Business Studies: Stage 6

Business Studies
Stage 6
Study Notes
HSC TOPIC 1: BUSINESS MANAGEMENT AND CHANGE......................................................................3
NATURE OF MANAGEMENT.....................................................................................................................5
UNDERSTANDING BUSINESS ORGANISATIONS WITH REFERENCE TO MANAGEMENT THEORIES................................7
MANAGING CHANGE............................................................................................................................10
HSC TOPIC 2: FINANCIAL PLANNING AND MANAGEMENT...............................................................13
THE ROLE OF FINANCIAL PLANNING.........................................................................................................15

FINANCIAL MARKETS RELEVANT TO BUSINESS FINANCIAL NEEDS...................................................................16
MANAGEMENT OF FUNDS.....................................................................................................................17
USING FINANCIAL INFORMATION............................................................................................................18
HSC TOPIC 3: MARKETING...............................................................................................................20
NATURE AND ROLE OF MARKETS AND MARKETING....................................................................................22

MARKET RESEARCH PROCESS.................................................................................................................25
CUSTOMER AND BUYER BEHAVIOUR........................................................................................................26
DEVELOPING MARKETING STRATEGIES.....................................................................................................28
ETHICAL AND LEGAL ASPECTS.................................................................................................................31
HSC TOPIC 4: EMPLOYMENT RELATIONS.........................................................................................33
NATURE OF EMPLOYMENT RELATIONS......................................................................................................35

KEY INFLUENCES ON EMPLOYMENT RELATIONS..........................................................................................36
EFFECTIVE EMPLOYMENT RELATIONS........................................................................................................37
LEGAL FRAMEWORK OF EMPLOYMENT.....................................................................................................40
INDUSTRIAL CONFLICT...........................................................................................................................41
ETHICAL AND LEGAL ASPECTS.................................................................................................................44
HSC TOPIC 5: GLOBAL BUSINESS......................................................................................................45
GLOBALISATION...................................................................................................................................48
GLOBAL BUSINESS STRATEGY.................................................................................................................49
SPECIFIC INFLUENCES ON GLOBAL BUSINESS..............................................................................................52
MANAGING GLOBAL BUSINESS...............................................................................................................53
MANAGEMENT RESPONSIBILITY IN A GLOBAL ENVIRONMENT........................................................................55
Business Studies Study Notes
HSC Topic 1: Business Management and Change
Content
Students learn to:
use existing business case studies to investigate and communicate ideas and issues
related to business management and change. The focus of these case studies will be
to:
• analyse how management theories apply to various business situations
• explain and evaluate how change is managed in one or more businesses.
Students learn about:
the nature of management

• the importance of effective management
• management roles
– interpersonal, informational, decisional
• skills of management
– people skills, strategic thinking, vision, flexibility and adaptability to change,
self-managing, teamwork, complex problem-solving and decision-making,
ethical and high personal standards
• responsibility to stakeholders; reconciling conflicts of interest
understanding business organisations with reference to management theories

• classical-scientific
– management as planning, organising and controlling
– hierarchical organisational structure based on division of labour
– autocratic leadership style
• behavioural
– management as leading, motivating, communicating
– flat organisational structure, teams
– participative/democratic leadership style
• political
– uses of power and influence, management as negotiating and bargaining
– structure as coalitions
– stakeholder view
• strengths and weaknesses of the classical, behavioural and political approaches
• systems/contingency
– adapting management and organisational approaches to circumstances
managing change
• nature and sources of change in business
– external influences — the changing nature of markets; economic, financial,
geographic, social, legal, political and technological developments
Ryan McDonald SHS 3

– internal influences — effects of accelerating technology including

e-commerce, new systems and procedures, new business cultures
– structural responses to change — outsourcing, flat structures, strategic
alliances and networks
• reasons for resistance to change
– financial costs — purchasing new equipment, redundancy payouts,
retraining, reorganising plant layout
– inertia of managers, owners
– cultural incompatibility in mergers/takeovers
– staffing — de-skilling, acquiring new skills, loss of career
prospects/promotional opportunities
• managing change effectively
– identifying the need for change
– setting achievable goals
– creating culture of change (encouraging teamwork approach using change
agents)
– change models — force-field analysis, Lewin’s unfreeze/change/refreeze
model
change and social responsibility

• ecological sustainability, quality of working life, technology, globalisation/
managing cultural diversity, e-commerce.
Ryan McDonald SHS 4

Nature of Management
The traditional definition of management is the process of coordinating a business’s

resources to achieve its goals. The resources of a business are:
 Human resources are the employees of the business and are generally its most
important asset.
 Information resources include the knowledge and data required by the business, such
as market research, sales reports, economic forecasts, technical material and legal
advice.
 Physical resources include equipment, machinery, buildings and raw materials.
 Financial resources are the funds the business uses to meet its obligations to various
creditors.
A manager is someone who coordinates the business’s limited resources to achieve specific
goals.
A contemporary definition of management views managements as the process of working

with and through other people to achieve business goals in a changing environment. Crucial
to this process is the effective and efficient use of limited resources. According to this
definition, management requires:
 Working with and through others.
 Achieving the goals of the business.
 Getting the most from limited resources.
 Balancing effectiveness and efficiency.
 Coping with a rapidly changing environment.
The 8 Skills a Manager must possess are:

 People skills
 Strategic thinking skills
 Vision skills
 Flexibility and adaptability to change skills
 Self-managing skills
 Teamwork skills
 Complex problem-solving and decision-making skills
 High personal standards and ethics
Stakeholders are groups of individuals who interact with the business and thus have a vested
interest in its activities. A business’s responsibilities to its stakeholders are:
 Change management
 Social justice
 Ecological sustainability
 Compliance with the law
 Codes of practice
 Reconciling conflicts of interest

Ryan McDonald SHS 5

Management Roles:
Category Role Description
 Performs ceremonial duties

Figurehead  Symbol of legal authority
 Motivates employees
Interpersonal Leader
 Establishes and maintains a network of contacts

Liaison  Interacts with other organisations
 Seeks and receives information from a wide variety

Monitor of sources to gain better understanding of the
business and its environment
 Shares information with selected employees within
Informational Disseminator the business
 Presents to outsiders information about the

Spokesperson business’s plans, policies, results and structure
 Scans the environment for opportunities

Entrepreneur  Initiates projects to improve performance
 Brings about change
 Deals with issues and crises inside and outside the
Disturbance
business
Handler
Decision  Takes corrective action
Making  Decides who should get what resources
Resource
 Allocates the human, financial, physical and
Allocator
information resources
 Participates in negotiations with other parties (e.g.
Negotiator unions, suppliers)
 An interpersonal role is one in which the manager deals with people.

 An informational role is one in which the manager gathers and disseminates information
within the business, also providing it to the outside world.
 A decision-making role is one involves solving problems and making choices.
Ryan McDonald SHS 6

Understanding Business Organisations with Reference to Management

Theories
A classical perspective on management emphasises how best to manage and organise work so
as to improve productivity. Scientific management is an approach that studies a job in great
detail to discover the best way to perform it. The role of a manager in the classical-scientific
theory is to:
1. Plan
2. Organise
3. Control
The other main features of the classical perspective on management are:
 Hierarchical organisational structures based on the division of labour.
 An autocratic leadership style.
The behavioural approach to management stresses that employees should be the main focus
of the way in which a business is organised. The role of a manager in the behavioural theory
is:
1. Leading
2. Motivating
3. Communicating
The other main features of the behavioural approach to management are:
 A flat organisational structure, with employees divided into teams.
 A participative or democratic leadership style.
Politics is the use of methods sometimes unstated and/or unethical, to obtain power or
advancement within an organisation. Organisational politics are often the unwritten rules of
work life. They involve the pursuit of self-interest through informal methods of gaining
power of an advantageous nature. The Sources of Power are:
 Legitimate
 Expert
 Referent
 Reward
 Coercive
In the political management theory, the role of management is:
1. Negotiating
2. Bargaining
The other key features of the political management theory are:
 Coalitions, which are two or more people who combine their power to push or gain
support for their ideas.
 A stakeholder view of the business, where different stakeholders support others for
their own advantages.
Ryan McDonald SHS 7

