Business Management Chapter 9

Front 1

Give four reasons why control is necessary:

Back 1

-Linked with planning, organising and leading. Without control, planning is pointless.

-Helps companies adapt to environmental change. It enables management to cope with change and uncertainty. If an organisation is to reach its goals according to plan, control is necessary.

-Helps limit the accumulation of error. An effective control system should detect errors of managers and subordinates before they accumulate and become critical.

-Helps organisations cope with increasing size and complexity.

Front 2

Name the four steps in the control process:

Back 2

-Step one: Establish standards - planned target against which actual performance will be compared.

-Step two: Measure actual performance - management information is presented to indicate the disparities between performance standards and actual
performance and to enable management to concentrate on problem areas.

-Step three: Evaluate deviations - determination of the performance gap between performance standards and actual performance. Important to know why standard has only been matched and not exceeded.

-Step four: Take corrective action - if actual performance does not meet the performance standards, management has a choice of three possible actions:
1. Actual performance can be improved
2. Strategies can be revised to accomplish the standards
3. Performance standards can be change to be more realistic

Front 3

Concept of deviation:

Back 3

Deviation is the action of straying from an established course or accepted standard.

Front 4

Four key areas of control:

Back 4

-Physical resources : inventory and quality control

-Human resources : selection + placement of employees, training and development, performance appraisal and remuneration levels

-Information sources : accurate market forecasting + environmental scanning

-Financial resources

Front 5

Name the three control systems relevant in the control of inventory:

Back 5

- Economic-ordering quantity (EOQ)
this is based on replenishing inventory levels by ordering the most economic quantity.

-Materials-requirements planning (MRP)
an estimate is made of the demand for raw materials and the components necessary to create a finished product. Inventories are ordered only when they are needed.

-Just-in-time (JIT)
this is the same as MRP in the sense that organisations endeavour to manufacture products without incurring significant inventory costs.
A manager applying JIT principle orders materials more often in smaller quantities, thereby reducing risk and investment in both storage and actual inventory.

Front 6

Name the management approach that emphasizes the management of quality:

Back 6

Total quality management (TQM)
Means that quality is the responsibility of everyone in the organisation, from the chairman of the board of directors down to the clerks and engineers.

Front 7

What is another name for financial analysis?

Back 7

Ratio analysis.

Front 8

The advantages and disadvantages of a budget.

Back 8

Advantages: budget facilitates effective control by placing a money value on operations, enabling managers to pinpoint problems.
Also facilitate co-ordination between departments and maintain records of organisational performance.

Disadvantage: Budgets may sometimes limit flexibility.

Front 9

Name the characteristics of an effective control system:

Back 9

-Integration
-Flexibility
-Accuracy
-Timeliness
-Simplicity