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CIMA E1
ORGANISATIONAL MANAGEMENT
Aim of Paper
• This paper focuses on the structure and principles
underlying the operational functions of the
organisation, their efficient management and
effective interaction in enabling the organisation to
achieve its strategic objectives.
• It will prepare candidates for Paper E2, Project and
Relationship Management, and Paper E3, Strategic
Management.
• Paper E1 is mainly a discursive paper.
1
Syllabus
Introduction to organisations
Managing the finance function
Managing technology and information
Operations management
Marketing
Managing human resources
2
25%
15%
15%
15%
15%
15%
Exam Format
E1 is tested in two exams:
90 minute computerised objective test exam
 Test comprises 60 questions of equal weighting.
 Each component learning outcome will be tested and the syllabus weightings will be reflected in the
exam.
 A range of question types will be used. The main types will be multiple choice, multiple response,
number entry, drag and drop, drop down and hot spot.
 Some questions might relate to a common scenario.
3 hour computerised operational level integrated case study
 4 sittings per year
 Made up of a number of timed sections
 Consists of a pre-seen scenario and supporting resources such as emails, articles or meeting
minutes
 Each section will have one or more tasks for candidates to complete and will require a written
response
3
Session
4
1
The Different Purposes
of Organisations
Overview Session One
The different purposes of organisations
• What is an organisation?
• Different types of organisation
• Mission, vision and objectives
• Creating value for stakeholders
5
What is an organisation?
Organisations are social arrangements for the controlled
performance of collective goals.
Organisations allow people to:
Share skills and knowledge
Specialise
Pool resources
This results in synergy.
6
Different types of organisation
7
Mission, vision and objectives
Mission is the most generalised type of objective and can be seen as
an expression of the organisation’s reason for being.
Vision sets out how an organisation sees itself in the future.
Detailed objectives will help in the achievement of the mission.
Objectives should be SMART:
specific
measurable
achievable
relevant and
time-constrained.
8
Creating value for stakeholders
Stakeholders are virtually everybody who has anything to
do with an organisation.
9
Session
10
2
Organisational Structure
Overview Session Two
Organisational structure
• What is organisational structure?
• Mintzberg’s effective organisation
• Types of structure
• Structural dimensions
• Organisational forms and boundaries
11
What is organisational structure?
Organisational structure is concerned with the
way in which the work is divided up and
allocated. It outlines the roles and
responsibilities of individuals and groups within
the organisation.
12
Mintzberg’s effective organisation
Mintzberg said that an organisation is made up of a
number of distinct parts.
13
Types of structure
14
Structural dimensions
Factors influencing organisational structure:
size
strategy
organisational type
technological change.
15
Organisational forms and boundaries
16
Organisational forms and boundaries
Outsourcing means contracting-out aspects of the work,
previously done in-house, to specialist providers.
It may not be wise to outsource aspects of the work in
which the organisation has a core competency.
Offshoring is the relocation of corporate activities to a
foreign country.
17
Organisational forms and boundaries
A tall organisation has many levels of management (a long scalar
chain and a narrow span of control).
A flat organisation has few levels of management (a short scalar
chain and a wide span of control).
A shared service approach involves restructuring the provision of
certain services within the organisation so that the service is
centralised into one specific part of the organisation.
A strategic alliance is a co-operative business activity, formed by
two or more separate organisations for strategic purposes, that
allocates ownership, operational responsibilities, financial risks and
rewards, to each member, while preserving their separate identity/
autonomy.
18
Session
19
3
Governance, regulation,
ethics and corporate
social responsibility
Overview Session Three
Governance, regulation, ethics and CSR
• Stakeholders
• Ethics
• Corporate social responsibility and sustainable development
• Corporate governance
• The impact of regulation on the firm
• Business/ government relations
20
Stakeholders
A stakeholder is a group or individual, who has an interest in
what the organisation does, or an expectation of the
organisation. There are three categories of stakeholder:
Internal, e.g.
employees and
managers
External, e.g.
local
community,
government
21
Connected,
e.g.
shareholders,
customers and
suppliers
Ethics
Ethics is the system of moral principles that examines the concept of
right and wrong.
Business ethics is the application of ethical values to business
behaviour.
In order to achieve the objectives of the accountancy profession,
CIMA qualified accountants have to observe five fundamental
principles:
1
Integrity
2
Objectivity
3
Professional competence and due care
4
Confidentiality
5
Professional behaviour
22
CSR and sustainable development
Sustainable development: aims to balance economic, environmental and
social needs.
Corporate social responsibility: the company is sensitive to the needs of all
stakeholders and not just shareholders. Benefits to the company include:
• Method of differentiation
• Attract and retain quality staff
• Brand strengthening
• Lower costs
• Identify new market opportunities and changing social expectations
 Increase in profitability as a result of the above
23
Corporate governance
Corporate governance is the set of processes and policies
by which a company is directed, administered and
controlled. It includes the appropriate role of the board
of directors and the auditors of the company.
