Liabilities – There are two main types of liabilities: current and long-term. Long-term liabilities are debts (mortgages or loans) that do not have to be paid within a year. And current liabilities are debts, which demand short-term payments e.g. tax or money owed to creditors and overdrafts. Long-term liabilities are often listed before the current liabilities on a balance sheet.
Assets – This shows all that the business owns from equipment to the amount of cash in the bank. Again there are two different types of assets: Fixed assets and Current assets. Fixed assets are permanent possessions, which enable the business to work e.g. buildings and machinery. Current assets are items that change constantly and are easily converted into cash e.g. stock.
Example 3, is an example of a balance sheet. On the right-hand side, it shows the Assets and on the left, the Liabilities are shown. At the bottom of each list, the total amount of money the business still has is shown. The total of the Liabilities should be equal to the total of the Assets so that they balance.
Calculating A Loan
Businesses very often need to borrow money whether it’s for new equipment or to see them over a time of difficulty.
A loan is when a business borrows money from a bank, but they have to pay additional charge – interest. The interest is the amount the borrower pays to the lender for the use of money.
The people, who do decide to have a loan, have to think very carefully about it because they would have to make enough profit not only to pay back the loan but also the interest.
Examples 4 and 5 are both examples of loans. Example 4 shows you that the balance at the beginning is £2000, the interest is 70.00. This interest is added onto your balance, so, as time goes by, more interest is added onto it. Example 5 starts with the same figure, but this time, the interest is lower and it is all paid back within 9 months, whereas, it took the other one 10 months to pay it all back.
Again ‘Bull and Bear Books’ could work out if they could afford to borrow a loan and how long it would take them to pay it all back.
Databases
A database is another form of computer application.
It is used to store information and it can also sort and search the information in detail.
The most important aspect in a database is what information you will put into it. You also have to think about the design and structure of the database. This is important because if you enter in the wrong information, or the wrong fields, then you will not be able to sort and search the data properly and this may result in arguments.
Before setting up a database, the person must think carefully about the kind of information they will put on it, whether it’s the customer’s details or the staff’s details. They must think about what fields they will put on the database. If the person does not set up the database properly, they may have to go back and make some changes, or they might even have to start all over again from scratch.
Information that is entered into a database can be used to produce mail-merge letters or you could go into a spreadsheet to see how much money a customer owes.
‘Bull and Bear Books’ are currently storing all their data on a paper-based system. Without a database, they won’t be able to keep good and accurate records.
These are some of the disadvantages of using a paper-based system:
- Cards can be lost
- Cards can be miss-placed
- People enter the data in different ways.
- Nothing to alert the person if there is a mistake.
I think that using a database is more efficient because it is a more accurate way of storing information and more than 1 person can use the database at a time. It can save a lot of time because you can sort and search in detail in a very short period of time.
Example 6, is a database of a company ‘ServusCom’ who keep details of their customers. ‘Bull and Bear Books’ can also keep records of their customers and staff on a database, so that they can contact them easily.
Direct Marketing
Today, the markets are highly competitive and very few companies can afford to be product orientated – when a product and its price are the most important. After a manufacturer has made the product they would price it without finding out if a market exists for that product.
Marketing helps businesses find out from the general public, the public sector, what they feel about a certain product, so that the company can sell the product successfully.
In marketing, there are four factors that affect a product. The four main categories are:
- Product
- Price
- Promotion
- Place
These four factors are usually known as the four P’s.
In order to have a successful business; the business must mix the four P’s in the right amounts so that the customer is attracted to the product.
The product factor is mainly about the quality of the product. Customers would normally go for quality and not quantity. The product must also be attractive to the customer so that the customer will purchase it.
The price of the product/service depends on the supply and demand.
The supply is the amount of goods and services that are currently available.
The demand is the number of goods or services that customers are able to buy over a period of time.
If the supplies were bigger than demand, the manufacturers would reduce the prices, but if the demand increases, the producers would increase the price. If the demand is equal to the supply, the equilibrium price will be reached.
The third P is promotion. Advertising through sales promotions play a big part in a business. Advertising itself is a big business. In Britain, over £10 billion is spent on advertisements each year. The main aim of advertising is to persuade people to buy anything from a chocolate bar to a house. Advertisements try to make people aware of the products they are selling by stating the advantages of buying this product.
The final P is place. The place is an aspect of distribution concerned with ensuring that a company’s products/services are available for customers to purchase at appropriate locations. The distribution channel is the route that is used in the actual physical distribution of a product from the manufacturer (producer) to the buyer of that product (consumer).
The third channel of distribution is direct marketing. Direct Marketing cuts out both of the retailer and the wholesaler, therefore the product transfers directly from the producer to the consumer. Producers try to create a personal long-term link with selected customers through:
- Direct Mail – personalized letters to chosen customers.
- Mail order catalogues.
- Press advertisements or magazine inserts with coupons.
- Direct telephone calls.
- Tele shopping – goods are shown on the television and ordered over the phone.