The systems management approach views organisations as an integrated process in which

all the individual parts contribute to the whole. A diagrammatic representation of this is:
Resources: Managerial Abilities: Outcomes:

 Human  Planning  Products – goods and
 Equipment  Organising services
 Financial  Controlling  Profits and losses
 Informational  Leading  Employment
 Materials  Waste and pollution
 Management
Contingency theory stresses the need for flexibility and adaptation of management practices
and ideas to suit changing circumstances.
Both systems and contingency management theories are based on adapting management and
organisational approaches to changing circumstances.
Strengths Weaknesses
 Based on scientific principles  Boredom resulting from production
 Work methods may be improved line approach
through time and motion study  Rigidity of autocratic leadership
 Results in increased productivity style
 Management may be trained  Lack of employee empowerment
 Measurements may be analysed to  Neglects the “human” and social
verify improvement in output needs of employees
 Individuals interests subordinated to  Employees are motivated not only
Classical the survival of the business by material gain
Scientifi  Planning, organising and controlling  Today’s better educated employees
c are the central management are less willing to accept formal
functions authority
 Specialisation and division of labour  Sense of impersonality and
 Clear, orderly lines of alienation between managers and
communication and authority employees
 Emphasises the important role of  Fails to acknowledge the informal
money as a motivator organisational structures
 Overlooks employees need for job
satisfaction
Ryan McDonald SHS 8

 Acknowledges the importance of  Complex theoretical concepts

the human dimension of work  Positive results may not always
 Integrates ideas from sociology, be immediate
psychology and anthropology  Difficulty in accurately predicting
 Outlines the importance of human human behaviour
resource managers  Some degree of conflict between
 Highlights the importance of the various behavioural theories
communications, teamwork, group  No simple formulas can be
dynamics, motivation and designed to explain complex
leadership personal behaviour
Behavioura
 Stresses the importance of conflict  What motivates one individual
l
resolution mechanisms may lessen another’s motivation
 Greater empowerment of  Management practice which was
employees due to flatter previously successful may not
management structures continue to work over time
 Participative or democratic  Many behavioural theories appear
leadership style acknowledged to abstract to apply to the “real”
 By understanding basic world
psychology, managers are more  Vast amounts of research for
able to prepare themselves for managers to read, digest and
managing people apply
 Recognises the “power plays”  Provides only a superficial
within groups of people explanation of organisational
 Acknowledges that individuals politics and power
will pursue their own interests  Sources of real power are often
 Explains the existence of hidden difficult to locate and analyse
agendas  Relies on personal observation
 Points out the existence and and perception rather than
importance of coalitions scientific measurements
 Highlights the need for managers  Entrenched power positions are
to adopt new skills in negotiating, often overlooked
bargaining and conflict resolution  Managerial dominance and
Political
 Explains power bases control over employees may
 Argues that all stakeholders views become acceptable behaviour
need to be taken into account  Many view some of the strategies
 Provides a mechanism for using used as manipulative
power to achieve a wide range of  Managers may become
stakeholder demands hypersensitive about the strengths
of their coalitions which affect
their performance
 Does not attempt to change the
power relationships, only explain
them
Ryan McDonald SHS 9

Managing Change
Change is any alteration in the business and work environment. The external business
environment comprises the factors and characteristics that are largely outside the direct
control of owners, directors and managers. The internal business environment comprises
the factors and characteristics that are within the direct control of owners, directors and
managers. The main sources of change in a business are:
External Factors Internal Factors

 Changing nature of markets  Accelerating technology
 Economic  E-commerce
 Financial  New systems and procedures
 Geographic  New business cultures
 Social
 Legal
 Political
 Technological
Structural change refers to changes in how the business is organised, that is, the
organisational structure. Structural responses to change include:
 Outsourcing – the contracting of some business operations to outside suppliers.
 Flat structures – the increasing of spans of control.
 Strategic alliances – this is when two or more businesses join together and pool their
resources.
 Strategic networks – these exist solely to provide administrative control of another
business or set of businesses that perform all the functions needed to produces and sell
the product.
Reasons for Resistance to Change:
Financial Costs Inertia Cultural Staffing

Incompatibility in Considerations
Mergers and
Takeovers
 New equipment  Lack of interest  Possible “culture  De-skilling
 Redundancy  Refusal to clash”  Acquiring new
payouts cooperate by skills
 Retraining managers/owners  Loss of career
workforce prospects or
 Reorganising opportunities for
plant layout promotion
Ryan McDonald SHS 10

Strategies for Reducing Resistance to Change include:
 Identifying the need for change

 Setting achievable goals
 Creating a culture of change (including encouraging a teamwork approach using
change agents)
 Change models
o Force-field analysis
o Lewin’s unfreeze-change-refreeze model
Change and Social Responsibility relates to:

 Ecological sustainability
 Quality of working life
 Technology
 Globalisation/managing cultural diversity
 E-commerce


HSC Topic 2: Financial Planning and Management
Content
Students learn to:
related to financial planning and management. The focus of these case studies will
be to:
• interpret the published annual reports of one or more businesses
• analyse the financial statements of one or more businesses (real or imaginary)
• undertake comparative ratio analysis — over a period of time, with similar
businesses, against common standards.
the role of financial planning

• strategic role of financial management
• objectives of financial management — liquidity, profitability, efficiency, growth,
return on capital
• the planning cycle — addressing present financial position, determining financial
elements of the business plan, developing budgets, cash flows, financial reports,
interpretation, maintaining record systems, planning financial controls,
minimising financial risks and losses
financial markets relevant to business financial needs

• major participants in financial markets including banks, financial and insurance
companies, merchant banks, superannuation/mutual funds, companies,
government (Reserve Bank of Australia)
• role of the Australian Stock Exchange as a primary market
• overseas and domestic market influences and trends in financial markets and
their implications for business financial needs
management of funds
• sources of funds
– internal — owners’ equity, retained profits
– external — short-term borrowing, (overdraft, bank bills), long-term borrowing
(mortgage, debentures) leasing, factoring, venture capital, grants
• financial considerations — matching the terms and source of finance to business
purpose and structure
• comparison of debt and equity financing, including costs and benefits, risks,
gearing/leverage
using financial information

• the accounting framework
– financial statements — revenue statement, balance sheet
– the accounting equation and relationships

• types of financial ratios

– liquidity — current ratio
– solvency — gearing debt to equity
– profitability — gross profit ratio, net profit ratio, return on owners’ equity
– efficiency — expense ratio, accounts receivable turnover ratio
• comparative ratio analysis
– over time, with similar businesses, against common standards
• limitations of financial reports
– historical costs, value of intangibles
effective working capital (liquidity) management

• the working capital ratio
• control of current assets — cash, receivables, inventories
• control of current liabilities — payables, loans, overdrafts
• strategies for managing working capital — leasing, factoring, sale and lease back
effective financial planning

• effective cash flow management
– cash flow statements
– management strategies — distribution of payments, discounts for early
payments
• effective profitability management
– cost control — fixed and variable, cost centres, expense minimisation
– revenue controls — sales objectives, sales mix, pricing policy
ethical and legal aspects

• audited accounts, inappropriate cut off periods, misuse of funds
• Australian Securities and Investments Commission
• corporate raiders and asset stripping.

The Role of Financial Planning
Financial management is the planning and monitoring of an organisations financial

resources to enable the organisation to achieve its financial goals. It encompasses:
 Liquidity – The extent to which a business can meet its financial commitments in the
short term.
 Profitability – The ability of an organisation to maximize its profits.
 Efficiency – The ability of a business to use its resources effectively ensuring
financial stability and profitability.
 Growth – The ability of the organisation to increase its size in the longer term.
 Return on Capital – The amount of profit returned to owners or shareholders as a
percentage of their capital contribution.
The Planning Cycle Diagram:
 The planning processes involve the setting of goals and objectives, determining the
strategies to achieve those goals and objectives, identifying and evaluating alternative
courses of action and choosing the best alternative for the organisation.