 The need for corporate governance arises because of
the separation of ownership and control.
 It helps the business to achieve its objectives in a way
that is acceptable to ALL stakeholders.
 Governance should lead to sustainable wealth
creation.
24
Corporate governance continued
Systems of corporate
governance
UK principles-based
approach: guidance on
the role of the chairman
and CEO, NEDs,
remuneration ,
nomination and audit
committees
25
US rules-based approach: the
Sarbanes-Oxley Act requires
auditor independence, an
audit committee, an internal
control report, increased
financial disclosures and
adherence to the US stock
exchange regulations
The impact of regulation on the firm
Regulation should
be:
Effective – ensuring a
safe and effective
product/service is
delivered, whilst not
inhibiting the function of
the business
26
Efficient– the total benefit to
the nation should be greater
than the total cost
Regulation continued
Regulation in the
UK
Regulation of the level of
competition:
1. Competition Act prohibits
anti-competitive
agreements or abuse of a
dominant position
2. Office of Fair Trading
investigates businesses
suspected of breeching
Competition Act
3. The Competition and
Markets Authority deals
with cases referred by the
Office of Fair Trading
27
Regulation of
people in business:
1. To prevent
insider trading
2. To prevent
trading if the
company is
insolvent
Regulation of externalities:
i.e. costs or benefits of
production experienced by
society but not by producers
or consumers themselves.
Regulation using:
1. max/ min prices
2. taxes/ subsides
3. fines and quotas
Regulation continued
International
regulation
The US Sarbanes-Oxley
Act 2002: only impacts
UK companies that are
registered on the US
stock exchange
28
Regulation of trade:
1. Free trade supported by
the World Trade
Organisation
2. Regional trading
organisations, e.g. EU
and NAFTA, allow free
trade between specific
countries
Business/government relations
Corporate political activity (CPA) refers to the involvement of
firms in the political process, with the aim of securing particular
policy preferences.
Two types of CPA:
Buffering – proactive
political actions on
behalf of firms, e.g. by
employing lobbying
29
Bridging – a more reactive
form of behaviour, e.g.
tracking the development of
new laws/regulations so that
compliance is in place when
the legislation is passed
Session
30
4
The Purpose of the
Finance Function
Overview Session Four
•Activities
•Components
•Conflict within the finance function
31
Activities
Five key activities are fundamental to the role of
the finance function:
1.accounting operations
2.analysis
3.planning
4.decision making
5.control
32
Components
33
Conflict within the finance function
Three key factors can result in conflict:
1.interdependence versus independence
2.short-term versus long-term
3.capital versus revenue expenditure.
34
Session
35
5
The Contemporary
Transformation of the
Finance Function
Overview Session Five
• Changes in the finance function
• Driving forces for change
• Bureaucratic to market orientation
• Outsourcing
• Offshoring
• Business process re-engineering (BPR)
36
Changes in the finance function
Focus has changed from financial control and
reporting to business support.
New role called the hybrid accountant.
Accountants don’t necessarily work in a
separate accounting function.
37
Driving forces for change
Management structure
Technology
Competition.
38
Bureaucratic to market orientation
Traditional function of finance
Modern function of finance staff
staff
Transaction processing, i.e. number Transformational role, i.e.
crunching.
contributing to strategy and
business decisions and focusing on
value adding activities such as
outsourcing, offshoring and BPR.
Bureaucratic nature
Market orientated, i.e. focused on
meeting customer’s needs.
39
Outsourcing
For most organisations, financial services are
non-core and there are benefits from outsourcing
these services.
Internal outsourcing (i.e. the formation of a
shared service centre) may be carried out as the
first step to full outsourcing.
40
Outsourcing continued
Benefits of internal outsourcing
Headcount reductions
Fall is staff morale
Reduction in cost of premises
Cost of redundancies
Systems consolidation
Lack of systems integration
Tax savings
Major set up costs
Favourable labour rate
Full outsourcing may be a better option
Improvements in quality
41
Drawbacks of internal outsourcing
Offshoring
Cost savings may be achieved through offshoring
some aspects of the finance function.
Alternatives to offshoring include:
retention of the finance function in-house.
near-shoring, i.e. moving tasks to a
neighbouring country.
42
Business process re-engineering (BPR)
BPR is the fundamental rethinking and radical redesign of business
processes. The main stages of BPR are as follows:
43
Session
44
6
The Purpose and
Management of the
Technology and
Information Function
Overview Session Six
•
•
•
•
•
•
•
•
•
•
The relationship between data, IT and IS
Evaluating a new information system
Systems development
Systems implementation
System maintenance
IS implementation – avoiding user resistance and non-usage
IS outsourcing
Privacy and security
Ethics and IT/ IS
IT enabled transformation
45
Information and information systems
Data consists of numbers, letters, symbols, raw facts, events and
transactions which have been recorded but not yet processed into a
form that is suitable for making decisions.
