business reporting & analysis,bbm(ib-5)

8/8/2019 Business Reporting & Analysis,BBM(IB-5)

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Introduction to Business

Reporting. ³ To manage a businesswell is to manage its

future; and to manage thefuture is to manageinformation´.

If you can¶t measure, youcan¶t manage´.

Reporting. Present Market scenario:

Too many companies,

Too many products, Too many categories,

Too much of competition,

Business conditions volatile andunpredictable.

Reporting. In view of this, management

needs to monitor larger business

environment.

By monitoring it, a company can

think of changing its businessstyle, business practices, if needbe.

Importance of Information.

Management must learn about,

Changing consumer needs and

wants, Competitors initiatives,

New distribution channels,

New manufacturing processes,practices, systems.

Management has devoted most of itsattention on,

Money, Materials,

Machines,

And, Men.

Management has so farignored, critical resource

called, ³Information´.

Issues related with information,

Information available is not of the

right kind. There is a lot of unwanted

information.

Information is suppressed. Information arrives too late.

Information is inaccurate.

Management Information

System. Definition: ³It is a system

continuing and interacting structure

of people, equipment and proceduresto gather, sort, analyze, anddistribute pertinent, timely andaccurate information for the use of

decision makers to improve theirplanning, implementation andcontrol´.

Environmental Appraisal

The environment of any organizationis ³the sum of all conditions,

events and influences thatsurround and affect it´

It is therefore crucial for anyorganization to understand the

environmental influences on itsbusiness.

Characteristics of Environment.

It is complex.

It is dynamic.

It is multi-faceted.

It has a far-reaching impact.

Various EnvironmentalComponents.

1) Market environment: Client¶s needs,preferences, perceptions, attitudes,values, buying behavior, satisfaction.

Product factors like demand, image,features, utility, design, life cycle, price,promotion, distribution, differentiationetc

Competitor factors like different types of competitors, nature of competition.

Market environment:Competition will have most

immediate impact on consumergoods, FMCG in particular.

While on basic goods like steel,or capital goods like plant orequipment competition will havelesser impact.

2) TechnologicalEnvironment:

Sources of technology.

Technological development,

R&D, cost of technology. Effects of technology onenvironment, human beings.

2) Technological Environment:Technological changes shortens the ³product life cycles´.

Products become irrelevant fast.

E.g. color t.v. market,pharmaceutical products, consumer

durables etc. It also affects packaging, logistics

3) Supplier environment:

Cost, availability, and continuity of

supply of raw material, components,parts.

Infrastructural support and ease of availability of the different factors of production.

4) Economic environment:

The economic stage at which thecountry exists at a given point of time.

The economic structure adopted,capitalistic, socialistic or mixed.

Economic policies, industrial, fiscal. Per capita income, balance of

payments etc.

4) Economic environment:

Major economic factors:

Income levels and distribution.

Business cycles/phases ( boom, recession,depression, recovery)

Price levels of goods ( inflation etc) Rate of interest on market borrowing.

5) Regulatory environment:

Policies related licensing,

monopolies, FDI, Policies related to distribution and

pricing.

Policies related to sick industries,public sector, backward areas,consumer protection etc.

Various EnvironmentalComponents. (Regulatory)

Government

Policy

Monetary

Policy

Fiscal

Policy

Physical

Policy

Credit

ControlsTaxes Subsidies

Investment

Production

Prices

6) Political environment:

The political system and its features,

ideological forces, coalitioncompulsions.

Political stability.

Political funding of elections. Government¶s role in business.

6) Political environment: Politicalstability improves the businessenvironment.

Coalition govt. has its owncompulsions and limitations.

Progressive political philosophy canattract and boost business.

7) Socio-cultural environment:

Demographics like population, itsdensity and distribution, agecomposition, inter state migration,income distribution etc.

Socio-cultural concerns like

environmental pollution,consumerism, corruption etc.

Family structure changes.

Socio-cultural environment:Today most of the companies arefocusing their product & brands on

youth segment. Changes in the value system and

lifestyle greatly affect consumerbuying behavior.

Better exposure to information,consumers prefer MNC brands.

Products and Cultures.

If company¶s fail to understandcultural implications, the chances

of their success is less.e.g. Cola drinks are taken with

snacks in the US, whereas they

are promoted as thirst quenchersin Asian markets.

Products and cultures.

Orange juice is a breakfast drink inthe US, but the same product willhave to be promoted differently in

other countries if it is not a breakfastdrink.

