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Management (MGT)
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Chris Bovaird

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MGTA04 REVIEW CHAPTER 1: PRODUCING GOODS AND SERVICES Service Operations: Production activities that yield intangible services Goods production: production activities that yield tangible products Operations (production) management: systematic direction and control of the processes that transform resources into finished goods and services Production managers: ensure that operations processes create value and provide benefits. Operation Process: set of methods and technologies used in the production of goods or services  Good producing processes o Types of transformation technology:  Chemical processes  Transport processes  Fabrication processes  Clerical processes  Assembly processes o Analytical vs synthetic processes  Analytic process: production process in which resources are broken down  Synthetic process: production process in which resources are combined  Service producing processes o High Contact Processes: system in which the service cannot be provided without the customer being physically in the system o Low Contact Processes: system in which the service can be provided without the customer being physically in the system DIFFERENCES BETWEEN SERVICE AND MANUGACTURING OPERATIONS  Focus on performance: focus in service is more complex than in goods production  Focus on process and outcome: goods outcome, service both process and outcome  Focus on service characteristics: services o Intangibility o Customization o Unstorability  Focus on the customer-service link: services specially  Focus on service quality and considerations CAPACITY PLANNING: ensure enough space and workers to meet demand Capacity: amount of a good that a firm can produce under normal working conditions LOCATION PLANNING: finding best location to get resources, good employees, and transport to market LAYOUT PLANNING: arrange store/factory for smooth flow of materials Layout Planning for producing goods o Productive facilities: workstations, equipment for transforming raw materials 1 o Non-productive facilities: storage and maintenance areas o Support facilities: restrooms, offices, parking lots, cafeterias  Process Layouts: organize production activities such that equipment and people are grouped together according to their function  Cellular Layout: used to produce goods when families of products can follow similar flow paths  Product Layout: organize production activities such that equipment and people are set to produce only 1 type of good o Assembly lines: type of product in which unfinished products move on a conveyor belt o U-shaped production line: production layout in which machines are placed in a narrow U shape rather than a straight line. o Flexible manufacturing system (FMS): a production system that allows a single factory to produce small batches of different goods on the same production line. o Soft manufacturing: reducing huge FMS operations to smaller, more manageable groups of machines. Layout Planning for producing services: same as for goods QUALITY PLANNING METHODS PLANNING Methods improvement in goods: process using flow charts to remove unnecessary steps Methods improvement in services: method improvements to speed services  Service Flow Analysis: analysis that shows the process flows that are necessary to provide a service to customers; allows managers to determine which processes are necessary  Designing to control employee discretion in services: limiting employee interaction, carefully planning and sometimes automating to control human discretion  Design for customer contact in services: high contact service OPERATIONS SCHEDULING Scheduling goods operations  Master production schedule: schedule showing which products will be produced, when production will take place and what resources will be used Scheduling service operations  Tools for scheduling o Gantt Charts: production schedule diagramming the steps in a project and specifying the time required for each o Pert Charts: production schedule specifying the sequence and critical path for performing the steps in a project OPERATIONS CONTROL: managers monitor production performance by comparing results with plans and schedules Follow up: checking to ensure that production decisions are being implemented 2 MATERIALS MANAGEMENT: planning, organizing, and controlling the flow of materials from purchase through distribution of finished goods. Four major areas:  Transportation  Inventory control  Warehousing  Purchasing Standardization: using standard and uniform components in the production process Purchasing processes  Holding costs: cost of keeping extra supplies or inventory on hand  Lead times: the gap between the customer’s placement of an order and the seller’s shipment of merchandise  Supplier selection: finding and determining suppliers to buy from, has 4 stages o Investigating possible suppliers o Negotiating terms of service with o Evaluating and isolating best a final choice candidates o Maintaining a positive buyer-seller relationship TOOLS FOR OPERATIONS PROCESS CONTROL Worker training Just-in-Time (JIT) Production System: method of inventory control in which materials are acquired and put into production just as they are needed CHAPTER 2: INCREASING PRODUCTIVITY AND QUALITY Productivity: measure of efficiency that compares how much is produced with the resources used to produce it. Also defined as a ratio that compares resources to products and inputs to outputs, higher the output, higher the profit  + time, + it costs  + material, + it costs  Operation managers concerned with the best way to make things Quality: product’s fitness for use in terms of offering the features that consumers’ want, (PBD) meeting or surpassing customers’ expectations. Superior quality, fewer