Information is data that has been processed in such a way that is
has a meaning to the person who receives it, who may then use it to
improve the quality of decision-making. Good information should
be ‘ACCURATE’ (accurate, complete, cost-effective, understandable,
relevant, accessible, timely and easy to use).
Information systems (IS) refers to the provision and management of
information to support the running of an organisation.
Information technology (IT) is the supporting equipment (hardware)
that provides the infrastructure to run the information systems.
46
Evaluating a new information system
Costs of a new
system
Initial costs:
• design and development
costs or purchase costs
• testing and implementation
• training
Running costs:
• labour time
• cost of material, e.g.
replacement parts
• cost of service support
47
Benefits of a new
system
• Enhanced efficiency and
capacity
• More ‘accurate’ information
• Better access to information
• Better sharing of information
• Improved communication
• Better decision making and
customer service
Systems development
Systems development follows a cycle called the systems
development life cycle (SDLC):
48
Systems implementation
Four methods of
system changeover
Direct:
appropriate
when there is
confidence in
the new
system or it is
not a critical
business
system
49
Parallel:
appropriate
when the
system has
not been
used
elsewhere or
it is a critical
business
system
Pilot:
appropriate
when the
system can
be operated
in different
geographical
regions
Phased:
appropriate
when the
system can
be
implemented
in distinct
parts
Systems implementation continued
Advantages
50
Disadvantages
Direct
Quick
Cheap
High risk
Parallel
Low risk
Output can be verified
Expensive
Slow
Users rely on old system
Pilot
Less risk than direct
Less costly than parallel
Slower than direct
Riskier than parallel
Phased
Staff have time to adjust
Less risky than direct
Slower than direct
Links between parts of the system
make it difficult
System maintenance
Three methods of
system maintenance
Corrective: the
correction of
technical
difficulties, e.g.
due to virus
infection,
hardware
failure
51
Adaptive:
changes to
the system
are made to
reflect the
changing
needs of the
organisation
Perfective
(preventative):
upgrades the
hardware and
software to
maximise speed
and
functionality of
the system
IS implementation – avoiding user resistance and
non-usage
Reasons for project failure:
 Insufficient user involvement
 Lack of management support
 Project too complex
 Poor planning
 Unrealistic deadlines
 Poor monitoring and control
 IT staff don’t have the necessary management skills
52
IS implementation – avoiding user resistance and
non-usage continued
Kotter, Schlesinger and Sache identified six methods of
dealing with resistance:
 Education and communication
 Participation
 Facilitation and support
 Negotiation
 Manipulation and co-optation
 Power/ coercion
53
IS outsourcing
IS outsourcing involves purchasing from outside the
organisation the IS services required to perform
business functions.
A service level agreement (SLA) setting out the terms
and conditions of the outsourcing arrangement,
should be drawn up between the client and the
supplier.
54
Privacy and security
55
General controls
Personnel controls
Application controls
Completeness checks
Access controls
Computer equipment
controls
Validity checks
Identification and
authorisation checks
Business continuity
planning
Problem management
facilities
Privacy and security continued
56
Potential threat
Possible solution
Natural disasters
Malfunction
Viruses
Fire procedures
Back-up procedures
Virus software
Hackers
Electronic
eavesdropping
Firewall software
Data encryption
Human errors
HR risk
Training
Ergonomic design of
workstation
Ethics and IT/ IS
Ethical issues connected with IT/IS
Data protection,
e.g. of customer
information
57
Incorrect systems
use, e.g.
downloading
improper materials
or violating
copyright laws
IT enabled transformation
IT enabled
transformation
Virtual companies:
1. Operate with
little physical
presence
2. IT has allowed
people to
collaborate
without meeting
face to face
3. Outsource most/
all functions
58
Virtual teams within
organisations:
1. A team of people not
present in the same
office or organisation
2. Work independently
but are guided by a
common purpose
3. IT allows information to
be sent/ shared
remotely and for virtual
meetings to be held
Homeworking
IT developments
have enabled
employees to
work at home
rather than being
based in an office.
Hot desking has
also become
common
IT enabled transformation continued
Benefits of virtual
companies
• Can exploit opportunities
• Look bigger than they are
• Flexibility
• Lower costs
59
Drawbacks of virtual
companies
• Difficult to negotiate
revenue sharing agreement
• Loss of control may result
in a fall in quality
• Loss of competitive
advantage if outsourcing
company work for
competition
IT enabled transformation continued
Challenges of virtual
teams
1.
Potential solution to these challenges
Forming a team can
be difficult
Knowledge sharing
1.
3.
5.
Difficult to establish
processes/ goals
Cultural differences
5.
6.
Leadership
Morale
5.