- Internet – goods are shown on the Internet and ordered on the Internet or on the phone.
Usually, these direct channels are used for services i.e. insurance, or for complex machines i.e. computers, where only the manufacturer can often solve any problems.
Financial Planning, Reporting, Control
All businesses need to keep financial records because they need to know how much money they are putting into the company and how much they are earning. They can find out of they are making a profit or just losing money.
Businesses can use spreadsheets and databases to help them record the financial details. A business could also predict how much money they will have earned or lost for each financial year.
If the company didn't keep good records, they will not know how much capital they are making or losing. Therefore, if they are losing more capital than they have invested, they will be in debt and if they cannot pay off this debt, it may result in the closing of the whole business. And if they were making profit, they wouldn't know how much money they have to spend on other equipment to help the business. Also, as I have seen from the film, lack of financial control can result in arguments between the people in charge.
To keep financial records, a business could use many different computer programs. They could use:
- Balance Sheets - a financial record of how a business is doing at one moment in time. It shows all the business' liabilities (all it owes) and all of the assets (all it owns).
- Profit and Loss Accounts - a financial summary of all the trading activities during the year. It shows how much money has been spent on buying stock and how much money was made when it was made and the gross profit (or loss).
Balance sheets can be used on a regular basis, but profit and loss accounts can be used only to calculate the gross profit for the financial year. By using profit and loss accounts, you can forecast how much money you will make or loose.
‘Bull and Bear Books’ should always keep records of how the business is doing. The business should also make decisions of who should be in charge of particular things.
Location
It is often very difficult to choose the best site to set a business because there are many factors involved.
Some of these factors are:
- Transport
- Near to markets
- Labour
- Environment
Transport links are important in choosing a business location because nearly all of their goods will have to be transported by road. If a business is set by the motorway, it would be an advantage, as the goods will be delivered faster than if it was delivered by road.
A business should be based upon the kind of product it will be selling and the materials that will be needed because if a company needed to use raw materials, it would be sensible to case their company near the source of their supplies. The location should also be convenient for their customers.
Another important factor is labour. The business must be set up in a convenient area for the work force. The employees must be able to travel there without too much difficulty. If the business was far away, they could maybe supply a form of transport so that the staff have an easy journey there.
The environment is again, another important factor. The location of ‘Bull and Bear Books’ should be pleasant and it should have good facilities. This way, it will be able to attract and retain employees and customers.
Market Research
Market research looks at market segments in detail. There are two kinds of data that is used – primary and secondary. Information that has already been gathered is secondary data. Original and first hand information about the customers and consumers is primary data.
Primary data is first-hand information that is collected by field research, e.g. street interviews.
Secondary information is information, which already exists. It is collected by desk research e.g. reading documents.
Many companies gather information from the public sector by carrying out surveys using data capture forms. The advantage of using data capture forms is that it can be sorted and searched and then it can be generated into graphs.
‘Bull and Bear Books’ should gather some market research to analyse, then they will be able to make sensible targets.
Example 7 is an example of a data capture form that companies could use to help them gather primary information.
Staff Issues
As in many businesses, before an employer decides to take on an employee, they have to be sure that they are (have been) trained to do that particular job.
Recruitment is an important process; most new employees in the UK are recruited through Job Centres. To make sure that the employee is right for the job, the employers should use various tests to select suitable employees.
All businesses should also try to retain and reward their staff; this would gain a lot of trust and responsibility. Labour turnover is a problem for many retailers. All employees should be given training opportunities, by doing so; the employees are offered a chance to develop their careers.
Communication is vital within a business especially if the company wishes to succeed.
‘Bull and Bear Books’ should encourage formal and informal communication, holding regular briefing sessions for all the staff.
The Future E-mail Internet
The Internet is used for many different things. It is almost like an electronic notice board. As long as you have access to a computer with a modem, you can easily get connected with the Internet as a way of communication around the world to keep in touch by means of electronic mail.
In a business the Internet usually favours larger companies with the correct software.
Here are a few companies, which the introduction of IT has improved the business:
CD NOW:
This is a record shop without a shop. It started in 1994 first of all as a web-site.
This company started because the owners said that there wasn’t enough information about the CD’s in the normal shops. And so now, they provide detailed information about the different CD’s. They have a huge range of music.
The shop itself doesn’t use money to buy the CD’s to stock.
Because there are no shops, there are low overheads and low staff. This means that the company saves a lot of money.
FED EX:
Federal Express is a service which delivers parcels all over the world. They use barcodes and networks to track parcels to see where they are and when they will arrive. But customers also wanted to know where their parcels were and this created many problems because they phoned up the company constantly and this was costing the business a lot of money.
Fed Ex decided to use the Internet as a solution to the customers’ queries. This way, the customers could find out everything about their parcel, and this wouldn’t cost the company. Using the Internet saved the company $4 million.
SFNB Banking:
This was a virtual bank and there were no buildings. This bank was used worldwide and customers had virtual accounts. These were less formal and more personal; therefore the bank had more control. The security was tight, and the bank saved money because it had a low fraud rate. FED EX found this bank useful and now it banks with SFNB.