Financial Markets Relevant to Business Financial Needs
 Financial markets are made up of the individuals, institutions and systems supplying
excess funds to those who require them. The term “financial” relates to money, and
“market” indicates trading activity.
 Financial intermediaries receive money from those with excess funds and provide
finance to those wishing to borrow money.
 Exchange traded markets are those traded on an authorized exchange, such as the
Australian Stock Exchange (ASX) and Sydney Futures Exchange (SFE).
 Over-the-Counter (OTC)markets are not traded on an exchange, but transactions
take place via telephone and other means of communication. The 4 Types of OTC
Markets are:
o Cash and securities markets
o Foreign exchange markets
o Commodity markets
o Derivatives markets
 The main participants in the financial markets are:
o Banks
o Finance and insurance companies
o Merchant or investment banks
o Superannuation funds
o Mutual funds
o Public and private companies
o Reserve Bank
 Primary markets deal with new issue of debt instruments by the borrower of funds.
 Secondary markets deal with the purchase and sale of existing securities.
 Domestic Market Influences include:

o Employment patterns
o Level of economic growth
o Changes in interest rates
o Changes in government policy
o Changes in inflation rate
o Competing demands for funds
 Overseas Market Influences include:

o Foreign government intervention
o Foreign exchange rates
o World events
o Accounting regulations affecting foreign markets
o Tax regulations for foreign operators
o Political risks
o Differences in interest rates between countries
 Derivatives are financial instruments used to hedge against businesses that have to
deal with uncertain prices of their own products or their purchases.

Management of Funds
 Financial decision making requires relevant information to be identified, collected

and analyzed to determine an appropriate course of action.
 Internal finance is the funds provided by the owners of the business (capital) or from
the outcomes of business activities (retained earnings).
 Owners’ equity is the funds contributed by owners or partners to establish and build
the business.
 External Sources of Funding are:

o Bank overdraft
o Bank bills
o Trade credit
o Factoring
o Mortgaging
o Debentures
o Leasing
 Internal Sources of Funding are:
o Owners’ personal funds
o Retained earnings
 External finance is the funds provided by sources outside the business, including
banks, other financial institutions, government, suppliers or financial intermediaries.
 Venture capital is funds supplied by private investors or specialist investment
organisations, either to new business or to established businesses ready to grow or
diversify.
 Costs to be considered in using debt finance include:

o Repayment of principal
o Interest payments
o Timing of repayments
o Administrative and legal costs associated with borrowing
o Conditions and terms of borrowing
o Tax considerations
o Maturity date of the loan as refinancing may be required
o Level of control by the lender
 Restrictive covenants set down what a borrower can or cannot do for the period of a
loan.
 Leverage, or gearing, is the proportion of debt (external finance) and the proportion
of equity (internal finance) that is used to finance the activities of a business.
 Considerations for a business’s gearing include:

o Return on investment
o Cost of debt
o Size and stability of the business’s earning capacity

o Liquidity of the business’s assets

o Purposes of short term debt
Using Financial Information
 The accounting framework consists of raw data that is processed, stored and then
summarized in a meaningful and accepted form.
 Financial statements summarise the activities of an organisation over a period of
time.
 The revenue statement shows the operating results for a period. It shows the revenue
earned and expenses incurred over the period with the resultant profit or loss.
 A balance sheet represents an organisations assets and liabilities at a particular point
in time, expressed in monetary terms, and represents the net worth of the business.
 The accounting equation forms the basis of the accounting process, shows the
relationship between assets, liabilities and owners’ equity. The accounting formulae
are:
o Assets = Liabilities + Owners Equity
o Owners’ Equity = Assets – Liabilities
o Liabilities = Assets – Owners Equity
 The types of financial ratios can be defined by four categories, relating too:
o Liquidity – Current Ratio
 Liquidity is the extent to which the business can meet its financial
commitments in the short term.
o Solvency – Debt to Equity
 Solvency is the extent to which the business can meet its financial
commitments in the longer term.
o Profitability – Gross and Net Profit Ratios, Return on Owners Equity
 Profitability is the earning performance of the business and indicates its
capacity to use its resources to maximize profits.
o Efficiency – Expense Ratio, Accounts Receivable Turnover Ratio
 Efficiency is the ability of the firm to use its resources effectively in
ensuring financial stability and profitability.


HSC Topic 3: Marketing
Content
Students learn to:
related to marketing. The focus of these case studies will be to:
• analyse and evaluate marketing strategies for a product or service
• analyse the marketing plan of a business
• construct a marketing plan for a single product/service (real or imaginary).
nature and role of markets and marketing

• the role of marketing in the firm and in society
• types of markets — resource, industrial, intermediate, consumer, mass, niche
• production–selling–marketing orientation
• the marketing concept — customer orientation, relationship marketing
• marketing planning process
elements of a marketing plan

• situational analysis including SWOT and product life cycle
• establishing market objectives
• identifying target market
• developing marketing strategies
• implementation, monitoring and controlling — developing a financial forecast,
comparing actual and planned results, and revising the marketing strategy
market research process

• determining information needs, data collection (primary and secondary), data
analysis and interpretation
customer and buyer behaviour

• types of customers — people, households, firms, educational institutions,
government, clubs and societies, religious organisations
• the buying process — buyers and users
• factors influencing customer choice — psychological, sociocultural, economic,
government
developing marketing strategies

• market segmentation and product/service differentiation
• product and service
– positioning
– branding
– packaging

• price including pricing methods — cost, market and competition-based

– pricing strategies/tactics — skimming, penetration, loss leaders, price points
– price and quality interaction
• promotion
– elements of the promotion mix — personal selling, advertising, below-the-
line promotions, public relations
– the communication process including opinion leaders and word of mouth
• place/distribution
– distribution channels and reasons for intermediaries
– channel choice including intensive, selective, exclusive
– physical distribution issues including transport, warehousing, inventory
• environmental effects on distribution — technology, local government

• environmentally responsible products
• other issues including creation of needs, impacts of retail developments, sugging
(selling under the guise of research)
• role of consumer laws in dealing with
– deceptive and misleading advertising
– price discrimination
– implied conditions
– warranties
– resale price maintenance.

Nature and Role of Markets and Marketing
Marketing is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create exchanges that satisfy the individual and
organizational objectives.
A market is a group of individuals, organisations or both that:

 Need or want a product.
 Have the money (purchasing power) to purchase the product.
 Are willing to spend their money to obtain the product.
 Are socially and legally authorized to purchase the product.
The main types of markets are:

 The resource market consists of those individuals or groups that are engaged in all
forms of primary production, including mining, agriculture, forestry and fishing.
 The industrial market includes industries and businesses that purchase products to
use in the production of other products or in their daily operations.
 An intermediate market consists of wholesalers and retailers who purchase finished
products and resell them to make a profit.
 Consumer markets consist of individuals – that is, members of a household who plan
to use or consume the products they buy.
 In mass markets, the seller mass-produces, mass-distributes and mass-promotes one
product to all buyers.
 A niche market, also known as a concentrated or micro-market, is created when the
mass market is finely divided into smaller markets consisting of buyers who have
specific needs or lifestyles.
The main approaches to marketing are:

 The production approach was used primarily between 1820 and 1910 and consisted
of business mass-producing products. Marketing primarily consisted of taking orders
and delivering the products.
 The sales approach was used mainly between 1920 and 1960, and was based
primarily on selling goods. Marketing consisted of advertising and personal selling.
 The marketing approach has been used from 1960 onwards, and focuses on using a
coordinated effort aimed at satisfying consumers’ needs. This is achieved through:
o An emphasis on marketing products.
o Establishing and maintaining customer relationships.
o Identifying consumer needs.
o Producing products for customers’ demands.
Marketing concept is a business philosophy that states that all sections of the business are
involved in satisfying a customer’s needs and wants while achieving the business’s goals.
This is achieved through customer orientation, which occurs when a business bases its
marketing decisions and practices on its customers wants.
Relationship marketing is the development of long-term and cost-effective relationships

with individual customers.

Strategic marketing planning is the process of developing and implementing marketing

strategies to achieve the marketing objectives. The elements of a marketing plan are:
1. Performing situational analysis, including SWOT and product life cycle analysis. A
situational analysis investigates the marketing opportunities and potential problems.
2. Establishing market objectives. A marketing objective is a statement of what is to be
achieved through the marketing activities.
3. Identifying target markets. The target market is the group of customers to which the
business intends to sell its products.
4. Developing marketing strategies. Marketing strategies are plans that outline how a
business will use its marketing objectives.
5. Implementing, monitoring and controlling. Marketing management is the process of
monitoring and modifying the marketing plan.
The Four P’s of Marketing are:
1. Product – including brand name, packaging, positioning and warranties.