In India tea or coffee is taken atbreakfast or anytime, but in Europecoffee is served after desserts.

Products and cultures

Colors,Blue color is feminine in Holland

but regarded as masculine inSweden.

White is associated with sadness

inChina and Korea butconsidered peaceful in other

parts of the world.

Red is popular in communistcountries but many African

countries dislike red color.

Green is a favorite color in in the

Muslim world, but in Malaysia itis associated with illness.

Coca-cola which is referred asa global product ,realized that

in Japan it had to changeDiet- Coke to Coke-Lightwhen introduced, because

Japanese women do not liketo admit to dieting as it

implies sickness.

Products and Cultures

Japanese consumers havestarted taking interest in

dishwashers, but have no roomin the kitchen.

To tackle this Mitsubishi and

Toto are making compactdesigns for this Japaneseproblem.

Products and Cultures

Financial services are difficult tointroduce in Muslim countries ascharging interest is forbidden in the

religion. Japanese cosmetics companyShiseido was successful in the US only after the products were madeeasy-to-use like the Americanproducts.

8) International environment:

Globalization process.

Global economic forces.

Global trade and commerce.

Global financial system.

Global markets and competitiveness.

Global communication

Global technology and quality systems.

Business Analysis.

What needs to be

analyzed?

Analysis of Industry andCompetition.

Why is it needed?

It is the basis of strategyformulation.

A firm can asses ³industryattractiveness.´

It can also asses its own strengths

compared to its other players.Helps a company to build its

competitive advantage.

Industry Attractiveness:

Different industries have different

opportunities, growth andprofitability.

Based on these factors a companycan make up its mind on theindustries it should enter.

Reasons for Analysis:

Understanding the environment

and its analysis.Helps in strategy formulation.

Industry attractiveness.

Helps organization in buildingcompetitive advantage.

Analysis of Industry.

What needs to be analyzed?

Basic industry facts.

Industry environment.

Industry performance.

Industry practices.

Emerging trends in the industry.

Competition Analysis.

Points of Analysis:

Firm¶s competitive position

within the industry.

5 forces shaping competition

in the industry.Profiling of each competitor.

5 Competitive Forces:

1)Industry Competitors:(Segment Rivalry)

Segment is unattractive if it alreadyhas many, aggressive competitors.

It is more unattractive if it is

declining.Result: price wars, advertising

wars, new product introductions.

2)Potential Entrants: (Threat of new entrants)

It means high entry barriers and lowexit barriers.

When both entry and exit barriers arelow firms can easily leave the industry.

If entry barriers are low and exitbarriers are high firms find it tough toget out of industry.

4)Buyers: (Bargaining power of buyers)

If buyers bargaining power is high,potential profitability can be low.

This happens when buyers becomemore concentrated.

Wal-Mart bargains very hard with itssuppliers.

5) Suppliers: (Threat of supplier¶sgrowing bargaining power.)

Asegment if unattractive, suppliersincrease price or reduce quantity.

Suppliers tend to become powerful, if they are organized or concentrated.

Supplier relations are thereforecrucial.

What to Analyze?

How are 5 forces shaping the

competition in the industry.History of competition in the

industry.

Rivalry and tussle for positionamong existing players.

Analysis of Competitionproper (Existing players)

Drawing up profiles of eachcompetitor.

Their size, capacity and

operation territory.Their products and services.

Their sales in each market, segmentand product line.

Their objectives, strategies andprograms.

Their strengths and weaknesses inproducts, costs, logistics, channel

management, sales force, marketingand sales promotion.

Procedure of Business

Reporting.

Data is Everything«.

Data Collection.

It is the heart of allreporting/research.

Researcher makes a plannedsearch for all relevant dataand gathers the entire datarequired for the assignment.

Data Collection.

Sources of data:

1) Customer database: Is

the collection of comprehensive data aboutcustomers/prospects.

Sources of Secondary data

2) Internet.

3) Yellow pages.

4) The Thomas register: Most powerful

industrial buying guide available inprint, CD form and also on the internet.

5) Industrial Product finder: Givesinformation about new industrialproducts, services.

6) Phone data service.( Tele data base.)

Qualitative Research

Deals with qualitative aspects.

Used in exploratory research work.

Expresses and summarizes data non-

numerically. Tackles limited number of respondents.

Involves in-depth probe.

Involves no structured questioning.

Provides insights on marketing problems.

