Business Management Techniques Essay Example


Business Management Techniques

Business Management Techniques

1.1. John Adair’s Theory on Core Management Responsibilities

According to John Adair, the fundamental management responsibilities lie in the managers achieving the task, managing their team or group, and lastly managing individuals in their team. Task relates to the duty that brings a group together. A task in the group denotes to the activities that the team must carry out (Adair 1973). Secondly, a team consists of individuals or members who work together for a common goal or good. Therefore, the team must be treated as an entity on its own. Thirdly, while the team takes its own identity, individuals within it do not lose their identity. Effectively, their needs as individuals must be met for them to continue showing allegiance to the group. Further, meeting their needs raises and sustains their motivation to achieve the task (Adair 1973). Imperatively, managers must integrate these responsibilities so that they practice action-centred leadership. The integration and observation of these core responsibilities is significant in raising and sustaining their motivation, achieving the goals of a task, and allowing the team to work effectively as one entity.

1.1.2. How effective management of these factors affect product and service standards

The effective management of the core management responsibilities affects product and service standards in different ways. Firstly, managers are expected to define the task and set SMART goals. Further, they must seek alternative ways of achieving the task through careful planning. In the absence of these parameters, managers cannot ascertain the product and service standards because they do not have alternative plans that may offer better standards compared to what they have (Adair 2006). Secondly, effective management of these tasks allows managers to seek better and innovative ideas on quality standards. For instance, the management of individuals enables managers to assess their capabilities and strengths, develop and train them, and understand their skills, personality and aim. Therefore, managers can get innovative ideas from these individuals and their team on how to improve standards in the organisation. It follows that effective management of these factors allows managers to get better product and service standards in the long-term. The use of Adair’s approach brings the best and most effective solutions focused on the need to attain the highest level of production; thus better services and products for customers.

1.2.1. Application of a Just-In-Time Management philosophy in the Achievement of Quality, Time, and Cost Objectives

The Just-In-Time management philosophy denotes to a production process with the aim of eliminating or reducing manufacturing waste by producing only the required units using the right amount at the right time. It follows that the philosophy seeks managers to only acquire raw materials from their suppliers and produce goods or units at the time that they are required by their client, thus reducing the inventory costs (Kootanaee et al 2013). Further, JIT encompasses continuous improvement through continual reduction of non-value-added inventory stocks. The philosophy emphasises the need for total quality management in the production processes and views any activity that adds costs without requisite value as a transfer of inventory from one place to another. Therefore, Just-In-Time philosophy enhances quality as it emphasises continuous improvement of the process, and achieves time since goods or services can only be produced if they are required by the customer. Lastly, it achieves cost since it seeks to reduce wastage and inventory costs in manufacturing or products (Kootanaee et al. 2013). The philosophy requires businesses to have better coordination with suppliers so that materials arrive immediately before their use to eliminate or reduce inventory associated costs.

1.2.2. Goals, Concept and Principles of Toyota Motor Corporations’ Production System

Toyota Motor Corporation’s Toyota Production System is a socio-technical system that consists of management practices and philosophy. Based on the concept of Just-In-Time, the goal of the Toyota Production System is to offer products with world class quality so as to meet customer expectations and be a model of corporate social responsibility in the auto industry and the surrounding communities (Toyota Handling n.d). To achieve its goal, the system has values and objectives that include provision of world class quality and customer service, development of each employee’s potential, based on trust, cooperation, and mutual respect, and reduction of cost through waste elimination and maximisation of profits. Lastly, TPS aims at developing flexible production standards that meet market demands. The Toyota Production System is based on several principles that define the Toyota Way (Toyota Handling n.d). The organisation outlines them in four different sections. Its long-term philosophy and first principle is basing management decisions on a long-term philosophy, and not on short-term financial gains. Secondly, the organisation believes that the right processes produce the right results as evident through its continuous process, use of pull system to avoid overproduction, application of heijunka principle, and building cultures that stop to fix problems so as to attain quality at the first time (Toyota Australia 2016). Thirdly, the organisation believes in value addition through the development of its employees and partners by growing leaders that understand their work; live the philosophy and teach others. Fourthly, it believes in continuously solving root problems to drive learning in the organisation.