costs, more revenue MEASURING PRODUCTIVITY Labour productivity: partial productivity ratio calculated by dividing gross domestic product by total number of workers Ratios:  Manufacturing: labour hours/product  Retailing: sales/square foot  Restaurant: revenue/table or revenue/store 3 Productivity among global nations: difference in productivity between nation’s  technology, human skills, economic policies, natural resources, traditions  Domestic productivity: domestic productivity that depends on production, - prod - wealth  Manufacturing productivity: higher than service productivity  Industry productivity: industries differ vastly within sectors  Company productivity: high productivity gives a competitive edge because costs are lower, make more profit from items sold, and can pay workers higher wages without raising prices TOTAL QUALITY MANAGEMENT (TQM): concept that emphasizes that no defects are tolerable and that all employees are responsible for maintaining quality standards Planning for quality  Performance quality: the overall degree of quality, how well the features of a product meet consumer’s needs and how well the product performs  Quality reliability: consistency of quality from unit to unit of a product Organizing of quality: everyone in the company must work to ensure quality Leading for quality  Quality ownership: quality belongs to each employee who creates or destroys it in producing goods or service, idea that workers must take responsibility for producing quality product Controlling for quality: by monitoring a company can detect mistakes and make corrections BUSINESS PROCESS RE-ENGINEERING: redesigning of business processes to improve performance, quality and productivity. Involves six steps 1. Identify bus. activity to be changed 4. Create new process design 2. Evaluate info and human resources 5. Implement new design 3. identify strengths and weaknesses ADDING VALUE THROUGH SUPPLY CHAINS Supply chains: flow of information, materials, and services that starts with raw materials suppliers and continues through other stages in the operations process until the product reaches the end customer 1. State case of action 4. Understand the current process 2. Identify re-engineering process 5. Create new process design 3. Evaluate info & HR for re-engineering 6. Implement the re-engineered design  Supply chain strategy: assume that companies are managed as individual firms rather than as members of a coordinated supply system Supply chain management (SCM): principle of looking at the chain as a whole to improve the overall flow through the system 4 CHAPTER 3: MANAGING INFORMATION SYSTEMS AND COMMUNICATION TECHNOLOGY Information manager: manager responsible for the activities needed to generate, analyze and disseminate information that a company needs to make good decisions Information Management: internal operation that arranges the firm’s information resources to support business performance and outcomes Data: raw facts and figures Information: a meaningful, useful interpretation of data Knowledge: through education and experience the use of information to make decisions Information system (IS): method of transforming data onto information to be used for decision making ELECTRONIC BUSINESS AND COMMUNICATION TECHNOLOGIES Electronic information technologies (EIT): IS application based on telecommunication technologies. 2 F o Provide coordination and communication within the firm o Speed up transactions with other firms  Fax machine: quickly transmit a copy of a document or graphics over telephone lines  Voice mail: computer based system for receiving and delivering incoming telephone calls  Electronic mail (email) system: electronic transmission of letters, reports, and other information between computers  Electronic conferencing: simultaneous communication from different locations via telephone, video, or email group software  Groupware: system that allows 2 or + to communicate electronically between desktop PCs. Data communication networks: global networks that permit users to send electronic messages quickly and economically  Internet: gigantic network of networks that serves millions of computers, offers information and provides communication flows among more than 170,000 separate networks around the world o Internet service provider: commercial firms that maintains a permanent connection to the internet and sells temporary connections to subscribers.  World wide web (or the web): system with universally accepted standards for storing, retrieving, formatting, and displaying information on the internet. o Web servers: dedicated workstations – large computers – that are customized for managing maintaining and supporting websites o Browser: software that enables a user to access information on the web o Directories: features that help people find the content they want on the web. The user types key words and the directory retrieves a list of websites with titles containing those words o Search engine: software for searching webpages that does not pre-classify them into a directory  Intranets: a company’s private network that is accessible only to employees via entry through electronic firewalls 5 o Firewalls: hardware and software security systems that ensure that internal computer systems are not accessible to outsiders  Extranets: network that allows outsiders limited access to a firm’s internal information system NEW OPTIONS FOR ORGANIZATIONAL DESIGN: THE NETWORKED ENTERPRISE Leaner organizations: few employees and simpler organization structure, + work can be done with fewer people, reduction of mid managers, networks are replacing operating managers More flexible operations:  Mass customization: producing large volumes of products or services, but giving customers the choice of features and options they want Increased collaboration: collaboration with outside firms  Networking and virtual company Greater