agree to discuss the issue again at a future meeting.
Standing These are the rules of conduct for committees that meet regularly.
Orders
A Point of A person may interrupt a meeting and object if he or she thinks that
Order standing orders are not being observed. The point of order is addressed
to the chair person.
Adjourn The meeting is suspended and will be continued at another time.

126
Conferences
Conferences and other large functions involve careful management and a lot of work if they
are to be successful. The administrative officer will need help with this and will normally
lead a sub-committee to help organise the event.
Prepare the programme of Book the accommodation

activities and facilities needed
Produce and deliver tickets Book the people who will

invitations, timetables, etc. speak at the conference
Arrange transport, parking, Manage the conference

etc budget
Conference Activities
The administrative officer must also ensure that the event runs smoothly and will continue
to be busy whilst it is underway. Activities will include:
1. Ensure that speakers, delegates and support staff turn up at the right place and at
the right time.
2. Provide necessary support to speakers and this includes ensuring that all facilities
and equipment operate correctly.
Follow Up Activities
These also need to be managed and may include:
1. Letters of thanks to the speakers

2. Payment of any fees due
3. Return of any borrowed or hired equipment
4. Ensure that any sales or business leads are followed up
5. Filing of conference records and notes, for future reference

127
Organisation and Methods
All the elements of business administration need to be reviewed

regularly. This is necessary to ensure:
Efficiency
That the changing needs of the business are being met
A separate team of people will be set up to carry out these reviews.
Any new procedures adopted as a result of the review will normally be phased in. This often
means running a new system in parallel with the old system. This has many advantages
including being able to compare the effects of the new and old approaches.
Throughout this period constant monitoring is needed to make sure that any problems with
the new approach can be corrected as soon as possible.
The head of a department may request a review

A review may be commissioned by the board of for many reasons. For example:
directors because concerns have been
- A new procedure needs checking
highlighted about an area of the business. For
example, consistent complaints from customers - A product might need some improvement
- Low staff morale because of boring
about late delivieries may suggest a problem procedures
with the delivery system. - High labour turnover/hard to recruit
replacements
Reasons for O&M

Reviews
As part of a schedule of review. Businesses are

When a complete business process review is
constantly changing so it is sensible to carry out
ordered so that an amalgamation of and
regular reviews to make sure that existing
reorganisation of business activities can take
systems and processes are still the best way of
place.
working.

128
Four stages of an O&M review
Stage 1: The terms of reference for the review are produced by the people
requesting it. Once agreed these are sent to the head of the O&M team
Terms of and will contain details of:
Reference The area to be investigated
Reasons and authority for the review
Objectives for the review
The time limit for the review and any practical constraints
A call to the department under review and the O&M team to
work in co-operation with each other
Stage 2: The first part of the review is to find out the present position. There are
usually two steps to this:
Present Meetings and interviews with managers and a random selection
Situation of employees. This is to find out what work is being done, how it
is being done, why it is being done and who it is being done by.
A detailed examination of what is being described. This will
involve job observation and an examination of records and
documents used in the process.
Stage 3: The information gathered at stage 2 is analysed. Considerations include:

Is the process needed at all?
Analysis Are staff working in the best way or could the system be
improved?
How many problems are caused by the current system (e.g.
number of errors)?
What is the cost of correcting any mistakes?
Is there any backlog of work and how serious is it?
How much idle time is there for staff and machines?
Stage 4: A detailed specification is drawn up for any changes proposed as a result

of the review. This should include:
Proposals Details of what is being proposed, including any new equipment
or staffing arrangements.
The expected effects of implementing the proposals (e.g.
reduction in costs, more productivity, less errors, etc).
A detailed specification of new processes to be followed.
A detailed implementation plan.

129
Security
Every organisation has security risks and must take steps to minimise them. We will take a
brief look at some of the more common risks they face and some of the steps that can be
taken.
Theft
Money, stock, machinery, equipment and even the personal property of employees and
customers are at risk from theft. Most theft is opportunistic and this means that the risk
can be minimized (but not eliminated) by some simple measures.
Examples of security measures
Everyone to have a security Train staff to follow security

conscious attitude procedures
Lock all doors and windows Goods waiting to be loaded or

unloaded are supervised at all
times
Safe systems for handling
petty cash Documentary controls
Removal of large amounts of Security firms transport large

cash from tills amounts of cash
Burglary
Burglary involves entering or exiting premises by force. This may be by causing damage to
the premises or causing (or threatening) bodily harm to employees or members of their
family.
Good physical security locks, A caretaking or security guard

alarms, safes, etc. system
Safe custody of keys when the Work together with the local
premises are not occupied. crime prevention officer