2. Price – including list price, discounts, credit terms and payment period.
3. Promotion – including advertising, sales promotion and publicity.
4. Place – including location of markets, warehousing, distribution, transport and
inventory.
Marketing objectives are outlined in the marketing plan. The four main marketing
objectives are:
 Increasing Market Share – refers to the business’s share of the total industry sales
for a particular market.
 Expanding Product Range – this is measured through a company’s product mix,
which is the total range of products offered by a business.
 Expanding Existing Markets – a key measure of this is a business’s geographical
representation, which refers to the presence of a business and the range of its
products across a suburb, town, city state or country.
 Maximising Customer Service – this relates to a business’s ability to meet the needs
of the consumer. Customer service means responding to the needs and problems of
the customer.
Market segmentation occurs when the total market is subdivided into groups of people who
share one or more common characteristics. The four main variables used by marketing
managers are:
1. Demographic – age, gender, ethnicity, income, occupation, education level, religion,
family size and social class.
2. Geographic – urban, suburban, rural, region, climate and landform.
3. Product-related – regular user, first-time user, brand loyalty, price sensitivity and end
use.
4. Psychographic – personality, motives and lifestyle.
Developing a financial forecast requires two steps. They are:

1. Cost Estimate – how much is the marketing plan expected to cost? Costs of the
marketing plan can be divided into four major components. These are:
 Market research
 Product development
 Promotion – including advertising and packaging
 Distribution

2. Revenue Estimate – how much revenue is the marketing plan expected to generate?
Forecasting revenue is based on two key questions. These are:
 How much consumers are expected to buy and for what price?
 What sales staff predict they will sell?
Comparing actual and planned results can be analysed through:

1. Sales analysis is the comparing of actual sales with forecast sales to determine the
effectiveness of the marketing strategy.
2. Market share analysis
3. Marketing profitability analysis is a method in which the business breaks down the
total marketing costs into specific marketing activities.
Changes in the marketing plan are necessary because all businesses operate in a dynamic
environment, and the marketing mix constantly needs to be updated and modified. Ways
through which this can be achieved include:
 Product modifications
 Price modifications
 Promotion modifications
 Place modifications
 The development of new products
 Product deletion

Market Research Process
Market research is the process of systematically collecting, recording and analysing

information covering a specific marketing problem. Information is useful if it:
 Results in marketing strategies that met the needs of the business’s target market.
 Assists business to achieve its marketing objectives.
 May be used to increase sales and profits.
Marketing data refers to the information, relevant to the defined marketing problem.
Marketing data is either:
 Primary data is the facts and figures collected from original sources for the specific
research of the problem. The three main methods used to gather primary data are:
1. Survey
2. Observation
3. Experimentation
 Secondary data is information that has been collected by some other person or
organisation. There are two types of secondary data. These are:
1. Internal data refers to information that has already been collected from inside
the business.
2. External data refers to published data from outside the business.
Statistical interpretation analysis is the process of focusing on the data that represents
average, typical or deviations from typical patterns.

Customer and Buyer Behaviour
Buyer behaviour, which is the decisions and actions involved in buying and using products.
This is used to classify consumers into four categories. These categories are:
1. Individual and household customers
o People (personal) – personal spending refers to consumer purchases by
individuals.
o Families/households – household spending refers to the combined purchases
of the individuals living together.
2. Organisation customers
o Businesses – the business market consists of all those businesses that
purchase goods and services for further processing or for use in their
production process.
3. Institutional customers
o Religious organisations
o Clubs and societies
o Educational establishments
4. Government customers – tendering is a process whereby firms submit quotes to
supply a good or service. The lowest bid that meets the specification is usually
accepted.
o Federal
o State
o Local
The buying process is the series of common steps, as outlined below. The steps involved in
this process are:
1. Recognise problem
o Need or want requiring satisfaction.
2. Search for information
o Brand names
o Product characteristics
o Warranty
o Service
o Price
3. Evaluate alternatives
o Various alternatives discovered
o Cost benefit analysis
4. Purchase
o Particular choice made
o Product bought
5. Evaluate after purchase
o Weighing up the suitability of the products
o Satisfaction gained
o Dissatisfaction may occur
A buyer is the individual or group who purchases the product. A user is the individual or
group who actually uses the product being purchased.

Psychological factors are influences within an individual that affect his or her buying
behaviour. They are categorized into:
o Perception – the process through which people select, organise and interpret
information to create meaning.
o Motives – the reason that makes an individual do something.
o Attitudes – an attitude is a person’s overall feeling about an object or activity.
o Personality – an individual’s personality is the collection of all the behaviors and
characteristics that make up that person.
Sociocultural influences are forces exerted by other people and groups that have affect an
individual’s buying behaviour. These are categorized into:
o Family and roles
o Peer group
o Social class
o Culture and subculture
Economic factors are the last key force exerted on a consumer. They can be classified into:
o Boom
o Contraction
o Recession
o Expansion
FACTORS INFLUENCING CONSUMER CHOICE

Developing Marketing Strategies
A business controls four basic marketing strategies to reach its target market. These four
strategies or tools of marketing are:
1. Product – anything that satisfies a need for want and can be offered in exchange.
Product is made up of:
o Quality
o Style
o Positioning
o Branding
o Packaging
o Warranty
2. Price – the value placed on what is exchanged. Price is made up of:
o Cost price
o Market price
o Competition-based price
o Price skimming
o Price penetration
o Loss leader
o Price ling and price point
o Price and quality interaction
3. Promotion – activities used to communicate to a target market persuasive, positive
information about a business and its products. Promotion is made up of:
o Personal selling
o Advertising
o Below-the-line promotions
o Public relations and publicity
o Opinion leaders
o Word of mouth
4. Place – methods used to get the products to the customer. Place is made up of:
o Channels
o Intermediaries
o Intensive coverage
o Selective coverage
o Exclusive coverage
o Transport
o Warehousing
o Inventory
The primary target market is the market segment at which most of the marketing resources
are directed. A secondary target market is usually a smaller and less important market
segment. For example, customer research conducted by “Sportsgirl” revealed a primary
target market of 18-25 year old females and a secondary target market of 26-40 year old
females.
Mass market or a total marketing approach seeks a large range of customers. Products that
can be marketed using the mass marketing approach include basic food items, water, gas and

electricity. A concentrated market approach requires the business to direct its marketing
mix towards one selected segment of the total market.
POSITIONING
 A product is a good or service, an idea or any combination of the three that can be
offered in an exchange.
 Product differentiation, in its broadest sense, is the process of developing and
promoting differences between the business’s products and those if its competitors.
 Product positioning refers to the development of a product image as compared with
the image of competing products.
BRANDING
 A brand is a name, term, symbol, design or any combination of these that identifies a
specific product and distinguishes it from its competition.
 A brand name is that part of the brand that can be spoken.
 A brand symbol or logo is a graphic representation that identifies a business or
product.
 Manufacturer’s or national brands are those owned by a manufacturer.
 A private or house brand is one that is owned by a retailer or wholesaler.
 Generic brands are products with no brand name at all.
 A trademark signifies the brand name or symbol is registered and the business has
exclusive right of use.
 Packaging involves the development of the container and the graphic design for a
product.
PACKAGING
 Packaging is the development of a container and the graphic design of the product.
Price refers to the amount of money a customer is prepared to offer in exchange for a product.
Pricing strategies include:
 Price skimming – involves charging the highest price possible for innovative
products.
 Price penetration – occurs when a business charges the lowest price possible for a
product or service so as to achieve a large market share.
 Loss leader – involves deliberately selling a product below its cost price to attract
customers.
 Price lining – is used mainly by retailers where a limited number or prices, or price
points, are set for selected lines or groups of merchandise.
 Prestige pricing – is used where a high price is charged to give the product an aura of
quality and status.
Promotion describes the methods used by a business to inform, persuade and remind a target
market about its products. The promotion mix is the various methods a business uses in its
promotional campaign. Methods include:
 Personal selling – involves the activities of a sales representative directed to a
customer in an attempt to make a sale.
 Advertising – is a paid, non-personal message communicated through a mass
medium. Advertising media refers to the many forms of communication used to
reach an audience.

