MANAGEMENT SERVICES

The Role of Information Technology in Business:

It is the acquisition, processing, storage and dissemination of vocal, pictorial,
textual and numerical information by a micro electronics based combination of
computing and telecommunications.
There are three major components of IT:
1. Computers that is electronic machines capable of making large sets of
calculations very rapidly.
2. Micro-electronics that is the design, application and production of very
small scale electronic devices containing densely packed components.
3. Telecommunications that is the transmission of information by cable or
radio waves.
Analysis of Administrative Practices
Meaning of Organisation and Methods
The investigation of systems in an office and attempt to re-design and
replace them with a more efficient or economic system.
Reasons why a Specialist Organisation and Methods Department is being
established include:
Specialist staff can give undivided attention to the work.
Can be very difficult for the office manager to do the job.
Office manager may not be trained or have to experience of organisation and
methods.
Can obtain information from professional sources or contacts within similar
areas.
Organisation and methods team is important and can view the work
objectively.
They can apply specialist knowledge of systems and machines.
Recommendations relating to activities that maybe undertaken by the
Organisation and Methods functions:

Calculation of and payments of wages and salaries.

Accounting systems.
Word processing.
Order procedure.
Sales procedure.
All areas of employment.
Stock control.

RESEARCH, DESIGN AND DEVELOPMENT

Research is a systematic, gathering, interpretation and analysis of

data in order to get finds for decision making from interpretation we
get findings which we use for planning and decision making.
It is a process that links the organisation and its publics.
Publics is a group of people that has both interest or influence to the
organisations operations.
C.E.O

R&D

PH Design & Development

and Interpretation

Field Work (Data Collection)

Data Analysis

Product Research:

Is a study specifically for a particular product line.

Product Design:

Is a process of designing the physical appearance of the product.

Product Development:

The process of manufacturing the product from idea generation to

launch.

Stages in Research Process:

1.
2.
3.
4.
5.

Definition of problem and set research objectives.

Designing research process.
Data collection.
Data analysis and interpretation.
Reporting of findings and make recommendations.

Definition of Problem and Setting Research Objectives:

A problem is a gap between desired outcome and actual outcome.

Research ___can be problems or opportunities. A problem needs to be
defined and scrutinised.

After examining the problem the researcher sets objectives (the

desired end).

Designing Research Process:

Is a guide used by researchers to structure their study.

There are three types of designs/approach/methodologies:
1. Explanatory explaining
2. Description describing
3. Consult/Experimental carry out experiment

Data Collection:

The researcher first collect secondary data (data already existing

somewhere in the organisation).
And the primary data (data collected for specific problems at hand).

Advantages and Disadvantages of Primary and Secondary Data:

Data Analysis:

This includes data editing (correcting of errors and omissions).

Data coding classification of data into codes or classes.
Data interpretation assignment of meaning to get findings from the
data.

Reporting of Findings:

This can be done in a written format or can be presented orally to the

management.
The researcher recommends a course of action to be taken in solving
the problem under study.

Stages in Product Development Process:

1.
2.
3.
4.
5.
6.
7.

Idea generation
Screening process
Business development
Development of prototype
Product development
Market testing
Commercialisation or launch

Idea Generation:

Ideas come from many sources e.g. suggestion boxes, customer

opinions, through research etc.
Companies should try by all means to gather more ideas.

Screening:

The idea is to drop other ideas and pursue the most attractive ideas.
Companies use criteria which includes items such as cost, the type of
product, the need to be satisfied etc.

Business Development:

This is the projection of revenue profits and expenses for the new idea.
The idea with more revenue and profits is the attractive one.

Development of Prototype:

A prototype is a simple product. Companies try to limit the cost by

producing samples.
The sample can go tests e.g enable market test.

Product Development:

This is the actual development of the product after satisfying the

product.

Market Testing:
Companies may choose a small market where they can sell their
product to test the customers response.
Commercialisation/Launch:

At this stage companies should answer the following questions:

1.
2.
3.
4.

When to launch?
Where to launch?
How to launch?
For who to launch?

Contributions of Marketing Research to Product Research Design and

Development:

Product research is part of Marketing Research the manager

contribution is that marketing advises production department on
product quality, quantity, product formulations needed to address
customers needs.
Marketing is also responsible for carrying out product research.

Marketing Research
Research

Design and Development

Areas of Research Application:

Product

Packaging; reliability of services; pricing; promotions; after sales

services.