130
Industrial Espionage
Whilst this may seem to be the stuff of story books and movies,
industrial espionage is a serious risk.
This is the theft of the intellectual property or expertise of a

business. Essentially, research is stolen and used by competitors.
This can be very damaging to a business and is very difficult to
combat. Measures that can help include:
Keeping systematic records of all visitors

Restricting access to the premises and/or parts of it
Keeping reception areas staffed at all times
Letter and Parcel Bombs
Unfortunately, terrorism is a risk that we all have to

guard against. One easy way to deliver bombs is
through ordinary mail in letters or parcels.
Like all terrorism this is particularly nasty because

innocent people can be hurt or killed. Often the victims
are not the intended targets because the perpetrators
cannot be certain who will actually open the mail.
Some guidance is given by the Metropolitan Police in London. They issue a hang up card
which they recommend is displayed in post rooms. This provides advice on what to look out
for and what to do if a parcel or letter looks suspicious. As with all terrorism it is important
to remain vigilant at all times.

131
Risk Management
All organisations face risks, with new businesses being the most vulnerable. In fact, many do
not survive beyond their first year.
There are many different types of risk and they all have to be managed. The aim is to
minimise risk as much as possible.
Good risk management can eliminate some risks altogether or reduce the chances of them
happening. It also involves having a plan in place to minimise the effects if it does happen.
Physical Risks
There is a risk of physical damage to the assets of the business. For example, the business
premises, fixtures and fittings, stock, machinery, equipment, etc.
The risks include fire, weather related incidents, malicious damage. Deterioration due to
rust, decay and other causes is also a risk. There are a number of steps that can be taken.
Maintenance of premises, Health and safety measures

machinery, equipment, etc
Train staff to be aware of risks Safe systems of work

and preventative measures
Business recovery plans Fire precautions
Security measures to reduce the Safe storage of machinery,

risk of theft and vandalism equipment, stock, etc
Some physical risks can be insured. The concept of insurance is that the business pays
money, known as a premium, to an insurance company. This money is pooled with other
insurance premiums. If an insured incident happens then the insurance company pays out.
Insurance does not prevent an incident from happening but does provide the funds to help
the business to recover.
Premiums are based on the likelihood of an incident happening and the potential cost if it
does happen. For example, you would expect a firework factory to pay a high premium for
its fire insurance. Equally a building worth millions of pounds would be more expensive to
insure than one of much less value.

132
Technical Risks
These are risks that relate to technical or technological aspect of a

business. We live in an age when products, machinery and
equipment can become obsolete very quickly. A failure to keep up
to date can cause a lot of damage to a business. Steps to minimise
these risks may include:
Keeping the business up to date with its knowledge

through continuous education and training.
Having a culture that encourages innovation and ideas.
Sometimes using external consultants to help solve urgent technical problems
Personal Risks
All organisations have key personnel. Losing these people would leave the business
vulnerable. For example, the relationship with a few large customers might depend on a
personal relationship with one sales manager.
The first step in minimising this risk is to identify who the key personnel are. The effects of
losing these people can be minimised through initiatives such as succession planning.
Insurance can also help. For example, key personnel insurance would be wise in a
partnership situation. The death of a partner may lead to a business being wound up.
However, appropriate insurance can provide the funds to keep the business going.
Marketing Risks
There is always a risk that the products and services a business is

trying to sell do not achieve enough sales. This risk can be
minimIsed by conducting proper market research before investing
money in developing or updating products.

133
External Risks
There are many external risks that can have an impact on an

organisation. There are far too many to be able to mention them all
but examples include.
The risk of war this can interrupt supplies or make it impossible to

operate in certain markets
The risk of recession This may reduce the market in which the business operates and it is
also likely to make it more difficult to obtain credit.
As with any risk, it is wise to have contingency plans in place. A concept known as hedging
also helps. This essentially means that the business uses a variety of suppliers rather than
relying on just one or two. Similarly, it is unwise to rely on just a few customers and business
partners.
Financial Risks
There are many types of financial risk and we have covered many of
these in earlier sections. However, one of the main financial risks
relates to bad debts. As we have already seen, sound credit control
techniques are necessary to keep these risks to a minimum.
A particular risk exists in relation to export trade. Non-payment by

foreign buyers can be particularly difficult to manage. As we have
already seen, there are a number of techniques to help manage this. However, particular
problems may occur if a foreign state imposes import controls or controls over the release
of foreign exchange.
Another financial risk relates to our own employees. The risk of pilfering, theft of cash and
embezzlement all need to be recognised and managed. Even the personal use of facilities
provided by the business (e.g. the phone system, access to the internet) can potentially cost
the organisation a lot of money.