6.
2.
4.
60
2.
4.
Spending time getting to know each other,
e.g. team identity, jokes
Regular and predictable communication
patterns
Training in technology and teamwork plus
clear roles and responsibilities
Detailed, timely feedback between the leader
and the team members
Pay attention to cultural differences
Choose independent and self-reliant people
Session
61
7
Emerging IS Trends and
their Role in Supporting
Organisational Strategy
and Operations
Overview Session Seven
• E-business
• Managing knowledge
• Customer relationship management (CRM) systems
• Wireless and hand-held technology
• Cloud computing
• Social media
• Big Data
62
E-business
E-business is the transformation of key business processes through
the use of internet technologies.
Categories of e-business:
business to business (B2B)
business to consumer (B2B)
consumer to business (C2B)
consumer to consumer (C2C)
E-commerce is trading on the internet.
Digital goods are any goods that are stored, delivered and used in
an electronic format, e.g. e-books and music downloads.
63
Managing knowledge
Businesses need to gather, organise, share and
analyse their knowledge. Knowledge resides in human
capital and structural capital.
64
CRM systems
CRM systems help the organisation to know their customers better
and to use that knowledge to serve customers better.
Benefits of CRM
Improved co-ordination and integration of
systems
Software purchase and associated costs
Improved customer relations
Cost of staff training and disruption
Improved control and management
Opportunity costs
Improved motivation
Adjustment of business processes to fit software
A source of competitive advantage
Cost of getting staff buy-in
Cost effective
65
Criticisms of CRM
Wireless and hand-held technology
There has been huge growth in the ownership of i-pads,
android tablets and other hand-held computing
technologies.
Firms have:
made websites tablet friendly
developed apps
used tablets to access key information.
66
Cloud computing
Cloud computing means storing and accessing data and
programs over the internet instead of on a computer’s
hard drive.
67
Social media
Includes a range of sites that provide different social
actions, such as Twitter, Facebook, LinkedIn and
Instagram.
Opportunities include:
advertising
brand development
method of listening to customers
communication
recruitment and selection.
68
Big Data
Big Data refers to large volumes of data beyond normal
processing, storage and analysis capacity of typical
database tools.
69
Big Data continued
Big Data Management is the storage, administration and
control of vast quantities of structured and unstructured
data.
Big Data Analysis is the process of scrutinising Big Data
to identify patterns, correlations, relationships and other
insights.
Hadoop is an open source programming framework
which enables the processing of large data sets by
utilising multiple servers simultaneously.
70
Big Data continued
Benefits of Big Data
Drives innovation
Skills to use systems may not exist
Improved customer service
Security of data
Storage of transactional data in a digital
format
Data protection issues
Use to develop the next generation of
products or services
Integration difficulties
Access to external information
Processing may not add value
Can create new revenue streams
Change of perspective required
Source of competitive advantage
71
Risks associated with Big data
Session
72
8
The Purpose of the
Operations Function
Overview Session Eight
• Definitions
• The four V’s of operations
• Porter’s value chain
• Sourcing strategies
• Purchasing vs supply
• Reck and Long’s strategic positioning tool
• Cousin’s strategic supply wheel
• Relationships with suppliers
• Process design
• Sustainability in operations management
• CSR and operations management
73
Definitions
Operations involves the transformation of inputs into outputs in order to
add value.
Operations management refers to the activities required to produce and
deliver a product or service. It includes purchasing, warehousing and
transportation.
Operations strategy – an organisation can achieve significant competitive
advantage over its rivals through superior operating capabilities of its
resources, e.g. assets, workforce skills, supplier relationships.
74
The four V’s of operations
Operations may vary according to:
 volume
 variety
 variation
 visibility
75
Porter’s Value Chain
Porter developed his value chain to determine
whether and how a firm’s activities contribute
towards its competitive advantage. Margin, i.e. profit
will be achieved if the customer is willing to pay more
for a product/ service than the sum of the costs of all
of the activities in the value chain.
The approach involves breaking the firm down into
five ‘primary’ and four ‘support’ activities and then
looking at each to see if they give a cost advantage or
a quality advantage.
76
Porter’s Value Chain continued
Infrastructure
Human Resource Management
Technology
Margin
Procurement
Inbound
Logistics
77
Operations
Outbound Marketing
Logistics and Sales
Service
Sourcing strategies
Strategy
78
Explanation
Single
sourcing
The organisation chooses one source of
supply
Multiple
sourcing
The organisation chooses several sources
of supply
Delegated
sourcing
The organisation chooses one supplier
and this supplier co-ordinates and works
with other suppliers to ensure the supply
requirements are fulfilled
Parallel
sourcing
The organisation uses a mix of the three
approaches
Purchasing vs supply
79
Purchasing
Supply
• Concentrates on the day to
day buying of goods
• Emphasis in on price, quality
and accurate delivery of goods
• May be viewed as an out of
date approach to supply chain
management
A more modern approach dealing
with issues beyond the day to day,
for example:
• planning and implementation of a
supply strategy
• managing the overall supply
process
• considering the appropriateness
of outsourcing arrangements
• investigating whether strategic
partnerships could be developed
• the number of suppliers to use
Reck and Long’s Strategic Positioning Tool
Passive
Independent
Supportive
Integrative
80
Cousins’ Strategic Supply Wheel
Structure
Performance
measures
Relationships
Strategy
Competences
81
Cost/benefit
Relationships with suppliers
Past approach – competitive (opportunistic)
relationships, e.g. using tendering to minimise the
cost of purchases.