 Below-the-line promotions – are promotional activities for which the business does
not make use of an advertising agency.
 Publicity and public relations – publicity is any free news story about a business’s
products. Public relations are those activities aimed at creating and maintaining
favorable relations between a business and its customers.
 Word of mouth communication occurs when people influence each other during
conversations.
A channel is any method used for carrying a message. Noise is any interference or
distraction that affects and or all stages in the communication process. An opinion leader is
a person who influences others.
Place or distribution are the methods through which a business distributes in products.
Channels or distribution or marketing channels are the routes taken to get the product from
the factory to the customer. The four most commonly used channels of distribution are:
1. Producer to customer.
2. Producer to retailer to customer.
3. Producer to wholesaler to retailer to customer.
4. Producer to agent to wholesaler to retailer to customer.
Market coverage refers to the number of outlets a firm chooses for its product. This is
relative to a business’s intensity of coverage. The three different intensities are:
1. Intensive distribution – this occurs when the business wishes to saturate the market
with its product.
2. Selective distribution – this involves using only a moderate proportion of all possible
outlets.
3. Exclusive distribution – this is the use of only one retail outlet for a product in a
large geographic area.
Physical distribution is all those activities concerned with the efficient movement of the
products from the producer to the customer. They are categorized into:
 Transport – the physical movement of products from producer to the retailer or
customer.
 Warehousing – the set of activities involved in receiving, storing and dispatching
goods.
 Inventory control – a system that maintains quantities and varieties of products
appropriate for the target market.

Ethical and Legal Aspects
Green marketing refers to the development, pricing, promotion and distribution of products
that either do not harm or have minimal impact upon the environment.
Materialism is an individual’s desire to constantly acquire possessions.
Sugging, or selling under the guise of a survey, is a sales technique disguised as market
research.
Monopolistic power occurs when only one business operates in a market and, therefore,
controls prices in that market.
Methods used by companies to mislead consumers include:

 Fine print
 Before and after advertisements
 Unsubstantiated tests and surveys
 Country of origin
 Packaging
 Special offer
 Bait and switch advertising
Price discrimination is the setting of different prices for a product in separate market.
Implied conditions or terms are the unspoken and unwritten terms of a contract. They are
categorized as:
 Merchantable quality means that the product is of a standard a reasonable person
would expect for the price.
 Fitness of purpose means that the product is suitable for the purpose for which it is
being sold. That is, it will perform as the instructions or advertisement implies.
A warranty is a promise by the business to repair or replace faulty products. Resale price
maintenance occurs when the manufacturer or supplier insists that a retailer sell the product
at a certain price.


HSC Topic 4: Employment Relations
Content
Students learn to:
related to employment relations. The focus of these case studies will be to:
• analyse how conflict and change are managed in a business
• prepare and justify possible ways of resolving conflicts in the selected business
organisations.
the nature of employment relations

• stakeholders in the employment relations process — employers, employees,
employer associations, unions, government organisations
• managing the employment relations function
– line management and specialist
key influences on employment relations

• social influences — changing work patterns, population shifts
• legal influences — overview of major employment legislation
• new organisational behavioural influences — flat management and team
structures
• economic influences — economic cycle, globalisation
effective employment relations

• role of employment relations
• communications systems — grievance procedures, worker participation, team
briefings
• rewards — financial, non-financial
• training and development — induction
• flexible working conditions — family-friendly programs
• measures of effectiveness — levels of staff turnover, absenteeism, disputation,
quality, benchmarking
legal framework of employment

• the employment contract — common law (rights and obligations of employers
and employees), statutes, awards, agreements
• types of employment contract — casual/part-time/flexible, permanent, casual
industrial conflict
• definition and causes — wage demands, working conditions, management
policy, political goals and social issues
• perspectives on conflict — unitary, pluralist, radical
• types of industrial action

– overt — lockouts, pickets, strikes, bans, work-to-rule

– covert — absenteeism, sabotage, turnover, exclusion from decision-making
in business
• roles of stakeholders in resolving disputes
• dispute resolution processes — conciliation, arbitration, grievance procedures,
negotiation, mediation, common law action, business/division closure
• costs and benefits of industrial conflict
– financial, personal, social, political, international

• issues in the workplace
– working conditions
– Occupational Health and Safety (OH&S)
– workers’ compensation — state and/or federal agencies and common law
redress
– anti-discrimination
– Equal Employment Opportunities (EEO)
– unfair dismissal.

Nature of Employment Relations
Employment relations refers to the total relationship between an employer and employee.
An employer, for legal purposes:
 Exercises control over employees
 Has responsibility for payment of wages
 Holds the power to dismiss employees
An employee is a worker under an employer’s control. Control, may involve:
 The location of the workplace
 The way in which the work is performed
 The degree of supervision involved.
The criteria are critical in determining legal dispute over the employment contract.
The key stakeholders in the employment relations process (and their aims) are:
 Governments
o Workplace reform and higher productivity
o International competitiveness
o Compliance with legislation
o Higher living standards and employment
 Employees – Trade Unions may represent employees
o Better wages
o Better working conditions
o Meaningful jobs
o Job security
o Participation in decisions
 Employers – Employer Associations may represent employers
o Increase profit
o Increase flexibility
o Minimise costs, be competitive
o Expand business
o Develop new products
o Maximise customer service
A line manager is responsible for the management of staff contributing to the prime function
of the business, for example, a production manager, service manager or sales manager. A
specialist employment relations manager is more commonly involved in:
 Recruitment and selection
 Induction and training
 Separation
 Managing the implementation of equal employment opportunity and affirmative
action legislation

Key Influences on Employment Relations
The key influences on employment relations can be categorised into four main categories:
 Social Influences
o Changing Work Patterns
 Casualisation of the work force
 Flexible working hours
 Rapid growth of outsourcing
o Population Shifts
 Increase in the female participation rate
 Legal Influences
o Overview of Major Employment Legislation
 Equal employment opportunity
 Anti-discrimination
 New Organisation Behavioural Influences
o Flatter management structures
o Team Structures and Coalitions
 Economic Influences
o Economic Cycles
o Globalisation

Effective Employment Relations
Effective employment relations systems involve a proactive, strategic approach to

implementing a strategic plan developed with employees. The key principles of effective
employment relations are:
 Appropriate reward systems
 Performance measurement systems
 Common purpose including a focus on quality and customer service
 Commitment to change supported from management
 Human resources planning based on needs analysis linked to recruitment and
selection, training, rewards, motivation and separation strategies
 Legal compliance
o Equal Employment Opportunity
o Occupational Health and Safety
o Industrial Relations Legislation
 Culture based on trust promotes collaboration and participation, values the worth of
each employee
 Commitment to ongoing training and development
 Flexible, family friendly working conditions
 Non-discriminatory environment
The success of an employment relations system depends heavily on the strength of an

organisations communications system. This system includes:
 Grievance procedures – grievance procedures are formal procedures that an
employer and employees have agreed to use to deal with issues or conflict in the
workplace. This is a two way process, due to:
o Employees needing avenues to communicate problems and air conflicts
o Employers needing a system to reprimand staff for unsatisfactory work or
conduct
 Worker participation
o Joint consultative committees
 Team Briefings
o Quality circles
o Semi-autonomous/self-managing work teams
An effective rewards management system should attract, retain and motivate employees.
Rewards can be classified as:
 Intrinsic
 Extrinsic
Intrinsic rewards are those that the individual derives from the task or job itself, such as a
sense of achievement. Extrinsic rewards are those given or provided outside the job itself.
They may be monetary, for example, incentive payments, or non-monetary, for example,
work schedules.