Final action cannot depend on findings.

Quantitative research.

Deals with quantitative aspects.

Used more in conclusive research projects.

Expresses data numerically, quantitatively.

Tackles large number of respondents.

Involves limited probe with limitedquestions.

Provides insights on marketing problems. Final action can depend on its findings.

Various Types of Reports.

Oral Report:

It is a presentation of information

through spoken words.Oral reports lack visual advantages.

There are no charts, no diagrams, nopictures in the presentation.

Various Types of Reports.

Oral Report:

Oral presenter has to rely

only on volume and pauses.

Pace of presentation cannot

be controlled in oralpresentation.

Oral Report:

Presenter should know the audienceto whom he is reporting.

It should be properly planned.

Presenter should be clear about theobjectives of the report.

Information should be organized in alogical manner.

Oral Report:

Language suitability has to beconfirmed.

Reporting should be done in a simpleand continuing manner.

Visual aids should be used toincrease effectiveness.

Oral Report:

Hand outs of data may be

given to the audience.

Oral summary of written

report should cover all majorpoints.

Written Reports.

Written reports are classified on afunctional basis.

Informational.

Examination.

Analytical or Problem solving.

Written Reports.

Informational Reports:

Informational report is a factualreport on a particular subject.

It provides information but noanalysis.

It does not provide any conclusionstoo.

Written Reports.

Examination Reports:

It provides facts on a particular

subject and also analyses thefacts.

Does not provide any

conclusions or recommendations.

Written Reports.

Analytical Reports:

Analytical reports not only

presents and analyses data butalso draws conclusions andmakes recommendations if

required.It is the most comprehensive

report.

Data Collection.

Data, is facts presented to theresearcher from the study¶senvironment.

Primary data, is data in its originalform, or first hand data

Secondary data, is the one which

has at one level of interpretationinserted between the event and itsrecording.

Data Analysis.

Data analysis usually involvesreducing accumulated data to

a manageable size,developing summaries,looking for patterns, and

applying statisticaltechniques.

Various Tools for DataAnalysis.

Management Methods:

Benchmarking:

Purpose:

To identify and fill gaps inperformance by putting in place bestpractice, thereby establishingsuperior performance.

When to use:

As a part of total quality

process when taking anindependent look atperformance by comparing itwith that of others.

How to use:

Internal Benchmarking:

This is the comparisonbetween functions,departments or a similar

organization as a means of improving performance.

Competitive Benchmarking:

This is a cross-comparison within oneindustry sector aimed at establishing

best practice through theidentification of gaps between yourown and your competitor¶sperformance.

Areas could be product, functional,departmental or entire company.

Comparative Benchmarking:

This is comparison across all

business sectors aimed atestablishing best practice

in all areas of operation.

Benefits of Benchmarking:

It helps in measurement, helps

to focus on the mission andto identify measures ortargets for key businessprocesses.

SWOT Analysis.

S: Strengths.

W: Weaknesses.

O: Opportunities.

T: Threats

Strength

It is an inherent capacitywhich an organization can

use to gain strategicadvantage.

E.g. superior r&d skills whichcan be used for new productdevelopment.

Weakness

It is an inherent limitation orconstraint which creates

strategic disadvantage. E.g. over dependence on asingle product line, whichcould be risky in crisis.

Opportunity

It is a favorable condition in theorganization¶s environment whichhelps it to consolidate and

strengthen its position.

E.g. growing demand for the

products or services that a companyprovides.

Threat

It is unfavorable situation in theorganization¶s environment whichcreates risk for, or causes damage

to, the organization.

E.g. emergence of strong newcompetitors who are offering stiff

competition.

SWOT Analysis

To carry out SWOT, one has toanswer the following questions.

STR ENGTHS:

What advantages do you have?

What are you good at?

What resources do you have?

SWOT Analysis

Weaknesses:

What can you improve?

What are you bad at?

What should you avoid?

Opportunities:

What good opportunities you have?

What are the favorable trends youare seeing?

SWOT Analysis

Threats:

What obstacles are you facing?

What is your competition doing? Are the relevant specifications for

your products, services changing?

Do you have resources problem? Can one of your weakness threaten

your business?

BCG Matrix

BCG stands for Boston ConsultingGroup.

It provides a graphic representationfor an organization to examine thedifferent businesses on the basis of their relative market shares and

industry growth rates.

BCG Matrix

Was developed by Bruce Henderson

in 1960.