Modern approach – collaborative approach aiming to
work with the supplier and to use their knowledge
and skills to reduce costs and improve quality.
82
Process design
Processes may be improved using methods such as:
Process
maps
83
BPR
TQM
Kaizen
Supply
chain
managem
ent
Change
to reflect
processes
not
functions
Sustainability in operations management
Sustainable development is about meeting the needs of the
present without compromising the ability of future
generations to meet their own needs.
Sustainability impacts operations management in a number of
ways:
Process design, e.g. designed to minimise waste
Product design, e.g. use of recycled inputs
Supply chain management, e.g. choose suppliers that adopt
sustainable development policies
Quality management should help to improve efficiency and
reduce waste
84
CSR and operations management
Organisations need to be aware of how effective supply
chain ethics can help them to avoid costly product recalls
and brand damage that results from an unethical supply
chain decision.
85
Session
86
9
Tools and Techniques of
Operations
Management
Overview Session Nine
•
•
•
•
•
•
•
•
•
•
•
•
•
Managing operational capacity
Forecasting demand
Inventory management systems
Process technology
Layout and flow
Work study
What is quality?
Quality related costs
TQM
Quality control
Lean management
JIT
Reverse logistics
87
Managing operational capacity
Capacity planning – aims to balance customer
demand with production.
Three possible approaches:
 level capacity planning
 chase demand planning
 demand management planning
88
Forecasting demand
89
Inventory management systems
Methods of managing
inventory
Continuous
inventory system:
each addition and
withdrawal is
recorded and an
automatic order is
placed when
inventory falls to a
pre-determined
level
90
Periodic
inventory
system:
inventory is
checked on a
regular basis and
a variable order
is placed
depending on
usage during the
period
ABC system:
managers focus
their attention
on inventory
items of high
value and there
is little
management
control of
inventory items
that are least
used
Process technology
91
Layout and flow
Layout and flow is a big design consideration in operations
management.
A fixed position layout involves the movement of employees and
machines to the product which remains stationary. Used when the
product is large or bulky and the cost of moving it would be too high.
With cellular manufacturing, work units are arranged in a sequence
that supports a smooth flow of materials and components through the
production processes with minimal transport or delay.
92
Work study
The theorist, Taylor, was one of the first people
to study the work process scientifically.
By organising work in the most efficient way, the
organisation’s productivity will be increased and
this will enable the organisation to reward its
employees with the remuneration they desire.
93
What is quality?
Quality is difficult to define. However, the need
to satisfy customer’s needs is critical in most
definitions of quality.
94
Quality related costs
Four types of quality
cost
Prevention: cost
of preventing
defects before
they occur
95
Appraisal: cost
of quality
inspection and
testing
Internal
failure: costs
arising from a
failure to meet
quality
standards.
Occurs before
product has
reached the
customers
External failure:
costs arising from
a failure to meet
quality standards.
Occurs after
product has
reached the
customers
TQM
Fundamental features:
Prevention of errors before they occur
Continual improvement
Real participation by all
Commitment of senior management
96
TQM continued
TQM techniques:
Quality circles
Kaizen
5-S practice
Six sigma
97
TQM continued
1. Senior
management
consultancy
98
2. Establish
quality steering
committee
3.
Presentations
and training
4. Establish
quality circles
5.
Documentation
6. Monitor
progress
Quality control
Quality control (QC) involves a number of
routine steps which measure and control the
quality of the product/service as it is
developed.
99
Lean management
A philosophy that aims to eliminate waste, i.e.
Inventory
Waiting
Defective units
Effort
Transportation
Over-processing
Over-production
100
Lean management continued
Characteristics
• Improved production
scheduling
• Small batch or continuous
production
• Continuous improvement
• Zero inventory
• Zero waiting time
101
Criticisms
• High initial outlay
• Requires a change in
culture
• Part adoption
• Cost may exceed benefit
Lean management continued
Six sigma
Cellular
manufacturing
JIT
Six core methods
of lean
production
TPM
Kaizen
5-S practice
102
JIT
Requirements for the successful operation of a JIT
system include:
Flexible production
The speed of throughout should match demand
Elimination of non-value added activities
Higher quality and reliability
Lower costs
103
Reverse logistics
Reverse logistics is the return of unwanted or surplus
goods, materials or equipment back to the organisation
for reuse, recycling or disposal. It is important for an
organisation to understand the reasons for returns and to
take action to reduce the volume of returns.