Contributions to the Growth of an Enterprise through Research:

Identifying problems helps you to address them, this improves services

thus growth.
Effective communication leads to massive growth through
understanding between the organisation and its publics.
The company uses opinions from respondents to develop every area in
the company.

Reasons for New Product:

To increase customer base, market share and sales.

To keep up with technology.
To fight competition with new products.
To remain an innovator.
For the growth of the company.

Contributions of Research Modification or Discovery of New Uses of

Existing Products:

Research tracks the trends or developments in the market eg on

identifying customers needs and problems gathering information,
identifying new uses etc.
The company can improve or modify the existing products using
customer opinions and news gathered through research.
Companies modify the product to suite identified needs eg bicarbonate
of soda.
Recommendations for New or the Development of Existing Products to
Counter Innovation External to the Enterprise:

We research the market to identify the type of innovation.

Offer improved services better than offered by the companies.
Develop better quality product than offered by other companies.
Development of new products increase market share.

Costs Incurred in Product Development:

Cost of research; problem cost; forecasting cost; labour.

P---- Prototype testing cost; material cost; cost of design.

How Costs can be met by Small Enterprises:

Employ agents.
In house training for data analysis and processing.
General collective activities (sharing of advertising as a group).

Suggestion boxes for gathering information.

Factors to be Considered in a Product Research:

Cost of research.
Materials and labour.
Time.
The respondents.
Stage of the product in the life cycle.

Factors Considered in Design and Development:

Standardisation (the use of uniform product eg bread) or adaptation eg

super white/whole wheat that is using different variations of the same
products.
Plant capacity (how many it can produce).
Maintenance (does it need to be maintained now and again).
Labour/manpower (do we have human resources for production).
Price of developing the product.

FINANCIAL

Is the content and interpretation of financial statements.

Financial statements include:

1. Trading, Profit and Loss Account:

Trading account is used to calculate the gross profit.
Gross profit is the difference between the selling price and the
purchase price applied to the same goods.
Profit and loss account is used to calculate net profit which is the
difference between gross profit and total expenses.

2. Balance Sheet:
Is a statement of affairs, it shows the position of a company at a
certain period of time.
It is represented by an accounting equation which is Capital = Assets
Liabilities.

3. Income and Expenditure Statement:

They are used by non-profit making organisations to calculate surplus
of cash or deficit. If income is more than expenditure we get surplus
vice versa is a deficit.

4. Cash Flow Statements:

Are used to show the cash inflows and outflows at a certain period of
time.
It shows the opening and the closing balance.
Trading, Profit and Loss Account for
the year ended 31 December 2008

Sales

Returns inwards

Turnover

Less Cost of Goods Sold

Opening stock

Purchases

Carriage inwards

Total goods available

Less returns outwards

Less closing stock

Cost of sales

Gross profit

Less expenses
Rent

Electricity

Wages

Depreciation

Bad debts

Total expenses

Net profit
X
X
BALANCE SHEET AS AT 31 DECMBER 2008
COST
Fixed Assets
Machinery
Buildings, Motor Vehicles

X
X
X

X
X
X

Current Assets
Cash at hand or cash at bank
Debtors
Prepayments
Less Current Liabilitires
Creditors, Bank overdraft,
accruals
Long Term Liabilities
Loan, working capital
Capital and
Net profit less
Drawings

DEPN
X
X
X

X
X
X

X
X
X

X
X
X

X
X

X
X

X
X
X
X

X
X
X
X

NBV
X
X
X

X
X
X

X
X

X
X

Assets:

Is a right acquired for use in the business depending on its nature.

It can be divided into fixed or current, current is an asset which is in
the form of cash or may be turned into cash or may within the next
accounting period eg a year.
Examples include debtors, cash at hand, cash in bank, prepayments,
trademarks.

Liabilities:

Is an owed by the business to an outsider at the balance sheet date. It

can be current or long term.
Current is the amount which the business owes to outsiders which it ca
reasonably expect to pay within the next accounting period usually
one year eg accruals, bank overdraft, creditors.
Long term is the amount which the business cannot settle on payout
with the next accounting period eg mortgage, loan.

Capital:

It is the value of the original investment plus any long term loans
taken out, plus any retained profits reinvested in the organisation over
time.
Retained profit is the amount of profit reinvested back in business.

Gross Profit:

Is the difference between selling prices and purchase prices applied to

the same goods which have been sold to customers during an
accounting period.
Its calculated in the trading account using the formula:
Sales Cost of Sales = Gross Profit

Trading Net Profit:

Is the financial surplus calculated by deducting the business expenses

of an accounting period from the gross profit.
Trading profit is calculated in the profit and loss account using the
formula
Gross Profit Expenses = Net Profit/Loss
Layout of Cash Flow Statement
Cash Flow Statement for the
period
Opening balance
Plus receipts (source of cash)
Capital
Sales
Loans
etc Commission
Less payments (use of cash)
Purchases
Salaries
Rent
Etc

X
X
X
X
X
X

X
X
X
X

X
X
X
X

X
X
X
X
X
X

Total payments
Closing balance

X
X

X
X

Non Profit Making Organisation

Layout of Income Receipts and Payments Expenditure
Account
Income and Expenditure Account
period
Income
Subscriptions, Donations
Commissions
Sales
Gate takings
Total income
Less Expenditure
Rent, transport
Salaries
Electricity
Total expenditure
Surplus/Deficit

for the

X
X
X

X
X
X
X
X
X

X
X
X
X
X
X

X
X

X
X

X
X
X

Budgets, Forecasts and Plans

A plan is a strategic or guide used to achieve a goal. Plan can be long

term or short term.
A forecast is a future prediction or outcome that can be used in
developing plans.
A budget is a financial guide which indicates budgeted units or cost
both budgets and forecasts are short term plans which can be
classified as single-use.
Budgetary control is a process of measuring the actual performance
and comparing it with the set budget in order to determine the
difference.
The difference between the two is known as variance. It can be
favourable (less than budgeted) or unfavourable (more than budgeted
as it stretches the budget.
Master budget this is an organisational financial plan which covers the
enter organisation, normally prepared by top management.
Departmental budget is a financial plan for a business function eg
production, normally prepared by functional managers covers one
department.

Methods of Preparing Budgets:

1. Top Down Approach

Top management prepare the master budget and divide into equal
proportions depending with the number of departments and
communicate down to functional managers.
Disadvantage Advantage
Functional managers will restrict their activities within the stipulated
budget eg Minister of Finance

2. Bottom Up Approach
Functional managers prepare their own departmental budgets and
submit to top management for approval.
Top management will then prepare the master budget using
departmental budgets.

Advantages of Budgeting
It offers guide and direction eg on utilisation of resource allocation
resources functional auditing (eg marketing audit).
It allows business to be more efficient.
It acts as a controlling tool.
The business will be aware of how much to raise between operations
eg decision making (when seeking loans).
Disadvantages of Budgeting
Time consuming.
Restricts operations eg if top management under budgets.
Needs someone who is skilled in terms of budgeting.
Relies with past info and is not 100% reliable.
Difficult to prepare in unstable external environments eg inflation.

Financial Accounting

It is that part of management accounting which establishes budgets

standard cost and actual cost of operation, processes, departments
and the analysis of variances, profitability or social use of funds.
It enables the business to find out what various jobs or processes have
cost as well as what they should cost.
It indicates where loses and wastes are occurring before the working is
finished and therefore immediate action may be taken.

Management Accounting

It is the provision of information required by management for such

purposes as formulation of policies, planning and controlling the
activities of the business, decision making on alternative courses of
action, disclosure to those external to the entity eg shareholders,
disclosure to employees and self guarding assets.
Cost = Quantity Used x Price

Cost is the amount of expenditure incurred to a specific timing or

activities

Ratio Analysis

Is a technique which makes use of the calculations of financial ratios

as a starting point.
In the interpretation of financial statements this is used in strategic
planning processes to monitor performance, to identify strengths and
weakness compared to the competition.
And to plan or control changes in the business operations in review of
their projected impact on future performance.
They focus mainly on three areas i.e:
1. Profitability
2. Resource utilisation
3. Returns t investors
Liquidity

Is concerned with the management of working capital. Its a measure

of a business ability to pay amount due in short term out of current
assets.
A company can be described as liquid if they are more than sufficient
current assets to cover all short term debts.
Two key ratios used to analyse liquidity are the current ratio and acidtest ratio
Current ratio = Current Assets
Current Liabilities
=1

The ratio assesses the relationship between the value of those assets
which are liquid in the sense that they will be turned into cash within
the next financial year and the value of the debts which will fall due
within the same time period.
Eg if the answer is less than 1 the company is said to be illiquid.
This means the company needs to raise extra funds from sources
other than the liquidation of their current asset. If the answer is 1 or
more than the company is said to be liquid.
Acid Test Ratio = Current Assets - Stock
Current Liabilities
Stock Turnover = Cost of Goods Sold
Average Stock
Average Stock = Opening Stock + Closing Stock
2

Profitability is defined as the relationship of the volume of sales

activities generated to the actual profits obtained through eg to know
how many dollars are needed to cover cost and how many left over as
profits, to be distributed or re-invested in the business.
Profitability ratios can be calculated include net margin and gross
margin.
Net Margin = Net Profit x 100
Sales
Gross Margin = Gross Profit x 000
Sales
10% gross margin means for every $100 we have $10 net profit
30% gross margin means for every $100 we have $30 gross profit
Mark Up = Gross Profit
Cost of Goods Sold
Selling Price = Cost +Mark Up

Return on investment ratios these include the following ratios:

1. Earnings per share = Net Profit after tax
Number of ordinary shares
It indicates how much profit for a given financial period is available to
be distributed to the holder of each share.
The part which is paid out is called the total dividend.
The dividend per share ratio is calculated :
Total dividend per share = Total dividend
Number of ordinary shares
Advantages of Ratio Analysis

Shows the profitability, the attractiveness of an investment and the

capabilities of paying debts in a given period of time.
Uses a small number of figures extracted from the statements eg net
profit and sales to show the relationship.

Disadvantages of Ratio Analysis

Sometimes may not be relevant due to changes in the future.

They focus on specific areas only eg does not show were more
expenses are used.
In other operations they cannot apply eg labour utilisation.

Internal and External Sources of Capital

Returned Profit
Internal

Sales of Assets
Reductions in Work Capital

External

Long term .share issue

.debentures/bonds
.long term loans, grants
Middle term .leasing, hire purchase
.medium term loans
Short term .bank overdraft
.bank loans
.creditors
.factoring

Advantages of Internal Services

1. It is convenient.
2. Easier to manage your assets.
3. Loan free, thus avoid liquidation.
Disadvantages
1. Limited cash generated.
2. Sometimes the company can generate losses.
3. Sources cannot find the longer projects for the company eg
expansion.
4. Reduction of work capital reduces operations thus less profits.
Advantages of External
1.
2.
3.
4.
5.

More cash can be generated.

Flexibility in paying back.
Offers can be obtained as per request.
Can always get cash inflow.
Increase the assets eg bonds that can mature in the future.

Disadvantages
1. Most of them accumulate interest eg bank loans.
2. Require more accounting work eg calculating balances per each and
every period.
3. Effective management because of over borrowing or in terms of
leasing.
C.E.O

Finance Manager

Budgeting Manager
Auditing Manager Accounting Manager
Investment Manager
Clerks

Auditors control the flow of financial funds in the company.

Budgeting prepare budgetary control measures and short/long term
budgets.
Investments make short term/long term investments for the
company.
Choose best way to invest.
Accounting prepare financial statements eg trading, profit and loss
balance sheet.

PRODUCTION

Production is concerned with the provision of goods, its central part in

manufacturing process.
Its responsibilities is to plan resources and control the process involved
in converting raw material and components into the finished goods
required to satisfy the needs and wants of the organisations
customers.
Production uses inputs known as factors of products such as land,
labour, capital and entrepreneurship.
These have their rewards that is rent, wages and salaries, interests,
profit.
In market oriented organisation production starts with the customer.

Stages and Production:

Stage 1 New Idea Generation:

The idea comes from many sources eg customer, supplier, competitor

etc.
The company tries to generate as many ideas as possible.

Stage 2 Screening Process:

The idea is to screen and drop poor ideas and pursue the good ones.
The company will use the criteria in screening eg benefits, cost etc.
They are two areas likely to occur that is dropping a good idea or
pursue a poor idea.

Stage 3 Business Analysis:

This is an overview or a projection of future scales, cost and profits.

This can be done by research and development in order to see the
profitability of the new product.

Stage 4 Development of Prototype:

A prototype is a sample of product, company produce a sample in

order to limit the cost of production.
The prototype will be tested in the lab and in the field in order to see
its functionality and the customers response.

Stage 5 Product Development:

This is the actual production of the actual product, it can be done after
the company is satisfied with the prototype.

Stage 6 Market Testing:

The company tries to sell the product in a selected market place, they
use strategies such as test price, limited distribution in order to see
and try who effective they can sell the product.

Stage 7 Commercialisation/Launch:

In this the introduction of the product into the market, the company
will decide or answer the following question before they launch eg
when, where, how and who to launch the product.

Organisation of Production Functions