Objective of BCG: Is to developbest product mix to maximize longterm earnings of company andproper allocation of resources among

these products.

BCG Matrix

Product/SBU Differentiation:

Stars: Market leaders in a highgrowth market. Have a high marketshare and high market growth too.These are business units that growrapidly.

Strategy is to increase market share.

BCG Matrix

Cash Cows: They produce a lot of cash for the company, have highmarket share but have a falling

growth rate.

If cash cows start losing marketshare the company has to pump

back money to maintain marketleadership.

BCG Matrix

Dogs: Businesses with lowmarket share in a low growth

market.A

company should avoidand minimize no. of dogs.

Best strategy is to plan a

withdrawal or redefine thebusiness.

BCG Matrix

Question Marks: These arebusinesses that operate in

high growth rate but have alow market share. It requiresa lot of money to keep up

with fast growing market.

Deming Wheel.(PDCA)

Purpose:

A management concept suggestedby Deming to satisfy the qualityrequirements of the customers byusing the cycle:

Plan, Do, Check, Action.

Deming Wheel.(PDCA)

When to use:

For the development of a

new product based on therequirements of the

customer.

Deming Wheel.(PDCA)

How to use:

Develop teamwork between thecompany¶s various functions, i.e.product development,manufacturing, sales and marketresearch

Use PDCA.

Deming Wheel.(PDCA)

When the cause of the

problem is detected, a qualityimprovement team will takethe responsibility for carrying

through the necessary stepsto solve the problem.

Deming Wheel.(PDCA)

CHECK:

When proper steps have

been taken to solve theproblem, an investigation willtake place to check whether

the improvement process wassuccessful.

Deming Wheel.(PDCA)

ACTION:

If the steps taken were

successful, the new and betterquality level should be accepted.

If steps taken were not

successful, then the PDCA cycleshould be repeated.

Deming Wheel.(PDCA)

Benefits:

It will help to ensurethat the customer isalways fully satisfied.

Gannt Charts.

Purpose: For planning the stepsnecessary to implement qualityimprovements.

When to use: When a team hasdecided upon a project and isplanning its implementation.

Gannt charts are useful for schedulingthe events necessary to complete theimprovement process.

Gannt Charts.

How to use:

Break down the implementation planinto achievable tasks and activities.

Estimate how long each task willtake and then set a realisticcompletion date.

Gannt Charts.

Break down the steps in a logicalsequence. Lines denote when a task is dueto start and end. The relationship over timebetween each task is immediately visible.

Assess each step individually, identifying, Any issue that stops you from completing a

started task.

Any department task that must completed

before another task has begun.

Gannt Charts.

Benefits:

The visual representation of taskshelps identify the key issues andbrings into the open the stepsneeded for successful completion.

It also makes it easy to see when

deadlines slip and changes to theplan have to be made.

Pareto Analysis.

Purpose: To separate the mostimportant causes of a problem fromthe many trivial.

Also to identify the most importantproblems for a team to work on.

It was first used by Wilfredo Pareto,

an Italian economist.

Pareto Analysis.

When to use: When a teamis analyzing data relating to a

problem to decide which arethe most important factors tobe tackled first to have the

most impact on the problem.

P A l i

Pareto Analysis.

How to use: Pareto is alsocalled as 80:20 rule.

It means 80% of the problemsare caused by 20% of theactivities.

It is therefore important toconcentrate on these 20%activities.

P t A l i

Pareto Analysis.

Steps involved are:

List the activities or causes in a tableand count the number of times each

occurs.Place these in descending order of

magnitude.

Calculate the total for the whole list.

Calculate the percentage of the totalthat each cause represents.

P t A l i

Pareto Analysis.

Draw a Pareto diagram with thevertical axis showing the percentageand horizontal axis the activity or

cause.Cumulative curve can be drawn to

show cumulative percentages from

all causes.Interpret the results.

P t A l i

Pareto Analysis.

Benefits:

When working in teams it can bedifficult to reach agreement whenpeople with different opinions wantto follow different courses of action.

Pareto analysis brings the facts to

the attention of all members of theteam to aid decision-making.

Areas of Business

Reporting.Functional Reporting.

Research in various areas of

Research in various areas of Marketing

Research on Consumer.

Research on Market/Demand.

Research on Product/Brand.

Research on Competition. Research on Distribution.

Research on Price.

Research on Advertising and Sales

promotion. Research on Sales methods.

Consumer Research

What can be understood from it?

