E2- A clear description and explanation of the objectives of the business.
Business objectives are what an organisation sets out to achieve. A business creates plans to enable it to achieve these objectives. The objectives and plans that an organisation creates are determined by balancing the requirements of the various stakeholders in the organisation. The stakeholders are the individuals or groups that are affected by and have an interest in how the business is run and what it achieves.
Making a profit – This is one of the main objectives so that it enables the business to expand/ carry on trading.
Making a Surplus – A surplus is for a non-profit/ charity organisation such as Oxfam.
Increasing Sales or Market Share – if a customer likes a product then they will buy more of it, which in turn increases sales, and therefore profit.
Providing Services to the Community – This is when they are for example sponsoring a football team.
Producing High Quality Products or Offering High Quality Services – Quality of products/ services means that a business must have services, which are of an exceptional standard.
Providing Employment – It is the responsibility of the company to provide employment.
Developing a skilled workforce – It is cheaper to re-train current employees than to employ new ones.
Fulfilling charitable or non-profit objectives - Some companies will have non-profit objectives such as supporting charities by making donations, fund- raising events etc.
Caring for the environment – A lot of companies will use materials that are eco-friendly or that won’t pollute the countryside.
Argos Mission Statement –
“We provide our customers with the best value for money through
The most convenient shopping experience”
This is the Argos mission statement and it can be broken down into different objectives, which are al linked together with the mission statement –
- Argos strives to ensure that customers have a shopping experience that is enjoyable and friendly as well as efficient.
- Argos focuses on teamwork, because this leads to greater co-operation and the sharing of best practice.
- Argos believes in taking ownership for decisions so that manager’s solve problems themselves rather than pass them on to others.
- Argos ensures that employees respect each other so that everyone they can contribute.
- Argos has a competitive will to win so that everyone is aiming to improve and to succeed.
Although Argos doesn’t mention it in the list of company objectives, it is probably the most important objective of them all and that is for the company to make a profit in order to continue running.
E3- A description of the functional areas that exist in the business, and an explanation of how they help the business to meet its objectives.
Businesses either exist to manufacture goods or to provide a service in order to make a profit. Some businesses however don’t make a profit like charities.
Inside a business there are various different functional areas that help to keep the company running.
Production – In production they use raw materials to manufacture goods or to supply a service. If production fails, the organisation as a whole will fail. They strive to make sure the goods are of a high quality standard and also deal with purchasing the raw materials and equipment needed to develop the product. This helps Argos to reach its objectives because they ensure that goods are of a high level of quality ensuring customer satisfaction.
Marketing – Marketing’s job is to identify and anticipate customer needs via market research, advertising, promotion, packaging, pricing and distribution. They deal with the advertising side of things such as posters, TV ads etc. so that the customer is informed of the item. They need to make sure that they get the right price in order to attract customers as well as make profit. Marketing helps Argos to reach its objectives because they produce all the advertising that attracts potential customers to the store.
Human Resources – They deal with the personnel/ staff in a company and they are involved in recruitment, training, health and safety, welfare of employees and grievances. Human Resources helps Argos by employing the right people who can ensure Argos reach their goals and objectives.
Administration – Administration or Admin (as it is usually shortened to) make sure that the business is running smoothly and take care of all the necessary documentation. They keep all the company records apart form the financial ones, which are dealt by finance. This helps Argos to run smoothly and to become more competitive in the market.
Finance – All businesses must control their expenditure. This is why all businesses have a finance department, which keeps a record of all transactions an produces all the necessary financial documents and reports as well as dealing with incoming and outgoing payments. Finance pays the wages and salaries of the staff and manages the company’s cash flow. Finance helps Argos to reach their objectives by ensuring that they are constantly making a profit, which is the most important objective of all.
Research Development – They try to maintain or increase their market share by introducing new products or by changing and improving existing ones. This helps Argos to reach its objectives by making sure that they always have exciting and attractive new products to help attract more customers.
E4- A description of the management style and culture of the business.
Management is the process of achieving the objectives of the business by using its available resources effectively. There are different styles that are best for different businesses, I will describe 4 of the main types of leadership/ management: -
Laissez-faire style – This is when the manager believes that there should be no rules and regulations. This system may well exist amongst more experienced managers rather than new managers. This style of management (or maybe mismanagement!), where the manager sits back and allows everyone to do as they please, might lead to staff just running riot and the manager could soon lose total control of the employees. Laissez-faire is basically the complete opposite of an autocratic style of management, which is explained later.