‘Bull and Bear Books’ could introduce IT to monitor the amount of stock they have and how much they have spent on it. They could also keep details of their staff and customers on a database.
Conclusions
This report has looked many areas that concern a business, and I have found that the managers must think very carefully before deciding to introduce IT into the business.
There are several areas of a business that IT can make more efficient and cost effective; it can also save a large amount of time.
Some of the points that were considered in this report were:
- Location
- Market Research
- Direct Marketing
- Financial Recording and Reporting
Any company that introduces IT systems has to be planned carefully and they have to be sure of what they want the new system to do. Because if it is not planned properly, the introduction of IT can make the business much more difficult as it did for ‘Craven Books.’
Craven Books was a company (like ‘Bull and Bear Books’), which decided to introduce IT to improve the way in which the business worked. They wanted to use IT to control the stock, they took care of the incoming orders and weighed the books to make sure there were enough. Stored in the computer was a map of the warehouse which showed where the books/comics were (the more popular books were placed at the front of the warehouse and the books which weren’t very popular, were stored near the end of the warehouse). When an order came in, these computerised machines would immediately go around the warehouse and collect the appropriate books; they would then weigh the books to make sure that the total weight of the books matched the weight that the computer had got. If the weight of the books matched, then the books were sent off. If it didn’t matched, then the computer would have to either get more books or put some back.
Everyone involved in this project including all of the staff weren’t very clear about what was happening. There was no one in charge (to blame) and the whole thing was like a ‘runaway train’. The boss did have an initial idea of what he wanted to do, but as time went by, the situation got bigger.
There were a few good points about the introduction of IT, but there were also many bad points. Because the computers did most of the work, about 60% of the employees were made redundant, the boss said that this wasn’t his fault because ‘people come and go’ implying that if this company didn’t exist, those people wouldn’t have even
Got a job. And so, you cannot blame the boss.
The software company where this particular package was purchased has obviously gained. Craven Books gained experience and knowledge.
Things went wrong because the people were over ambitious and tried to everything in one go. They had relied too much on the consultants. They tried to take a standard package, which was not very adaptable and adapt to it. Nearly all of the stock got muddled up, and there were disaster strikes.
All of the people involved, could have done things differently to prevent or decrease the amount of troubled this caused.
Many people said that they should have broke it all up into small parts and do each part slowly and carefully.
There were two different packages available:
1) Standard package: This didn’t cost too much and it wasn’t adaptable.
2) Tailored solution: This package was made to suit your needs but it was also very expensive.
The IT consultants said that Craven Books should have bought the standard package because it was the safest bet even though it was boring. They should have gone into the ‘tried and tested’ packages.
Experts say that they should put business first before computers, and if there is no need, they shouldn’t introduce them to the business.
Craven Books needed to think about the cost of everything before they actually did anything.
The Boss of Craven Books had built this company from scratch and he didn’t want to admit that he had made a mistake. He said that he didn’t feel guilty about all of the people who had been made redundant because ‘people come and go’ and that it was a ‘natural thing’ and ‘not a disaster’ implying that the employees got a job through him and his business and so now that they have lost their job, it doesn’t matter because if Craven Books didn’t exist, then they wouldn’t have even got a job.
Overall, Craven Books had gained new experiences and they now say:
‘Never trust salesmen and consultants because they often don’t know that much.’
They now know what way is best for them.
‘Bull and Bear Books’ should think carefully about what exactly they want the IT systems to do and decide whether it is appropriate for the company.
Recommendations
‘Bull and Bear Books’ should plan carefully what they want the IT system to do. They should contact other businesses who have already introduced IT (e.g. Craven Books) and they could get some advice.
‘Bull and Bear Books’ need to take some decisions about things like who is to be in charge of the introduction, training needs of staff and generic software or customised.
If ‘Bull and Bear Books’ do decide to bring IT into the system, this report recommends that they start small and then, if it all goes well, they should gradually increase the use of IT.
But before they actually buy the systems, they should consider the following points:
- Hardware
- Software
- Training
- Consultants
- Responsibility/Accountability
This report does not recommend for the business to use IT to weigh books (as Craven Books did) because this would be inaccurate and it may drive away customers. They shouldn’t always rely on consultants because as you can see, they are not 100% trustworthy.
This report however, recommends that ‘Bull and Bear Books’ should use IT to record details of staff and customers and maybe to monitor stock. If this all goes well, they should produce balance sheets and profit and loss accounts to help them to see whether the money that was spent on buying these IT systems were worth it. They can also experiment with different figures to help them set a target.
Contents Page
- Introduction of ‘Bull and Bear Books’
- Synopsis
- Spreadsheets
- Profit and Loss/ Trading Accounts
- Balance Sheets
- Calculating a Loan
- Databases
- Direct Marketing
- Financial Planning, Reporting, Control
- Location
- Market Research
- Staff Issues
- The Future E-mail Internet
- Conclusions
- Recommendations