134
The Business Environment
All organisations need a sound understanding of the external environment in which they
operate. One way of doing this is to conduct what is known as a PEST analysis. This
examines the Political, Economic, Social and Technological environments in which a business
operates.
This includes tax, labour law, environmental law and factors such as
Political trade restrictions. Governments also influence health, education and the
infrastructure of the nations they govern.
Factors included here are inflation rates, interest rates and exchange
Economic rates. Whether the economy is in recession or in growth will also impact
business.
There are many social factors that can affect a business. Examples may
Social include trends in fashion, age of the population, health consciousness,
career attitudes, attitudes to spending and saving money, environmental
conscience, etc.
It is important to keep up to date with technology. This includes

Technological information technology, automation of processes, incentives to use
technology, the extent to which customers and competitors use new
technology and what is happening in the field of research and
development.
Some analysts suggest two other categories to be included in the analysis expanding it to
what is called a PESTLE analysis. These categories are Environmental and Legal. However,
other analysts prefer to incorporate these within the four existing categories.

135
1. a) Identify the chief aspects of office security procedures.
b) Explain the procedures you would establish to ensure the safe handling of:
i computer terminals which are part of a LAN
ii petty cash
2. The Administration Manager of your organisation is considering alternative

electronic methods of transmitting information. Describe, with examples:
a) internal electronic methods of communication
b) external electronic methods of communication
3. a) Define the term O & M.
b) With the aid of a diagram, describe the main stages of an O & M review.
4. Your Office Manager has recently introduced the universal use of e-mail throughout
the company. In an attempt to convince staff of the benefits of e-mail, you have
been asked to give details of the benefits to both staff and the company for
insertion in the staff handbook.

136

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Business

Section 1: The Background to Business Administration 6

Section 2: Features of Organisations 15

Section 3: The Structure of Business Enterprises 25

Section 6: Research and Development 59

Section 8: Information Technology 81

Section 9: The Personnel Department (Human Resources) 89

Section 10: The Accounting Function 107

Section 11: Office Administration 114

Trainer Bubble Ltd. 2010

Study Aid Page: Key Learning Point:

Trainer Bubble Ltd. 2010

Trainer Bubble Ltd. 2010

The Organisational Background

Trainer Bubble Ltd. 2010

Business Administration forms part of the management of a business. It

Management The term management can be widely interpreted with many

However, for the purposes of this course we will concentrate

Deciding the objectives of the organisation

Top level management acts at a higher level than Business Administration.

Trainer Bubble Ltd. 2010

The Chairman is often a part time member of the organisation.

The Managing Director is charged by the board to run the firm.

These will normally be full time roles. Additional part time

Executive Directors Executive directors are normally full time employees.

Non-Executive directors are not full time members of the

The main functions of this role include transfer of shares and

Trainer Bubble Ltd. 2010

Sets company policy and

Trainer Bubble Ltd. 2010

Some possible definitions:

Function A group of specific activities within an organisation. The term

Line Function A group of activities forming a fundamental part of the

Trainer Bubble Ltd. 2010

Produces products from This department often

Production Purchasing Marketing Accounts Admin. Personnel

Sales -Northern Sales - Southern Sales Support Marketing Advertisiing Packaging

Trainer Bubble Ltd. 2010

This is the concept that actions taken in one part of the

Every organisation is in a particular state or condition at any

Every product and every process within a business has a finite

Trainer Bubble Ltd. 2010

Trainer Bubble Ltd. 2010

a) managers of the company

b) business administrators within the company

2. a) Describe the main functions of an organisation as identified by Henri Fayol.

b) Explain which functions are associated with business administration

c) Identify which functions are associated with business management.

3. a) Define the term business management.

b) Briefly compare the main differences between business management and

c) Explain under what circumstances a business owner might also be a business

Trainer Bubble Ltd. 2010

Trainer Bubble Ltd. 2010

The structure also acts as a framework of authority.

This is the most common type of authority found in organisations. It

The benefit of legal authority is that offices can be created or

This type of authority is inherited and a good example is a monarchy.

Unlike legal authority this type of authority is personal with

This type of authority arises from the leadership qualities and

In modern organisations authority may be given to as many staff as

Trainer Bubble Ltd. 2010

Authority lies with defined Each office is established

Employees owe obedience Office holders perform in

The organisation has a If an office holder applies a