independence of company and workplace Improved management process: instantaneous and easy to find info, + use by upper management  Enterprise resource planning: large information systems for integrating all the activities of a company’s business units USER GROUPS AND SYSTEM REQUIREMENTS Knowledge workers: employees whose jobs involve the use of information and knowledge as the raw materials of their work Managers and different levels  First line/operational managers need info to oversee day to day details of their dept. or projects  Knowledge workers need special info for conducing technical projects  Mid-level managers need summaries and analyses for setting intermediate and long-range goals for the departments or projects they supervise  Top-level managers analyze broader trends in the economy, the business environment, and overall company performance to conduct long range planning for the entire organization Functional areas and business processes each function – marketing, HR, accounting, production and finance – has its own information needs. MAJOR SYSTEMS BY LEVELS Transaction Process Systems (TPS): applications of info processing for day to day business transactions Systems for knowledge and office applications  IS knowledge workers: includes both systems analysts and applications programmer o System analysis and designers: deal with the entire computer system. They create the systems according to the customer’s needs and specifications. Chose computers and how to set links among computers to form a network of users 6 o Programmers: write the software instructions that tell computers what to do. App programmers write instructions to address particular problems. System programmers ensure that a system can handle the requests made by various application programs.  Operations personnel (data workers): people who run a company’s computer equipment, also called system operations personnel Knowledge level and office systems  Computer-aided design (CAD): computer analysis and graphics programs that are used to create new products.  Computer-aided manufacturing (CAM): computer systems used to design and control all the equipment and tools for producing goods o Computer operations control: any system for managing the day to day production activities for either goods or service production. Management information systems (MIS): systems that support an organization’s managers by providing daily reports, schedules, plans and budgets. Decision support systems (DSS): computer systems used to help managers consider alternatives when making decisions on complicated problems Executive support systems (ESS): quick-reference, easy-access application of information systems specially designed for upper-level managers Artificial intelligence and expert systems  Artificial intelligence (AI): the construction and/or programming of computers to initiate human thought processes  Robotics: use of computer-controlled machines that perform production tasks  Expert systems: form of artificial intelligence in which a program draws on the rules an expert in a given field has laid out to arrive at a solution for a problem ELEMENTS OF THE INFORMATION SYSTEMS Computer network: form of computer system architecture in which computers at different locations can function independently but are also interconnected and able to exchange information with one another Hardware: physical components of a computer system  Input device: hardware that gets data into the computer in a form the computer understands  Central processing unit (CPU): hardware in which the actual transforming of data into info takes place, contains the primary storage unit, the control unit, and the arithmetic logic unit  Main memory: any sequence of instructions to a computer  Output device: part of computer hardware that presents results to users, common forms include printers and video monitors Software: programs that instruct the computer in what to do and how to do it  System Programs: program that tells a computer what resources to use and how to use them  Application program: program that processes data according to the specific needs of the user. 7 o Graphical user interface (GUI): The user-friendly display that helps users select from among the many possible applications of the computer. o Icons: small images on a computer screen that represent various applications CONTROL DATABASE AND APPLICATION PROGRAMS Database: a centralized, organized collection of related data Application programs  Word processing programs: application programs that allow the computer to act as a sophisticated typewriter to store, edit and print letters and numbers  Electronic spreadsheets: application programs that allow the user to enter categories of data and determine the effect of changes in one category on other categories  Database management programs: application programs that keep track of and manipulate the relevant data of a business  Computer graphics program: application programs that convert numerical and character data into pictorial forms  Presentation graphics software: application programs that offer choices for assembling graphics for visual displays, slides, video, and even sound splices for professional presentations.  Desktop publishing: combines word processing and graphics capability in producing typeset-quality text from personal computers.  Software piracy: the unauthorized use of software such as word processing and spreadsheets TELECOMMUNICATION AND NETWORKS Multimedia communication systems: connected networks of communication appliances such as faxes, televisions, sound equipment, cellphones, printers, and photocopiers that may also be linked by satellite with other remote networks.  Communication devices o Global Positioning Systems o Personal Digital Assistants (GPSs) (PDAs)  Communication channels: media that makes all transmissions possible.  