ICAEW PREPARATION

CHAPTER 1

1.WHAT IS AN ORGANIZATION ?

1.1. Introduction to organizations

Include profit-oriented and not-for-profit oriented.

1.2.Why do organizations exist?

 overcome people’s individual limitations

 let people specialize in what they do best
 save time
 accumulate and share knowledge
 let people pool their expertise
 enable synergy (like cooperating for better and more productive)

1.3. What do organizations have in common?

a.Definition

Organization : social arrangement, controlled performance of collective goals, boundary separating

1.4. How do organizations differ?

 Ownership : public(owned by nation and managed by government) and private (owned by private investors and
shareholders)
 Control : by owners themselves, by people working on behalf (CEO)
 Activity : what they do
 Profit or non profit orientation
 Size
 Legal status : company, club, association, partnership, or sole trader
 Sources of finance: borrowing, government funding, share issues
 Technology

2.WHAT IS A BUSINESS ?

Profit-oriented organization are referred to as businesses

Not for profit oriented are frequently structured and run like a business (for better economy, efficiency and effectiveness
in using resources and management) , but they are not owned by shareholders (like profit oriented) .Their primary
objectives are focused on providing goods and services to their beneficiaries at minimized cost

Defintion of a business

An organization that is oriented towards making a profit for its owners so as to maximise their wealth and that can be
regarded as an entity separate from its owners.

3.STAKEHOLDERS IN A BUSINESS
 Shareholders Money invested A return on their investment
(Primary)  Steady , growing profit paid out by the
business(dividend)
 Growth in the capital value of their
share of the business

Directors/managers Livelihoods,careers and reputation Fair and growing salary

Employees and trade Career progression
unions
Safe working environment
Training
Pension
Customers Their custom Good quality of the product
Fair terms of trade
Continuity of supply
Suppliers The items they supply Fair term of trade
Quick payment
Continuity of custom (habit buying)
Lenders Money lent Interest
Repayment of capital
Government National infrastructure used by business Employment and business practice
The welfare of employees Compliance with regulations
Tax revenue Tax revenue
Local community National infrastructure used by business Employment and business practice
The welfare of employees

The natural environment The environment Environmental and business practices

3.1. Sustainability and corporate responsibility

Defintions

 Sustanability : the ability to meet the needs of the present without compromising the ability of future
generations to do it) (using tangible and intangible resources)
 Corporate responsibility : the actions, activities and obligations(duty) of business in achieving sustainability

4.WHAT ARE THE BUSINESS’S OBJECTIVES

4.1. The hierarchy of objectives

 Primary Objective

For a businesss, the primary objective is financial : profit maximization and increasing their shareholder’s wealth

Note: Profit can not be persued at any cost due to the subject to laws and regulation and social responsibility
  Secondary Objective:
 Market position: gain market share, sales boost, enter or leave the market when the time is right, avoid
depending on single customer
 Product development: new products, product range
 Technology : reduce cost
 Employees and Management: train employees, reduce labour turnover, innovative culture, high quality leaders

4.2. is walth maximization always the primary objectives?

Managers do not necessarily make decisions that will maximise shareholder wealth

 They may have no personal interest in the creation of walth, except they are accountable to owners
 The market lack competitive pressure

4.3. Profit satisficing

Decisions might be taken by managers with their own managerial objectives in mind rather than the aim of wealth
maximization

The owners of a business set a minimum acceptable levels of achievement in terms of revenue and profit.

4.2.2.Revenue maximization

Maximise revenue (not necessarily profit or wealth) to gain market share, ensure survival and discourage competition
(william Baumol)

4.2.3. Multiple Objectives

Peter Drucker : ‘to manage a business is to balance a variety of needs and goals…the very nature of business enterprise
requires multiple objectives’

 Market standing:market share, customer satisfaction, product range and distribution resources
 Innovation
 Productivity
 Physical and financial resources : efficient use of limited resources
 Profitability
 Manager performance and development : managerial effectiveness, managers for continuity(managerial
succession)
 Worker performance and attitude : labour productivity , stability(controlled labour turnover), motivation and
morale, development of skills
 Social responsibility : community and environmental impacts, labour standards and employment protection

4.2.4. Constaint theory

Herbert Simon said that wealth objective is not the main concern to make decision due to other pressure like
environmental protection, good staff relation and quality product and service which may lower the profit.