Democratic style – In this style, the manager believes that the staff should be involved in decision-making processes. Decisions are usually made in a meeting with a vote and will involve all areas of the business. A democratic style allows freedom of thought and action but is still realistic enough to stay close to the mission statement and objectives of the company. This can be a good way to let employees have more of say in the company.
Autocratic style – A manager who uses this style of management determines how the business will run alone and assigns duties to staff without consulting them. The manager will issue orders and they must be carried out without question and in the correct manner. With this sort of management however the staff may be discouraged by the lack of input they are having. In schools for example it may lead to low morale for both staff and pupils which may, in turn, become the cause of strikes and riots. On the other hand, an autocratic style may provide a bit of certainty for those beneath the manager. They may feel safe because they do not have to be involved in solving problems. The autocratic leader usually has great self-confidence and a clear vision of what needs to be done.
Paternalistic style – A paternalistic style is a style of management where the company/ organisation discusses what happens within it and then comes to a decision what is best. The advantage of this management style is that people get a say, however not everyone’s opinion may be discussed which then could lead to low morale.
Argos’ management style is strongly based around that of an autocratic style. Staff are assigned different duties and are told what to do. If a problem arises then the manager will usually sort the problem out however staff are encouraged to use their own instincts for smaller problems. A good example of this would be Argos’ Customer Service desk; when a customer returns a product, 90% of the time it is down to the employee serving the customer to decide what action to take. Therefore Argos could also be described as having a democratic style of management as well.
Culture – This is a set of values and beliefs that are shared by people and groups in organisations. The company’s culture must relate to and reflect the company’s objectives/ aims.
Argos’ corporate culture is a set of different values that help the company reach its objectives. They are - Teamwork (as this leads to greater co-operation and the sharing of best practice), Taking ownership for decisions (so that the managers solve the problems themselves instead of putting the blame on the company as a whole), respecting each other and having the competitive will to win.
E5- A description of the use of ICT for internal and external communications of the business.
Communication is essential for a business to succeed. The business must have the ability to communicate clearly both internally and externally. Good communicators succeed in choosing the best medium of communication for the particular purpose in mind.
Internal Communication – This is the part within the business e.g. The communication between different departments. Means of this sort of communication can include-
- Team briefings or meetings
- Notices
- Memos
- Telephone
- Face to Face
- E- Mail
- Fax
External Communication – This is the communication that is used to contact people outside of the business e.g. to the suppliers. Means of this sort of communication can include-
- Telephone
- Fax
- Meeting with the suppliers
- Web sites or Internet
- Market Research
- Advertisements
- Letters
- E- Mail
Good communication- A business needs good communication otherwise it will struggle to succeed e.g. using E- Mail instead of handwriting as it is clearer. Usually a good structure inside the organisation can help as the message can be passed on easily and quickly, if not then the message could get distorted.
Formal Communication – This is an official or recognised means of communication. This can include official meetings, notice boards or newsletters etc.
Informal Communication – This is a means of communicating that is not recognised by the businesses’ network such as memos or phone calls etc.
Downward Communication – This is the traditional way of communication used by businesses. It involves orders or directions coming down from the head office down to managers to lower employees actually carrying out the instructions.
Upward Communication – This is the opposite of downward communication. Instead of ideas or directions going down the company order ideas go up.
Communication Breakdown
This is often referred to as ‘noise’ and simply means anything that will distract the recipient of the message or cause either a failure to receive the message or a misinterpretation of the message. There are a number of factors that can cause communication breakdown:
- Too much technical language (‘jargon’) being used
- Poor presentation and use of grammar
- Too much information being sent (‘information overload’)
- Geographical and time problems (e.g. communications between different countries in different time-zones)
- Length of the communication channel
- Employees already being overworked and ignoring the message
- Technology breakdown (e.g. computers ‘crashing’)
However, there are many problems inherent in what is termed ‘the electronic office’ – that is, a work environment which is highly computerised and relies heavily on software and communications equipment.
- Much time is often required to train staff in the use of the new equipment and software
- Computer fraud (e.g. ‘hacking’ into the computer-held information and changing the data or embezzling the business funds)
- Huge initial capital outlay required in order to purchase the equipment and software
- Equipment and software may become obsolete within a few years
- Resistance from employees and from trade unions to the new working practices
E6- A clear explanation of how the production process and quality assurance/ control system employed by the business help it to add value to its product or service.
Methods of Production
Quality
Total Quality Management (TQM) – This is a business trying to stop errors from occurring at all levels within an organisation, and try to encourage all employees to make quality changes within their job role. There are different parts to this: -
- Internal relationships between workers and their superiors and subordinates are seen to be as important as the external relationships that exist between the business and its customers and suppliers.