Consumer motivation research.

Drawing up of consumer profiles for products,categories and segments.

Consumer tastes and preferences and reactions. Shifts/changes in consumption patterns of

consumers.

CSI (Customer satisfaction index)

Customer dissatisfaction study.

Customers acceptance of innovations.

Study of influencers.

Market/Demand research

What can be understood from it?

Market size study.

Market potential study.

Market profiles and characteristics.

Market segmentation study and analysis.

Market share analysis.

Sales forecasting.

Overall business trends.

P d t/B d R h

Product/Brand Research

What is understood? Study on product lines, product design,

product features, product quality. Study of product usage. New product testing. New product concepts. Tracking of product, brand, its image and

competitive position.

Brand preferences across territories. Study on package design, material etc.

Di t ib ti h

Distribution research

What is understood?

Study of different types of marketingintermediaries.

Dealer responsiveness to companyproducts and services.

Logistics and transportation.

Warehouse efficiency.

Distribution cost analysis.

Price research

What is understood?

Pricing strategy of company.

Company¶s pricing incomparison with its rivals.

Segment wise price monitor.

Advertising and sales

Advertising and salespromotion research

What is understood?

Media research.

Feedback on advertising campaigns.

Impact of advertisement and itseffectiveness.

Assessment and effectiveness of sales promotion campaigns.

S le ethod e e h

Sales methods research

New sales programs.

Analysis of sales problems.

Analysis of sales territories.

Measurement of sales forceeffectiveness.

Study of sales compensation plans.

Review of sales targets/quotas. Sales forecasting and budgets.

Financial Reporting

Financial Reporting.

Significance:

It gives a picture of financialactivities of business/company.

Helps in resource allocation.

Helps in analyzing and interpretingfinancial results.

Helps in understanding company¶sfinancial performance.

Financial Reporting

How is financial reportexpressed?

Balance Sheet: It reports the

following,

Company¶s assets.(What co. owns)

Liabilities.(What co.owes)

Ownership equity.

Financial Reporting

An Income Statement:

It lists the various revenues andexpenses that result from a business.

It can be studied on a quarterlybasis, half yearly basis for a specifictime.

It is also known as ³Profit & loss´ statement.

Financial Reporting

Retained Earning report: Itindicates changes in the company¶sretained earnings.

Cash Flow statement:

Indicates all sources of company¶smoney and its usage. For e.g.

revenues, long-term financing, saleof non-current assets etc.

Financial Reporting

Various Types:

Internal Reporting: Reports usedby managers for effective handling of

operations.

Internal financial reports aregenerated on a daily, weekly,

monthly basis.

Financial Reporting

Special Purpose Financialreporting: These reports aregenerated to meet the needs of

parties outside the organization. General Purpose reporting: These

reports are generated for the sake of

stakeholders, employees, etc.

Inter Company Analysis

Inter Company Analysis.

³Inter company´ analysis is doneamongst the various companies of different groups.

When analysis is done amongst theinternal companies of the samegroup, it is referred as ³Intra-

Company´ analysis.

Purpose of Inter-companyanalysis:

To understand company¶s standing in

the market.To understand strengths and

weaknesses.

To understand company¶sperformance in comparison with itscompetitors.

Benefits:

To decide on future investments.

To decide on relevant businesses.

To decide on products.

To understand new businessmethods.

Creates cost consciousness.

Macro Economic Analysis

Macro-Economic Analysis.

Definitions:

It is concerned with

aggregates like nationalincome, investments and

consumption.

Macro-Economic Analysis

The main focus of macro-economicanalysis is on;

Gross Domestic Product.(GDP)

Inflation.

Unemployment.

Macroeconomics thus focuses on theoverall economic factors, tounderstand the economic condition.

Gross Domestic Product: (GDP)

In simple words, it means how muchgoods and services a nation

produces.While interpreting the GDP, inflation

has to be taken into account.

This gives an insight into recessions,slowdowns and booms in themarket/economy.

Unemployment:

It tells how many jobs are createdfor the labor class.

Unemployment rate is low when theGDP is up.

Higher GDP means higher growth,

production and output, which meansmore labor and more jobs.

Macro Economic Analysis.

Demand and Disposable Income:

Demand means how much isconsumer willing to buy.

Consumer¶s buying power dependson how much savings and hisdisposable income.

Disposable income is the income leftwith the consumer after all expenseshave been taken care of.

business reporting & analysis,bbm(ib-5)

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