Task 2: Understanding Costs involved in Business Activities

2.1. Purpose of a Standard Costing System in a Manufacturing organisation

Standard costing is an essential component of cost accounting, especially for manufacturing organisations. These organisations deal with the costs associated with direct raw materials, direct labour, and manufacturing costs. In most cases, these organisations do not assign the actual costs of these components and instead assign expected or standard cost (Edwards-Nutton & TIS 2008). Eventually, they pay the actual costs and the difference between their standard costs and actual costs create variances. Therefore, based on the variance, standard costs allow the organisation to have controls over their budgeting processes, and measure performance of cost centre managers. Secondly, they allow the organisation to calculate and analyse the variances so as to offer feedback to the management and indicate the performance of the company (Edwards-Nutton & TIS 2008). Further, standard costs can be used to value inventories and simplify the accounting process because a company focuses only on one cost, the standard cost.

2.2 Job Costing and Process Costing and their applications

Job costing is a system that involves assigning manufacturing costs to a single product or batches of products. It occurs when the manufactured products are significantly different from each other. Because of the significant variation in manufactured products, job costing system creates a record for each product, job or order (Blocher et al. 2008). The record then reports direct material, direct labour and manufacturing costs assigned to each job. The concept of job costing entails customisation and calculation of each job. Job costing is used in industries that manufacture products based on customer orders. Further, the method is ascertains costs based on job completion and the cost per head cannot be transferred to another process and product.

Process costing is a technique used in the manufacturing industry to determine the overall production cost of a product or unit. The process is used in industries that have multiple production processes. For instance, production in large organisations requires products to move through different departments or cost centres, for instance, manufacturing, procurement, distribution and quality assurance. At each stage, the unit incurs costs that must be identified and reported. Therefore, process costing allows a company to compile the respective costs at each stage. Process costing is used in mass production of identical units (Blocher et al. 2008). Further, costs can be transferred and losses can carefully be identified. Process costing is a continuous process that must identify relevant costs at each stage of production and allow the organisation to attain high production. Process costing can also be used in ascertain the cost of each process as opposed to a product. It is also used where standardised products are manufactured.

2.3. Principles of the following costing techniques

  • Absorption Costing

Absorption costing implies that all the costs involved in the manufacturing of a product or unit are expensed for external reporting. This means that the cost of a finished product or unit in the inventory must include direct labour costs, cost of direct materials, and all the overhead costs like utility costs (Garrett 2017). The main principle of absorption costing is that record and units produced should include or have a share of all production costs incurred in producing them; both fixed and variable.

  • Marginal Costing

Marginal costing is an accounting system where variable costs are identified or charged to the cost of units while the fixed costs during the period are waived in full. Marginal costing principles are based on the use of the information for internal decision-making (Garrett 2017). While fixed costs are incurred irrespective of an organisation’s level of activity, the main principle and purpose of marginal costing is to determine the contribution that is being generated.

  • Activity Based Costing

The principle of activity-based costing is that any activity that a firm performs in production of goods has a cost; though indirect to the product. Imperatively, activity-based costing identifies the activities that a firm carries out and then assigns them indirect costs to the manufactured products (Blocher et al. 2008). Therefore, the method takes an approach where products are assigned costs based on the resources that they have consumed.

Task 3: Monetary Resources

3.1. Why Financial Planning is necessary for an orgganisation’s viability

Financial planning or forecasting is an essential business activity for any organisation because it offers an estimate of two critical future financial outcomes for the entity; projected income and expenses. The sustainability and long-term achievement of goals and objectives depends on financial planning within an organisation (Donaldson 1985). An extensive plan allows a company to adapt to the economic reality of their market environment. For example, at short term, financial planning considers decisions that affect assets and how to adapt to the effects. Further, lack of an effective long-term financial planning has in most cases been cited as the main reason for financial difficulties in many organisations. Additionally, the performance, operation, and long term viability of a business relies on continuous individual and collective decisions taken by the management team. Most of these decisions have economic impact for the business, either positively or negatively. Therefore, financial planning formalizes the procedures through which an organisation’s financial goals can be achieved through the integration of investment decisions and financing options in one long term plan. It follows that long term financial planning (strategic) should serve as a script in the preparation of short term financial planning (operational). Further, financial planning demonstrates the future financial viability of a business, especially a new start up for one can construct a model of how their business will perform if they implement particular strategies, plans, and events.

3.2. Explanation for

  • Short Term financial plans

Financial plans in an organisation involve three kinds of planning, short, medium and long term financial plans. Short term financial plans in most cases involve financial forecast for a period of less than two years (Akrani 2011). Short term financial plans focus on financing of operations within the organisation, especially day to day operations. Therefore, short term plans are mainly operational financial plans within a firm.