- TQM must be seen to be a policy that is followed by, and has the commitment of, all workers, from senior management to shop floor employees.
- The business must monitor all its activities and processes in order to identify any areas for improvement and to ensure that quality is being achieved.
- Team-working is important, since a group of people working together will develop a wider range of skills, co-operation, and higher motivation than if workers were performing repetitive tasks on their own.
- Regular market research must be undertaken to ensure that customers are happy with the level of service that they receive (any complaints can be used to improve the existing systems).
Quality Circles - This is a group of workers that meets at regular intervals during the working week in order to identify any problems with quality within production, to consider the alternative solutions to these problems, and to then recommend to management the solution that they believe will be the most successful. The members of the quality circle are also involved in the implementation and monitoring of the solution. This should help to improve the level of motivation amongst the workers because it makes each person in the group feel valued and that they are making a significant contribution to the improvements on the factory-floor.
Zero Defects - This is the ultimate objective for a business, to produce every product with no defects, therefore eliminating waste and the time taken to correct mistakes. Zero defects can lead to an improved business and customer reputation, as well as increasing levels of both sales and profitability. In order for the objective of zero defects to be achieved, it requires the involvement of every employee in the business, making sure that they are all committed and suitably trained.
Continuous Improvement - A business will often be facing increasing demands from customers to add new features to their products, as well as facing pressures from their competitors who are producing new and improved products, or offering improved after-sales service. The business will need to continually update and improve their products and marketing, in order to stay ahead of their competitors and boost revenue and profitability.
It is widely held that any aspect of the business can be improved, not just the production processes and, as with zero defects, it is vital that every employee in the business is involved in this philosophy, not simply those in the production department, but also those in marketing, finance and personnel.
Quality Standards - The British Standards Institution (BSI) is the body that is responsible for setting quality and performance standards in UK industry. The BSI ‘kitemark’ on a product implies to customers that it has been manufactured and produced to a high level of quality, and will be fit for the purpose for which it was advertised.
Quality assurance refers to the attempt to achieve customer satisfaction, by ensuring that the business sets certain quality standards and publicises the fact that these standards are met throughout the business.
British Standard 5750 (BS 5750) was the most common quality certification in the UK. It is now known as ISO 9000, which is an international standard that tells customers that a business has reached a required level of quality in its products and processes. Quality of output is vital for retaining customer loyalty and, therefore, it is necessary for quality to be an important consideration in the design, the production, the distribution, the sale and the after-sales service of products.
Employee involvement and participation in quality programmes (e.g. quality circles and suggestion-schemes) will serve two purposes:
- Improve the overall quality of the output and processes.
- Help motivate the workers by making them feel that their contributions and their suggestions are highly valued.
Quality control is the process of checking the quality and the accuracy of raw materials and supplies as they arrive at the business and also of the finished products as they leave the business en route to retailers and customers. This is usually carried out either by quality inspectors or by the employees themselves. The philosophies of zero defects require stringent quality control systems, in order to reduce the costs and time associated with both waste and the correction of low quality output.
Lean Production
This is the term given to businesses who reduce waste and costs in production.
Just In Time - This is a method of manufacturing products, which aims to minimise:
- The production time
- The production costs
- The amount of stock held in the factory
Raw materials and supplies arrive at the factory as they are required, and consequently there is very little stock sitting idle at any one time. Each stage of the production process finishes just before the next stage is due to commence and therefore the lead-time is significantly reduced. With a just-in-time production system, the level of production is related to the demand for the output (i.e. the number of orders) rather than simply producing finished goods and waiting for orders. This means that raw materials and stock only needs to be ordered from suppliers as required – this reduces the amount of money tied up in stocks, and leaves more money available for investment elsewhere.
The advantages of a just-in-time production system are:
- Cashflow is improved, as less money is tied up in raw materials, work-in-progress and finished goods.
- Less need for storage space for raw materials and finished goods.
- The business builds up strong relationships with its suppliers.
- Communication and co-operation between the marketing and the production departments are improved.
The disadvantages of a just-in-time production system are:
- The business may struggle to meet orders if their suppliers fail to deliver the raw materials on time.
- The business is unlikely to ‘bulk-buy’ its raw materials and, therefore, it may lose the benefit of achieving economies of scale.
- Buffer stocks are minimal and this may lead to the business having to reject customer orders requiring delivery immediately.
Cell Production - This method of manufacturing an item organises workers into ‘cells’ within the factory, with each cell comprising several workers who each possess different skills.
Each cell is independent of the other cells and will usually produce a complete item, and each cell will usually have an output target to achieve for a given period of time.
