Commercial Manager

Cathy Boyce Tim/Lake

Description

The Commercial Manager is the complete handbook for practitioners across all sectors of commerce and industry and covers every aspect of this multi-faceted role.Commercial management covers a large range of different and crucial functions including contract negotiation, procurement, financial management, risk management, project management - and yet until now the subject has rarely if ever been treated as a single 'discipline'. This book fills that important gap.Written by authors with wide practical experience, The Commercial Manager offers expert, accessible and practical guidance on all the legal, commercial and planning aspects of this crucial management role.Part One covers commercial awareness and relationships, the contract and negotiation techniques.Part Two explores techniques of risk managementPart Three provides expert advice on planning and project management.It will serve as an indispensable handbook for managers in both the private and public sectors.

Sujets

• Strategic management

Informations

• Publié par: Thorogood Publishing
• Date de parution: 14 août 2013
• Nombre de lectures: 10
• EAN13: 9781854184221
• Langue: English

Extrait

First published in eBook format 2013 Thorogood Publishing Ltd 10-12 Rivington Street London EC2A 3DU Telephone: [phone] Fax: [phone] Email: [e-mail] Web: www.thorogoodpublishing.co.uk
© Tim Boyce and Cathy Lake 2009
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, photocopying, recording or otherwise, without the prior permission of the publisher.
This book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out or otherwise circulated without the publisher’s prior consent in any form of binding or cover other than in which it is published and without a similar condition including this condition being imposed upon the subsequent purchaser.
No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher.
A CIP catalogue record for this book is available from the British Library.
ISBN 978 185418672 0
Part One - The Commercial Manager
Chapter One - Commercial Awareness
Introduction
The key words of the commercial view of business are profit, cash, order book, intellectual property, risk and contracts.
A purist might say that the first three only are the real core. These three may be considered in terms of their relative immediacy. The most immediate need in successfully running most businesses is cash. Cash is needed every month, every week and every day to pay the workers and to meet creditors’ demands. The next most immediate need is for the company to produce good profits. Profit is measured in the annual accounts but for many companies, the half-year and quarterly results are anticipated and watched equally closely by the company, by investors and by the City. Internally to the company, profit forecasts are monitored monthly or at more frequent intervals depending upon the company’s financial health. Poor profits means reduced investment by the company and loss of confidence by shareholders, who expect their dividends and bonuses. To be active at all, a company must have orders to process. It is arguably artificial to make this the third most immediate priority. Some companies, such as supermarkets, may receive (and need) hundreds of orders a day, with a complete order processing and delivery time measured in hours or days only, with an inventory holding of no more than forty eight hours’ worth. On the other hand there are companies, such as shipbuilders, who may need only one or two orders a year in order to maintain the order book. But it is not just a question of maintaining the order book. Most companies aspire to growth. Provided commercial performance is maintained, a bigger company means bigger profits.
A company that considers only the first three of the commercial components may be highly successful and may be described, perhaps, as highly focused. However it will have no future unless it constantly refreshes itself with new ideas. New ideas will generate tomorrow’s orders, profit and cash.
The management of risk has a major influence on profit, cash, orders and the commercial exploitation of ideas. Most managers will be familiar with programme risk management aimed at identifying and eliminating or mitigating technical risks that potentially impact upon time (and therefore money). But there are also commercial risks and the management thereof in a way that is not divorced from programme risk management – is crucial to success.
Similarly, the opportunity to maximize profit and cash, to eliminate threats to the successful performance of orders, and to protect ideas for the future hinges on the terms of ‘the contract’. Companies operate by receiving contracts from customers and placing contracts with suppliers. Contracts from customers are sometimes called sales orders and contracts with suppliers are usually called purchase orders. Of all the transactions into which the company enters, the contract is the one with which the commercial manager must be most familiar. The contract must be good, sound and familiar to all those concerned with it. There is an old maxim to the effect that if the job is going well the contract is left to gather dust in a forgotten drawer. If the job goes badly the contract does nothing to help. In enshrining two extremes, the maxim neglects the majority of contracts, which lie somewhere between the two, and indeed in practice many problems are caused by people thinking they know what is in the contract without bothering to check. Also, if problems do arise then a solution, which is arrived at other than by recourse to the courts, will be based around what the contract says, even if the contract does not expressly address the specific problem.