Broadband channels System Architecture  Wide area network (WAN): system to link computers across the country through telephone wires or satellites  Local area network (LAN): system to link computers in one building or in a small geographical area by cabling or wireless technology  Client server systems: network composed of both clients(users) and servers that allows the clients to access various services without costly and unnecessary duplication o Client: point of entry in a client-server network 8 o Server: computer that provides the services shared by network users CHAPTER 4 Accounting: comprehensive system for collecting, analyzing and communicating financial information Bookkeeping: recording accounting transactions Accounting information system (AIS): organized procedure for identifying, measuring, recording, and retaining financial information so that it can be used in accounting statements and management reports Type of accounting users:  Business managers use accounting information to set goals, develop plans, set budgets and evaluate future prospects.  Employees and unions use accounting information to get paid and to plan for and receive such benefits as health care, insurance, vacation time and retirement pay.  Investors and creditors use accounting information to estimate returns to stockholders, to determine a company’s growth prospects, and to decide if the company is a good credit risk before investing or lending.  Taxing authorities use accounting information to plan for tax inflows, to determine the tax liabilities of individual and businesses, and to ensure that correct amounts are paid in a timely fashion.  Government regulatory agencies rely on accounting information to fulfill their duties; the provincial securities commissions, for example, require firms to file financial disclosures so that potential investors have valid information about a company’s financial status. WHO ARE THE ACCOUNTANTS AND WHAT DO THEY DO Controller: individual who manages all the firm’s accounting activities Financial and managerial accounting: process whereby interested groups are kept informed about the financial condition of a firm Managerial (management) accounting: internal procedures that alert managers to problems and aid them in planning and decision making PROFESSIONAL ACCOUNTANT  Chartered Accountant (CA): individual, who has met certain experience and education requirements and has passed a licensing examination, acts as an outside accountant for others firms  Certified General Accountants (CGA): individual who has completed an education program and passed a national exam, works in private industry or a CGA firm  Certified Management Accountant: individual who has completed an university degree, passed a national examination, and completed a strategic leadership program; works in industry and focusses internal management accounting 9 ACCOUNTING SERVICES Auditing  Auditing: accountant’s examination of a company’s financial records to determine if it used proper procedures to prepare its financial reports  Forensic accountant: accountant who tracks down hidden funds in business firms, usually as part of a criminal investigation  General accepted accounting principles (GAAP): standard rules and methods used by accountants in preparing financial reports Tax services: include helping clients with preparing tax returns and in their tax planning Management consulting services: specialized accounting services to help managers resolve a variety of problems in finance, production scheduling and other areas PRIVATE ACCOUNTANTS: accountant hired as a salaried employee to deal with a company’s day to day accounting needs TOOLS OF THE ACCOUNTING TRADE The accounting equation: assets = liabilities + owner’s equity  Asset: anything of economic value owned by a firm or individual  Liability: any debt owed by a fir or individual to others  Owner’s equity: any positive difference between a firm’s liabilities; what would remain for a firm’s owners if the company was liquidated, all its assets were sold and all its debs were paid Double entry accounting system: bookkeeping system, developed in the fifteenth century and still in use, that requires every transaction to be entered in two ways – how it affects assets and how it affects liabilities and owner’s equity – so that the accounting equation is always balanced FINANCIAL STATEMENTS: any of several types of broad reports regarding a company’s financial status; most often used in reference to balance sheets, income statements, and/or cash flows Balance sheets: type of financial Statement that summarizes a firm’s financial position on a particular date in terms of its assets, liabilities and owner’s equity Assets:  Current assets: cash and other assets that can be converted into cash within a year  Liquidity: the ease and speed with which an asset can be converted to cash; cash is said to be perfectly liquid  Accounts receivable: amounts due to the firm from customers who have purchased goods or services on credit; form of current assets 10  Merchandise inventory: the cost of merchandise that has been acquired for sale to customers but is still on hand  Prepaid expenses: include supplies on hand and rent paid for the period to come Fixed assets: assets that have long-term use or value to the firm such as land, buildings and machinery  Depreciation: distributing the cost of a major asset over the years in which it produces revenues; calculated by each year subtracting the asset’s original value divided by the number of years in its productive life Intangible assets: non-physical assets such as patents, trademarks, copyrights, and franchise fees that have economic value but whose precise values is difficult to calculate  Goodwill: amount paid for an existing business beyond the value of its other asset Liabilities  Current liabilities: any debts owed by the firm that must be paid within one year  Accounts payable: amount due from the firm to its supplier for goods and/or services purchased on credit; a form of current liability  Long term liabilities: any debts owed by the firm that are not due for at least one year Owner’s Equity  Paid in capital: any additional money invested in the firm by the owners  Retained earnings: company’s net profit less any dividend payment to shareholders Income (profit-and-loss) Statement: type of financial statement that describes a firm’s revenues and expenses and indicates whether the firm has earned a profit or suffered a loss during a given period  Revenues: any monies received by a firm as a result of selling a good or service or from other sources such as interest, rent, and licensing fees  Cost of goods sold: any expenses directly involved in producing or selling a good or service during a given time period  Gross profit (or gross margin): firm’s revenue (gross sales) less its cost of goods sold  Operating expenses: cost incurred by a firm other than those included in cost of goods sold  Operating income and net income o Operating income: compares the gross profit from business operations against operation expenses o Net income (net profit or net earnings): firm’s gross profit less its operating expenses and income taxes Statement of cash flows: financial statement that describes a firm’s generation and use of cash during a given period 11  Cash flows from operations: cash transactions involving buying and selling goods and services  Cash flows from investing: report net cash in or provided by investing.  Cash flows from financing: reports net cash from all financing activities THE BUDGET: AN INTERNAL FINANCIAL STATEMENT Budget: detailed financial plan for estimated receipts and expenditures for a period of time in the future, usually one year ANALYZING FINANCIAL STATEMENTS Solvency ratios: ratios that estimate financial risk that is evident in a company Short-term solvency ratios  Liquidity Ratios: measures of a firm’s ability to meet its immediate debts; used to analyze the risk of investing in the firm  Current Ratio: form of liquidity ratio calculated as current assets divided by current liabilities o Working capital: difference between a firm’s current assets and current liabilities Long-term solvency ratios  Debt ratios: measure of a firm’s ability to meet its long-term debts; analyze risk of invest in firm  Debt-to-owner’s-equity ratio: form of debt ratio calculated as total liabilities divided by owner’s equity  Debt: company’s total liabilities  Leverage: using borrowed funds to make purchases, thus increasing the user’s purchaseing power, potential rate of return, and risk of loss Profitability ratios: measures of a firm’s overall financial performance in terms of its likely profits; used by investors to assess their probable returns  Return on equity: form of prof ratio calculated as net income divided by total owner’s equity  Earnings per share: form of prof ratio calculated as net income divided by the number of common shares outstanding CHAPTER 5 WHAT IS MARKETING Marketing: planning and executing the development, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy both buyers and sellers. Marketing concept: idea that firm is directed toward serving present and potential customers at a profit 12 Providing Value and Satisfaction Value: relative comparison of a product’s benefits versus it’s cost. Value = benefit / cost Utility: ability of a product to satisfy a human want or need. Four types of utility - Time utility: makes products when the customers wants them - Place utility: makes products available where customers can conveniently purchase them - Ownership utility: transference of ownership from store to customer - Form utility: by turning raw materials into finished products customers want Good, Services and Ideas Consumer Marketing: firms that sell products to consumers for personal consumption - Consumer goods: products purchased by individuals for personal use Industrial Marketing: firms that sell products to other manufacturers - Industrial goods: products purchased by companies to use it to produce other products Service Marketing: firms that market for the consumption of their services - Services: intangible products that can’t be purchased Marketers promote ideas. Strategy: the Marketing Mix Marketing Managers: managers responsible for planning and implementing all the market-mix activities that results in the transfer of goods or service to customers Marketing Plan: detailed strategy for gearing the marketing mix to meet consumers’ wants and needs Marketing Mix: combination of product, price, place and promotion strategies to market a product - Product: good, service or idea that satisfy costumers needs and demands  Product differentiation: creation of a product or prod image that differs from others  Mass customization: allows marketers to provide products that satisfy specific needs - Price: part of marketing mix concerned with choosing the appropriate price for a product to meet the firm’s profit objectives and buyers’ purchasing objectives - Place (distribution): part of marketing mix concerned with getting products from producer to buyer, including physical transportation and choice of sales outlets (channels of distribution) - Promotion: techniques for communicating information about products TARGET MARKETING AND MARKET SEGMENTATION Target Market: group of people who the products have to be addressed to 13 Market Segmentation: dividing a market into categories according to traits customers have in common. To identify it there are 4 variables. - Geographic variables: geographical units that may be considered in a segmentation strategy - Demographic variables: characteristics of population to be considered in developing a segmentation strategy - Psychographic variables: psychological traits group has in co
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