  • Medium Term Financial Plans

These are financial plans that outline an organisation’s income stream against their projected expenditure in a period of between three to five years. Medium term financial plans are essential for they allow a company to align its long term and short term financial plans (Akrani 2011).

  • Long Term financial plans

Long term financial plans seek to align an organisation’s financial capacity with its long-term objectives or goals. It attempts to offer an insight into the future financial capacity with the aim of developing and achieving long-term financial sustainability (Akrani 2011).

3.3. Differences between Strategic and Operational plans

Organisations make two main types of plans; strategic and operational. Strategic plans take place at the corporate level where executives in the firm make decisions on how to achieve long-term objectives of the business. Further, strategic planning aims at achieving the vision of the organisation and constitutes a wide scope. Again, it covers an all the organs and departments of a company and determines both external and internal environmental factors affecting the company (Brown 2017). It focuses on how the organisation can sustain its long-term development and uses planning and environmental analysis tools like SWOT, Porter’s 5 Forces Model, PESTEL framework and Portfolio analysis among others. In contrast, operational plans are short-term frameworks designed at functional level by middle and lower-levels managers. These plans change every year and are narrow as they plan day-to-day activities and operations in the organisation (Donaldson1985). Furthermore, they are meant to help an organisation achieve its short-term objectives. They are carried out at departmental levels in line with the strategic plans and identify how the employees must meet objectives, desired results, maintenance of quality standards and how employee’s performance is assessed.

3.4. Clear financial objectives and organisational strategy

Financial objectives are important for a business since they motivate the employees to achieve their expected performance, especially when the organisation hits its target in a certain financial period. Once the goals are clear, the staff will work hard since they know that they will get incentives when they hit their targets. Secondly, setting financial objectives promotes accountability as once the goals are set, the organisation must address potential problems that may hinder the attainment of the goals. Accountability allows a firm to keep track of employee performance and find better and more effective ways to better production and minimise wastage (Donaldson 1985). Finally, clear goals allow managers and employees to make things more manageable and build a reputation.

Secondly, it is important to have a clear organisational strategy as it enables a firm to meet its long-term development and sustainability goals. Further, an organisational strategy predicts future performance of the company in many aspects, for instance, employees’ performance and need for training. The strategy enables the firm to identify its long-term revenue streams and align its activities with the goals, especially in expenditure reduction and profit maximization (Donaldson 1985). Through the strategy, a firm identifies its financial goals and makes decisions in line with the prevailing industry or market conditions without a profound impact on its overall growth projections.

The Work Breakdown Structure

The Work Breakdown Structure acts as the basis for planning and controlling a project. The structure acts as the connecting point for cost and work estimates, actual cost expenditures and work expenditures, accountability, and schedule information. As a result, the project manager refers to the WBS before embarking on determining the cost and work estimates, actual cost and work expenditures, information on schedules, and accountability. It is imperative for the project manager to use the WBS in measuring the variance of the project from the plan and its progress.

# Days Required

Percent Complete

Immediate Predecessor Activities















The Gantt chart

Course +Code

Discussion and Analysis

In the event that delays and changes occur that affect the critical path activities thereby extending the project completion date by four weeks, several implications are clear. From the first instance, it would be proper to state that the project would be a resource-constrained rather than time-constrained project. The first implication is the reduction in the slack and flexibility of the project. The reduction in the slack would imply that the project manager has reduced time within which he or she can adjust some of the project activities without having change the scheduled completion date of the project. The project manager would also witness an increase in the critical and non-critical activities associated with the project. Moreover, the manager would encounter more complexities in relation to scheduling the project because of the addition of the resource constraints onto the normal constraints of project management and managing the flow of activities. The other implication is that the critical path would seize to be meaningful. Following the emergence of resource constraints, the potential of sequence breakup is imminent because of the resource constraints. The result is a project network that comprises of disjointed critical activities. Finally, the changes could also turn parallel activities into sequential activities (Endale 2016).

The Work Breakdown Structure is an essential tool in planning and controlling a project. With the help of the WBS, project managers can determine the variance of the project from its real deliverables. From the Gantt chart, it is evident that the full completion of the project requires 50 days. In the event that delays and changes occur that affect the critical path activities, the changes will also affect the initial financial and operations resources allocated for each project activity. As a result, the full completion of the activities of the project would require additional financial and operations resources in the quest to avoid maximum delays that would extend beyond the deadline allowance.


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