104
Session
105
10
Introduction to
Marketing
Overview Session Ten
• Approaches to selling a product
• Understanding the marketing environment
• Consumer behaviour
• Factors affecting buying decision
• Types of buyer behaviour
106
Approaches to selling a product
Four possible approaches
to selling a product
Sales
orientation: uses
aggressive
promotional
policies to entice
the customer
107
Production
orientation:
focus is on high
volume
production to
achieve a low
unit cost
Product
orientation:
focus is on
continual
improvement of
products
assuming
customers
simply want the
best quality for
their money
Marketing
orientation: starts
by understanding
the customers’
needs and then
produces products
with benefits and
features to fulfil
these needs. The
best approach.
Understanding the marketing environment
The following technique can be used to analyse the macro
environment:
• Political
• Economic
• Social
• Technical
• Ecological
• Legal
Each of these factors can be applied to the marketing function.
108
Consumer behaviour
Consumers go through a five stage decision-making process in any purchase:
Need Recognition
Information Search
Evaluating Alternatives
Decision to purchase
Post Purchase Evaluation
109
Theories of consumer behaviour
Cognitive
paradigm
theory
Learned
behaviour
theory
110
Habitual
decisionmaking
Factors affecting buying decision
Socio/cultural
influences, e.g.
reference groups,
role models, family
Personal
influences, e.g.
age, family
status,
occupation
111
Psychological
influences, e.g.
motivation,
beliefs and
attitudes
Types of buyer behaviour
Fast moving consumer goods are relatively cheap,
habitual purchases, e.g. bread.
Durable goods are relatively expensive, irregular
purchases, e.g. a car.
112
Session
113
11
The Market Planning
Process and the
Marketing Mix
Overview Session Eleven
•
•
•
•
•
•
•
•
•
•
•
•
The market planning process
Market segmentation
Targeting
Positioning
Market research
The marketing mix
Product
Pricing
Promotion
Place
Branding
Big data
114
The market planning process
Situation analysis
Review mission/objectives
Set marketing objectives
Devise a marketing strategy
Plan the marketing mix
Implementation and review
115
Market segmentation
Market segmentation is the sub-dividing of the
market into homogenous groups to whom a separate
marketing mix can be focused.
Kotler suggested that segments should be:
Measurable
Accessible
Substantial
116
Market segmentation continued
Bases for segmentation
Demographic:
• age
• sex
• geographical
area (geodemographic)
•family life
cycle
117
Socioeconomic:
• occupation
• income
Psychological:
• lifestyle
• attitudes
• values
Situational
(behavioural):
•occasion of use
•frequency of
purchase
•customer
loyalty
Targeting
Targeting is the process of selecting the most
lucrative market segment(s) for marketing the
product.
118
Positioning
Positioning involves the formulation of a definitive
marketing strategy around which a product would be
marketed to a target audience. Porter identified a
number of potential strategies:
 Concentrated marketing: specialises in one or two
of the identified markets only
 Differentiated marketing: the company makes
several products each aimed at a separate market
 Undifferentiated marketing: the delivery of a single
product to the entire market
119
Market research
Market research is the way in which organisations find out
what their customers and potential customers need, want and
care about.
Data gathering techniques
Primary research:
collected for the specific
purpose of the research
in question, e.g. focus
groups, observation,
interviews,
experimentation
120
Secondary research: data
that is already available,
e.g. market research
agency data, Companies’
Annual Reports and
Accounts, trade and
technical journals
The marketing mix
The traditional marketing mix (4Ps):
Product: Factors such as quality, design, range,
packaging, branding and warranties
Place: Where to sell the products, distribution
channels, stock levels and warehouse locations
Promotion: Techniques such as advertising,
personal selling, public relations, sales promotion
and direct marketing
Price: level, discounts, credit policy and payment
methods
121
The marketing mix continued
Additional 3Ps for the service industry:
People: relates to both staff and customers
Processes: systems through which the service is
delivered
Physical evidence: makes the intangible service
more tangible
122
Product
Terms
• Product item: the individual product
• Product line: a collection of product items that are
closely related
• Product mix: total product lines. Consists of:
-width: the number of product lines
-depth: the number of product items within each
product line
123
Product continued
The product life-cycle
Sales
Intro
Growth
Maturity
Decline
Time
124
Product continued
The Boston Consulting Group (BCG) matrix is used by managers to identify
the cash flow requirements of different products and to help to decide
whether a change in the mix of products is required.
125
Pricing
Pricing is influenced by the 3Cs, i.e. cost, customers and
competitors.
Two forms of pricing for a new product are:
 skim pricing
 penetration pricing.