Intrinsic Extrinsic
Job Environment Direct Indirect
 Interesting work  Good policies  Wages  Insurance
 Challenge and practices  Salary  Holidays
 Responsibility  Effective  Commissions  Child care
 Recognition leadership and/or  Bonus plan  Medical care
 Promotion supervision  Share plan  Employee
 Autonomy in job  Good  Pay increase assistance
 Sense of relationships with  Gainsharing  Flexible work
achievement co-workers schedules
 Safe and healthy  Free legal advice
work  Personal loans at
environment cheap rates
 Fair treatment  Moving expenses
 Club membership  Training
 Social activities expenses
 Recognition  Time off
 Company car
 Parking space
 Discount
purchases
Training and development is designed to introduce new employees to the job, their cow-
workers, the organisation and its culture. This is achieved through induction programs.
Flexible working conditions allow workers to balance work and family responsibilities more
effectively. The main strategies to achieve flexible working conditions include:
 Flexible Working Hours
 Job Sharing
 Part-time work
Family friendly programs can be classified into 6 main categories. These are:
 Workplace Participation and Training
o Increased multi-skilling to allow staff to “fill-in” for others.
o Staff meetings to discuss work-life issues.
 Other
o Flexible salary packages.
o Support on parental leave.
o Work-family information.
o Relocation policies, such as school matching services.
o Family days.
o Work experience for children.
 Leave
o Maternity leave.
o Paternity leave.
o Family leave.
 Child Care

o Employer-supported venture.
o Joint venture.
o Reserved child care place.
o Vacation care programs.
o Sick children arrangements.
o Advice/referral service.
 Family Support
o Arrangement to check children.
o Phone policy.
o Employee assistance.
o Seminars
o Respite care for elderly and disabled.
o Supporting community service.
 Flexible Working Arrangements
o Part-time work.
o Variable full-time/part-time work.
o Career breaks.
o Job sharing.
o Flexible hours.
o Work from home.
The measures of effectiveness of a business’s employment relations policies can be explored

through:
 Levels of staff turnover – whether they are increasing, decreasing or steady.
 Absenteeism – the average number of days missed by employees, either as a whole or
done by average.
 Disputation – the number of grievance procedures used in a given time-frame.
 Benchmarking – comparing a business’s result with those of industry leaders.

Legal Framework of Employment
An employment contract is a legally binding, formal agreement between employer and

employee.
The responsibilities of the employer include:

 Providing work
 Payment of income and expenses
 Meeting requirements of industrial relations legislation
o Anti-Discrimination
o Equal Employment Opportunity
 Duty of care
o Occupational Health and Safety
The responsibilities of the employee include:

 Obey lawful and reasonable commands made by the employer
 Use care and skill in the performance of their work activities
 Act in good faith and in the interest of the employer
Key Statutes include:

 Racial Discrimination Act
 Trade Practices Act
 Workplace Relations Act
 Industrial Relations Act
Awards are legally binding documents, setting out minimum wages and conditions of
employees in an industry or occupation, made by the Australian Industrial Relations
Commission (AIRC). Awards are used as a benchmark for comparison with other agreements
in a test of minimum wages and conditions.
Casual employees are in employment that is short term, irregular and uncertain, they are not
entitled to paid holiday or sick leave.

Industrial Conflict
Conflict refers to disputes, disagreements or dissatisfaction between individual stakeholders,

due to a different in views on certain business policies. The key causes of industrial conflict
are:
 Wage demands
 Working conditions
 Political goals and social conditions
 Management policy
The 3 Main Perspectives on Conflict are:

 Unitary – this approach assumes stakeholders, such as employees and their
employers, work “hand in hand” to achieve shared goals.
 Pluralist – this approach recognises the active roles played by unions and employer
associations and the framework developed by the government.
 Radical – this approach views conflict as inevitable, and reflects the traditional view
of an “us versus them”, conflict based relationship between employer and employees.
Industrial actions can be classified into two main types, over and covert. The main
manifestations of these types of conflict are:
Overt Covert
Employee Management Employee Management
 Pickets  Lockouts  Absenteeism  Discrimination
 Strikes  Stand-downs  High labour  Harassment
 Stop-work  Dismissals turnover rates  Lack of
meetings  Retrenchments  Higher defect cooperation
 Work bans rates  Exclusion from
 Boycotts  Reduced decision making
 Work-to-rule productivity
 Lack of
cooperation
The main roles of the key stakeholders in resolving disputes are:

 Employers and Managers – use grievance procedures and negotiate agreements with
employees to resolve disputes. Line managers are playing a much greater role today
in resolving disputes.
 Employees – use grievance procedures and negotiate agreements with employees,
with or without unions, on a collective or individual basis.
 Trade Unions – represent employees in disputes from the shop floor to the national
level, negotiate with management, employers and associations, as well as representing
employees in tribunals.
 Anti-Discrimination Boards – work closely with the Human Rights and Equal
Opportunity Commission to ensure that disputes about discrimination on the basis of
age, colour, sex, disability, criminal record, political opinion, race or religion in the
workplace are resolved through provision of information, investigation and
conciliation. Can refer cases to Administrative Review Tribunal for determination.
 Civil Courts – Federal Court, State Supreme Courts. Enforce legislation and handle
common law actions.

 Industrial Tribunals (AIRC) – interpret legislation. Make and supervise awards and
agreements. Provide conciliation and arbitration for the resolution of disputes and
unfair dismissal claims.
 Human Right Commission – monitors and reviews how legislation relating to human
rights is implemented. It can investigate and conciliate complaints about
discrimination in employment opportunities or a person’s treatment in the workplace.
Refers complaints of sex discrimination in awards and agreements for determination
to the Federal Court.
 Governments – provide the institutions, policy and legislative framework for the
resolution of conflict. Investigate breaches of legislation.
 Employer Associations – provide information and support to employers, assist in
negotiations with unions, and represent employers in tribunals.
The dispute resolution process is:

1. Grievance procedures
2. Negotiation
3. Conciliation – decision is NOT binding
4. Arbitration – decision is binding
5. Mediation
6. Common law action
7. Business/Division closure
Benefits and Costs of Industrial Conflict

Benefits Costs
 Increase empowerment of all parties  Lost production and sales
who “own an agreement” adversely affect a firm’s income
 Empowerment can lead to increased and levels of debt, and
productivity, fewer disputes and reputation may be damaged
reduced absenteeism and labour  Some firms may close of
turnover relocate
Financial  Cost-cutting measures can lead to  Other businesses dependent on
conflict but can ensure a firm’s firms in dispute can be affected
survival and competitiveness in the  Families can suffer significant
long term loss of wages
 Legal representation and fines
imposed can be a financial
burden on firms
 Conflict helps workers to gain  Stress can be created through
management’s attention on major intensification of work and
issues that may have caused changes due to restructuring of
dissatisfaction and stress for a long the workplace
time  Rumours or threats of
 Better work relationships may result downsizing cause fear,
Personal from a clearer understanding of insecurity and lowering of staff
work problems morale
 Greater employee involvement and  Absenteeism, accidents and
motivation may result from defect rates can increase
negotiated changes and  Working relationships may
improvements in training suffer as a result of conflict or
methods used to resolve it

 Jobs can be saved in some cases  Community bitterness can be

 Employee and community welfare directed at unions, employees
can be enhanced by changed work or employers in industries
practices where disputes affect the
 Introduction of multiskilling, new general public
Social training opportunities and career  Verbal and physical abuse can
paths benefit individuals and society occur
 Occupational health and safety  Demonstrations can disrupt
problems may be reduced communities, and violence and
injuries may occur in extreme
cases
 Governments can change their  Frequent and disruptive conflict
policies in response to workplace has an impact on government or
conflict opposition policies, particularly
 Disputes draw public attention to the at election times
need to protect worker entitlements  Bitterness between unions and
Political  Particular industries may be government can lead to political
restructured to improve the economy conflict and large scale civil
unrest
 Loss of national income in
extended disputes can affect
economic growth
 Changes to work practices following  Loss of export income and
conflict can improve a business’s markets can occur after periods
international competitiveness. This of disruption
Internatio
may present opportunities for  The nation’s reputation for
nal
international expansion stability can be lost and
overseas customer or investors
may turn elsewhere

Ethical and Legal Aspects
Ethical business practices are those practices that are socially responsible, morally right and
honorable and fair.
An ethical employer can achieve safe and fair working conditions through:
 Compliance with social justice and industrial legislation
 Providing a safe and healthy working environment
 Creating challenging, interesting and meaningful work
 Improving communication and fostering teamwork
 Implementing change through collaboration with staff
 Offering flexible working hours and conditions
The key legal aspect of employment relations are:

 Occupational Health and Safety
 Equal Employment Opportunities
Workers compensation provides a range of benefits to an employee suffering from an injury

or disease relating to their work. It is also provided to families of injured employees when the
injury/disease was caused by, or related to, their work.