Profit
Accountants use many measures to monitor the financial health of a business. Expressions such as ‘gross profit’, ‘net profit’, ‘operating profit’, ‘margin’, ‘contribution’, ‘recovery’, ‘revenue’, ‘earnings’, ‘earnings before interest and tax’ and several more all have a distinct meaning. Profits are also expressed as percentages of cost, of sales, of turnover and as a return on capital investment. The percentage range across these various measures can be quite large. 5% return on sales may equate to 200% return on capital. Bandying such numbers can inadvertently cause embarrassment. The customer who hears that his job generated 75% profit for the company may be concerned that he was overcharged. But if this figure is simply the margin between the selling price (which includes overheads, material handling charges, financing costs, warranty, third party royalties, packaging, freight and insurance) and the basic works cost (direct labour and materials) then the net profit on the job may only be 10% and the customer should be quite content. No financial figures should ever be used outside of the company other than properly approved prices.
For the purposes of this book the single word ‘profit’ will be used both to mean how well the business has done over a twelve-month accounting period and also how well an individual job has been done in financial terms. In both cases the objective is, in simple terms, the same. Everything the company does must be sold at a higher value than the sum of all of its costs. Accountants make adjustments to profit, for example, by making ‘provisions’, which is money kept in the kitty against some known contingent liability that may or may not arise. Special items in the accounts (for example, unexpected excessive costs of acquisitions) also affect profit. Profits retained for investment are still profits, although the shareholders forgo a higher next dividend in return for the promise of growth and higher dividends later. But for present purposes, the simple definition is more than sufficient. To maximize profit means minimizing cost, maximizing selling prices and finding a product/market where customers abound or are secure. The strategies towards this are as follows.
Increasing demand
Concentration on producing and supplying those goods and services where demand is increasing should lead to higher profits. This may sound obvious but sometimes product developments are pursued because of the inherent technical challenge – found attractive at the individual or corporate level – rather than because of a well-researched market demand.
Minimizing costs
Minimization of the cost of production by selecting the cheapest possible combination of premises, machinery, labour and services is an obvious goal. Thus, if substituting machines for labour is cheaper, this will be done despite the social consequences. Proactive supply chain management, value chain management, partnership sourcing and service outsourcing are all aimed at reducing cost in the overall value chain.
Optimizing output
Maintaining output at the level at which profits are maximized is a useful approach. For example, if a business produces widgets and the best machine runs most efficiently at 5,000 widgets per hour then producing only 4,000 widgets per hour is under-utilizing the equipment and recovering the cost of the machine more slowly – to attempt to produce 6,000 widgets an hour may incur higher maintenance costs and longer downtime periods.
Market/price influencing
Where a single organization is dominant in its own area of activity it can affect the price of the goods it produces by varying the amount it supplies to the market. It is therefore able to adjust either price or output to suit its own profit-maximization objectives.
Niche markets
Supplying in a niche market can provide secure profits. Whether there are many or few customers, the fact that there are few suppliers or a single supplier will support high prices provided the niche is for essential, high value adding products. The niche may disappear as technology or business practice changes, but there are no foolproof ways of making good profits over an extended period of time.
High price markets
Supplying in a market where prices are kept artificially high can appear attractive. There are a few markets – for example perfumery – where regulatory bodies appear happy to allow artificially high prices to prevail.
Low risk markets
Supplying in a market where risks are low is a worthwhile consideration. Some markets (arguably business consultancy) are at the high profit, low risk end of the spectrum, but sometimes low risk business may mean low rates of profit. However, the attraction is in the certainty of profit and the avoidance of events that could threaten not only profit, but also the very existence of the company.
Mergers and acquisitions
Merging with or acquiring other businesses is a frequent route to intended higher profits. The aim may be to eliminate part of the competition, to acquire new customers and products or ‘simply’ to realize higher efficie