Other pricing options include:






126
follow the leader pricing
charging a high price if the company is the sole producer
loss leader pricing
low prices to crush competitors.
variable pricing
consideration of the product portfolio
Promotion
The promotion mix comprises the blend of methods that
a company uses to promote its products to existing and
potential customers.
Methods include:
Advertising
Personal selling
Public relations
Sales promotion
Direct marketing, e.g. direct mail/ telemarketing
E-marketing
127
Promotion continued
Some relatively new forms of marketing include:
Viral
Guerrilla
Experiential
Digital
Social media
Postmodern
128
Promotion continued
Mass media: non personal
and aimed at the whole
market
Three classes
of marketing
communication
Personal and direct: one way
communication with the
customer, e.g. by letter
129
Personal and interactive: a
one to one dialogue between
the salesperson and customer
Place
Distribution involves getting the right products to the
right people at the right time.
Three forms:
 Zero level
 One level
 Two level
One and two level distribution involve:
Pull strategies – advertising creates consumer demand
forcing retailers to stock the product
Push strategies – retailers are offered high margins and
therefore stock the product
130
Branding
A brand is a name, symbol, term, mark or design that enables customers to
identify and distinguish the products of one supplier from those offered by
competitors.
Brand equity is the premium that customers are willing to pay for a brand
compared to a similar, generic product.
Characteristics of a strong brand
• Consistency
• A distinctive name
• Distinctive product features
131
Determinants of brand value
• High loyalty
• Name awareness
• Strong personality associations
• Perceived quality
• Other attributes, e.g. patents
Branding continued
Benefits of effective brand management include:
improved profitability
valuable asset
higher prices can be charged
method of differentiation
way of connecting with customers
assists with other marketing practices
customer loyalty.
132
Big Data
In the digital age, companies gather information
about their customers from a huge range of
sources. Sophisticated analysis using Big Data
technologies allows some companies to more
accurately predict demand.
133
Session
134
12
Further aspects of
marketing
Overview Session Twelve
• Differences between B2B and B2C
• Internal marketing
• Marketing sustainability and ethics
• Social marketing and corporate social responsibility
• Marketing in a not for profit context
135
Differences between B2B and B2C
Derived
demand
from
consumer
market
Technical
complexity
Closer
relationship
between
buyers and
sellers
136
Features of
B2B
compared
to B2C
marketing
Fewer
buyers
High
purchasing
power
Internal marketing
Internal marketing is the means of applying the
philosophy and practices of marketing to the people
who serve the external customers so that:
the best people can be employed and retained
the employees will do the best possible work.
137
Marketing sustainability and ethics
Typical issues surrounding ethics and marketing
include:
marketing’s responsibility for customers’
privacy and security
marketing’s responsibility to vulnerable people
marketing’s responsibility to employees
marketing’s responsibility for preserving
competitiveness in the market
responsible communication.
138
Social marketing and corporate social
responsibility
Acts as a
unique selling
point
Change before
new legislation
is introduced
Advantages of
adopting a
socially
responsible
approach
Lower costs,
e.g. due to
using less
packaging
139
Increased
sales, e.g.
customers may
be willing to
pay more
Marketing in a not for profit context
Charities employing the most appropriate marketing practices are most
likely to lever the generosity of peoples’ time and money.
Within the UK, political reforms have pushed the public sector into a more
commercial and managerial style meaning some managers need to make
marketing decisions.
NGOs use marketing to:
 find a position for themselves in the market
 distinguish client and donor needs
 formulate and communicate NGO requirements
 gain new supporters.
140
Session
141
13
An Introduction to
Human Resource
Management
Overview Session Thirteen
• Definitions
• Human resource planning
• HR in different organisations
• The HR cycle
• Recruitment
• Selection
• Induction
142
Definitions
Human resource management (HRM) can be viewed as a strategic
approach to acquiring, developing, managing and motivating an
organisation’s key resource. This should help the organisation
achieve its stated objectives through the best use of its employees.
Hard HRM treats employees simply as a resource of the business
(like machinery and buildings). There is little staff empowerment and
pay is just enough to recruit and retain sufficient staff.
Soft HRM treats employees as the most important resource in the
business and as a source of competitive advantage. Employees are
empowered and receive a competitive pay structure (including
performance-related pay).
143
Human Resource Planning
Stage 1: Strategic analysis
Stage 2: Internal analysis
Stage 3: Identify gap
between
supply and demand
Stage 4: Put plans in place to
close the gap
Stage 5: Review
144
HR in different organisations
HR practices vary depending on organisational:
size
culture
availability of specialist HR staff.
New forms of organisation have resulted in changing HR
needs, for example:
project-based teams
virtual organisations.
145
The HR cycle
146
Recruitment
Recruitment involves attracting a pool of suitable
candidates for the job.