HSC Topic 5: Global Business
Content
Students learn to:
related to global business. The focus of these case studies will be to:
• select a global business and identify its international targets
• describe and analyse the reasons for its international expansion
• explain the influences on this business in the global market
• explain the strategies used by the business to achieve its targets.
globalisation
• nature and trends — growth of the global economy and changes in markets
(financial/capital, labour, consumer)
• trends in global trade since World War II
• drivers of globalisation
– role of transnational corporations
– global consumers
– impact of technology
– role of government
– deregulation of financial markets
• interaction between global business and Australian domestic business
global business strategy

• methods of international expansion
– export
– foreign direct investment
– relocation of production
– management contract
– licensing/franchises
• reasons for expansion
– increase sales/find new markets
– acquire resources and have access to technology
– diversification
– minimise competitive risk
– economies of scale
– cushioning economic cycle
– regulatory differences
– tax minimisation
specific influences on global business

• financial

– currency fluctuations
– interest rates
– overseas borrowing
• political
– tensions between protectionism and free trade
– international organisations and treaties (World Trade Organisation)
– trade agreements
– regionalism
– war and civil unrest
• legal
– contracts
– dispute resolution
– intellectual property
• social/cultural
– languages
– tastes
– religion
– varying business practices and ethics
managing global business

• financial
– methods of payment
– credit risks
– hedging
– derivatives
– insurance
– obtaining finance
• marketing
– research of market
– global branding
– standardisation and differentiation
• operations
– sourcing (vertical integration, make or buy)
– global web (components produced in different countries)
• employment relations
– organisational structure
– staffing
– shortage of skilled labour
– labour law variations
– minimum standards of labour
– ethnocentric/polycentric/geocentric staffing system
• evaluation — strategies with reference to a particular global market
• modifications of strategies according to changes in global market
management responsibility in a global environment

• ethical practice — tax havens and transfer pricing

– minimum standards of labour
– dumping illegal products
– ecological sustainability.

Globalisation
The global economy is the world economy and refers to the economic activity going on in the
world. It includes the flow of all trade, finance, technology, labour and investment.
Consequently, it is the total economic activity within and between countries.
Globalisation is the movement across nations of trade, investment, technology, finance and
labour.
Some of the global influences on the Australian business environment are:

 Increasing globalisation and a changing international business environment.
 Changes in protection policies.
 An increasing trend by Australian businesses towards the establishment of
overseas operations.
The globalisation of markets (finance/capital, labour and consumers) refers to the combining
of one separate and distinct national markets into one huge marketplace. Globalisation of
production refers to the practice of many businesses to purchase their inputs from around the
globe as well as the tendency to manufacture components in low cost locations.
As globalisation continues, flows of finance, labour and consumer products between countries
will increase as these markets undergo structural change.
Merchandise exports are domestically made products sold to customers in another country.
The Drivers of Globalisation can be classified as:

 Deregulation of financial markets
o Foreign Direct Investment (FDI)
 Role of transnational corporations
 Impact of technology
 Global consumers
 Role of government
o Free Trade Agreements
A transnational corporation (TNC) is any business that has productive activities in two or
more countries and that operates on a worldwide scale.
Foreign Direct Investment (FDI) is investment made for the purpose of actively controlling
companies, assets or property outside a business’s home country.
Australian businesses have three specific advantages during the transition towards a truly
global economy. These are:
1. Many of the TNC’s that operate in Australia have done so since the 1960’s and,
therefore, networks and relationships are well established.
2. The multicultural make-up of the Australian workplace provides personnel with
language skills and people who understand and appreciate cultural differences.
3. Governments and numerous consultants provide advice, financial assistance and
contacts to encourage export-oriented businesses.

Global Business Strategy
Exporting occurs when a business manufactures its products in its home country and then
sells them in foreign markets.
The 3 Different Types of Exporting are:

1. Indirect exporting is the most basic level. A business sells its products to a
domestic customer who then exports the product.
2. Direct exporting happens when the exporting business sells its products to an
agent, intermediary or final consumer in another country.
3. Intracorporate exporting is the selling of a product by a firm in one country to a
subsidiary firm in another.
The 3 Methods of Foreign Direct Investment are:

1. The greenfield strategy involves commencing a new business venture from
scratch.
2. The acquisition strategy occurs when one business acquires, through a takeover
or merger, an existing business already operating in a foreign country.
3. A joint venture means two or more businesses agree to work together and form a
jointly owned but separate business.
The Advantages of Foreign Direct Investment are:

 It provides the parent business with direct control over the foreign facilities.
 As the products are being produced in the overseas country there is a subsequent
reduction in transport costs.
 Transfer of technology, people, products and intellectual property becomes easier.
 The parent business is in a better position to be able to monitor and adapt to
changes in the foreign country’s business environment.
The Disadvantages of Foreign Direct Investment are:

 Increased financial risk is likely, especially when investing in a business that is
located in a politically unstable country.
 The parent business is exposed to economic uncertainties of the foreign country.
 Adverse currency fluctuations may wipe out cost efficiencies.
 Legal, social, cultural and language barriers may create problems.
 Joint venture profits must be shared between all the parties involved.
Relocation of production occurs when the domestic production facility is closed down and
then set up in a foreign country. The main advantages of this strategy include:
 Moving to a low-cost labour country should help decrease costs of production.
 Decreased productions costs may result in increased profits.
 More modern, up-to-date facilities can be constructed, adding to other cost
efficiencies.
 Some governments provide financial assistance to cover relocation costs.
The Disadvantages of Relocation of Production are:

 The parent business may be faced with social, cultural and language barriers in the
overseas country.
 The possibility of a consumer backlash if exploitative work practices are used.

 The business needs to recruit a local workforce and train it to meet its standards.
This could be time consuming and expensive.
 The business may be perceived as foreign and no longer a local business, which
may result in some consumers being reluctant to purchase the products.
The management contract is an arrangement under which a global business provides

managerial assistance and technical expertise to a second host business for a fee. The
advantages of this include:
 The global partner has greater control over production standards in a joint venture
operation.
 The fees paid by the subsidiary are a business expense, and are therefore a tax
deduction.
 The global business is able to earn extra revenue.
The Disadvantages of Management Contracts include:

 The host business does not gain any managerial training.
 The global business may face political pressures from the host business’s
government, especially with regard to foreign exchange restrictions.
Licensing is an agreement in which one business (licensor) permits another (licensee) to

produce and market its product. In comparison, franchising is a specialized form of licensing
in which the franchisor grants the franchisee the right to use a company’s trademark and
distribute its product. The main advantages of licensing and franchising are:
 There is little financial risk for the licensor/franchisor.
 It is a useful option for forms lacking the capital to develop an overseas operation.
 The licensor/franchisor is able to develop a global presence relatively quickly.
The Disadvantages of Licensing/Franchising include:

 It is difficult to maintain quality control over a wide range of locations.
 International franchising is more complex than domestic franchising, often
requiring the need for extensive legal advice.
 The profits are shared between the two parties.
The reasons for global business expansion include:

 Increasing sales and finding new markets.
 Acquiring resources and technology.
 Diversification.
 Fewer government regulations.
 Minimise the risk of competition.
 Exploiting economies of scale.
 Cushioning economic cycles.
 Tax minimization.
Diversification is process of spreading the risks encountered by a business. Diversification

can occur at a number of different levels. These include:
 Geographic diversification – operating in foreign locations.
 Product diversification – expansion of product lines.
 Supplier diversification – counteract price increases.

Economies of scale refers to the reduction in costs of production that arise from increasing
the size or scale of the production facility and spreading overhead (fixed) costs over a larger
output.
A tax holiday occurs when no tax is paid for a certain period of time. A tax haven is a
country that imposes little or no taxes on business income.