It is often argued that if the group of workers in each cell can see the completion of the finished product, then their work will have more meaning and therefore their levels of motivation and job satisfaction will be greatly enhanced.
This method of production is often combined with the just-in-time approach.
The advantages of cell production are:
- Improved job satisfaction and motivation.
- Improved quality as the group of workers take responsibility for the output.
- Multi-skilling of workers means that job rotation can occur.
- Stockholdings are reduced (leaving less money tied up in stocks).
- The factory space can be used more efficiently.
- Lead-times are reduced.
The disadvantages of cell production are:
- Output may not be as high as a ‘flow’ production system.
- Different ‘cells’ may work at different speeds (leading to conflict and tension).
- The business may need to invest heavily in new machinery and equipment, as each cell will require the same capital items.
Benchmarking - This refers to a business finding the best methods and processes that are used by other businesses, and then trying to emulate these in order to become more efficient in its operations.
Benchmarking can be used in all areas and processes in a business, not just for production.
For example, it can be used to improve customer service, advertising campaigns, Human Resource Management, and budgeting procedures.
Data for Benchmarking is collected and used with the full co-operation of the other businesses, and often the results will help both businesses to improve their systems and procedures.
There are several stages involved in implementing a Benchmarking system:
- Researching the areas in a business which need improving.
- Deciding how an improvement in these areas can be measured.
- Identifying ‘best practice’ in other businesses.
- Agreeing the exchange of information with other businesses.
- Comparing the ‘best practice’ with the existing processes, systems and procedures in the business.
- Altering the processes, systems and procedures in order to improve performance.
- Evaluating how successful the changes have been.
In order for Benchmarking to be successful, the business must ensure that firstly every employee is committed and involved in the system, (from senior management to shop-floor employees), and secondly that sufficient time and finance is available for the gathering of data and the implementation of new procedures.
Benchmarking will fail to deliver improvements to the business if there is a lack of willingness by other businesses to disclose information, or if the systems and procedures used by the ‘best practice’ businesses are not appropriate for the business in question.
In summary, Benchmarking can help a business identify those areas in its operations which need improvement, as well as considering alternative processes and procedures for achieving its objectives. ‘Best practice’ can be emulated and the competitiveness of the business should improve as it strives to improve and become more efficient.
Time Based Management - Time is a very valuable resource and time-based management is concerned with reducing both the length of time taken to produce the product and also, therefore, reducing the lead-time (the time lag between the customer placing an order and the business delivering the finished product).
In order for a business to successfully operate a time-based management system, it is important that machinery is flexible and production runs can be shortened or lengthened at short notice, in order to produce more of an existing product or to start the production of an alternative product.
It is also essential that staff are multi-skilled and can rotate between different tasks, as they may be required to perform a number of different jobs in a short space of time.
Time-based management makes it easier for a business to implement other lean production techniques (such as just-in-time and cell production), and since these techniques require less time and fewer stocks of raw materials than more traditional mass production techniques, then the business will save money.
However, it is often argued that the move away from mass production and lengthy production lines will reduce the chance of the business benefiting from economies of scale in its manufacturing techniques.
It is also likely that a business will be able to implement the time-based management philosophy to its R&D processes, as well as to the production line.
A business, which can develop, and launch more products in a shorter time than its competitors will benefit from a number of advantages:
- If the business is the first to launch a product on the market, then it can charge a premium price to reflect the innovative nature of the product.
- Premium prices help to quickly recoup R&D costs, as well as earning the business a significant profit margin per unit sold.
- Brand loyalty is likely to develop - enabling the business to use this strong customer base as a ‘launch pad’ for new products in the future.
- The diversity of products that are on sale will increase the product portfolio of the business, as well as reduce the risk of business failure should one or two of the products prove unsuccessful.
C1- Judgements about how successfully the business is meeting its objectives.
When Argos was acquired by GUS in 1998, sales and profits were disappointing. Since then growth has been excellent. Annual sales grew by 13% and profits by 17% from 2002 to 2003 alone, significantly outperforming the market as a whole. This has been a remarkable turnaround for the business, brought about by instilling insights and enthusiasm into employees, keeping the brand modern with strong identifiable values, making the service more convenient, and building a culture within the firm that wants to win.
Changes to the Argos culture and in its marketing mix have revitalised the brand and boosted its market share. Its success at motivating its staff, developing an effective advertising campaign and providing more ways for customers to buy the firm’s products have all been recognised by Industry awards highlighting the remarkable recovery of Argos in recent years.
As a result, Argos is now the market leader (by sales volume and by sales value) in several key product categories. These include small kitchen appliances, home office and toys.