147
Recruitment continued
Competency frameworks attempt to identify all the competencies that are required by
anyone taking on a particular role within the organisation.
A person specification is developed as part of the recruitment process. It defines the
personal characteristics, qualifications and experience required by the job holder in
order to do the job well. It therefore becomes the specification for the attributes sought
in a successful candidate for the job, a blueprint for the perfect person to fill the role.
Rodgers recommended that the following categories should be covered in a person
specification:
 Background/ circumstances
 Attainments
 Disposition
 Physical make-up
 Interests
 General intelligence
 Special attributes
148
Selection
Selection is aimed at choosing the best person for the
job from the field of candidates sourced using
recruitment.
The selection method must be:
• Reliable
• Valid
• Fair
• Cost effective
149
Selection continued
Application
form
Selection
interview
References
Selection
methods
Assessment
centre
150
Selection testing
Induction
The purpose of an induction is to ensure the most effective
integration of staff into the organisation, for the benefit of
both parties.
Benefits include:
• Quick assimilation of employees into the organisation
• The process reassures employees which increases
motivation/ performance
• Increased employee commitment
• Reduces staff turnover
151
Session
152
14
Appraisal, Training,
Development,
Motivation and
Retention
Overview Session Fourteen
• Appraisals
• Training and development
• Reward systems
• Workforce flexibility
• Knowledge workers
• Employee involvement
• Psychological contracts
153
Appraisals
Appraisal is the systematic review and assessment of an
employee’s performance, potential and training needs. It will
involve the following steps:
Identifying the criteria for assessment
Preparation of appraisal report by manager
Appraisal interview between job holder and manager
Agreement of future objectives and solutions to problems
Manager’s supervisor reviews the assessment for fairness
Follow up
154
Appraisals continued
Lockett’s barriers to effective appraisal
Confrontation
Judgement
Chat
Bureaucracy
Annual event
Unfinished business
155
Training and development
Training: formal learning to achieve the level of skills,
knowledge and competence to carry out the current role
Development: the realisation of a person’s potential through
formal and informal learning to enable them to carry out their
current and future role
Honey and Mumford suggested that there are four different
learning styles:
• Activists
• Reflectors
• Theorists
• Pragmatists
156
Training and development continued
Kolb’s experiential learning cycle:
Concrete Experience
Reflection
Testing Ideas
Concept Creation
157
Reward systems
Motivation
To comply
with
legislation/
regulation
To achieve
organisational
goals
Attract/retain
quality staff
Aims of a
reward system
Recognise
factors other
than job
performance
158
Consistency
and fairness
Reward
performance
Reward systems continued
There are four main types of incentive scheme:
• Profit-related pay
• Piece rates
• Performance-related pay
• Non-financial rewards
A total reward package draws together all the
financial and non-financial benefits available to
employees.
159
Training and development continued
The stages in the training and development process:
1. Identify training
and development
needs
5. Evaluate the
training
4. Deliver the
training
160
2. Set training
objectives
3. Plan the training
Workforce flexibility
Numerical
flexibility
Flexible working
arrangements
Four types of
workforce
flexibility
Task or
functional
flexibility
161
Financial
flexibility
Knowledge workers
Knowledge workers are people who create
knowledge and produce new products and services
for the organisation to sell.
For example:
• Research staff
• Chemists
• Architects
162
Employee involvement
Employees should be given the opportunity to
contribute to the organisation. High performance
work arrangements rely on all employees for their
ideas, intelligence and commitment to make the
organisation successful.
163
Handy’s psychological contracts
Psychological contracts exist between the
employee and the employer.
They can exert strong influence on behaviour
because it captures what employees really believe
they will get in return for what they give.
164
Session
165
15
Employment practices,
HR roles and ethics
Overview Session Twelve
• Employee practices
• HR roles
• Ethics
166
Dismissal
Dismissal is the termination of a person’s
employment with or without notice from the
employer.
Considerations when analysing if dismissal is fair:
conduct of the employee
capability of the employee
breach of statutory duty
redundancy
other suitable reasons, e.g. dishonesty.
167
Redundancy
True redundancy arises when the role the employee
performs is no longer required. Alternatives to
redundancy include:
recruitment freeze
natural wastage
retraining staff to fill vacancies elsewhere
job sharing
part time work/ reduced hours
retirement
voluntary redundancy.
168
Role of line managers and HR professionals
The role of the line manager and HR department is
different, e.g. the line manager may take a more
operational approach where as the HR department takes
a strategic, longer term view.
Organising the HR function:
centralised
decentralised
shared services
outsourced HR
169
Ethics
Ethics is a set of moral principles to guide behaviour.
How to deal with ethical dilemmas at work:
obtain further information
follow internal procedures
consult with line managers/ higher levels of
management or the audit committee as appropriate
seek advice from professional institute
consider withdrawing from situation/ engagement.
170