5. MISSION GOALS PLA NS AND STANDARDS

5.1.Planning and control system

 Plans and Actual Comparison of
Objectives
Standards performance performance with
plans/standards

On target
Adjust plan (unachievable) or how the plan Deviation Identify
No corrective action requierd is performed

5.2.Mission (basic function)

The overall direction of a business is set by its mission. (general) mang tính tổng quát

Definition:

Mission: ‘The business’s basic function in society’s expressed in terms of how it satisfies its various stakeholders’
(purpose, strategy, policy and standard of behavior, value)

Ask question:

What is our business?

What is the value of our business?

What do we want the business become?

What should the business be?

 It has real implications for the policies and activities of the organization and how individuals go about what
they do.

5.2.1.Vision

Some businesses also have a vision of the future state of the industry or business which determines what its mission
should be (concern how the organization sees itself in the future)

5.3. Goals: aims and objectives

Goal: desired end result.There are 2 types of goals

 Non-operational aims or qualitative goals: university’s aim may be to seek truth (you can not see: increase truth
by 5%)
 Operational objectives or quantitative goals: for example , increase sales volume by 10%
Objective should be SMART

 Specific
 Measurable
 Achievable
 Relevant
 Time-bound

5.3.1.The purpose of setting operational objective in a business

‘Objectives are need in every area where performance and results directly and vitally affect the survival and prosperity of
the business’ (Peter Drucker). Objectives in these key areas should enable management to

 Implement the mission

 Publicise the direction of the organization to managers and staff
 Appraise
 Assess and control the actual performance by using objectives as targets for achievement

5.4.Plans and Standards

Plans: the state what should be done to achieve the operational objectives

Standards and targets: specify a desired level of performance

 Physical standard
 Cost standards
 Quality standards

Chapter 2

1.What is management?

Definition: Management ‘getting things done through other people’

Set objectives

Monitor progress and results

Communicate and sustain corporate values , ethics and operating principles

Look after the interests of the organization’s owners and other stakeholders

2.Power, authority , responsibility , accountability and delegation

2.1.What is needed for effective management?

Due to a lot of actitivities and the demand for cooperation , synergy, the business needs to be operated by managers.

2.2.Power

Definition: the ability to get things done

Power classification
 Coercive The power of physical force or punishment (rare in business ) but sometimes the imitation
happens (like work bullying)
Reward (resource) Based on control over valued resources (the capacity to control scare value resource)
power
Criteria to evaluate the reward power of manager: scarcity, value, how far the resource is
under manager’s control (power range)
Legitimate (position) Assiociated with a particular position
power
For example: the power to authorize certain expense, issue instructions (because the manager
has been delegated to do so)
Expert Power Based on experience, qualifications and expertise
Referent (personal) Based on force of personality or trust, which can attract, influence or inspire other people
power
Negative Power The power to disrupt the operations
(Handy)

2.3.Authority

Definition: the rights to do something, or to ask someone else to do it and expect it to be done (another word for
position and legitimate power)

Magerial authority include

Make decision withing the scope (pham vi) of authority given to the position

Assign tasks to subordinate and expect satisfactory performance on these tasks

2.4.Responsibility and accountability (theo doi trach nhiem)

Definitions

Responsibility: the obligation of a person has to fulfil a task which she or he has been given

Accountability: The obligation of an individual or organization to account for its activities, accept responsibility for
them, and to disclose the results in a transparent manner. It also includes the responsibility for money or other entrusted
property.

 One is thus accountable to a superior (or other persons with legitimate interest) for a piece of work for which
one is responsible

2.5.Delegation (su uy quyen)

Manager may make subordinate responsible for work but remains accountable to his or her own manager.

3.Types of manager

Line manager Has authority over a subordinate

Staff manager Has authority in giving specialist advice to another
manger or depearment, over which they have no line
authority
 For example: The HR manager gives advice to Finance
Manager about interviewing methods
Functional Manager Combine line manager and staff manager
In certain circumstances, to direct , design or control
activities or procedure of other department.
For example : Finanace managers require timely report
from other department
A project manager Full authority over project team to progress the project
(still has line authority)

4.The management hierarchy

Characteristic

Top Manager Few in number, responsible for overall direction

and performance of the business
Middle managers
Many, responsible for ensuring the performance
Manageing targets are met by first-line manager
managers
First line managers
Numerous, responsible for ensuring direct
Managing the staff on operational staff do what is required
direct operation
Direct operational staff , Very numerous, accountable to first line
doing the work managers for getting the job done

5.The management process

The management process comprises four main tasks : planning, organizing, controlling and leading.

5.1.Planning

Determine the specific aims

Forecast what is needed

Look at actual and potential resources

Develop objectives , plans and targets

Use feedback from the control part of the process to make necessary amendments(adjustment) to the plan.
5.2.Organizing

Managers allocate time and effort in such a way that the objectives , plans and targets are likely to be met

Define what processes, technology and people are required

Allocate and coordinate work

5.3.Controlling

Manager monitor events so they can be compared with the plan and remedial action (corrective action) can be taken if
required

5.4.Leading

Managers generate effort and commitment towards meeting objectives , including motivation of staff.

5.5.Putting the management process into action.

Supplement further actions (like material, staff, money, equipment,…..) if there is any problem arouse.

6.Managerial roles

The informational role Checking data received and passing it on to relevant

people, as well as acting as the ‘spokeperson’ for his or
her team in relation to other teams or his or her own
manager.
The interpersonal role Acting as leader for his or her own team, liking with the
managers of other teams
The decisional role Allocate resources to operations
Handle disturbance like dealing with awkward client,etc
Negotiate for what they need
Solve problem
Act as entrepreneur such as spot the gap in the market,
or unmet needs of customer
7.Culture

Definition: the common assumptions values beliefs that people share, the way we do things around here

Some types of business culture

Internal process culture Look inwards, aiming to make its internal environment
stable and controlled. Known and unchanging goals,
defined methods and procedures .Security, stability and
order motivate staff.
Example : public sector organization
Rational goal culture Effectiveness, satisfy the external
requirements.Competition and the achievement of goals
motivate staff
Example: Large established business
 Open system culture External environment is source of energy and
opportunity but unpredicted. Flexible and open to new
ideads. Staff are motivated by growth, creativity and
variety.
Example: a new business unit working with fast changing
technology
Human relations culture Inward , maintain its existence and well-being of its staff.
Staff are motivated by the sense of belonging.
8.Management models

8.1.What is model?

Model is management theory to represent a complex reality, which is then analysed and broken down into its constituent
parts to:

help to explain the past

help to understand the present

predict the future leading to

more influence over future events so

less disturbance from the unexpected

8.2.The rational goal model of arrangement (look at why the business does something to make it done)

To be most efficient, the managers need to be in detailed control of every last part of the process.

Determine one best way of doing a particular task

Select the best person to do this task on the basis of their mental and physical capacity.

Train the worker to follow the set procedure very precisely

Give financial incentives

Give all responsibility to plan and organize work to the manager.

There are strong elements of the model commonly seen in today

Systematic work methods

Detailed division of labour

Centralised planning and control

8.3.The internal process model of management (look at how business does something)

Rationality : use of most efficient means to meet the business’s objectives

Hierarchical lines of authority , managers have closely defined areas of authority, and have none outside the areas

Detailed procedures and rules : subject to light regulation and public scrutiny
Divisions of labour : tight limits are set on the areas of responsibility of staff

Impersonality : appraisals of staff performance are based on objective criteria, not personal preference

Centralisation

9.Business function

The key functions in any business are marketing, operations/production, human resouces and finance

10.Marketing function

10.1.What is marketing?

Definition: The set of human activities directed at facilitating and consuming exchanges.It therefore covers the whole
range of a business’s activities.

Or The management process which identifies, anticipates and supplies customer requirements efficiently and profitably.

Point: customer : purchaser of the goods consumer: the ultimate user of the goods

10.2.Consumer and industrial market.

Consumer market are the markets for products and services bought by individuals for their own or family use.

FMCGs(fast moving consumer goods) : These have high volume but low unit value, fast purchase such as bread

Consumer durables: These have low volume but high unit value

White goods : fridges, freezers,etc

Brown goods: CD players, cars,etc

Soft goods: clothes, bed linen

Service: dentist, doctor , holiday,etc

 Described as business to consumer (B2C)

Industrial market: business operating in industrial markets are often described as ‘business to business’ or B2B

For example : iron, steel, textiles, machine tools, legal, accountancy, distribution,etc

10.3.The marketing mix and segmentation

Defintion: the set of controllable marketing variables that a firm blends to produce the response it wants in the target
market

Four ‘P’ rules:

Product: quality of the product, assessment of the product’s suitability for its stated purpose, its aesthetic factor,
durability, brand factor, packaging,etc

Price: prices to customer, discount structures for the trade, promotion pricing, methods of purchase, etc

Promotion: advertisement, sales boost, public relation efforts, etc

Place: distribution channel decisions, website selling, location of outlets, position of warehouse, inventory level, etc

When the business provide services, a further three Ps are involved , making the seven Ps of services marketing.

People: Service businesses need to have excellent recruitment and selection policies, good training programmes, standard
consistent operational procedures, effective motivational programmar (focus on developing human)

Processes: registration procedures, timing of when the service is consumed, what happens after the service has been
consumed

Physical evidence: refer to items that give physical substance such as logos, staff uniforms, store layout or design

Market segmentation : the division of the market into homogeneous groups of potential customers who may be treated
similarly for marketing purpose

10.4.Marketing orientation

Defintion: market-oriented business is one which accepts the needs of potential customers as the basis for its
operations.Its success is seen as being dependent on developing and marketing products that satisfy the needs

Sales orientation: main purpose aer to sell more of the product or service, no attempt to identify customer needs , nor to
create products….

Production orientation: The business is just preoccupied with making as many units as possible.

Product orientation : focus on product , as it often seen with hi-tech industries .

10.5.Product

Basic (or core) product – a car : the perceived or real benefits, value to be gained from the product

3 main elements of a product

Basic (or core) product – a car The perceived or real benefits, value to be gained from
the product
Example : Volvo cars satisfy the needs for safety and
security, MBWs satisfy egos and status
Actual product A Ford car
 Augmented product has both the primary physical attributes and the non-
physical attributes that are added to increase the
product's value
Example : warranty, installation ,etc
General factors to consider
Quality and reliability
Packaging
Branding
Aesthetics
Product mix
Servicing/associated services

10.6.Pricing

Costs : ensure the price is over its total costs

Competitors: the price is dictated by the market, the price must be compared to those of competitors

Customers: a consideration of customer expectations is essential in setting prices.

Corporate objectives

To maximize profits

To achieve a target return on investment

To achieve a target revenue figure, market share

To match the competition

10.7.Place

The basic decision to be made when considering distribution is whether to sell direct often via the internet

Producer  Consumer

or to use intermediaries to give a longer distribution chain.

Producer  Wholesalers  Retailers  Consumer

10.8.Promotion

Definition: Promotion is all about communication , thus informing customers about the product and persuading them to
buy it.There are five main types of promotion

Advertising

Sales promotion

Public relations
Direct marketing

Personal selling

Promotion
Technique

Push Pull
Push : ensuring products are available to consumers by encourageing intermediaries

Pull: persuading the ultimate consumers to buy.

11.Operations management

11.1.Operation and Production management

Definition: supplying to customers by being concerned with the design, implementation and control of the business’s
processes so that inputs are transformed into output products or services

All operations involve a transformation process, 4 Vs affect the operations

Volume Operations differ in the volume of inputs they handle

and the volume of output they produce
High volume: capital-intensive operation, specialization
of work and well-established systems for getting the
work done. Low unit cost
Low volume: limited specialization .higher unit cost
Variety Range of products or services an operation provides, or
the range of inputs
High variety : the operation needs to be flexible and
capable of adapting to individual customer needs.
Complex work and high unit cost
Low variety: well-defined operation, with
standardization, regular operational routines and low unit
cost
Variation in demand Demand might vary. Variations in demand ight be
predictable, or unexpected.
High variation(fluctuating demand) : the operation has a
problem with capacity utilization .High unit costs
Low variation (stable demand) : high level of capacity of
utilization and lower unit cost
Note:Capacity utilization or capacity utilisation is the
extent to which an enterprise or a nation uses its installed
productive capacity
 Visibility High visibility calls for staff with good communication
and interpersonal skills.More staff are needed. High unit
cost
Low visibility means that there is a time lag between
production and consumption. Consumer contact are not
important, and low unit cost
Operations management is concerned therefore with balancing key variables

External and internal demand for goods and services

Resources

Capacity of the long-term and short term assests of the business

Inventory levels

Performance of the process which creates the goods or services

11.2.Research and Development (R&D)

Definition

Pure research: original research to obtain new scientific or technical knowledge or understanding.There is no obvious
commercial or practical end in view

Applied research : research which has an obvious commercial or practical end in view. It tends to improve products or
processes

Product research: find new and improved products for the market

Process research: develop new and better ways of producing

11.3.Procurement (san hang)

Definition: Procurement is the acquisition of goods at the best possible total cost of ownership, the right quantity and
quality, right source,etc

Procurement Mix

Quantity: the size and timing of purchase orders will be dictated by the balance between (time, and cost of holding
inventories)

Quality: The quality of input resources affects the quality of outputs and the efficiency of the operations function

Price

Lead-time : the time between placing and delivery of an order, crucial to efficient inventory control and production
planning.

12.Human resource management.

12.1.What is human resource management(HRM)?

Definition: the creation, development and maintenance of an effective workforce . matching the requirements of the
business and responding to the environment such as

Personnel planning and control

Production of job description and person specifications

Development of policies for compliance with legal and other employment standards

Development of training course

Design remuneration package and design employment contract

12.2.Hard and soft approaches to HRM

The hard approach emphasizes on the resource element of HRM. Human are planned to meet the objectives of the
business

The soft approach emphasizes the human element of HRM. It is concerned with employee relations, the development of
individual skills and the welfare of the staff

12.3.The Harvard 4 Cs model of HRM

HRM policies need to be derived from a critical analysis of:

Stakeholder demands : include the employees as one legitimate stakeholder group

Situational factors : labour market conditions, management styles, technology, ownership,etc

The effectiveness of HRM should be evaluated under four headings

Commitment: assesses employee’s motivation , loyalty and job satisfaction which measures an employee’s commitment
to a business

Competence : Relates to employee’s skills, abilities and potentials. The objective of HRM in this area should be to
attract, retain, motivate and train the right person

Congruence (su thong nhat) : measure of extent to which management and employees share a common vision for the
business and act consistently to attain that vision

Cost-effectiveness: concerns operational efficiency and productivity

13.Organizational Behaviour

13.1.What is organizational behavior?

Definition: the study and understanding of individual and group behavior in an organizational setting in order to help
improve organizational performance and effectiveness (human behavior, formal structure, tasks, technology and
processes used , management process, external environment)

13.2.The organizational iceberg

13.3.Organizational metaphor
13.4.Models of human behavior

F.W.Taylor: people are similar and could be treated in a standardized fashion

Dounglass McGregor: People are different so what motivates each individual differ

13.4.1.Taylor’s model: scientific management

People are rational economic animals concerned with maximizing their economic gains

People respond as individuals, not groups

People can be treated in a standardized fashion, like machine

 Taylor’s conclusions were as follow

Main motivator: high wages

Manager’s job: tell workers what to do

Worker’s job: do what they are told and get paid

13.4.2.McGregor’s Model : Theory X and Theory Y

Theory X
Individual dislike work and try to avoid it
Individual lack ambition , dislike responsibility and prefer
to be led
A system coercion (compulsory) control and punishment
is needed to achieve business objectives
The individuals desire security
Theory Y
Physical and mental effort in work is as natural as rest or
play
Commitment to objectives is driven by rewards
External control and threats are not the only way to
achieve objectives – self-control and direction are very
important.
People learn to like responsibility
The intellectual potential is partly used , need to develop
further

13.5.Motivation

Characteristics to realise the motivated staff

Higher productivity

Better quality work with less waste

A greater sense of urgency

More feedback and suggestions made for improvement

More feedback demanded from superiors

13.5.1.Maslow’s content theory

13.5.2.Herzberg content theory: hygiene and motivating factors

The factors causing motivation and positive job satisfaction were not simply the opposites of factors causing
demotivation

Note: Hygiene factors are concerned with satisfying lower-level Maslow needs (3,4,5) whereas motivating factos are
more concerned with higher Maslow needs (1,2)

13.6.Group behavior
Definiton: a collection of people with following characteristics

Common sense of identity

Common aim of purpose

Existence of group norms (expected and accepted standards of behavior)

Communication withing the group

The presence of a leader

13.6.1.The stages of group development.

Forming  Storming (go through the conflict stage)  Norming (norms operating, established)  Performing (reach
full potential)