Specific Influences on Global Business
A business that operates globally has to deal with a more complex set of factors compared to a
business that operates only in a domestic market, including:
 Difficulty of assessment.
 Different value systems.
 Decision making is more complex.
 Cultural differences.
Financial Influences include:

 Currency Fluctuations
o Exchange rates
 Interest Rates
 Overseas Borrowing – The two main sources of international finance are:
o International Equity (Share) Market
o International Bond Market
Political Influences include:

 Tension between protectionism and free trade
 International Organisations and Treaties – the main organisations are:
o World Bank – (WB)
o International Monetary Fund – (IMF)
o Bank for International Settlement – (BIS)
o World Trade Organisation – (WTO)
 Trade Agreements – the main trading agreements are:
o North American Free Trade Agreement – (NAFTA)
o Association of South-East Asian Nations – (ASEAN)
o Asia-Pacific Economic Cooperation – (APEC)
 Regionalism – the main trading bloc is:
o European Union – (EU)
 War and Civil Unrest
Legal Influences include:

 Contracts
 Dispute Resolutions – including:
o Which country’s legal system applies?
o In which country should the dispute be settled?
o How will the final decision be enforced?
 Intellectual Property – treaties protecting intellectual property rights include:
o International Convention for the Protection of Industrial Property.
o Berne Convention for the Protection of Literary and Artistic Works.
o Universal Copyright Convention.
Social and Cultural Influences include:

 Languages
 Tastes
 Religion
 Varying Business Practices and Ethics


Managing Global Business
The 5 basic methods of payment a business can select are:

1. Payment in Advance – this method allows the exporter to receive payment and then
arrange for the goods to be sent.
2. Letter of Credit – this is a commitment by the importers bank, which promises to pay
the exporter a specified amount when the documents proving shipment of the goods
are presented.
3. Clean Payment – occurs when the payment is sent to, but not received by, the
exporter before the goods are transported.
4. Bill of Exchange – this is a document drawn up by the exporter demanding payment
from the importer at a specified time. The two types of bill of exchange are:
 Document Against Payment – using this method, the importer can collect the
goods ONLY after paying for them.
 Document Against Acceptance – using this method, the importer may collect
the goods BEFORE paying for them.
5. Open Credit – this allows the importer access to the goods with a promise to repay at
a later date.
Hedging is the process of minimizing the risk of currency fluctuations. Hedging helps to
reduce the level of uncertainty involved with international financial transactions.
Derivatives can be divided into three main types for exporters. These are:
 Forward Exchange Contract – this is a contract to exchange one currency for
another currency at an agreed exchange rate on a future date, usually after a period of
30, 90 or 180 days.
 Options Contract – this gives the buyer the right, but not the obligation, to buy or sell
foreign currency at some time in the future.
 Currency Swap – this is an agreement to exchange currency in the spot market with
an agreement to reverse the transaction in the future.
The main types of Insurance available to businesses are:

 Marine insurance – covering shipment by road, rail and air as well as sea.
 Product liability insurance – protecting the manufacturer and exporter from liability
due to damage caused by the use of a product.
 Currency risk insurance – protecting the exporter from losses due to currency
fluctuations.
Finance can be obtained through:

 Domestic Capital Markets
 International Capital Markets
 Eurocurrency Markets
Marketing involves:
 Research of Market
 Global Branding – this is the worldwide use of a name, term, symbol or logo to
identify products of one seller and differentiate them from those of the competitor.
 Standardisation and Differentiation – these can be defined as:

o A standardized approach is an international marketing strategy the assumes the

way the product is used and the needs it satisfies are the same all over the
world.
o A differentiated approach is an international marketing strategy that assumes
the way the product is used and the needs it satisfies are different between
countries.
Operations involves:
 Sourcing – the acquisition of a business’s products and materials. This can be simply
defined as “make or buy”.
 Global Web – this is a network of production sites located around the world, each
specializing in the part of the production process it can most efficiently perform.
Employment Relations involves:

 Organisation Structure
 Staffing
 Shortage of Skilled Labour
 Labour Law Variations
 Minimum Standards of Labour
 Staffing Systems – as defined below.
An ethnocentric approach to staffing is one in which all key management positions at all
company locations are filled by parent company personnel
A polycentric approach to staffing is one in which personnel from the host country manage
the subsidiaries, while the parent company personnel fill the key roles at company
headquarters.
A geocentric approach to staffing means seeking the best people for key jobs throughout the
entire organisation, irrespective of nationality.

Management Responsibility in a Global Environment
Tax Havens can be classified into three different types. These are:
 Tax Paradise
o No relevant company income tax.
o Examples include Cayman Islands, Bahamas, Bermuda and Vanuatu.
 Tax Shelter
o Tax may be levied on some internal transactions.
o Low rates on tax on profits from internal sources.
o Examples include Hong King, Panama and Liberia.
 Tax Privilege
o To tax for some types of business.
o Examples include Channel Islands, Liechtenstein, Luxembourg, Isle of Man
and Monaco.
Transfer Pricing refers to the prices one subsidiary of a company charges a second
subsidiary for goods and services.
Labour standards refer to the conditions that affect a business’s employees, or those of its
suppliers, subcontractors or others in the production chain.
Two other key environmental factors facing global businesses are:

 Ecological Sustainability
 Dumping Illegal Products
Arguments for and Against Corporate Social and Ethical Responsibility include:
For Against
 A better society means a better  A business is essentially an economic
environment for doing business. By organisation which, therefore, lacks the
adopting a philosophy of enlightened ability to pursue social goals. Economic
self-interest, a business can turn inefficiencies could result if managers are
today’s problems into future profits. forced to undertake an extra role.
 Businesses are unavoidably involved in  Maximising profits ensures that society’s
social issues. Therefore, they have resources are sued efficiently. Providing
certain social rights and the best quality products at the lowest
responsibilities. price should be the goal of all businesses
because this benefits society.
 Businesses have the resources to help  Business managers are appointed, not
solve complex social problems. With elected. Therefore they are not
their base financial, technical and accountable to society.
human resources businesses can play a
positive role.
 Corporate social action will prevent
government regulation. It is better to
self-regulate than have governments
force companies to comply with certain
standards.

Business Studies: Stage 6

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Studies: Stage 6

Uploaded by

Copyright:

Available Formats

Business Studies

HSC TOPIC 2: FINANCIAL PLANNING AND MANAGEMENT...............................................................13

THE ROLE OF FINANCIAL PLANNING.........................................................................................................15

HSC TOPIC 3: MARKETING...............................................................................................................20

NATURE AND ROLE OF MARKETS AND MARKETING....................................................................................22

HSC TOPIC 4: EMPLOYMENT RELATIONS.........................................................................................33

NATURE OF EMPLOYMENT RELATIONS......................................................................................................35

HSC TOPIC 5: GLOBAL BUSINESS......................................................................................................45

HSC Topic 1: Business Management and Change

Students learn to:

Students learn about:

the nature of management

understanding business organisations with reference to management theories

Ryan McDonald SHS 3

– internal influences — effects of accelerating technology including

change and social responsibility

Ryan McDonald SHS 4

The traditional definition of management is the process of coordinating a business’s

A contemporary definition of management views managements as the process of working

The 8 Skills a Manager must possess are:

Ryan McDonald SHS 5

Category Role Description

 Performs ceremonial duties

 Establishes and maintains a network of contacts

 Seeks and receives information from a wide variety

 Presents to outsiders information about the

 Scans the environment for opportunities

 An interpersonal role is one in which the manager deals with people.

Ryan McDonald SHS 6

Understanding Business Organisations with Reference to Management

Ryan McDonald SHS 7

The systems management approach views organisations as an integrated process in which

Resources: Managerial Abilities: Outcomes:

Ryan McDonald SHS 8

 Acknowledges the importance of  Complex theoretical concepts

Ryan McDonald SHS 9

External Factors Internal Factors

Reasons for Resistance to Change:

Financial Costs Inertia Cultural Staffing

Ryan McDonald SHS 10

Strategies for Reducing Resistance to Change include:

 Identifying the need for change

Change and Social Responsibility relates to:

Ryan McDonald SHS 11

Ryan McDonald SHS 12

HSC Topic 2: Financial Planning and Management

Students learn to:

Students learn about:

the role of financial planning

financial markets relevant to business financial needs

using financial information

Ryan McDonald SHS 13

• types of financial ratios

effective working capital (liquidity) management

effective financial planning

ethical and legal aspects

Ryan McDonald SHS 14

The Role of Financial Planning

Financial management is the planning and monitoring of an organisations financial

The Planning Cycle Diagram:

Ryan McDonald SHS 15

Financial Markets Relevant to Business Financial Needs

 Domestic Market Influences include: